REGIONAL EXPRESS HOLDINGS LIMITED
1
REGIONAL EXPRESS VALUE STATEMENT
WHAT DOES IT PROFIT A COMPANY IF IT GAINS THE WHOLE WORLD...
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.
...AND LOSES ITS SOUL
•
Important decisions concerning staff matters are
always referred to the Management Committee to
ensure transparency, fairness and consistency.
We are committed to standing behind our staff members
and their families and will do all we can to help them in
their times of special need:
• We believe in the value of the family and will strive to
create a working environment that is supportive of
the family.
• All staff members have the right to appeal to the
Management Committee if special assistance or
consideration is needed.
CUSTOMER
We are committed to providing our customers with safe
and reliable air transportation with heartfelt hospitality.
As a regional carrier, we constantly strive to keep fares
low through our commitment to simplicity, efficiency and
good value.
to
We are committed
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.
that maximizing shareholders’
returns
We believe
in the long term is not incompatible with our duties
and responsibilities towards our other stakeholders
outlined above.
FOREWORD
SHIFTING WINDS
The Financial Year (FY) 19 started well, with strong momentum from the prior year, which had a 41% rise in earnings,
carrying into the first half of the FY2019. However, the Australian economy, in tandem with the rest of the world’s
economies, started faltering in November 2018 when the United States started imposing massive trade tariffs on
China. Rex was similarly affected and finished the 1H FY2019 with only 7.7% improvement while Qantas had a
16.3% reduction in profits.
The world economic situation worsened sharply in the 2H FY2019, with even more tariffs imposed by the United
States, oil prices spiralling upwards and extreme tensions at the Straits of Hormuz. The United States, which
was having a dream run in its economy, is also now facing a technical recession in its manufacturing, having had
two-quarters of negative growth. Singapore’s exports are at their lowest levels since the Global Financial Crisis,
and Australia’s third-quarter economic growth slowed to a decade low of 0.4% with the FY’s (already revised
downwards) outlook of 1.8% to be looking increasingly unachievable. It is no wonder that the Organisation for
Economic Co-operation and Development (OECD) has recently revised downwards by 20% its estimate of
world economic growth.
Not surprisingly, the majority of the major carriers worldwide are reporting steep
declines in profits. Singapore Airlines closed its financial year on 31 March 2019
with profits down by over 40% and reported a further 20% decline in the latest
quarter to 30 June 2019. Closer to home, QANTAS reported a 6.5% decrease
in profits.
In this backdrop, I am pleased that Rex is still able to maintain the same
level of profitability as the prior FY with the strong momentum of the first
half just about balancing the downward pressures of the second half.
Rex will not be spared the full brunt of the global headwinds in the
new FY, and our profits could be eroded by 15-20% as things stand.
However, with virtually no debt and very strong foundations, we
are confident that Rex will have the wherewithal to wait out this
slowdown just as Rex traversed the period following the Global
Financial Crisis while still making operational profits every year.
Not all is gloomy on the horizon. Surprisingly mining activities
seem to be re-gaining momentum, and there is a good chance
that the Group could pick up some additional charter operations.
Also, pilot training is still facing strong worldwide demand and
talks are underway with international partners to train more pilots
for international carriers at the Group’s pilot academy, AAPA,
based in Wagga Wagga.
Notwithstanding the very uncertain year ahead, the Board is
confident of the Group’s ability to continue to generate strong
positive cash flow in the new FY and has therefore recommended
a dividend of 8 cents per share.
The Board wishes to put on record its special vote of thanks to
Management and staff for their tireless efforts and sacrifices in
keeping the show going in this period of the continued pilot shortage.
Lim Kim Hai
Executive Chairman
23 August 2019
LIM KIM HAI
EXECUTIVE CHAIRMAN
CORPORATE
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 ($).
SOLICITOR
Baker & McKenzie
Level 27, AMP Centre
50 Bridge Street
Sydney, NSW 2000
BANKER
Westpac Banking Corporation
AUDITOR
Deloitte Touche Tohmatsu
DIRECTORS
Lim Kim Hai
The Hon. John Sharp AM
Lee Thian Soo
Neville Howell
Chris Hine
James Davis
Prof. Ronald Bartsch
COMPANY SECRETARIES
Irwin Tan
Benjamin Ng
Richard Kwan
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
CONTENTS
06 DIRECTORS’ REPORT
25 AUDITOR’S INDEPENDENCE
DECLARATION
29 CORPORATE GOVERNANCE STATEMENT
37 FINANCIAL STATEMENTS
37 CONSOLIDATED STATEMENT OF
PROFIT OR LOSS
38 CONSOLIDATED STATEMENT OF
OTHER COMPREHENSIVE INCOME OR LOSS
39 CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
40 CONSOLIDATED STATEMENT OF
CASH FLOWS
41 CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
42 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
79 DIRECTORS’ DECLARATION
80 INDEPENDENT AUDITOR’S REPORT
85 ASX ADDITIONAL INFORMATION
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
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 2019 (FY2019).
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, 27 November 2015 and 21 November 2018.
Mr Lim started his career as a Defence Engineer
specialising in underwater warfare. After ten
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.
from
the prestigious
Mr Lim obtained his Masters in Electronics
Engineering
‘Grande
Ecoles’ engineering colleges in France where
he was awarded a French Government
scholarship. He later returned to France to
complete a Masters of Public Administration
at the elite Ecole Nationale d’Administration in
Paris on a Singapore Government scholarship.
Mr Lim also holds a Masters of Business
Administration from the National University of
Singapore.
Mr Lim was one of the founding shareholders
and directors of Rex in August 2002. He has
been the Executive Chairman of the Rex Group
of companies since July 2003.
THE HON. JOHN SHARP AM
Deputy Chairman and
Independent Director
LEE THIAN SOO
Non-Executive Director
Appointed 14 April 2005 and re-appointed 19
November 2008, 23 November 2011, 27 November
2013 and 29 November 2016.
Appointed 27 June 2003 and re-appointed 16
November 2006, 25 November 2009, 27 November
2012, 27 November 2015 and 21 November 2018.
Mr Lee has extensive international business
experience and currently is the Chairman
and owner of a company supplying specialty
to
medical devices, systems and drugs
healthcare institutions in the ASEAN region.
Mr Lee was one of the founding shareholders
and directors of Rex in August 2002.
The Honourable John Sharp AM 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 Chairman of Pel-Air Aviation
Pty Ltd and is also a director of Power and Data
Corporation Pty Limited and a director of Lurssen
Australia and a director of the Australian Maritime
Shipbuilding Export Group.
Mr Sharp is a Trustee and Board Member of John
McKeown House. He was Honorary Federal
Treasurer, National Party of Australia from 1999
to 2017 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. Mr
Sharp 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 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.
Mr Sharp was named a Member of the Order of
Australia for significant service to the people and
Parliament of Australia, to the aviation industry,
and the community during Queen’s Birthday
Honours in June 2018.
6
REGIONAL EXPRESS HOLDINGS LIMITED
NEVILLE HOWELL
Chief Operating Officer
Appointed 1 July 2014 as Executive
Director, re-appointed 26 November
2014 and 21 November 2017.
