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1
REGIONAL EXPRESS HOLDINGS LIMITED
ANNUAL REPORT
FOR THe FinanCial YeaR ended 30 JUne 2016
ReGiOnal eXPRess HOldinGs liMiTed
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.
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 sWupportive 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.
fOREWORd
LIM KIM hAI
EXECUTIVE CHAIRMAN
hEAdWINdS ANd TAILWINdS
This past Financial Year (FY) has once again been very challenging. Rex’s traditional
Regular Public Transport (RPT) passenger revenue did not reach the bottom as expected
and showed a slight decline of 0.74%. The end of the Defence target towing contract
since October of 2015 also dragged down the Group’s performance. The end of
the Defence contract also prompted us to aggressively write down the Learjets and
WestWind values along with goodwill recorded when Pel-Air was first acquired as a
precautionary measure. Although Rex remains operationally profitable, the write down
meant that the Group recorded its first statutory loss in 13 years of $9.6M.
However, even as we faced strong headwinds, Rex continued to scale new heights.
Following the FY 15 feat of commencing RPT services to 16 new Queensland ports after
winning the Queensland Government regulated route tender, Rex has once again in FY
16 won another state government regulated route tender, this time in Western Australia
(WA). With the start of the Perth/Albany and Perth/Esperance routes on 28 February
2016, Rex can now be considered a truly pan-Australia regional airline with operations
servicing 58 ports spanning all states of Australia.
The FY ahead is again fraught with uncertainties both internationally and within Australia,
however Rex sees several favourable tailwinds too. The new WA routes started well
and are achieving all of our targets. These two routes, awarded under exclusive rights,
contribute about 10% to our overall passenger numbers and will help us achieve
improved operating efficiencies and profitability. With its presence in WA fully entrenched,
Rex intends to further expand its services in WA wherever commercially viable.
Besides the WA contributions, we see several other significant tailwinds as well. Our
fuel requirements for FY 17 are 75% hedged and our fuel bill for the full FY is estimated
to achieve a $6.5M annual saving compared to FY 16. Also, our Australian Airline Pilot
Academy (AAPA) has been approved by the Civil Aviation Authority of Vietnam at the end
of FY 16 and we have already enrolled a steady stream of Vietnamese students. Finally,
the Pel-Air medivac division has completed a trial deployment in Singapore over several
months in FY 16 and the results have been positive. Consequently, a detachment will be
permanently based in Singapore for the full FY 17 and we expect to grow this activity in
the ASEAN region. This will make up most of the ground lost by the completion of the
Defence contract.
The net outcome should see the Rex Group stronger at the end of FY 17 than when
we started. I would like to thank all shareholders for their long suffering patience as we
went through five years of very difficult conditions, as well as management and staff for
their extraordinary dedication and steadfastness.
Lim Kim Hai
Executive Chairman
24 August 2016
• Important decisions concerning staff matters are always
to ensure
the Management Committee
referred
transparency, fairness and consistency.
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This annual report covers both Regional Express Holdings Limited as an
individual entity and the consolidated entity comprising Regional Express
Holdings Limited and its subsidiaries.
The Group’s functional and presentation currency is AUD ($).
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, AMP Centre
50 Bridge Street
Sydney, NSW 2000
BANKER
Westpac Banking Corporation
AUdITOR
Deloitte Touche Tohmatsu
Contents
O5 dIRECTORS’ REPORT
27 AuDITOR’S INDEPENDENcE DEcLARATION
29 CORPORATE gOVERNANCE STATEMENT
37 fINANCIAL STATEMENTS
38 cONSOLIDATED STATEMENT OF PROFIT OR LOSS
39 cONSOLIDATED STATEMENT OF OTHER cOMPREHENSIVE INcOME OR LOSS
40 cONSOLIDATED STATEMENT OF FINANcIAL POSITION
41 cONSOLIDATED STATEMENT OF cASH FLOWS
42 cONSOLIDATED STATEMENT OF cHANGES IN EQuITY
43 NOTES TO THE cONSOLIDATED FINANcIAL STATEMENTS
77 DIREcTORS’ DEcLARATION
78 INDEPENDENT AuDITOR’S REPORT
81 ASX AddITIONAL INfORMATION
1
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 ended 30 June
2016 (FY 16).
The names and particulars of the directors of Rex during or since the end of the FY are:
Lim Kim Hai
Executive Chairman
Appointed 27 June 2003 and re-appointed 16
November 2006, 25 November 2009,
27 November 2012 and 27 November 2015.
THE Hon. JoHn SHarp
Deputy Chairman and independent Director
Appointed 14 April 2005 and re-appointed 19
November 2008, 23 November 2011 and
27 November 2013.
LEE THian Soo
non-Executive Director
Appointed 27 June 2003 and re-appointed 16
November 2006, 25 November 2009, 27 November
2012 and 27 November 2015.
specialising
Mr. Lim started his career as a Defence
Engineer
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.
the
from
scholarship. He
Mr. Lim obtained his Masters in Electronics
Engineering
prestigious
‘Grande Ecoles’ engineering colleges in
France where he was sent on a French
Government
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.
Directors’ report
the
founding
Mr. Lim was one of
shareholders and directors of Rex in
August 2002. He has been the Executive
Chairman of the Rex Group of companies
since July 2003.
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
shareholders and directors of Rex
August 2002.
founding
in
the
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. In 2001, he became
a director of Airbus Group, Australia Pacific,
a position he retired from in June 2015. 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. He has also been a
director of the French, Australian Chamber
of Commerce and Industry, and Co-Chair
of the Cancer Council of NSW Southern
Highlands Branch. He is currently a director
of the Climate Change Authority. 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.
REGIONAL EXPRESS HOLDINGS LIMITED
6
nEViLLE HoWELL
Chief operating officer
Appointed 1 July 2014 as Executive Director and re-
appointed 26 November 2014.
CHriS HinE
Group Flight operations advisor
Chairman, australian airline pilot academy
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 and
Group Flight Operations Advisor 18 May 2015.
JamES Da ViS
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.
Mr. Hine has over 25 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 and
Chairman of the Australian Airline Pilot
Academy. 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.
Mr. Davis has a degree in Aeronautical
Engineering and commenced his aviation
career with
the Civil Aviation Safety
Authority (CASA) before obtaining his Air
Transport Pilot Licence. He 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).
Mr. Howell has over 35 years of aviation
the
experience and has been with
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
flight operations, continuing airworthiness,
maintenance control, airport operations
and the human factors group. Mr. Howell is
the accountable manager for the Regional
Express Air Operator Certificate (AOC)
and also holds the CASA approval as
Alternate Chief Pilot.
ronaLD bar TSCH
independent Director
Appointed 23 November 2010 and re-appointed 23
November 2011 and 26 November 2014.
Mr. Bartsch has over 35 years experience
in the aviation industry in a variety of senior
operational, safety and regulatory roles.
He was head of safety and regulatory
compliance for Qantas Airways Limited’s
AOC and manager of the CASA Sydney
Airline Transport Field Office.
In addition, Mr. Bartsch is an experienced
pilot and has extensive legal and regulatory
formal
experience. Mr. Bartsch has
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.
Garr y FiLmEr
alternate Director to Chris Hine until 12 January
2016, Group Engineering Training manager and
Engineering advisor
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
and stepped down as Alternate Director on 12 January
2016. He was appointed Group Engineering Training
and Engineering Advisor on 15 January 2016.
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
flight operations, continuing airworthiness,
maintenance control, airport operations
and the human factors group.
7
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
8
2
senior management exeCutives
The names and particulars of the senior management executives of Rex during or since the end of the FY are:
nEViLLE HoWELL
Chief operating officer
WarriCK LoDGE
General manager, network
Strategy & Sales
irWin Tan
General manager, Corporate
Servicese
mayooran
THanabaLaSinGam
General manager,
information Technology and
Communications
.DaLE HaLL
General manager, Engineering
until 8 January 2016
Neville is a member of the Rex
Management Committee. A
description of his qualifications,
is
and
skills
included on page 7.
experience
and
team
Warrick manages a
responsible
for scheduling,
pricing, revenue management,
commercial
sales
analysis. His duties
include
the monitoring of network
performance and analysis of
both existing and new market
opportunities. Warrick has more
than 24 years of regional airline
experience in the specialised
areas of scheduling, pricing
revenue management
and
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
was
background
originally in genetic research
after graduating with first class
honours in biotechnology from
the University of New South
Wales in Sydney. Irwin left the
field of genetic research when
he joined Morrison Express
Logistics in 1999 and then
Singapore Airlines
in 2001.
He was later transferred to
Singapore Airlines Cargo as
an executive where he took
appointments
on
in
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.
various
product
ensuring
initiatives
the
Mayooran leads a team of
(IT)
Information Technology
responsible
professionals
day-to-day
for
operations of the airline. With
over 15 years experience and
an extensive background in
information
technology, he
has managed a range of IT
for
projects and
Rex
Internet
including
Booking Engine, the Amend
Booking Engine, Web Check-
in and numerous Mobile/
iPad applications. Mayooran
has a Master of Business
Administration
(Computing)
from Charles Sturt University.
He also has a Graduate
Certificate
in Management
(Information Technology) as
well as an Associate Diploma
of Electrical Engineering
/
Computer Engineering. He
commenced with Rex in April
2004. Mayooran is a member
the Rex Management
of
Committee and a Director
of
the Australian Airline
Pilot Academy (AAPA).
aviation
then spent
Dale has over 32 years
of
engineering
experience. He began his
career as an apprentice in
the Royal Australian Air Force
for nine
where he served
years. He
the
next 17 years in the industry
working in turbine engine and
component overhaul facilities,
on and offshore gas and
petroleum helicopter industries
and maintaining aero-medical
charter aircraft. Dale
joined
Kendell Airlines in 1999 as a
Licensed Aircraft Maintenance
Engineer and held the position
of a Technical Support Engineer
with both Kendell and Rex. In
late 2006 Dale was appointed
as a Maintenance Controller for
Rex and took up the position of
Maintenance Control Manager
in 2007. In March 2012, he was
appointed GM Engineering
and Chairman of the Australian
Airline Pilot Academy (AAPA).