Mr Howell has over 38 years of
aviation experience and has been with
the Company since its inception in
August 2002. He 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 General Manager 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
several aviation subjects and has
a Diploma of Aviation. He has held
many Civil Aviation Safety Authority
(CASA) delegations 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
the
Accountable Manager
Regional Express Air Operator
Certificate (AOC).
for
CHRIS HINE
Group Flight Operations Advisor
and 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,
and re-appointed 21 November 2017.
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 Executive Chairman of
the Australian Airline Pilot Academy.
Preceding 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
the
(Civil Aviation) degree at
University of South Australia.
JAMES DAVIS
Independent Director
PROF. RONALD BARTSCH
Independent Director
Appointed 26 August 2004 as Executive
Director.
Appointed Managing Director on 27
May 2008 and retired 1 July 2011.
Appointed 23 November 2011 as an
Independent Director, re-appointed 26
November 2014, and 21 November
2017.
26
years,
Engineering
subsequently
in
Mr Davis has a degree
Aeronautical
and
commenced his aviation career
the Civil Aviation Safety
with
Authority (CASA) before obtaining
his Air Transport Pilot Licence.
He
flew with
airlines in Australia and overseas
for
accumulating
some 12,500 flying hours. Mr
Davis joined Hazelton Airlines in
1999 as Flight Operations and
later
Standards Manager and
became Chief Pilot. He has been
with Rex since its inception 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
company Pel-Air Aviation Pty Ltd.
He is currently Chairman of the
Regional Aviation Association of
Australia (RAAA) and sits on the
board of Airports Coordination
Ltd.
Australia
(ACA)
Pty
Appointed 23 November 2010 and
re-appointed 23 November 2011, 26
November 2014, and
21 November 2017.
Professor Bartsch has over 40 years’
experience in the aviation industry
in a variety of senior operational,
safety and
roles. He
regulatory
was head of safety and regulatory
compliance
for Qantas Airways
Limited’s AOC and manager of the
Civil Aviation Safety Authority (CASA)
Sydney Airline Transport Field Office.
in
Professor Bartsch is an experienced
pilot and has extensive legal and
regulatory experience. He has formal
qualifications
law, education,
philosophy and science, and is the
author of the definitive legal textbook
on aviation law. Professor Bartsch
is an international aviation safety
consultant and visiting Professor
of International Aviation Law at the
University of South Pacific and the
College of Law at the Australian
National University and a Senior
Visiting Fellow with the School of
Aviation at the University of New
South Wales and the College of
Law at
the Australian National
University. He is a former aviation
specialist and Presiding Member of
the Administrative Appeals Tribunal
and author of several publications
including Aviation Law in Australia,
International Aviation Law and Drones
in Society and contributing aviation
author for The Laws of Australia.
REGIONAL EXPRESS HOLDINGS LIMITED
7
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 Services
e
MAYOORAN
THANABALASINGAM
General Manager, Information
Technology and Communications
Mr Howell is a member of the
Rex Management Committee. A
description of his qualifications,
skills and experience is included
on page 7.
for
the
team
Mr Lodge manages
scheduling,
responsible
pricing,
revenue management,
sales and commercial analysis.
His duties include the monitoring
of network performance and
analysis of both existing and new
market opportunities. Mr Lodge
has 27 years of regional airline
experience in the specialised areas
of scheduling, pricing and revenue
management and held the position
of Manager Network Planning with
Kendell Airlines, having joined that
company in 1992. Mr Lodge has
been with Rex since its inception in
2002 and is also a member of the
Rex Management Committee.
Tan’s
Mr
background was
originally in genetic research after
graduating with first-class honours
in biotechnology from the University
of New South Wales in Sydney.
Mr Tan left the field of genetic
research when he joined Morrison
Express Logistics in 1999 and then
Singapore Airlines in 2001. He was
later transferred to Singapore Airlines
Cargo as an executive where he
took on various appointments in
product development, advertising,
sales and airline alliances before
role of Regional
taking on
Marketing Manager for the South-
West Pacific region in 2003. Mr
Tan joined Rex in July 2005 and
was appointed
the Company
Secretary on 7 September 2005.
Mr Tan is also a member of the Rex
Management Committee.
the
including
Mr Thanabalasingam
leads a
Information Technology
team of
(IT) professionals responsible for
ensuring day-to-day operations
of the airline. With over 19 years
of experience and an extensive
background
information
in
technology, he has managed a
range of IT projects and initiatives
for Rex
Internet
the
the Amend
Booking Engine,
Booking Engine, Web Check-
in and numerous Mobile/iPad
applications. Mr Thanabalasingam
has a Masters of Business
Administration
from
Charles Sturt University. He
also has a Graduate Certificate
in
(Information
Technology) as well as an Associate
Diploma of Electrical Engineering
/ Computer Engineering. He
commenced with Rex in April 2004.
Mr Thanabalasingam is a member
of the Rex Management Committee
and a Director of the Australian
Airline Pilot Academy (AAPA).
Management
(Computing)
8
REGIONAL EXPRESS HOLDINGS LIMITED
PNG YEOW TAT
General Manager, Engineering
MARK BURGESS
DAVID BROOKSBY
Deputy General Manager, Engineering
National Airports Manager
PAUL FISHER
General Manager, Flight Operations
and Chief Pilot
from
in aviation
Mr Png has been
engineering for more than 40 years
and has many years of experience
in various senior management
positions. He graduated with an
Honours Degree in Electrical and
Electronic Engineering
the
UK. Mr Png 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 Maintenance
Organisations
in June
2013. He is a member of the
Rex
Engineering Management
Committee and a member of the
Rex Management Committee.
(AMOs)
Mr Burgess is a Licensed Aircraft
Maintenance Engineer with over
30 years’ experience and has
been with the Company since its
inception in 2002.
Mr Burgess’ 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
regular
public transport (RPT) services. He
migrated to Australia in 2001 to
work for Kendell Airlines in Wagga
Wagga and became Production
Leader coordinating maintenance
and manpower on heavy checks
for Saab 340 aircraft. In 2008 Mr
Burgess moved to Adelaide as
the Line Maintenance Supervisor
the expansion of
and oversaw
Rex maintenance activities
from
line to heavy maintenance. He is
a member of the Rex Engineering
Management Committee.
joining
the company
Mr Brooksby commenced
the
role of National Airports Manager
for Rex in 2010. Mr Brooksby
has held previous senior roles in
a management and operational
capacity at each of Rex’s major
airports
Adelaide,
including
Sydney, Brisbane and Melbourne
since
in
April 2006. Prior to commencing
Rex, Mr
employment with
Brooksby worked as a contracted
outport agent with his family’s
business at Mount Gambier airport
where his father is the Company’s
longest-standing
contracted
ground handling agent, having
been contracted by Rex/Kendell
since 1982 to provide ground
handling services. Mr Brooksby
graduated from the University of
South Australia with a Bachelor
of Management
in 2003. Mr
Brooksby is also a member of the
Rex Management Committee.
Mr Fisher has over 29 years
of aviation experience and has
been with the Company since its
inception in August 2002. He has
operated the Saab 340 aircraft as
a First Officer and Captain for over
19 years with both Hazelton Airlines
and Regional Express. Prior to his
role as General Manager Flight
Operations (GMFO) and Chief Pilot,
Mr Fisher served in various roles
within the Training and Checking
department including the Adelaide
Flight Operations Manager, Flight
the
Standards Manager
Training & Checking Manager /
Deputy Chief Pilot. He holds several
Civil Aviation Safety Authority
(CASA) delegations. As GMFO he
is responsible for all facets of the
Company’s flight operations and
all operational matters affecting the
safety of flight operations.
and
REGIONAL EXPRESS HOLDINGS LIMITED
9
03 DIRECTORSHIPS OF OTHER LISTED COMPANIES
During the year under review, no directors appointed as at 30 June 2019 served as a director with any other company listed on the ASX.
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 AM
Lee Thian Soo
Neville Howell
Chris Hine
James Davis
Ronald Bartsch
Fully paid ordinary shares
direct interest
Fully paid ordinary shares
indirect interest
Share options
18,998,346
50,000
7,722,181
27,936
77,855
200,866
-
5,755,513
275,032
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, 1
Remuneration, 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
AM
Lee Thian Soo
Neville Howell
Chris Hine
James Davis
Remunerations,
Nominations and
Disciplinary Committee
Board
Audit & Corporate
Governance Committee
Safety & Risk
Management
Committee
4
4
4
3
4
4
4
1
-
1
-
-
-
1
2
-
2
-
-
-
2
4
-
-
-
4
4
-
10
REGIONAL EXPRESS HOLDINGS LIMITED
06 REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT
Information about the remuneration of directors and senior management is set out in the remuneration report of this directors’ report, on
pages 21 to 23.
07 SHARES UNDER OPTION OR ISSUED ON EXERCISE
OF OPTIONS
No options were granted or exercised in FY2019.
08 FORMER PARTNERS OF THE AUDIT FIRM
No directors or officers in Rex or the Group have been a partner or director of Deloitte Touche Tohmatsu, the Group’s auditor.
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 8.
Mr Benjamin Ng, having completed his Bachelor of Science followed by an MBA in the UK, started his career with the German
multi-national chemical company, Henkel in Malaysia. In his eight years with Henkel/Cognis, he held various positions ranging from
sales, marketing, business analysis and cost controlling. In 2001, he was posted to headquarters in Germany for just over a year
where he was the cost controller for the Asia Pacific Region. Upon his return to Malaysia, he oversaw the controlling department
of Cognis for three years. Mr Ng joined Rex in May 2006 and was appointed Company Secretary on 10 October 2007.
Mr Richard Kwan started his career with Rex after graduating with a Bachelor of Aviation (Hons) from the University of New South
Wales (UNSW) in 2010. He has held various roles within the Corporate Services and Network Strategy & Sales departments.
Specifically, Mr Kwan focusses on analysis, project and contract management within the Rex Group of companies, including the
Queensland and Western Australia regulated routes and Pel-Air contracts. He has subsequently obtained a Master of Commerce
from UNSW and has been certified as a PRINCE2 Practitioner. Mr Kwan was appointed Company Secretary on 26 September
2016.
10 PRINCIPAL ACTIVITIES
The Group’s principal activity during the FY was the provision of air services principally for the transportation of passengers and freight.
REGIONAL EXPRESS HOLDINGS LIMITED
11
11 ORGANISATION & GROUP STRUCTURES
REGIONAL EXPRESS AIRLINE ORGANISATION STRUCTURE
12
REGIONAL EXPRESS HOLDINGS LIMITED
REGIONAL EXPRESS GROUP HOLDINGS STRUCTURE
REGIONAL EXPRESS HOLDINGS LIMITED
13
12 REVIEW OF OPERATIONS
SUMMARY
At the commencement of FY2019, the Rex RPT network serviced 60 airports throughout all states of Australia. In FY2019, 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, Ballina, Broken Hill, Burnie, Carnarvon, Ceduna, Coober Pedy, Esperance, Grafton, Griffith,
Kangaroo Island, Mildura, Monkey Mia (Shark Bay), Moruya, Mount Gambier, Narrandera-Leeton, Newcastle, Orange, Parkes, Cooma
(Snowy Mountains).
The Rex Community Fare Scheme is an initiative pioneered by Rex as a way to ensure fare affordability and to foster passenger growth.
As a result of partnership agreements with local councils and airport owners, Rex implemented the Rex Community Fare Scheme on
the following routes during FY2019:
• Monkey Mia (Shark Bay) to Perth ($157)
• Carnarvon to Perth ($198)
• Mount Gambier to Adelaide ($129)
• Mount Gambierr to Melbourne ($129)
• Griffith to Sydney ($129)
• Narrandera-Leeton to Sydney ($129)
• Mildura to Adelaide ($128)
• Kangaroo Island to Adelaide ($99)
• Broken Hill to Melbourne ($199)
The above Rex Community Fares were in addition to those that were in place prior to the commencement of FY2019 which included
the following routes:
• Albany to Perth ($139)
• Esperance to Perth ($139)
• Broken Hill to Sydney ($199)
• Broken Hill to Adelaide ($139)
• Burnie to Melbourne ($129)
• Moruya to Sydney ($119)
• Parkes to Sydney ($99)
• Cairns to Mount Isa ($200)
• Orange to Sydney ($109)
The Rex Community Fare Scheme has been highly successful in making regional air travel more affordable and on the above-
mentioned routes between 15 and 30% of total passengers have taken advantage of the discounted fare scheme during FY2019.
This FY2019 saw a 50% drop in the pilot attrition rate compared to the prior year due to a slowing in domestic and international
recruitment. For the period under review, Rex recruitment surpassed attrition by 27 pilots. Internal training was operating at full
capacity and saw 27 pilots upgraded to the rank of Captain, and 66 pilots checked to line as First Officers.
The Saab 340 Full Flight Simulator (FFS) located at AAPA was in high demand this FY and recorded its highest utilisation rate since
inception of 2126 hours. The FFS continues to optimise our training capabilities and provide significant cost savings to recurrent
training and checking regulatory requirements. CASA has renewed the Flight Simulator Qualification Certificate until April 2020.
The in-house designed and developed Electronic Flight Bag (EFB) continues to provide operational efficiencies to all Saab 340 aircraft
and flight crew across the Rex Group. Flight Attendants have been issued with iPads containing operational applications and access
to the full suite of company manuals. An additional application now provides the Flight Attendants with an electronic passenger
manifest and seat plan allowing for the removal of hard copy documents which transfers to cost savings and environmental benefits.
14
REGIONAL EXPRESS HOLDINGS LIMITED
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 – The Group hedged part of its fuel requirements in FY2019. The Group continues to closely monitor Brent Crude prices.
The first half of FY2020 fuel requirement has been hedged.
Foreign exchange rates – The Group’s main financial risk is its exposure to the US dollar, and hence, its main objective is to minimise
the impact of USD fluctuation on its operations. The Group hedged part of its USD requirements in FY2019, which has had a positive
impact on its overall performance. The Group will continue to monitor the exchange rate closely and will hedge whenever the rates
are favourable.