As GM Engineering,
he
became Part 145 Accountable
Manager for both Rex and Air
Link Approved Maintenance
Organisations (AMOs) in June
2013. He was a member of the
Rex Management Committee.
Dale
employment
with the Rex Group on 8
January 2016.
ceased
pnG yEoW T aT
General manager, Engineering from
1 January 2016
Tat was previously employed as Deputy
General Manager, Engineering.
Tat has been
in aviation
engineering for more than 35
years and has many years of
experience in various senior
management positions. He
graduated with an Honours
in Electrical and
Degree
Electronic Engineering
from
the UK. Tat joined Rex in
June 2007 as the Logistics
Advisor and subsequently as
the Engineering Advisor in the
Chairman’s Office. He became
the Deputy General Manager
and Part
145 Alternate
Accountable Manager for both
Rex and Air Link Approved
Organisations
Maintenance
(AMOs) in June 2013. He is a
member of the Rex Engineering
Management
Committee
and a member of the Rex
Management Committee.
marK burGESS
Deputy General manager,
Engineering from 1 april 2016
pauL FiSHEr
General manager, Flight operations
and Chief pilot
Paul has over 26 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
/ Deputy Chief
Manager
Pilot. He holds a number of
Civil Aviation Safety Authority
(CASA)
As
GMFO he is responsible for all
facets of the Company’s flight
operations and all operational
matters affecting the safety of
flight operations.
delegations.
Mark is a Licensed Aircraft
Maintenance Engineer with
over 30 years’ experience and
has been with the Company
since its inception in 2002.
His career began as an
apprentice in the British Armed
Forces where he maintained
helicopters for 12 years and
left as a Senior Rank. He
continued his career in the
oil and gas
industry with
CHC Helicopters and also
British Midland Regional Prop
and Jet RPT services. He
migrated to Australia in 2001
to work for Kendell Airlines in
Wagga Wagga and became
Production
co-
ordinating maintenance and
manpower on heavy checks
for Saab 340 aircraft. In 2008
he moved to Adelaide as the
Line Maintenance Supervisor
and oversaw expansion of Rex
from
maintenance activities
line
to heavy maintenance.
He is a member of the Rex
Engineering
Management
Committee.
Leader
9
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
10
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 2016 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.
09 CompanY seCretaries
Mr. Irwin Tan holds the position of Rex Company Secretary. A description of his qualifications, skills and experience is included
on page 9.
Mr. Benjamin Ng, having completed his Bachelor of Science followed by an MBA in the UK, started his career with the German multi-
national chemical company, Henkel in Malaysia. In his eight years with Henkel/Cognis, he held various positions ranging from sales,
marketing, business analysis and cost controlling. In 2001, he was posted to headquarters in Germany for just over a year where he
was cost controller for the Asia Pacific Region. Upon his return to Malaysia, he headed up the controlling department of Cognis for
three years. Benjamin joined Rex in April 2006 and was appointed Company Secretary on 10 October 2007.
10 prinCipal aCtivities
The Group’s principal activity during the FY was air transportation of passengers and freight.
04 DireCtors’ shareholDings
The following table sets out each director’s relevant interest in shares and options of Rex as at the date of this report. No debentures
or rights exist.
Directors
Lim Kim Hai
The Hon. John Sharp
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
18,898,346
50,000
7,722,181
25,857
176, 628
200,866
-
23,038
5,755,513
150,000
3,727,181
-
-
-
-
-
-
-
-
-
-
-
-
-
05 DireCtors’ meetings
The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during the FY
and the number of meetings attended by each director (while they were a director or committee member). During the FY, 4 Board
meetings, 3 Remunerations, Nominations and Disciplinary 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
Remunerations,
Nominations and
Disciplinary Committee
Board
Audit & Corporate
Governance Committee
Safety & Risk
Management Committee
4
4
4
3
4
4
4
4
-
3
-
3
-
-
-
3
-
-
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 22 to 25.
07 shares unDer option or issueD on exerCise of options
No options were granted or exercised in FY 16.
11
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
12
11 organisation & group struCtures
REgIONAL EXPRESS AIRLINE ORgANISATION S TRUCTURE
REgIONAL EXPRESS gROUP hOLdINgS S TRUCTURE
13
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
14
12 revieW of operations
SUMMARY
At the commencement of FY 16 the Rex RPT network serviced 53 airports throughout South Australia, Victoria, Tasmania, New South
Wales and Queensland. This came on the back of significant expansion throughout Queensland during FY 15 which saw the number
of airports serviced by Rex increase by 47% from 36 to 53 airports. At the close of FY 16, the Rex Group was servicing 58 airports as
a result of NSW expansion and new operations within the state of Western Australia (WA).
In early December 2015 the Western Australian (WA) Government announced that Rex had been selected to provide essential regional
air services between Perth and the communities of Albany and Esperance. The contract awarded Rex the sole right to operate these
routes for the next five years commencing 28 February 2016. Rex procured an additional three aircraft for this purpose, increasing the
Group’s Saab 340 fleet to 55. The WA operation has a dedicated crew and engineering base in Perth.
In FY 16 partnership agreements were either renewed or entered into with the regional councils that own and operate the following
regional airports: Albany, Armidale, Bamaga (NPA), Bathurst, Broken Hill, Ballina, Ceduna, Coober Pedy, Esperance, Grafton, Lismore,
Mildura, Moruya, Narrandera, Newcastle, Parkes, Snowy Mountains, Taree, Whyalla and Wagga Wagga.
There were no partnership agreements during the FY with the following regional airports: Albury, Burnie, Dubbo, Griffith,
Kangaroo Island, King Island, Merimbula, Mount Gambier, Orange or any of the regional airports associated with the Queensland
regulated routes.
The Rex pilot cadet programme (Australian Airline Pilot Academy; AAPA) continued to supply First Officers (FO) to meet demand within
the Rex Group. FY 16 saw an additional 14 cadets inducted as FOs, taking the number of former cadets flying in the Group to 137, of
which 30 have already reached the rank of Captain. The maturity of the cadet programme was further proven when for the first time
ever we saw four former cadets successfully reaching the rank of Training Captain.
The Saab 340 Full Flight Simulator (FFS) located at AAPA continued to perform well and has proven to be a reliable training device.
The FFS is now fitted with the new avionics plug-and-play LCD cockpit displays as fitted to our Saab 340 fleet. The FFS proved to be
an invaluable platform for the testing of the LCD cockpit displays and will continue to further enhance pilot training and safety. The Civil
Aviation Safety Authority (CASA) has renewed the Flight Simulator Qualification Certificate until April 2017.
On 16 December 2015, the Australian Airline Pilot Academy (AAPA) entered into a pilot training agreement with Vietnam based, Viet
Flight Training (VFT) to train cadet pilots destined for Vietnam Airlines. On 1 February 2016 AAPA received official accreditation as an
Approved Flight Training Organisation by the Civil Aviation Authority of Vietnam (CAAV) and on 29 February 2016 became an Approved
Supplier to Vietnam Airlines. The first intake of Vietnam Airlines cadets from VFT commenced training on 4 April 2016 with a second
intake following on 4 July 2016. These cadets will integrate into Vietnam Airlines after their graduation from AAPA.
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 FYs (ASX Recommendation 7.1):
• Fuel price increases – The Company has mitigated against this risk by hedging the majority of FY 17’s fuel requirement. In
December 2015 and January 2016, the Rex Group took advantage of the fall in Brent Crude price and hedged its fuel requirement
for the first three quarters of FY 17. The fuel hedge is expected to deliver fuel cost savings of approximately $4.7M compared to
FY 16’s fuel bill.
• Foreign exchange rates – The Group’s financial risk is essentially its exposure to US dollars (USD) 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 reduced. The Group will continue to monitor the exchange rate closely and will hedge whenever the
rates are favourable.
The Company is also aware of the potential risk of the loss of pilots. In FY 08 the aviation world was hit with a worldwide 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 nine years from its pilot training
academy AAPA in Wagga Wagga NSW. The success of the cadet pilot programme is clearly demonstrated in the steady and low
attrition rates over the past seven FYs.
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
16
16
15
14
13
10
15
13
11
22
17
17
12
11
12
11
10
19
14
8
6 6 5
4
FY 07
FY 08 FY 09 FY 10
FY 11 FY 12 FY 13
FY 14
FY 15 FY 16
Yearly Average
captain
FO
Signing of the pilot training agreement between AAPA and VFT by Rex Executive Chairman Lim Kim Hai and CEO of VFT Captain Nguyen
Nam Lien, with Ambassador of Australia to Vietnam HE Hugh Borrowman (centre) and Mr Do Quang Viet, Deputy Director General of CAAV
(to Ambassador’s left).
Pilot attrition for the past 10 years.
15
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
16
ROUTE NETWORK dEVELOPMENTS
In July 2015 Rex commenced three return flights each week day between Cairns and Townsville, adding some 60,000 annual seats
to the route with 34 weekly flights. This followed heavy solicitation by the Townsville and Cairns business community post Virgin
Australia’s exit in January 2014 and a market sounding exercise to gauge business community support for Rex services.
In August 2015 Rex announced that Rex subsidiary Air Link would commence RPT services between Sydney and Cobar via Dubbo
with effect from Monday 31 August 2015 and operated by Air Link’s Beech 1900D aircraft. Cobar had been without an RPT service
since mid December 2013 when the prior operator Brindabella Airlines was placed into receivership.
In November 2015 Rex announced that in partnership with Snowy Mountains Airport Corporation Pty Ltd, Rex would commence
regular services between Sydney and the Snowy Mountains (Cooma) in March 2016. The core schedule comprises of five return
services per week, with additional services on Fridays, Saturdays, Sundays and Mondays operating throughout the ski season. The
Snowy Mountains region had been without regular air services since mid December 2013, which was also linked with the collapse of
Brindabella Airlines.
On 7 December 2015, the Western Australian (WA) Government, after a formal tendering process, signed a Deed of Agreement with
Rex as the successful operator of two regulated routes in the state. This conferred on Rex the sole right to operate on the Perth/Albany
and Perth/Esperance routes for a five year term beginning on 28 February 2016.
A traditional water cannon salute welcomes the first Rex service into Albany.