The Company also faces the risk of pilot attrition. This has been mitigated by the establishment of Rex’s pilot cadet training programme
which has been operating successfully from its pilot training academy, AAPA, in Wagga Wagga, NSW. More than half of the active pilot
strength within Rex is made up of graduates from this programme.
REGIONAL EXPRESS HOLDINGS LIMITED
15
ROUTE NETWORK DEVELOPMENTS
On 2 July 2018 Rex commenced services from Perth to Carnarvon and Monkey Mia (Shark Bay) under a Deed of Agreement with the
Western Australian (WA) government which conferred on Rex the sole right to operate on the route for a term of five years.
Rex is servicing the route with 24 weekly services between Perth and Carnarvon and 12 weekly services between Perth and Monkey Mia,
representing a 20% increase in flight frequency for Carnarvon, and a 50% increase in flight frequency for Monkey Mia in comparison with
the flight frequency offered by the previous operator.
Rex has also established the successful Rex Community Fare Scheme on the Perth to Carnarvon ($198) and Monkey Mia ($157) route.
The additional Rex flight frequency and Community Fare Scheme has been a catalyst for almost 30% passenger growth between Perth
and Carnarvon and more than 55% passenger growth between Perth and Monkey Mia in FY2019.
On 27 October 2018 Rex exited the Sydney to Mildura route following notice from Mildura Airport Pty Ltd (MAPL) of a 22.5% increase to
the Mildura Airport passenger head tax charge.
Rex entered into a new five-year partnership agreement with Griffith City Council which saw Rex redeploy the Sydney to Mildura aircraft,
flight crew and Sydney Airport slots across to the Sydney to Griffith route. This resulted in an additional ten weekly flights between Griffith
and Sydney with effect from 28 October 2018, adding 17,000 seats to the route annually. In addition, Rex implemented a new service
between Griffith and Broken Hill, bringing benefits to both communities. The new partnership agreement with Griffith City Council also
resulted in the introduction of a $129 Rex Community Fare between Griffith and Sydney.
Services to Carnarvon and Monkey Mia (Shark Bay) Launced 2 July 2018
16
REGIONAL EXPRESS HOLDINGS LIMITED
The graphs below set out the evolution in monthly passenger carriage and monthly passenger revenue over the last eight FYs.
REGIONAL EXPRESS HOLDINGS LIMITED
17
FLEET CHANGES
A further two Saab 340 B+ aircraft were added to the fleet in 2H FY2019 bringing the total Saab fleet to 60 aircraft. Of the 60 Saab
340 aircraft in the Rex Group, 58 are fully paid for, and two are on lease. Rex sold Air Link’s fleet of five piston aircraft along with the
divestment of the company in 1H FY2019.
ENTERPRISE AGREEMENTS (EA)
The Rex Flight Attendant, Engineers and Airline Services EAs have been approved by the Fair Work Commission. The Rex Pilot
Agreement is under negotiation.
OPERATIONAL AND SERVICE STANDARDS
In FY2019 Rex recorded 83.79% on-time departure performance as reported by the Bureau of Infrastructure, Transport and Regional
Economics (BITRE).
Rex completed FY19 with the lowest cancellation rate of all Australian airlines for the sixth year in a row, recording 0.99% of all flights
cancelled. Other main regional carriers QantasLink and Virgin Australia Regional Airlines ranked second and fifth respectively.
Airline
QantasLink
Virgin Australia Regional Airlines
Qantas
Virgin Australia
Jetstar
Tigerair
On-Time Departure
Cancellation Rate (%)
FY 2019
FY 2018
FY 2019
FY 2018
2nd
1st
5th
4th
3rd
6th
7th
3rd
2nd
5th
4th
1st
6th
7th
0.99%
1.62%
2.13%
2.40%
1.96%
2.52%
4.29%
1.3%
2.3%
2.6%
1.5%
1.6%
1.3%
2.6%
18
REGIONAL EXPRESS HOLDINGS LIMITED
COMMUNITY INVOLVEMENT
During FY2019 Rex contributed $320,000 in sponsorships to worthy
charitable and community causes across the network.
Rex is committed to regional and remote Australia and is proud to give directly
back to the local communities we service. From corporate partnerships and
cultural events to local fundraisers and cases of personal hardship, Rex
remains supportive of the unique vibrancy of regional Australia by providing
air travel for locals and visitors. Connecting the country with the city, Rex
continues to grant valuable fare assistance to passengers in need, highlighting
that our ethos of ‘Our Heart is in the Country’ remains unwavering.
In FY2019 Rex responded to the devastating effects of the worst drought
to hit regional Australia in 50 years by establishing a $1 million Rex Drought
Relief Fund. When the devastation of the floods in Queensland prevailed, the
fund was increased to $1.5 million and renamed the Rex Relief Fund, with
contributions going to community groups working to alleviate the impact of
natural disasters.
Rex partnered with the Foundation for Rural & Regional Renewal (FRRR)
for network-wide collection drives in-flight and on the ground in FY2019,
collectively raising a further $26,860 for drought and flood-affected regions.
Funds raised in collaboration with the FRRR went towards activities and
services identified by the local communities as most pressing.
Some of the causes and events supported by Rex during FY2019 were:
• Charleville Cup Race day, Charleville Race Club, Queensland
• The Crows Bros, Eyre Peninsula Crows Supporter Group, Port
Lincoln, South Australia
• McHappy Day, Bega, New South Wales
• Club Scout Leaders Conference, Esperance Scout Group, Western
Australia
• Shane Doherty Memorial, Sunraysia Golf Tours, Mildura, Victoria
• Heart of Australia, Dr Rolf Gomes, Queensland
• 2019 New Years Day Carnival, Burnie Athletic Club, Tasmania
• Little Wings Ball, Little Heroes Foundation, Adelaide, South Australia
• The Poetry Object, the Red Room Company, Sydney, New South Wales
Dr Louise Baker-
Winner Rex Airlines
Regional Women of the
Year- NSW Woman of
the Year Awards 2019
• Dirranbandi Miss Showgirl Competition, Queensland Country Life Showgirl Awards, Dirranbandi, Queensland
• Red Faces Variety Show, Grow SA, South Australia
• Albany Food and Wine Festival, Taste Great Southern, Albany, Western Australia
• 2019 New South Wales Regional Woman of the Year (WOTY) Award, Department of Family and Community Services
• Miss Rodeo Queen, Tony “Tonka” Toholke, Mount Isa Rodeo, Queensland
• Shark Bay Annual Bowling Carnival, Shark Bay Bowling, Sport and Recreation Club Inc, Western Australia
Bravehearts
Red Faces Variety Show
REGIONAL EXPRESS HOLDINGS LIMITED
19
13 SUBSEQUENT EVENTS
In July 2019, Pel-Air submitted a Request For Tender (RFT) response for the NSW Health Fixed-wing Air Ambulance Service. This
Tender asked for the procurement of five new aircraft, along with the supply of pilots and maintenance to support the provision of
24/7 fixed-wing air ambulance services from Mascot, commencing January 2022.
In August 2019, the Group signed a letter of intent with Vinpearl Air for pilot training in Australian Airline Pilot Pty Limited (AAPA), and
obtained a development approval to build a Simulator Centre at Rex’s facility at Mascot, Sydney.
14 CHANGES IN STATE OF AFFAIRS
The Group divested of its wholly-owned subsidiary, Airlink Pty Ltd.
15 FUTURE DEVELOPMENTS
Rex Flight Operations in conjunction with the Continuing Airworthiness Management Organisation (CAMO) and Information Technology
(IT) departments are developing an electronic Flight Technical Log (eFTL) application, which will encompass the existing electronic
Flight Log already in use, to include an electronic Aircraft Maintenance Log (eAML) suite. The eFTL application as part of the flight
deck Electronic Flight Bag (EFB), uses cellular connectivity to provide seamless data transfer to the end-users of the data and is a
further step towards a paperless flight deck.
Rex Flight Operations and IT departments are currently working on the development of a catering application to be used on-board
by Flight Attendants. The application will allow Flight Attendants to maintain an accurate inventory of catering supplies and the ability
to reorder stock as required through the connectivity of their company-issued iPad to the Rex catering trucks. This will provide
operational efficiencies in the deployment of ground crew resources and enhance on-time performance at capital city airports. Rex
will also introduce a cashless point-of-sale onboard allowing passengers to purchase beverages using debit or credit cards.
16 ENVIRONMENTAL REGULATIONS
During FY2019, 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 10th NGER report to the Clean Energy Regulator in October 2019.
17 DIVIDENDS
Although conditions have deteriorated in 2H FY2019 and predicted to be challenging in FY2020, the Board has nonetheless
approved a final dividend of 8 cents per share, bringing the full year’s dividend payout to 12 cents per share. This is on the back of
the Group’s strong cash holdings, and the expected continued steady cash flow in the new FY.
18 INDEMNIFICATION OF OFFICERS AND AUDITORS
During the FY2019, 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 any related body corporate against a liability incurred as such an officer or auditor.
20
REGIONAL EXPRESS HOLDINGS LIMITED
19 REMUNERATION REPORT
REMUNERATIONS, NOMINATIONS AND DISCIPLINARY COMMITTEE
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.
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 eleven 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.
• Share Gift Plan
Rex established the share gift plan (effective from FY2006) 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 equivalent to a
percentage of their base salaries. There are no vesting conditions attached to the share gift.
DIRECTOR AND SENIOR MANAGEMENT DETAILS
The following persons acted as directors of the Company during or since the end of the FY:
Lim Kim Hai (Chairman)
The Hon. John Sharp AM (Deputy Chairman)
Lee Thian Soo
Neville Howell
Chris Hine
James Davis
Prof. Ronald Bartsch
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)
Png Yeow Tat (General Manager, Engineering)
Mark Burgess (Deputy General Manager, Engineering)
Paul Fisher (General Manager, Flight Operations & Chief Pilot)
David Brooksby (National Airports Manager)
REGIONAL EXPRESS HOLDINGS LIMITED
21
REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT
The directors and other nominated key management personnel received the following amounts as compensation for their services
as directors and executives of the Company and/or the Group during the year:
Short-term benefits
Cash salary
& fees
Cash profit
sharing &
other bonuses
$
-
-
$
-
-
FY
2019
2018
Post
employment
benefits
Long-term
benefits
Share gift
provision
Pension &
super-annuation
Long service
leave
Share gift
issued
$
-
-
$
-
-
$
-
-
Total
$
-
-
2019
139,887
1,388
13,421
2,749
2,158
159,603
Directors/Executives
EXECUTIVE DIRECTORS
LIM KIM HAI (1)
Executive Chairman
CHRIS HINE
Excecutive Director & Group Flight Operations
Advisor
2018
137,829
933
13,183
1,797
2,114
155,856
NEVILLE HOWELL
2019
229,419
51,735
20,441
3,581
4,200
309,376
Executive Director & Chief Operating Officer
2018
224,711
41,167
19,862
3,497
3,899
293,136
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
2019
107,307
-
10,194
-
-
117,501
2018
90,000
-
8,550
-
-
98,550
2019
30,000
-
-
-
-
30,000
2018
30,000
-
-
-
-
30,000
2019
35,000
-
3,325
-
-
38,325
2018
35,000
-
3,325
-
-
38,325
2019
40,000
-
3,800
-
-
43,800
2018
40,000
-
3,800
-
-
43,800
WARRICK LODGE
2019
179,164
51,735
18,232
2,998
3,500
255,629
GM, Network Strategy & Sales
2018
174,833
41,167
17,145
2,914
3,327
239,386
IRWIN TAN
2019
193,289
51,735
19,151
2,998
3,400
270,573
GM, Corporate Services
2018
184,929
40,875
17,849
2,831
3,327
249,811
MAYOORAN THANABALASINGAM
2019
185,317
51,735
18,692
2,998
3,500
262,242
GM, ITC
2018
179,833
41,167
17,492
2,831
3,327
244,650
PAUL DAVID FISHER
2019
203,654
49,746
19,866
5,095
4,000
282,361
GM, Flight Operations & Chief Pilot
2018
199,705
38,458
18,766
5,000
3,694
265,623
PNG YEOW TAT
GM, Engineering
MARK BURGESS
Deputy GM, Engineering
DAVID BROOKSBY
2019
177,012
51,735
18,102
2,998
3,400
253,247
2018
2019
2018
2019
169,750
41,167
16,790
2,831
3,140
233,678
142,177
29,132
15,521
3,557
2,793
193,180
139,517
23,998
14,695
3,491
2,735
161,380
51,735
19,215
2,581
2,800
184,436
237,711
National Airports Manager
2018
149,614
31,167
15,389
2,498
2,282
200,950
TOTAL
2019
2018
1,823,606
390,676
179,960
29,555
29,751
2,453,548
1,755,721
300,099
166,846
27,690
27,845
2,278,201
(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.
22
REGIONAL EXPRESS HOLDINGS LIMITED
VALUE OF OPTIONS ISSUED TO DIRECTORS AND EXECUTIVES
No options lapsed, were granted or were exercised during the year.
RELATIONSHIP BETWEEN THE REMUNERATION POLICY AND COMPANY
PERFORMANCE
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.
The tables below set out summary information about the Group’s results and movements in shareholder wealth for the five years
to June 2019:
Revenue
Net profit / (loss) before tax
Net profit / (loss) after tax
Share price at start of year
Share price at end of year
Interim dividend
Final dividend 1,2
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
30 June 2019
$’000
30 June 2018
$’000
30 June 2017
$’000
30 June 2016
$’000
30 June 2015
$’000
317,649
25,201
17,517
295,537
25,075
16,913
280,967
17,810
12,620
261,906
(10,703)
(9,557)
256,217
9,296
6,672
30 June 2019
30 June 2018
30 June 2017
30 June 2016
30 June 2015
$1.46
$1.42
$0.04
$0.08
16.1 cps
16.1 cps
$1.04
$1.43
$0.04
$0.08
15.7 cps
15.7 cps
$0.77
$1.11
-
$0.10
11.7 cps
11.7 cps
$1.04
$0.77
-
-
(8.8) cps
(8.8) cps
$0.75
$1.04
-
-
6.2 cps
6.2 cps
1 The final dividend is per share fully franked and after corporate tax of 30%.
2 Declared after the balance date and reflected in the financial statements of the year of payment.
KEY TERMS OF EMPLOYMENT CONTRACTS
Employment contracts between the senior management executives and the Group do not have a specified duration. A notice of four
weeks must be given for senior management executives to terminate their contract. There are no extraordinary termination payments
set out in the contracts of the senior management executives of the Group.