Photo courtesy of the City of Albany.
The commencement of these services on 28 February 2016 was very significant to Rex for two reasons. First of all, this marked Rex’s
entry into the WA market for the first time, thereby establishing Rex’s presence in all states of the nation.
Secondly, the new WA routes contribute about 10% to Rex’s passenger numbers and reverse a five-year decline of passenger
numbers which peaked in FY 10.
Snowy Mountains (Cooma) services launch on 23 March 2016.
(L – R): Rex Deputy Chairman the Hon. John Sharp, Member for Monaro the Hon. John Barilaro MP, and Snowy Mountains Airport Corporation Chairman
Kevin Blyton.
Photo courtesy of Steve Cuff.
17
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
18
The graphs below set out the evolution in monthly passenger carriage and monthly passenger revenue over the last eight FYs. The
strong performance from March 2016 onwards is due to the start of the WA operations.
fLEET ChANgES
During the reporting period, Rex added three Saab 340 aircraft to its fleet to cater for its Western Australian operations. Two of these
were leased and one was paid for in cash. Of the 55 Saab 340 aircraft in the Rex Group 38 of them are fully paid for, 15 are on
mortgage with about three years left to run and two are on lease.
ENTERPRISE AgREEMENTS (EA)
The Rex Flight Attendant Enterprise Agreement (EA) was ratified in December 2014 and the Airline Services Collective Agreement was
ratified in October 2015. Agreements with the Australian Federation of Air Pilots (AFAP) and the Australian Licenced Aircraft Engineers
Association (ALAEA) were also reached in FY 16 and were subsequently ratified in early FY 17.
OPERATIONAL ANd SERVICE STANdARdS
In FY 16 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 88.52% on-time departure performance which ranked Rex
as the top performing regional airline.
In addition, Rex completed FY 16 with a low cancellation rate of 0.50%, the lowest cancellation rate of all Australian airlines, with the
other main regional carriers QantasLink and Virgin Australia Regional Airlines coming in 500% and 400% higher respectively.
airline
QantasLink
Virgin Australia Regional Airlines
Qantas
Virgin Australia
Jetstar
Tigerair
on-Time Departure
Cancellation rate (%)
Fy 2016
Fy 2015
Fy 2016
Fy 2016
3rd
4th
6th
2nd
1st
7th
5th
2nd
5th
4th
1st
3rd
6th
7th
0.5%
2.6%
2.1%
1.1%
1.5%
2.2%
1.0%
0.3%
2.1%
1.4%
1.2%
1.8%
1.4%
0.9%
COMMUNITY INVOLVEMENT
Throughout FY 16 Rex contributed over $285,000
in sponsorships to worthy charitable and community
projects across our regional 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.
Some of the causes and events supported by Rex during
FY 16 are:
• Parkes Elvis Festival
• Julia Creek Dirt n Dust Festival
• Heart of Australia
• NSW Regional Woman of the Year Award
• Camp Quality Puppet Tour to King Island
• Normanton Barra Classic Fishing Competition
• Birdsville Big Red Bash
• Casino Beef Week
Rex Deputy Chairman the Hon. John Sharp with Rex Airlines’ Regional Woman of the
Year finalists (including winner Jodie McCrae in pink), and the Hon. Pru Goward MP,
Minister for Women at the NSW Women of the Year Awards 2016.
Photo courtesy of the NSW Government.
With Rex’s help, the Camp Quality Primary School Education Program and their
puppet show visited King Island for the first time.
Photo courtesy of Camp Quality.
19
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
20
13 Changes in state of affairs
19 remuneration report
No changes in the state of affairs were observed by the Group during the reporting period apart from what is reported in the
Operational Review.
REMUNERATIONS, NOMINATIONS ANd dISCIPLINARY COMMITTEE
14 suBseQuent events
Rex’s board of directors has established a Remunerations, Nominations and Disciplinary 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.
The Regional Express Pilots Enterprise Agreement (EA) was voted in on 23 July 2016. On 18 August 2016, the last remaining EA, the
Regional Express Engineers Agreement was voted in.
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 ten 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 FY immediately
preceding the award. The profit share is allocated on an equal share basis. Permanent part time employees receive an amount
proportional to their employment hours. The Board continues to offer this to all non-Enterprise Agreement (EA) employees
who are not the subject of an adverse recommendation by the Remunerations, Nominations and Disciplinary Committee.
• Share Gift Plan
Rex established the share gift plan (effective from FY 06) 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 Remunerations, Nominations and Disciplinary 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 FY, the Group bought back 791,489 fully paid ordinary shares for the share gift scheme.
Rex has introduced its fully in-house designed Electronic Flight
Bags (EFB) across its entire Saab 340 fleet in the Rex Group.
The EFB allows the electronic capture of data on aircraft cycles,
flight times, engine trend monitoring, aircraft flow management
and pilot flight times. This will provide significant efficiencies
in accurately collecting critical data for both Engineering and
Flight Operations. Rex received CASA approval for the EFB on
15 July 2016. This is the first time in the world that an EFB has
been approved for Saab 340 aircraft operations.
Upcoming development will see the EFB loaded with Pilot
Airway documents, aircraft load control and performance
data, flight planning and weather related applications and the
full suite of company manuals which will significantly improve
operational efficiencies as well as safety.
15 future Developments
The Electronic Flight Bag in use on the Saab 340 with effect from 18 July 2016.
On the back of establishing new air services in WA (Perth/Albany and Perth/Esperance) during FY 16, Rex intends to actively explore
new market opportunities in WA during the course of FY 17 and FY 18.
Rex has engaged in a ground breaking project to certify the Saab 340 for tolerance to the Transmitting of Personal Electronic Devices
(TPED). This project involved extensive and rigorous testing and required the assistance of a specialised company in order to gain
certification. The TPED approval allows the use of Bluetooth and Wi-Fi in the cabin throughout all phases of flight. This will provide
passengers with greater adaptability in completing business tasks or enjoying entertainment while using their own personal device
such as a tablet or laptop. Rex received CASA approval for TPED on 2 October 2015. Building on from the TPED approval, in-flight
connectivity testing is now underway with a view to providing in-flight Wi-Fi access in the coming months.
Pel-Air has permanently deployed medivac jet aircraft to Singapore to service the ASEAN region and to intends to follow this up with
a deployment of up to three additional medivac aircraft over FY 17 and FY 18.
16 environmental regulations
During FY 16 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 7th NGER report to the Clean Energy Regulator in October 2016.
17 DiviDenDs
No final dividends will be paid out for FY 16 due to the continued deteriorations of the operational and financial performance of the
Group. However the Board is committed to a high dividend payout ratio once the Group is firmly on the path to recovery.
18 inDemnifiCation of offiCers anD auDitors
During the FY, the Company paid a premium in respect of a contract insuring the directors of the Company (as named above), the
company secretaries (as named above), and all executive officers of the Company and of any related body corporate against a liability
incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of
insurance prohibits disclosure of the nature of the liability and the amount of the premium.
The Company has not otherwise, during or since the FY, except to the extent permitted by law, indemnified or agreed to indemnify an
officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor.
21
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
22
dIRECTOR ANd SENIOR MANAgEMENT dETAILS
The following persons acted as directors of the Company during or since the end of the FY:
Lim Kim Hai (Chairman)
The Hon. John Sharp (Deputy Chairman)
Lee Thian Soo
Neville Howell
Chris Hine
James Davis
Ronald Bartsch
Garry Filmer (until 12 January 2016)
The term ‘senior management’ is used in this remuneration report to refer to the following persons. Except as noted, the named
persons held their current position for the whole of the FY and since the end of the FY:
Neville Howell (Chief Operating Officer)
Warrick Lodge (General Manager, Network Strategy & Sales)
Irwin Tan (General Manager, Corporate Services / Company Secretary)
Mayooran Thanabalasingam (General Manager, Information Technology and Communications)
Dale Hall (General Manager, Engineering until 8 January 2016)
Png Yeow Tat (Deputy General Manager, Engineering until 31 December 2015, and then General Manager, Engineering
from 1 January 2016)
Mark Burgess (Deputy General Manager, Engineering from 1 April 2016)
Paul Fisher (General Manager, Flight Operations & Chief Pilot)
REMUNERATION Of dIRECTORS ANd SENIOR MANA gEMENT
The directors and other nominated key management personnel received the following amounts as compensation for their services as
directors and executives of the Company and/or the Group during the year:
Short-term benefits
Cash salary
& fees
Cash profit
sharing &
other bonuses
Post
employment
benefits
Long-term
benefits
Share gift
provision
Pension &
super-annuation
Long service
leave
Share Gift
Issued
$
-
-
141,960
70,317
215,259
203,634
49,389
55,312
93,461
90,000
31,154
30,000
36,346
35,000
41,538
31,308
170,350
161,914
185,927
176,914
175,542
166,914
189,173
179,260
154,999
142,483
$
-
-
-
-
-
308
-
308
-
-
-
-
-
-
-
-
-
308
-
308
-
308
30,139
29,250
-
308
$
-
-
13,486
6,680
19,029
18,380
4,692
5,284
8,879
8,550
-
-
3,453
3,325
3,946
2,974
16,183
15,411
17,663
16,836
16,677
15,886
18,135
17,122
14,725
13,565
$
-
-
2,172
1,052
3,205
3,156
2,000
1,106
-
-
-
-
-
-
-
-
2,735
2,692
2,735
2,779
2,735
2,692
4,559
4,487
2,581
2,372
$
-
-
618
-
3,800
3,537
823
3,164
-
-
-
-
-
-
-
-
3,242
3,242
3,242
3,242
3,242
3,242
3,600
3,336
2,853
2,853
129,252
16,438
13,841
3,375
2,400
Total
$
-
-
158,236
78,049
241,293
229,015
56,904
65,174
102,340
98,550
31,154
30,000
39,799
38,325
45,484
34,282
192,510
183,567
209,567
200,079
198,196
189,042
245,606
233,455
175,158
161,581
165,306
134,385
165,164
1,748,735
1,508,220
-
231
46,577
31,329
9,151
15,713
159,860
139,726
1,229
2,414
27,326
22,750
2,906
2,906
26,726
25,522
147,671
186,428
2,009,224
1,727,547
Directors/Executives
EXECuTiVE DirECTorS
Lim Kim Hai (1)
Executive Chairman
CHriS HinE (2)
Alternate Director to Garry Filmer & Group Flight
Operations Advisor
nEViLLE HoWELL
Executive Director & Chief Operating Officer
Garry FiLmEr (2)
Alternate Director to Chris Hine & Group Engineering
Training Manager & Engineering Advisor
non-EXECuTiVE DirECTorS
JoHn SHarp
Deputy Chairman
LEE THian Soo
Non-Executive Director
ronaLD barTSCH
Non-Executive Director
JamES DaViS
Non-Executive Director
SEnior manaGEmEnT EXECuTiVES
WarriCK LoDGE
GM, Network Strategy & Sales
irWin Tan
GM, Corporate Services
mayooran THanabaLaSinGam
GM, ITC
pauL FiSHEr
GM, Flight Operations & Chief Pilot
pnG yEoW TaT (2)
GM, Engineering
marK burGESS (2)
Deputy GM, Engineering
DaLE HaLL (2)
GM, Engineering
ToTaL
FY
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2016
2015
2016
2015
(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 ) Please see Directors’ Report on pages 6 to 10 for changes of appointment details.
23
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
24
VALUE Of OPTIONS ISSUEd TO dIRECTORS ANd EXECUTIVES
No options lapsed, were granted or were exercised during FY 16.
RELATIONShIP BETWEEN ThE REMUNERATION POLICY ANd C OMPANY PERfORMANCE
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.
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,
Nominations and Disciplinary Committee, was given to selected members of executive management based on an assessment of the
recipient’s performance during the year.
21 non-auDit serviCes
The tables below set out summary information about the Group’s results and movements in shareholder wealth for the five years to
June 2016:
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.
Revenue
Net (loss) / profit before tax
Net (loss) / profit after tax
30 June 2016
$’000
30 June 2015
$’000
30 June 2014
$’000
30 June 2013
$’000
30 June 2012
$’000
261,906
(10,703)
(9,557)
256,217
9,296
6,672
253,336
10,662
7,725
258,311
19,177
14,018
273,145
35,077
25,497
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
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
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.
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.
22 rounDing off of amounts
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
Neville Howell
Chris Hine
James Davis
Garry Filmer
Key management personnel:
Warrick Lodge
Irwin Tan
Dale Hall
Balance at
1 July 2015
Additions
during the year
Balance at
30 June 2016
24,406,859
247,000
24,653,859
200,000
-
200,000
11,449,362
-
11,449,362
22,203
3,654
25,857
176,034
594
176,628
200,866
-
200,866
22,247
791
23,038
147,910
3,117
151,027
23,694
3,117
26,811
37,441
2,795
40,236
Mayooran Thanabalasingam
76,272
3,117
79,389
Paul Fisher
Png Yeow Tat
Mark Burgess
31,794
3,462
35,256
17,822
2,743
20,565
12,145
2,307
14,452
During the financial year, no options were granted to (2015: nil), nor exercised (2015: nil) by key management personnel for ordinary
Rex shares. No options remained unpaid or to be exercised at the year end.
In accordance with Legislative Instrument 2016/191 issued by the Australian Securities and Investments Commission relating to the
rounding off of amounts in the financial statements amounts in the financial statements have been rounded to the nearest hundred
thousand dollars in accordance with that Legislative Instrument, 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, 24 August 2016
25
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
26
AUdITOR’S INdEPENdENCE dECLARATION
The Board of Directors
Regional Express Holdings Limited
81 – 83 Baxter Road
MASCOT NSW 2020
24 August 2016
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 2016, 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
Jamie C. J. Gatt
Partner
Chartered Accountant
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited.
27
REGIONAL EXPRESS HOLDINGS LIMITED
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
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 FY to 30 June 2016 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
Remunerations, Nominations and Disciplinary 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 Remunerations, Nominations and Disciplinary Committee. The performance of the Management Committee was
reviewed in FY 16 (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 Remunerations, Nominations and Disciplinary 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 three meetings
during the FY 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 Remunerations, Nominations and Disciplinary Committee given the size of the Company
and Board.
The Remunerations, Nominations and Disciplinary 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.
REGIONAL EXPRESS HOLDINGS LIMITED
30
Corporate
governanCe
statement
Below is the Rex Board skills matrix outlining the skills that the board currently has (ASX Recommendation 2.2):
(B)
EXECUTIVE MANAgEMENT
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
ENGINEERING KNOWLEDGE
*Alternate Director to Chris Hine
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 2016, 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, 27 November 2012 and 27 November 2015.
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, 27 November 2012 and 27 November 2015.
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
Garry Filmer
Alternate Director to Chris Hine
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.
Appointed 1 March 2012 and re-appointed 27 November 2012.
Stepped down as Alternate Director to Chris Hine on 12 January 2016.
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.
The Board is responsible for the management of the affairs of the Company and its subsidiaries (the Group), including:
(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.
• Appointing, monitoring and 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 Remunerations, Nominations and Disciplinary 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 every two years 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.
(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 Remunerations, Nominations and Disciplinary
Committee, review and evaluate the performance of the Board, each Board Committee, and each individual director against the
relevant Charters, corporate governance policies, and agreed goals and objectives (ASX Recommendation 2.5).
• Following each review and evaluation the Board will consider how to improve its performance.
• The Board will agree and set the goals and objectives for the Board and its Committees each year, and if necessary, amend the
relevant Charters and policies.
• With the advice and assistance of the Remunerations, Nominations and Disciplinary 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 FY as set out above.
31
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
32
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 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 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.
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.
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 Company has a program for inducting new Directors.
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 32.4%. 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 (2015-2016) 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.
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.
In FY 16 this Committee was chaired by Lee Thian Soo and had one other member, the Hon. John Sharp. In FY 17, this Committee
is chaired by the Hon. John Sharp and has one other member, James Davis. Descriptions of the members’ qualifications, skills
and experience are included in the Directors’ Report. The Committee had two meetings during FY 16 attended by all then-current
members of the Committee.
The Board acknowledges the ASX recommendations to have the Committee composed of a majority of independent directors,
chaired by an independent director and have at least three members (ASX Recommendation 4.1).
The Committee is currently made up of two non-executive directors of which both are independent. 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).
33
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
34
The Committee is currently made up of one independent director. 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 13 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
FYs 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 Remunerations, Nominations and Disciplinary 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).
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
35
REGIONAL EXPRESS HOLDINGS LIMITED
ConsoliDateD statement of profit or loss
fOR ThE fINANCIAL YEAR ENdEd 30 JUNE 2016
Passenger revenue
Freight revenue
Charter revenue
Other passenger services and amenities
Other revenue
Total revenue
Finance income
other losses
Flight and port operation costs (excluding fuel)
Fuel costs
Salaries and employee-related costs
Selling and marketing costs
Engineering and maintenance costs
Office and general administration costs
Finance costs
Depreciation and amortisation
Asset impairment
Goodwill impairment
Total costs and expenses
(Loss) / profit before tax
Tax benefit / (expense)
(Loss) / profit after tax
(Loss) / profit attributable to
Members of the parent
(Loss) / earnings per share
Basic
Diluted
Notes to the financial statements are included on pages 43 to 76.
Note
2016
$’000
2015
$’000
227,239
210,343
1,333
1,027
24,862
34,750
2,371
2,427
6,101
7,670
261,906
256,217
721
849
(250)
(1,166)
(48,569)
(42,198)
(35,150)
(36,883)
(103,001)
(99,964)
(6,855)
(6,310)
(39,149)
(36,683)
(7,090)
(6,520)
(2,171)
(2,171)
(16,136)
(15,875)
(8,344)
-
(6,615)
-
(273,080)
(246,604)
(10,703)
9,296
1,146
(2,624)
(9,557)
6,672
4
4
4
4
4
4
4
4
4
5
(9,557)
6,672
(9,557)
6,672
cents per share
cents per share
16
16
(8.8)
6.2
(8.8)
6.2
REGIONAL EXPRESS HOLDINGS LIMITED
38
finanCial
statements
ConsoliDateD statement of other Comprehensive inCome or loss
fOR ThE fINANCIAL YEAR ENdEd 30 JUNE 2016
ConsoliDateD statement of finanCial position
AS AT 30 JUNE 2016
(Loss) / profit after tax
other comprehensive income
Hedge reserve
Revaluation of cash flow hedges
Income tax effect
other comprehensive income, net of tax
Note
2016
$’000
2015
$’000
(9,557)
6,672
15
15
969
-
(291)
-
678
-
Total comprehensive (loss) / income
(8,879)
6,672
Notes to the financial statements are included on pages 43 to 76.
Current assets
Cash and bank balances
Trade and other receivables
Inventories
Other financial assets
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
Provisions
Current tax payable
Other financial liabilities
Total current liabilities
non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
net assets
Equity
Issued capital
Reserved shares
Retained earnings
Share-based payments reserve
Other reserves
Total equity
Notes to the financial statements are included on pages 43 to 76.
Note
22
6
7
2016
$’000
2015
$’000
26,821
23,360
9,626
11,742
22,964
20,170
1,105
-
-
96
60,516
55,368
6
8
9
10
11
12
13
5
12
13
5
14
15
15
15
7,448
7,966
9
10
108,572
125,987
94,296
83,707
1,026
7,893
211,351
225,563
271,867
280,931
25,912
23,127
19,341
18,208
6,641
9,200
5,413
5,418
1,069
-
136
-
58,512
55,953
23,638
26,229
1,857
1,115
807
2,793
26,302
30,137
84,814
86,090
187,053
194,841
72,024
72,024
(1,821)
(2,273)
112,995
122,552
1,587
948
2,268
1,590
187,053
194,841
39
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
40
ConsoliDateD statement of Cash floWs
fOR ThE fINANCIAL YEAR ENdEd 30 JUNE 2016
ConsoliDateD statement of Changes in eQuitY
fOR ThE fINANCIAL YEAR ENdEd 30 JUNE 2016
Note
22 (B)
Receipts from customers
Payments to suppliers, employees and others
Interest paid
Income tax refunded / (paid)
net cash flows from operating activities
Interest received
Proceeds from investment - capital reduction
Proceeds from disposal of property, plant and equipment
Payments for property, plant and equipment - aircraft and other
Payments for property, plant and equipment - software
net cash flows used in investing activities
Shares purchased as reserve shares
Repayment of borrowings – non-related parties
Proceeds from borrowings
net cash flows used in financing activities
net increase in cash held
Cash at the beginning of the financial year
Cash at the end of the financial year
22 (A)
Notes to the financial statements are included on pages 43 to 76.