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:
Balance at
1 July 2018
Increase / (Decrease)
during the year
Balance at
30 June 2019
Directors:
Lim Kim Hai
The Hon. John Sharp
Lee Thian Soo
Neville Howell
Chris Hine
James Davis
Key management personnel:
Warrick Lodge
Irwin Tan
Mayooran Thanabalasingam
Paul Fisher
Png Yeow Tat
Mark Burgess
David Brooksby
24,753,859
325,032
11,449,362
30,499
76,346
200,866
158,400
34,184
86,762
43,443
27,525
21,514
21,561
-
-
-
-2,563
1,509
-
2,448
2,378
2,448
2,797
2,378
1,953
1,958
24,753,859
325,032
11,449,362
27,936
77,855
200,866
160,848
36,562
89,210
46,240
29,903
23,467
23,519
During the financial year, no options were granted to (2018: nil), nor exercised (2018: nil) by key management personnel for ordinary
Rex shares. No options remained unpaid or to be exercised at the year-end.
REGIONAL EXPRESS HOLDINGS LIMITED
23
20 PROCEEDINGS ON BEHALF OF THE COMPANY
No proceedings have been brought on behalf of the Group, nor has any application been made in respect of the Group under s.237
of the Corporations Act 2001.
21 NON-AUDIT SERVICES
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note
26 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on
the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in Note 26 to the financial statements do not compromise the external
auditor’s independence, based on advice received from the Audit Committee, for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor,
and
• none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110
Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing
or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the
company or jointly sharing economic risks and rewards.
22 ROUNDING OFF OF AMOUNTS
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
23 August 2019
24
REGIONAL EXPRESS HOLDINGS LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
The Board of Directors
Regional Express Holdings Limited
81 – 83 Baxter Road
MASCOT NSW 2020
23 August 2019
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 2019, 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
Damien Cork
Partner
Chartered Accountants
Member of Deloitte Asia Pacific and the Deloitte Network.
Liability limited by a scheme approved under Professional Standards Legislation.
REGIONAL EXPRESS HOLDINGS LIMITED
25
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
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 2019 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 with the assistance of the
Remunerations, Nominations and Disciplinary Committee. The performance of the Management Committee was reviewed in FY17
(ASX Recommendation 1.7). The performance of the Directors and Board Committees are reviewed periodically with the assistance
of the Remunerations, Nominations and Disciplinary Committee. The performance and the composition of the Board Committees
were reviewed in FY17 (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 James Davis and has one other member, the Hon. John Sharp AM. The Committee had one meeting
during the FY and was 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
29
Below is the Rex Board skills matrix outlining the skills that the board currently has (ASX Recommendation 2.2):
LIM
KIM HAI
JOHN
SHARP
LEE
THIAN SOO
RONALD
BARTSCH
JAMES
DAVIS
CHRIS
HINE
NEVILLE
HOWELL
BUSINESS / ENTREPRENEURIAL EXPERIENCE
POLITICAL EXPERIENCE
CORPORATE GOVERNANCE
SAFETY AND RISK MANAGEMENT
FINANCE
LEGAL
REGULATORY KNOWLEDGE AND EXPERIENCE
INDUSTRY
EXPERIENCE
PILOT
ENGINEERING KNOWLEDGE
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
The membership of the Board during the year ended 30 June 2019, including independence status was as follows (ASX
Recommendation 2.3):
Director
Status
Date of Appointment
Lim Kim Hai
Executive Chairman
The Hon. John Sharp AM Deputy Chairman and Independent Director
Lee Thian Soo
Non-Executive Director
Neville Howell
Chief Operating Officer & Executive Director
Chris Hine
Executive Director &
Group Flight Operations Advisor
James Davis
Independent Director
Ronald Bartsch
Independent Director
Appointed 27 June 2003 and re-appointed 16 November 2006, 25
November 2009, 27 November 2012,27 November 2015 and 21 November
2018.
Appointed 14 April 2005 and re-appointed 19 November 2008, 23 November
2011, 27 November 2013 and 29 November 2016.
Appointed 27 June 2003 and re-appointed 16 November 2006, 25
November 2009, 27 November 2012, 27 November 2015 and 21 November
2018.
Appointed 1 July 2014 and re-appointed 26 November 2014, and 21
November 2017.
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,
re-appointed 21 November 2017.
Appointed 26 August 2004 as Executive Director and re-apointed 23
November 2011 as Independent Director, re-appointed 26
November 2014 and 21 November 2017.
Appointed 23 November 2010 and re-appointed 23 November 2011.26
November 2014, and 21 November 2017.
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 seven that qualify as independent non-executive directors, Lee Thian Soo is only
considered non-independent by virtue of his share ownership and is considered by the Board to be effectively an independent Director.
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.
30
REGIONAL EXPRESS HOLDINGS LIMITED
(B) EXECUTIVE MANAGEMENT
• 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.
REGIONAL EXPRESS HOLDINGS LIMITED
31
The evaluation of the Board, its committees and directors was carried out during the FY as set out above.
A Director of the Company is entitled to seek independent professional advice (including, but not limited to, legal, accounting and
financial advice) at the Company's expense on any matter connected with the discharge of his or her responsibilities, in accordance
with the procedures and subject to the conditions set out in the Board Charter.
The Board believes that its members have the appropriate skill set and knowledge to effectively perform their roles as directors
without requiring further professional development. Our board members have a vast wealth of experience in the aviation industry and
beyond as a majority of them have aircraft pilot qualifications.
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.
The Company was compliant with the Workplace Gender Equality Act 2012 as reported by the Workplace Gender Equality Agency.
As at the end of the reporting period, the proportion of female employees in the Company was 33.2%. There were 12 women holding
management positions in the Company. There were no female Board members or Management Committee members.
In accordance with the requirements of the Workplace Gender Equality Act 2012 (Act), Regional Express Holdings Limited lodged
its annual public report (2018 - 2019) 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 FY2019, this Committee was chaired by the Hon. John Sharp AM 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 FY2019
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).
The Board acknowledges the ASX Recommendation to have the Chief Executive Officer and Chief Financial Officer provide this statement
to the Board. The Board believes that it is appropriate for Chief Operating Officer and GM Corporate Services to provide the statement.
The directors have ensured that the Company’s External Auditor attends all Annual General Meetings and is available to answer shareholders’
questions about the conduct of the audit and the preparation and content of the Auditor’s report thereon (ASX Recommendation 4.3).
32
REGIONAL EXPRESS HOLDINGS LIMITED
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 (ASX Recommendation 6.2).
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 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 15 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).
REGIONAL EXPRESS HOLDINGS LIMITED
33
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Passenger revenue
Freight revenue
Charter revenue
Other passenger services and amenities
Other revenue
Total revenue
Finance income
Other gains / (losses)
Flight and port operation costs (excluding fuel)
Fuel costs
Salaries and employee-related costs
Selling and marketing costs
Engineering and maintenance costs
Office and general administration costs
Finance costs
Depreciation and amortisation
Total costs and expenses
Profit before tax
Tax expense
Profit after tax
Profit attributable to
Members of the parent
Earnings per share
Basic
Diluted
Notes to the financial statements are included on pages 42 to 78.