2016
$’000
291,139
(261,590)
(2,464)
1,343
28,428
721
1
228
(20,011)
(88)
(19,149)
(668)
(8,515)
3,365
(5,818)
3,461
23,360
26,821
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)
1,393
21,967
23,360
Attributable to equity holders of the Company
Issued
capital
$’000
Reserved
shares
$’000
Retained
earnings
$’000
Share-based
payments
reserve
$’000
Cash flow
hedge
reserve
$’000
General
reserve
$’000
Total
equity
$’000
at 1 July 2014
Profit for the year
72,024
(1,182)
115,880
789
-
1,590
189,101
-
-
6,672
-
-
-
6,672
Other comprehensive income, net of tax
-
-
-
-
-
-
-
Total comprehensive income
-
-
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
at 1 July 2015
Loss for the year
-
756
-
(634)
-
-
122
-
-
-
793
-
-
793
72,024
(2,273)
122,552
948
-
1,590
194,841
72,024
(2,273)
122,552
948
-
1,590
194,841
-
-
(9,557)
-
-
-
(9,557)
Other comprehensive income, net of tax
-
-
-
-
678
-
678
Total comprehensive (loss) / income
-
-
(9,557)
-
678
-
(8,879)
Shares purchased as reserve shares
-
(668)
-
-
-
-
(668)
Share gift issued - gift
Share gift plan provision
at 30 June 2016
-
-
1,120
-
(688)
-
-
432
-
-
72,024
(1,821)
112,995
1,327
1,587
-
678
-
1,327
1,590
187,053
Notes to the financial statements are included on pages 43 to 76.
41
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
42
notes to the ConsoliDateD finanCial statements
fOR ThE fINANCIAL YEAR ENdEd 30 JUNE 2016
Note
Content
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
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
Reserved Shares and Other Reserves
Loss / 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
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.
02 appliCation of neW anD reviseD aCCounting stanDarDs
In the current year, the Group has applied all amendments to AASBs issued by the Australian Accounting Standards Board (AASB)
that are mandatorily effective for an accounting period that begins on or after 1 July 2015, and therefore relevant for the current year
end. The most relevant amendment is noted below. The application of these amendments does not have any material impact on the
disclosures or the amounts recognised in the Group’s consolidated financial statements.
AASB 2015-3 ‘Amendments to Australian Accounting Standards arising from the
Withdrawal of AASB 1031 Materiality’
This amendment completes the withdrawal of references to AASB 1031 in all
Australian Accounting Standards and Interpretations, allowing that Standard to
effectively be withdrawn.
APPLICATION Of NEW ANd REVISEd ACCOUNTINg STANdARdS NOT YET EffECTIVE
At the date of authorisation of the financial statements, the Standards and Interpretations that were issued but not yet effective are
listed below. The potential impact of these Standards and Interpretations has not yet been fully determined. The Group does not
intend to adopt any of these announcements before their effective dates.
Standard/Interpretation
Effective for annual reporting
periods beginning on or after
Expected to be initially applied
in the financial year ending
AASB 9 ‘Financial Instruments’, and the relevant amending standards
1 January 2018
30 June 2019
AASB 15 ‘Revenue from Contracts with Customers’, AASB 2014-5 ‘Amendments to Australian
Accounting Standards arising from AASB 15’, AASB 2015-8 ‘Amendments to Australian
Accounting Standards – Effective date of AASB 15’
AASB 16 ‘Leases’
AASB 2014-3 ‘Amendments to Australian Accounting Standards – Accounting for Acquisitions
of Interests in Joint Operations’
AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of Acceptable
Methods of Depreciation and Amortisation’
1 January 2018
30 June 2019
1 January 2019
1 January 2016
30 June 2020
30 June 2017
1 January 2016
30 June 2017
At the date of report, there are no pronouncements approved by the IASB/IFRIC that have yet to be issued by the AASB.
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.
43
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
44
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:
04 revenues anD expenses
fOR ThE fINANCIAL YEAR ENdEd 30 JUNE 2016
IMPAIRMENT Of gOOdWILL
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill
has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-
generating unit and a suitable discount rate in order to calculate present value.
The carrying amount of goodwill at the balance date was $518 thousand (2015: $7,133 thousand) after recognizing an impairment
charge of $6,615 thousand during the year (2015: nil). Note 9 provides more information.
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.
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.
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.
other revenue
Training income
Engineering services
Insurance claim
Other income
Finance income
Interest
other losses
Net foreign currency loss
Gain / (loss) on disposal of property, plant and equipment
Salaries and employee-related costs
Wages and salaries (including bonus – profit share scheme)
Workers’ compensation costs
Superannuation costs - defined contribution plan
Expense of share-based payments
office and general administrative costs
Bad debts written-off
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 4.3% per annum for finance leases.
Depreciation and amortisation
Depreciation and amortisation of property, plant and equipment
Amortisation of development costs and software
impairment
Asset impairment
Goodwill impairment
Lease payments included in consolidated statement of profit or loss
Included in flight and port operation costs
Minimum lease payments – operating lease
2016
$’000
2015
$’000
1,557
2,347
701
123
148
144
3,695
5,056
6,101
7,670
721
849
721
849
(345)
(1,116)
95
(50)
(250)
(1,166)
(93,716)
(91,205)
(987)
(968)
(6,971)
(6,998)
(1,327)
(793)
(103,001)
(99,964)
(80)
(108)
(80)
(108)
(2,464)
(2,926)
293
755
(2,171)
(2,171)
(15,796)
(15,527)
(340)
(348)
(16,136)
(15,875)
(8,344)
-
(6,615)
-
(14,959)
-
(231)
-
(231)
-
45
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
46
05 inCome tax
INCOME TAX RECOgNISEd IN PROfIT OR LOSS
Tax expense comprises:
Current tax expense
Prior period tax expense
Deferred tax (benefit) / expense relating to the origination and reversal of temporary
differences
2016
$’000
2015
$’000
1,391
1,109
283
-
(2,820)
1,515
Tax (benefit) / expense
(1,146)
2,624
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:
(Loss) / profit before tax from operations
(10,703)
9,296
Tax (benefit) / expense calculated at 30%
Tax on non deductible expense / (non assessable income)
Prior period tax expense
Previously unrecognised and unused tax losses and tax offsets now recognised as deferred
tax assets
(3,211)
2,789
1,918
(13)
283
-
(136)
(152)
Tax (benefit) / expense
(1,146)
2,624
The effective tax rates are as follows:
(10.7%)
28.2%
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.
2016
$’000
2015
$’000
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
1,069
-
1,069
-
7,499
4,611
7,499
4,611
(8,306)
(7,404)
(8,306)
(7,404)
net deferred tax assets / (liabilities)
(807)
(2,793)
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
30 June 2016
Gross deferred tax liabilities
Inventories
Other items
Gross deferred tax assets
Employee-related provisions
Provision for doubtful debts
Other items
(5,426)
(1,978)
(7,404)
(484)
(418)
-
-
-
-
(902)
-
-
2,571
9
2,031
4,611
102
-
-
-
-
-
2,786
-
-
2,888
-
-
net deferred tax
(2,793)
1,986
-
-
30 June 2015
Gross deferred tax liabilities
Inventories
Other items
Gross deferred tax assets
Employee-related provisions
Provision for doubtful debts
Other items
(4,339)
(2,096)
(6,435)
(1,087)
-
-
118
-
-
(969)
-
-
2,482
9
2,666
5,157
89
-
-
-
-
-
(635)
-
-
(546)
-
-
net deferred tax
(1,278)
(1,515)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,910)
(2,396)
(8,306)
2,673
9
4,817
7,499
(807)
(5,426)
(1,978)
(7,404)
2,571
9
2,031
4,611
(2,793)
Deferred tax assets of $99 thousand (2015: $356 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
non-current
Other receivables – at amortised cost
2016
$’000
2015
$’000
5,237
7,347
(31)
(31)
5,206
7,316
2,816
2,829
1,604
1,597
9,626
11,742
7,448
7,966
7,448
7,966
47
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
48
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
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
2016
$’000
2015
$’000
-
4
-
82
-
86
30
283
(31)
(31)
(31)
(31)
-
-
-
-
(31)
(31)
(31)
(31)
2016
$’000
2015
$’000
22,964
20,170
Opening gross
carrying amount
$’000
Additions
$’000
Disposals /
Reclassification
$’000
Impairment
$’000
Closing gross
carrying amount
$’000
195,944
2,686
(4,286)
-
194,344
08 propertY, plant anD eQuipment
at 30 June 2016
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
63,302
12,598
(4,402)
5,522
1,684
(1,035)
10,952
764
(238)
29,911
1,750
22
Leasehold improvements
1,327
103
(22)
Motor vehicles
Furniture and fittings
Computer equipment
2,436
127
(60)
1,072
57
(21)
2,127
242
(29)
Other property, plant and equipment
116,649
17,325
(5,785)
Total property, plant and equipment
312,593
20,011
(10,071)
at 30 June 2015
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
56,348
9,570
(2,616)
8,527
698
(3,703)
12,804
943
(2,795)
31,212
198
(1,499)
Leasehold improvements
1,274
53
-
Motor vehicles
Furniture and fittings
Computer equipment
2,350
86
-
1,365
9
(302)
2,164
302
(339)
Other property, plant and equipment
116,044
11,859
(11,254)
Total property, plant and equipment
309,961
13,912
(11,280)
-
-
-
-
-
-
-
-
-
-
71,498
6,171
11,478
31,683
1,408
2,503
1,108
2,340
128,189
322,533
-
-
-
-
-
-
-
-
-
-
63,302
5,522
10,952
29,911
1,327
2,436
1,072
2,127
116,649
312,593
193,917
2,053
(26)
-
195,944
49
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
50
08 propertY, plant anD eQuipment (ContinueD)
Opening
accumulated
depreciation and
impairmen
$’000
Disposals /
Reclassification
$’000
Depreciation
charge for the year
$’000
Impairment
$’000
Closing
accumulated
depreciation and
impairment
$’000
(69,957)
2,610
(10,081)
(8,344)
(85,772)
(15,972)
4,294
(2,870)
-
(14,548)
(2,374)
334
(481)
-
(2,521)
(5,085)
63
(1,096)
-
(6,118)
(4,583)
-
(768)
-
(5,351)
at 30 June 2016
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
Leasehold improvements
(1,154)
-
(42)
-
(1,196)
Motor vehicles
Furniture and fittings
Computer equipment
(1,223)
38
(188)
-
(1,373)
(880)
19
(80)
-
(941)
(1,671)
16
(190)
-
(1,845)
Other property, plant and equipment
(32,942)
4,764
(5,715)
-
(33,893)
Total property, plant and equipment
(102,899)
7,374
(15,796)
(8,344)
(119,665)
at 30 June 2015
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
(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)
Leasehold improvements
(1,063)
-
(91)
-
(1,154)
Motor vehicles
Furniture and fittings
Computer equipment
(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 2016
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
125,987
108,572
47,330
3,148
5,867
25,328
173
1,213
192
456
83,707
56,950
3,650
5,360
26,332
212
1,130
167
495
94,296
Total property, plant and equipment
209,694
202,868
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
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
Aircraft impairment of $8,344 thousand has been recognised for the year ended 30 June 2016 (2015: nil). See Note 9 for details.
51
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
52
09 gooDWill anD other intangiBle assets
at 30 June 2016
Cost
Accumulated amortisation
net carrying amount
Total goodwill and other intangible assets
reconciliation
At 1 July 2015, net of accumulated amortisation
Additions
Impairment
Amortisation at 30 June 2016
at 30 June 2015, net of accumulated amortisation
Total goodwill and other intangible assets
at 30 June 2015
Cost
Accumulated amortisation
net carrying amount
Total goodwill and other 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 other intangible assets
Goodwill
$’000
518
-
518
7,133
-
(6,615)
-
518
7,133
-
7,133
7,133
-
-
7,133
Software and
development costs
$’000
2,344
(1,836)
508
1,026
760
88
-
(340)
508
1,026
2,276
(1,516)
760
7,893
980
128
(348)
760
7,893
IMPAIRMENT TESTINg Of gOOdWILL ANd NON-CURRENT ASSETS
The Group has identified the following Cash Generating Units (CGUs) for the purposes of assessing the carrying value of the
Group’s assets:
• Air Link Pty Limited (Air Link)
• Pel-Air Aviation Pty Limited (Pel-Air)
• Regional Express Holdings Limited (Rex)
Goodwill has been allocated for impairment testing purposes to the CGUs as follows:
Air Link
Pel-Air
2016
$’000
518
-
2015
$’000
518
6,615
518
7,133
The contract between Pel-Air and the Australian Defence Force ended and was not renewed. As a result of the non-renewal of this
contract, the Group considered there to be an indicator of impairment in Pel-Air CGU and undertook a review of the recoverable
amounts of Pel-Air CGU determined through a value in use calculation detailed at (A) below. As a result of the impairment testing
performed, the Group assessed that the recoverable amount was less than the carrying value of the assets and accordingly an
impairment charge of $6,615 thousand relating to the Goodwill previously held in Pel-Air has been recognised.
In addition to the above, certain aircraft assets which were used in the Australian Defence Force contract are idle. The recoverable
amount of these aircraft has been measured using fair value less cost to sell and an impairment of $8,344 thousand has been
recognised. Note (B) below provides more information.
(A)
VALUE-IN-USE: REX ANd PEL-AIR CgUS
The value in use calculations 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
each CGU.
(B)
fAIR VALUE LESS COST TO SELL : AIRCRAfT ASSETS
Certain aircraft assets which were utilised in the Australian Defence Force contract are idle and as at balance date are not generating
cash flows. Accordingly these have been recognised on a fair value less cost to sell basis. This has been determined based on
historical sales price information for comparable aircraft, less historical aircraft brokerage commissions.
An impairment relating to the carrying value of these aircraft assets of $8,344 thousand has been recognised in profit and loss.
KEY ASSUMPTIONS
The following key assumptions were used in determining the value-in-use valuation models for the Rex and Pel-Air CGUs:
Key Assumptions
(i) Discount rate
(ii) Revenue growth
(iii) Fuel cost escalation
(iv) Operating cost escalation
Rex CGU
11.0%
1.5%
1.0%
1.5%
Pel-Air CGU
10.5%
1.5%
1.0%
1.5%
(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
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.
SENSITIVITY ANALYSIS
The Group has performed a sensitivity analysis by considering reasonable changes in key assumptions, including discount rate,
revenue growth, operating cost escalation, fuel cost escalation and capital expenditure.
The changes in the following table to assumptions used in the impairment review would, in isolation, lead to a reduction of or additional
impairment charge in the year ended 30 June 2016. Changes in one assumption could be accompanied by a change in another
assumption, which may increase or decrease the recoverable amount of the CGU.
Post tax discount rate %
Revenue %
Operating cost escalation %
Fuel cost escalation %
Capital expenditure %
Rex
Pel-Air
Increase/
Decrease by
0.5%
0.5%
0.5%
0.5%
5.0%
Increase
$’000
(6,223)
31,608
(24,687)
(4,724)
(2,772)
Decrease
$’000
6,902
(31,179)
24,352
4,640
2,772
Increase
$’000
(623)
234
(1,170)
(19)
(208)
Decrease
$’000
640
(234)
1,155
19
208
53
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
54
10 traDe anD other paYaBles
Current
Trade payables
Other payables
Total
2016
$’000
15,461
10,451
25,912
2015
$’000
13,785
9,342
23,127
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
Effective
interest rate %
9.1%
4.3%
9.1%
4.3%
2016
$’000
19,283
58
19,341
2016
$’000
2,935
3,706
6,641
14,805
8,833
23,638
2015
$’000
17,718
490
18,208
2015
$’000
2,676
6,524
9,200
17,740
8,489
26,229
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 Saab aircraft. The aircraft has been part of the operational fleet and was acquired at their
lease end in March 2014. During the year, the Group refinanced and extended lease terms for the purchase of a number of aircraft.
The refinanced leases expire in August 2019.
The liabilities are secured over the assets being funded, the carrying value of which exceeds the outstanding liabilities.
13 provisions
Current
Employee benefits
Profit share, pilot retention bonus
Annual leave and long service leave
non-current
Employee benefits
Long service leave
Total employee benefits provisions
profit share, pilot retention bonus
Balance at the beginning of the year
Arising during the year
Utilised
Pilot share gift transfer to equity
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
balance at 30 June
2016
$’000
2015
$’000
1,911
1,688
3,502
3,730
5,413
5,418
1,857
1,115
7,270
6,533
2,786
2,821
1,160
1,433
(1,603)
(1,468)
(432)
-
1,911
2,786
4,845
6,728
7,586
5,526
(7,072)
(7,409)
5,359
4,845
2016
No. ’000
110,155
110,155
$’000
No. ’000
$’000
2015
72,024
72,024
110,155
110,155
72,024
72,024
Share units held as reserved shares by subsidiary company was 1,308,911 (2015: 1,594,063).
15 reserveD shares anD other reserves
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 FY 06.
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 Remunerations, Nominations and Disciplinary 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.
55
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
56
Cash flow hedge reserve
Balance at 1 July
Revaluation of cash flow hedges, net of tax
balance at 30 June
General reserve
Balance at 1 July
Movement during the period
balance at 30 June
Total other reserves
1,590
1,590
-
-
1,590
1,590
2,268
1,590
The cash flow hedge reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The
cumulative deferred gain or loss on the hedge is recognised in profit or loss when the hedged transaction impacts the profit or loss,
or is included as a basis adjustment to the non-financial hedged item, consistent with the applicable accounting policy.
The general reserve is used from time to time to transfer profits from retained profits. There is no policy of regular transfer.
16 loss / earnings per share
Basic (loss) / earnings per share
Diluted (loss) / earnings per share
2016
Cents per share
(8.8)
(8.8)
The (loss) / earnings used in the calculation of basic and diluted (loss) / earnings per share are as follows:
Net (loss) / profit
(Loss) / earnings used in the calculation of basic (loss) / earnings per share
(Loss) / earnings used in the calculation of diluted (loss) / earnings per share
2016
$’000
(9,557)
(9,557)
(9,557)
2015
Cents per share
6.2
6.2
2015
$’000
6,672
6,672
6,672
The weighted average number of ordinary shares used in the calculation of basic and diluted (loss) / earnings per share are as follows:
2016
$’000
2015
$’000
-
-
678
-
18 Commitments for expenDiture
(A) CAPITAL EXPENdITURE COMMITMENTS
678
-
Not later than one year
Later than one year and not later than five years
2016
$’000
7,053
-
7,053
2015
$’000
-
6,200
6,200
The construction of an office and catering facility next to the Group’s head office on Baxter Road commenced during the year. The
Group undertook to purchase a hangar in Wagga Wagga for $2.8 million. Both commitments will be completed in FY 17.
(B) fINANCE LEASE LIABILITIES
During the year, the Group purchased a number of aircraft under finance leases. The leases expire in August 2019. 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.
During the year, the leases were refinanced where repayment frequency was converted from monthly to quarterly for principal and
interest, and interest was converted from fixed to variable rate.
The fair value of the finance lease liabilities is approximately equal to their carrying amount.
Minimum lease payments
Present value of minimum lease payments
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
2016
$’000
4,140
9,314
13,454
(915)
12,539
2015
$’000
7,144
8,771
15,915
(902)
15,013
2016
$’000
3,706
8,833
12,539
-
12,539
3,706
8,833
12,539
2015
$’000
6,524
8,489
15,013
-
15,013
6,524
8,489
15,013
Weighted average number of ordinary shares for the purpose of basic (loss) / earnings per share
Weighted average number of ordinary shares for the purpose of diluted (loss) / earnings per share
17 DiviDenDs
2016
No. ‘000
108,447
108,447
2015
No. ‘000
108,457
108,457
19 Contingent liaBilities anD Contingent assets
There are no contingent liabilities nor contingent assets as at 30 June 2016 (2015: nil).