Note
2019
$’000
2018
$’000
278,433
260,302
1,505
1,437
28,515
25,735
1,279
2,601
7,917
5,462
317,649
295,537
895
1,153
1,111
289
(57,829)
(55,341)
(42,508)
(32,690)
(112,238)
(107,726)
(8,797)
(7,948)
(46,110)
(42,325)
(7,838)
(7,681)
(1,956)
(1,975)
(17,178)
(16,218)
(294,454)
(271,904)
25,201
25,075
4
4
4
4
4
4
5
(7,684)
(8,162)
17,517
16,913
17,517
16,913
17,517
16,913
cents per share
cents per share
16
16
16.1
15.7
16.1
15.7
REGIONAL EXPRESS HOLDINGS LIMITED
37
CONSOLIDATED STATEMENT
OF OTHER COMPREHENSIVE INCOME OR LOSS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Profit after tax
Other comprehensive income / (loss)
Hedge reserve
Revaluation of cash flow hedges
Income tax effect
Other comprehensive income / (loss), net of tax
Note
15
15
2019
$’000
2018
$’000
17,517
16,913
360
(70)
(108)
21
252
(49)
Total comprehensive income
17,769
16,864
Notes to the financial statements are included on pages 42 to 78.
38
REGIONAL EXPRESS HOLDINGS LIMITED
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AS AT 30 JUNE 2019
Current assets
Cash and bank balances
Trade and other receivables
Inventories
Other financial assets
Total current assets
Non-current assets
Other receivables
Inventories
Investments - fair value through equity
Deferred tax assets
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
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserved shares
Retained earnings
Share-based payments reserve
Other reserves
Total equity
Note
22
6
7
23
6
7
5
8
9
10
11
12
13
5
12
13
14
15
15
15
2019
$’000
2018
$’000
21,727
24,019
16,674
14,027
13,439
11,778
360
-
52,200
49,824
6,679
5,808
8,055
12,356
9
9
1,897
1,585
89,178
93,091
114,100
111,714
731
824
220,649
225,387
272,849
275,211
20,939
18,813
24,502
24,693
3,852
7,509
9,217
8,124
2,452
5,728
60,962
64,867
4,220
9,045
2,248
1,815
6,468
10,860
67,430
75,727
205,419
199,484
72,024
72,024
(1,163)
(2,256)
131,165
126,521
1,551
1,605
1,842
1,590
205,419
199,484
Notes to the financial statements are included on pages 42 to 78.
REGIONAL EXPRESS HOLDINGS LIMITED
39
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Note
22 (B)
Receipts from customers
Payments to suppliers, employees and others
Interest paid
Income tax paid
Net cash flows from operating activities
Interest received
Proceeds from disposal of business
Proceeds from disposal of property, plant and equipment
Payments for property, plant and equipment - aircraft and other
Payments for property, plant and equipment - software
Net cash flows used in investing activities
Dividends paid
Shares purchased as reserve shares
Repayment of borrowings – non-related parties
Net cash flows used in financing activities
Net decrease 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 42 to 78.
2019
$’000
344,970
(299,417)
(1,056)
(11,456)
33,041
895
908
2,403
(18,002)
(28)
(13,824)
2018
$’000
324,122
(279,926)
(1,526)
(7,115)
35,555
1,153
-
1,951
(18,484)
(193)
(15,573)
(13,027)
(15,062)
-
(8,482)
(21,509)
(86)
(7,072)
(22,220)
(2,292)
(2,238)
24,019
21,727
26,257
24,019
40
REGIONAL EXPRESS HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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 2017
Profit for the year
72,024
(3,246)
124,670
1,358
49
1,590
196,445
-
-
16,913
-
-
-
16,913
Other comprehensive loss, net of tax
-
-
-
-
(49)
-
(49)
Total comprehensive income / (loss)
-
-
16,913
-
(49)
-
16,864
Dividends paid
-
-
(15,062)
-
-
-
(15,062)
Shares purchased as reserve shares
-
(86)
-
-
-
-
(86)
Share gift issued - gift
Share gift plan provision
At 30 June 2018
At 1 July 2018
Profit for the year
-
1,076
-
(1,076)
-
-
-
-
-
-
1,323
-
-
1,323
72,024
(2,256)
126,521
1,605
-
1,590
199,484
72,024
(2,256)
126,521
1,605
-
1,590
199,484
-
-
17,517
-
-
-
17,517
Other comprehensive income, net of tax
-
-
-
-
252
-
252
Total comprehensive income
-
-
17,517
-
252
-
17,769
Dividends paid
Share gift issued - gift
-
-
(13,027)
-
-
-
(13,027)
-
1,093
-
1,093)
-
-
-
Share gift plan provision transfer
-
-
-
(277)
-
-
(277)
Share gift plan provision
-
-
-
1,316
-
-
1,316
Adjustment on adoption of AASB 15 Revenue
-
-
154
-
-
-
154
At 30 June 2019
72,024
(1,163)
131,165
1,551
252
1,590
205,419
Notes to the financial statements are included on pages 42 to 78.
REGIONAL EXPRESS HOLDINGS LIMITED
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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
Earnings Per Share
Dividends Paid and Payable
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
42
REGIONAL EXPRESS HOLDINGS LIMITED
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 January 2018 and adopted by the Group on 1 July
2018, and therefore relevant for the current year end. The impact of the application of these amendments is detailed below.
APPLICATION OF NEW AND REVISED ACCOUNTING STANDARDS EFFECTIVE FOR THE
CURRENT YEAR
A number of new accounting standards have been implemented in the current year. The impact of these are summarised as follows.
AASB 15 REVENUE FROM CONTRACTS WITH CUSTOMERS (“AASB 15”)
AASB 15, which replaces AASB 118 Revenue, is based on the principle that revenue is recognised when control of a good or service
transfers to a customer, and introduces a five-step model to determine when and how much revenue should be recognised. The Group
has applied the modified retrospective approach to the adoption of AASB 15 and accordingly comparatives have not been restated. The
adoption of AASB 15 from 1 July 2018 resulted in changes in accounting policies, the effect of which are detailed below.
The Group has identified the following changes to revenue recognition on adoption of the standard:
PASSENGER REVENUE
The changes to revenue recognition of passenger revenue are as follows:
• Under AASB 118 Revenue, revenue arising from expired tickets or “breakage” was typically recognised once the customer is no
longer able to refund or reschedule their ticket booking. Under AASB 15, revenues arising from expired tickets relate to a portion of
contractual rights captured under contract liabilities that the Group does not expect to be exercised. As a result, expired ticket revenue
is recognised earlier to match the timing of revenue recognition with the underlying performance obligations.
As a result of this change in accounting policy, the Group has calculated an increase in retained earnings at 1 July 2018 of $326
thousand net of tax.
•
Ancillary services such as booking fees or change fees were previously recognised on issuance of tickets to customers. Under AASB
15, revenues relating to ancillary services are not considered as distinct from the passenger flight, and so are deferred and recognised
at the time of the related passenger revenue.