In respect of financial year ended 30 June 2016, the directors have recommended no dividends to be paid out given the continued
difficult 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 / (receivable) as at the end of financial year
2016
$’000
2015
$’000
33,705
35,048
1,069
(96)
57
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
58
20 suBsiDiaries
Name of entity
parent entity
Regional Express Holdings Limited
Subsidiaries
Regional Express Pty Limited
Rex Freight & Charter Pty Limited
Rex Investment Holdings Pty Limited
Air Link Pty Limited
Pel-Air Aviation Pty Limited
Australian Airline Pilot Academy Pty Limited
VAA Pty Ltd
AVIEX Pty Ltd
Country of incorporation
Ownership Interest
2016
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
2015
%
100
100
100
100
100
100
100
100
Regional Express Holdings Limited is the head entity within the tax-consolidated group. These subsidiary companies are members of
the tax-consolidated group.
21 aCQuisition of Business
No business was acquired during the year.
22 notes to the ConsoliDateD statement of Cash floWs
(A) RECONCILIATION Of CASh ANd CASh EqUIVALENTS
For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in banks and investments in
money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown
in the statement of cash flows is reconciled to the related items in the statement of financial position as follows:
Cash and bank balances
2016
$’000
26,821
(B) RECONCILIATION Of (LOSS) / PROfIT fOR ThE YEAR TO NET CASh fLOWS fROM OPERATINg ACTIVITIES
(Loss) / profit for the year
Depreciation and amortisation
Asset impairment
Goodwill impairment
Share-based payment
Unrealised foreign exchange (gain) / loss
(Gain) / loss on disposal of non-current assets
Interest received and receivable
Decrease in receivables
Increase in inventories
Increase in other financial assets
(Decrease) / increase in deferred tax
Increase / (decrease) in current tax payable
Increase in other financial liabilities
Increase / (decrease) in trade payables
Increase / (decrease) in provisions
Increase in other liabilities
net cash flows from operating activities
(C) fINANCINg fACILITIES
Maximum facilities available and reviewed annually:
Loan facility (fund aircraft purchases)
Leases (fund aircraft purchases)
Tape negotiations authority
Letter of credit
Set off
Guarantee
Credit card
2015
$’000
23,360
2015
$’000
6,672
15,875
-
-
793
67
50
(849)
5,515
(798)
-
1,515
(333)
-
(1,820)
(3,016)
-
2016
$’000
(9,557)
16,136
8,344
6,615
1,327
(55)
(95)
(721)
2,634
(2,794)
(1,105)
(1,814)
993
136
6,969
737
678
28,428
23,671
2016
Used
$’000
17,743
12,556
2,500
-
-
3,829
52
36,680
Limit
$’000
17,976
13,000
2,900
559
1,000
3,937
620
39,992
2015
Used
$’000
20,423
15,081
200
-
-
3,442
45
39,191
Limit
$’000
20,635
19,733
2,900
559
1,000
3,937
620
49,384
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.
59
REGIONAL EXPRESS HOLDINGS LIMITED
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60
23 finanCial instruments
(A) CAPITAL RISK MANAgEMENT
The Group manages its capital to ensure that the entities in the Group will be able to continue as a going concern while maximising
the return to stakeholders.
The Group’s overall strategy remains unchanged from 2015.
(C)
fINANCIAL RISK MANAgEMENT OBJECTIVES
The Group is exposed to foreign exchange, fuel price, interest rate and liquidity risk. Management of these risks is governed by the
Group’s policy approved by the Board of Directors, which provides written principles on the management of financial risks. 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 financial risks from time to time, is managed by the Group’s Corporate Services
Department and reports regularly to the Board and Audit and Corporate Governance Committee.
The capital structure of the Group consists of debt as disclosed in Note 12 and attributable to equity holders of the parent comprising
issued capital, reserves as disclosed in Notes 14, 15 respectively, and retained earnings.
(d)
fOREIgN CURRENCY RISK MANAgEMENT
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 FY 10, and $4 million during FY 11. At the end of FY 11, 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 FY 14, 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.
The net cash position at the end of the financial year was as follows:
Debt (i)
Cash and cash equivalents
Net debt
Equity (ii)
2016
$’000
2015
$’000
30,279
35,429
26,821
23,360
3,458
12,069
187,053
194,841
Net debt to equity ratio
1.8%
6.2%
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
2016
$’000
2015
$’000
Assets
2016
$’000
2015
$’000
3,427
2,419
-
-
fOREIgN CURRENCY SENSITIVITY ANALYSIS
The Group is mainly exposed to USD for the following main purchases, approximate amounts per annum are:
• USD 21 million for engineering purchases
• USD 14 million for engine care and maintenance
• USD 4 million for airline reservation systems usage
• USD 1 million for aircraft insurance policies
• USD 1 million for operating leases
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. For a weakening of the Australian Dollar against the respective currency there would
be an equal and opposite impact on the profit and other equity, and the balances below would be negative.
Profit or loss
The Group’s sensitivity to foreign currency has remained constant.
fORWARd fOREIgN EXChANgE CONTRACTS
2016
$’000
2015
$’000
470
320
(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
Financial assets
Loans and receivables
Cash and bank balances
Derivative financial instruments
Available-for-sale financial assets
Financial liabilities
Amortised cost
Derivative financial instruments
2016
$’000
2015
$’000
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.
15,470
18,111
26,821
23,360
1,105
-
9
10
(E) fUEL PRICE RISK MANAgEMENT
The Group uses jet fuel swap contracts to hedge exposure to movements in the price of aviation fuel. Jet fuel swaps are taken out
hedge exposures to a maximum of 12 months in accordance with the Group’s risk management policies. The group uses fuel swaps
linked to the Platts Singapore Kerosene benchmark to hedge exposures to jet fuel.
The following table sets out the timing of the notional amount and the hedged jet fuel price of the Group’s fuel hedging instruments:
Hedged price
$ per
Notional amount
L’000
Less than 1 year
L’000
1 to 2 years
L’000
2 to 5 years
L’000
56,191
58,556
136
-
2016
AUD fuel costs
0.5088
30,000
30,000
-
-
61
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
62
The following table details the sensitivity of the Group’s financial assets and liabilities to a 20% increase and 20% decrease in the jet fuel
price. A positive number indicates an increase in profit or loss and other equity where the jet fuel price weakens. For an increase in the
jet fuel price there would be an equal and opposite impact on the profit and other equity, and the balances below would be negative.
This analysis assumes that all other variables remain constant and based on the designated hedge relationship at the reporting date.
(I)
fAIR VALUE Of fINANCIAL INSTRUMENTS
Except as disclosed below, 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.
20% increase
20% decrease
(J)
fAIR VALUE hEIRARChY
2016
Derivative asset – jet fuel swap
Derivative liability – jet fuel swap
Carrying amount
$’000
Profit/(loss)
$’000
1,015
(136)
969
-
-
-
Equity
$’000
2,978
73
3.051
Profit/(loss)
$’000
-
-
-
Equity
L’000
(2,978)
(73)
(3,051)
(f) 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.
(g) 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.
(h) 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.
LIqUIdITY ANd INTEREST RISK TABLES
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The amounts disclosed
are based on the contractual undiscounted principal and interest cash flows of financial liabilities based on the earliest date on which
the Group can be required to pay. The table includes both interest and principal cash flows.
1 month
$’000
1-3 months
$’000
3 months to a year
$’000
1-5 years
$’000
5+ years
$’000
2016
Non-interest bearing
Interest bearing
2015
Non-interest bearing
Interest bearing
25,912
-
-
-
-
369
1,774
6,429
27,040
26,281
1,774
6,429
27,040
-
-
23,127
-
-
-
-
964
1,929
8,679
26,501
4,431
24,091
1,929
8,679
26,501
4,431
The table below analyses financial instruments carried at fair value. The different levels have been defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
• There were no transfers between levels during the year.
2016
Financial assets carried at fair value
Derivative asset – jet fuel swap
Financial liabilities carried at fair value
Derivative liability – jet fuel swap
Level 1
$’000
-
-
Level 2
$’000
1,105
(136)
Level 3
$’000
-
-
Total
$’000
1,105
(136)
For financial instruments not quoted in active markets, the Group uses valuation techniques such as present value, comparison to
similar instruments for which market observable prices exist and other relevant models used by market participants. These valuation
techniques use both observable and unobservable market inputs.
Fuel swap hedging contracts are financial instruments that use valuation techniques with only observable market inputs and are
included in Level 2 above. Future cash flows are estimated based on forward rates (from observable forward rates at the end of the
reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.
The Group does not have any Level 3 financial instruments.
24 KeY management personnel Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out below:
Short-term benefits
Post-employment benefits
Other long-term benefits
Share-based payment
2016
$
1,795,312
159,860
27,326
26,726
2,009,224
2015
$
1,539,549
139,726
22,750
25,522
1,727,547
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
The interest-bearing liabilities have a weighted average effective interest rate of 9.1% per annum for the 10-year bank loan (FY 12 to
FY 21), and 4.3% per annum for the bank finance leases maturing in August 2019
(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.
63
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
64
26 remuneration of auDitors
Audit and review of the consolidated financial statements
Other non-audit services - tax compliance, tax advice
The auditor of the Group is Deloitte Touche Tohmatsu.
2016
$’000
285,075
73,617
358,692
2015
$’000
265,000
68,560
333,560
27 events after the reporting perioD
The Regional Express Pilots Enterprise Agreement (EA) was voted in on 23 July 2016. On 18 August 2016, the last remaining EA, the
Regional Express Engineers Agreement was voted in.
Rex has introduced its fully in-house designed Electronic Flight Bags (EFB) across its entire Saab 340 fleet in the Rex Group. The
EFB allows the electronic capture of data on aircraft cycles, flight times, engine trend monitoring, aircraft flow management and pilot
flight times. This will provide significant efficiencies in accurately collecting critical data for both Engineering and Flight Operations. Rex
received CASA approval for the EFB on 15 July 2016. This is the first time in the world that an EFB has been approved for Saab 340
aircraft operations.
Upcoming development will see the EFB loaded with Pilot Airway documents, aircraft load control and performance data, flight
planning and weather related applications and the full suite of company manuals which will significantly improve operational efficiencies
as well as safety.
28 segment information
The following is an analysis of the Group’s revenue and results by reportable operating segment for the year:
Continuing operations
Regular public transport
Charter
Finance income
Other losses
Central administration costs and directors’ salaries
Finance costs
(Loss) / profit before tax
Tax benefit / (expense)
Revenue
2016
$’000
2015
$’000
Segment result
2016
$’000
2015
$’000
237,044
221,467
3,871
12,426
24,862
34,750
(5,784)
5,878
261,906
256,217
(1,913)
18,304
721
849
(250)
(1,166)
(7,090)
(6,520)
(2,171)
(2,171)
(10,703)
9,296
1,146
(2,624)
Consolidated segment revenue and profit
261,906
256,217
(9,557)
6,672
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:
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.
Continuing operations
Regular public transport
Charter
Total assets / liabilities
The Group’s reportable segments under AASB 8 are as follows:
• Regular public transport
• Charter
The accounting policies of the reportable segments are the same as the Group’s accounting policies.
Other segment information for the year is as follows:
Depreciation and amortisation
Additions to non-current assets
Continuing operations
Regular public transport
Charter
2016
$’000
10,557
5,579
16,136
2015
$’000
10,063
5,812
15,875
2016
$’000
19,664
435
20,099
Assets
2016
$’000
208,558
63,309
271,867
2015
$’000
205,064
75,867
280,931
Liabilities
2016
$’000
50,573
34,241
84,814
2015
$’000
45,232
40,858
86,090
2015
$’000
13,553
487
14,040
65
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
66
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
Cash flow hedge reserve
General reserve
Total equity
(b) FinanCiaL pErFormanCE
Profit for the year
Other comprehensive income
Total comprehensive income
2016
$’000
2015
$’000
47,443
40,840
165,230
162,561
212,673
203,401
50,794
44,642
2,314
591
53,108
45,233
72,024
72,024
85,165
85,119
1,382
709
678
-
316
316
159,565
158,168
46
191
678
-
724
191
(C)
gUARANTEES ENTEREd INTO BY ThE PARENT ENTITY IN RELATION TO ThE dEBTS Of ITS SUBSIdIARIES
During FY 11, 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 2016, no contingent liabilities or assets existed (2015: nil).
(E)
COMMITMENTS fOR ThE ACqUISITION Of PROPERTY, PLANT ANd EqUIPMENT BY ThE PARENT ENTITY
During FY 15, the parent entity undertook to construct an office and catering facility next to the head office on Baxter Road. Construction
commenced during the year, and would be completed in the next FY 17.
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 17 August 2016.
(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;
• potential voting rights held by the Company, other vote holders or other parties;
• 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.
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68
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.
(d)
REVENUE
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for rebates and other
similar allowances.
RENdERINg Of SERVICES
Revenue from providing air passenger, 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
(h)
dERIVATIVE fINANCIAL INSTRUMENTS
The Group enters into jet fuel swap derivatives to hedge exposures to jet fuel prices. It is the Group’s policy not to enter into or hold
derivative financial instruments for speculative trading purposes. Derivative financial instruments are recognised at fair value both
initially and on an ongoing basis. Transaction costs attributable to the derivative are recognised in profit or loss when incurred.
hEdgE ACCOUNTINg
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash flow hedges). At the inception of
the hedge, the Group documents the relationship between hedging instruments and hedged items, including the risk management
objective and strategy for undertaking each hedge. The Group also documents its assessment, both at hedge inception and on an
ongoing basis, of whether the hedging instruments that are used in hedge transactions have been and will continue to be highly
effective.
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.
Any derivative financial instruments not designated into an effective hedge relationship are classified as a current asset or a current
liability at fair value through profit and loss.
(I)
EMPLOYEE BENEfITS
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick
leave when it is probable that settlement will be required and they are capable of being measured reliably.
Liabilities recognised in respect of short term employee benefits are measured at their nominal values using the remuneration rate
expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated future cash
outflows to be made by the Group in respect of services provided by employees up to reporting date.
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.
(J)
fINANCIAL INSTRUMENTS
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).
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.
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EffECTIVE INTEREST METhOd
dERECOgNITION Of fINANCIAL ASSETS
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected
life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through
profit or loss’.
fINANCIAL ASSETS AT fAIR VALUE ThROUgh PROfIT OR LOSS
Financial assets are classified as financial assets at fair value through profit or loss where the financial asset:
(i)
(ii)
has been acquired principally for the purpose of selling in the near future;
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
(iii)
is a derivative that is not designated and effective as a hedging instrument.
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss.
The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.
Fair value is determined in the manner described in Note 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.
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.
(K)
fINANCIAL LIABILITIES ANd EqUITY INSTRUMENTS
CLASSIfICATION Of dEBT OR EqUITY
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual
arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity Instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
fINANCIAL LIABILITIES
Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.
LOANS ANd RECEIVABLES
fINANCIAL LIABILITIES AT fAIR VALUE ThROUgh PROfIT OR LOSS
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.
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.
Interest is recognised by applying the effective interest rate.
IMPAIRMENT Of fINANCIAL ASSETS
OThER fINANCIAL LIABILITIES
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
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.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense
recognised on an effective yield basis.
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.
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.
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72
(M)
gOVERNMENT gRANTS
dEfERREd TAX
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 gOOd WILL
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-
generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and
whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount
of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately,
unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A
reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case
the reversal of the impairment loss is treated as a revaluation increase.
(O)
TAXATION
Income tax expense represents the sum of the tax currently payable and deferred tax.
CURRENT TAX
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the
consolidated [statement of profit or loss and other comprehensive income/statement of profit or loss] because of items of income or
expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current
tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax 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
(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.
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74
(R)
LEASINg
(T)
PROVISIONS
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.
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.
gROUP AS LESSOR
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs
incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a
straight line basis over the lease term.
gROUP AS LESSEE
Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the
minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the
statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are recognised immediately in profit and loss, unless they are directly
attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs.
Refer to Note 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.
The rates applied are as follows:
Aircraft
Building
Computer Equipment
Engines
Furniture & Fittings
Leasehold Improvements
Motor Vehicles
Plant & Equipment
15,000 to 60,000 hours
20 to 30 years
4 to 5 years
10 to 20 years
8 to 10 years
over the unexpired lease period
7 years
8 years
Rotable Assets
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.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting
date, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cashflows
estimated to settle the present obligation, its carrying amount is the present value of those cashflows (where the effect of the time
value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the
receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be
measured reliably.
(U)
ShARE-BASEd PAYMENTS
Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity
instrument at the grant date. Details regarding the determination of the fair value of the equity-settled share-based transactions are
set out in Note 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.
ii.
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
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and
financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
75
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
76
dIRECTORS’ dECLARATION
The directors declare that:
(a)
when they become due and payable;
in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and
(b)
the consolidated financial statements;
the attached financial statements are in compliance with International Financial Reporting Standards, as stated in Note 30 to
(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.
On behalf of the Directors
Neville Howell
Chief Operating Officer
Sydney, 24 August 2016
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 consolidated statement of financial position as at 30 June 2016, the
consolidated statement of profit or loss, consolidated statement of other comprehensive
income or loss, the consolidated statement of cash flows and the consolidated 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 38 to 77.
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,
financial statements comply with
International Financial Reporting Standards.
the consolidated
that
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.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited.
77
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS HOLDINGS LIMITED
78
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001. We confirm that the independence declaration required by the
Corporations Act 2001, which has been given to the directors of Regional Express
Holdings Limited, would be in the same terms if given to the directors as at the time of
this auditor’s report.
Opinion
In our opinion:
(a) the financial report of Regional Express Holdings Limited is in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30
June 2016 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001; and
(b) the consolidated financial statements also comply with International Financial
Reporting Standards as disclosed in Note 30.
Report on the Remuneration Report
We have audited the Remuneration Report included in Section 19 of the directors’ report
for the year ended 30 June 2016. The directors of the company are responsible for the
preparation and presentation of the Remuneration Report in accordance with section
300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Opinion
In our opinion the Remuneration Report of Regional Express Holdings Limited for the
year ended 30 June 2016, complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Jamie C. J. Gatt
Partner
Chartered Accountants
Sydney, 24 August 2016
79
REGIONAL EXPRESS HOLDINGS LIMITED
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
ASX AddITIONAL INfORMATION AS AT 22 SEPTEMBER 2016
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 2,184 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 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 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
707
1,044
184
193
56
2,184
429
Securities
387,818
2,836,560
1,466,557
5,961,991
99,501,449
110,154,375
139,685
Fully paid
number
18,998,346
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
REX INVESTMENT HOLDINGS PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
LAY KHIM NG
ANACACIA PTY LTD
STRATEGIC VALUE PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
PACIFIC CUSTODIANS PTY LIMITED
MR MICHAEL KARL KORBER
J P MORGAN NOMINEES AUSTRALIA LIMITED
MASTAR PTY LIMITED
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
MR THIAN SONG TJOA
ROPER CRESCENT INVESTMENTS PTY LTD
BRAZIL FARMING PTY LTD
81
REGIONAL EXPRESS HOLDINGS LIMITED
number
18,998,346
16,234,094
7,722,181
7,454,362
7,454,362
5,755,513
4,383,562
3,932,158
3,727,181
2,928,055
2,314,573
2,070,258
1,564,308
1,320,463
1,320,000
1,007,281
830,000
815,981
800,000
697,774
626,922
issued Capital (%)
0.35
2.58
1.33
5.41
90.33
100.00
0.13
percentage
17.25
14.74
7.01
6.77
6.77
5.22
percentage
17.25
14.74
7.01
6.77
6.77
5.22
3.98
3.57
3.38
2.66
2.10
1.88
1.42
1.20
1.20
0.91
0.75
0.74
0.73
0.63
0.57
Photo by Daniel Delgado