As a result of this change in accounting policy, the Group has calculated a decrease in retained earnings at 1 July 2018 of $172
thousand net of tax.
The net of these two changes to accounting policies is $154 thousand as at 1 July 2018. This has been recognised as an adjustment
to increase retained earnings at 1 July 2018.
REGIONAL EXPRESS HOLDINGS LIMITED
43
IMPACT OF ADOPTION
Passenger revenue
Freight revenue
Charter revenue
Other passenger services and amenities
Other revenue
Total revenue
Finance income
2019
as reported
$’000
Impact of
adoption
$’000
Amount without
AASB 15
$’000
278,433
(1,985)
276,448
1,505
-
1,505
28,515
-
28,515
1,279
2,005
3,284
7,917
-
7,917
317,649
20
317,669
895
-
895
Other gains / (losses)
1,111
-
1,111
Flight and port operation costs (excluding fuel)
Fuel costs
Salaries and employee-related costs
Selling and marketing costs
Engineering and maintenance costs
Office and general administration costs
Finance costs
Depreciation and amortisation
Total costs and expenses
Profit before tax
Tax expense
Profit after tax
(57,829)
-
(57,829)
(42,508)
-
(42,508)
(112,238)
-
(112,238)
(8,797)
-
(8,797)
(46,110)
-
(46,110)
(7,838)
-
(7,838)
(1,956)
-
(1,956)
(17,178)
-
(17,178)
(294,454)
-
(294,454)
25,201
20
25,221
(7,684)
(6)
(7,690)
17,517
14
17,531
AASB 9 FINANCIAL INSTRUMERNTS ("AASB 9")
Effective 1 July 2018 the Company adopted AASB 9, which sets out requirements for recognition and measurement, impairment,
derecognition and general hedge accounting. This standard simplifies the classification of a financial asset as either at amortised cost
or at fair value as opposed to the multiple classifications which were permitted under AASB 139 Financial Instruments: Recognition and
Measurement (“AASB 139”). This standard also requires the use of a single impairment method as opposed to the multiple methods in
AASB 139. The approach in AASB 9 is based on how an entity manages its financial instruments in the context of its business model and
the contractual cash flow characteristics of the financial assets. The standard also adds guidance on the classification and measurement
of financial liabilities. The Group has adopted AASB 9 on a fully retrospective basis.
The Group holds an investment which was classified as an available for sale financial instrument and has elected for it to be designated as
fair value through other comprehensive income.
Trade and other receivables that were classified as loans and receivables under AASB 139 are classified as financial assets measured
at amortised cost. There is no change to the initial measurement of the Group’s financial assets. Impairment of financial assets is based
on an expected credit loss (“ECL”) model under AASB 9, rather than the incurred loss model under AASB 139. ECLs are a probability-
weighted estimate of credit losses. The Group calculated ECLs based on consideration of customer-specific factors and actual credit loss
experience over the past five years to calculate expected credit losses. The Group’s actual credit loss experience has not been material.
The adoption of AASB 9 has not had a material impact on the Group’s financial liabilities.
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 adoption of
AASB 9 has resulted in changes to the documentation of hedging relationships and the assessment of hedge effectiveness, but has not
resulted in a change to derivative financial instruments recognised or the classification of these derivatives as cash flow hedges.
44
REGIONAL EXPRESS HOLDINGS LIMITED
INTERPRETATION NOTE 22 FOREIGN CURRENCY TRANSACTIONS AND ADVANCE
CONSIDERATION
Interpretation 22 addresses how to determine the ‘date of transaction’ for the purpose of determining the exchange rate to use on initial
recognition of an asset, expense or income, when consideration for that item has been paid or received in advance in a foreign currency
which resulted in the recognition of a non-monetary asset or non-monetary liability (e.g. a non-refundable deposit or deferred revenue).
The Interpretation specifies that the date of transaction is the date on which the entity initially recognises the non-monetary asset or non-
monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the
Interpretation requires an entity to determine the date of transaction for each payment or receipt of advance consideration.
The adoption of Interpretation note 22 has not had a material impact.
APPLICATION OF NEW AND REVISED ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
At the date of authorisation of the financial statements, the Group has not adopted the following new and revised Australian Accounting
Standards, interpretations and amendments that have been issued but are not yet effective:
Standard/Amendment
AASB 16 Leases
AASB 2017-6 Amendments to Australian Accounting
Standards – Prepayment Features with Negative
Compensation
AASB 2018-1 Amendments to Australian Accounting
Standards – Annual Improvements 2015-2017 Cycle
AASB 2018-6 Amendments to Australian Accounting
Standards - Definition of a Business
AASB 2018-7 Amendments to Australian Accounting
Standards – Definition of Material
AASB 2019-1 Amendments to Australian Accounting
Standards – References to the Conceptual Framework
Interpretation 23 Uncertainty over Income Tax Treatments
Effective for annual reporting
periods beginning on or after
1 January 2019
1 January 2019
1 January 2019
1 January 2020
1 January 2020
1 January 2020
1 January 2019
At the date of report, there are no pronouncements approved by the IASB/IFRIC that have yet to be issued by the AASB.
With the exception of AASB 16 detailed below, the reported results and financial position of the Group are not expected to change
materially on adoption of any of the amendments to the current standards listed above that will be adopted on 1 July 2019 as they do not
result in any changes to the Group’s existing accounting policies.
For those standards that will be adopted on 1 July 2020 the impact has not been fully determined and is not expected to be material.
AASB 16 Leases (“AASB 16”) effective 1 January 2019, and the Group will apply the standard from 1 July 2019.
STANDARD/INTERPRETATION AND NATURE OF THE CHANGE AND IMPACT
AASB 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements for
both lessors and lessees. AASB 16 will supersede the current lease guidance including AASB 117 Leases and the related Interpretations
when it becomes effective for accounting periods beginning on or after 1 January 2019. The date of initial application of AASB 16 for the
Group will be 1 July 2019. The Group has chosen to apply AASB 16 on a modified retrospective basis and consequently, the Group will
not restate the comparative information.
Impact of the new definition of a lease
The change in definition of a lease mainly relates to the concept of control. AASB 16 distinguishes between leases and service contracts
on the basis of whether the use of an identified asset is controlled by the lessee. Control is considered to exist if the lessee has the right to
obtain substantially all of the economic benefits from the use of an identified asset and the right to direct the use of that asset. In preparation
for the first-time application of AASB 16, the Group has assessed the new definition in AASB 16 and determined that it will not change
significantly the scope of contracts that meet the definition of a lease for the Group.
Impact of accounting for leases
AASB 16 will change how the Group accounts for leases previously classified as operating leases under AASB 117, which were off-
balance sheet. In accordance with the modified retrospective basis of adoption, on initial application of AASB 16, for all leases (except as
noted below), will result in the:
a)
b)
c)
Recognition of a right-of-use asset and lease liabilities in the consolidated statement of financial position, initially measured at the
present value of the future lease payments on a prospective basis at the date of initial application (i.e. 1 July 2019);
Recognition of depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss;
Separation of the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented
within operating activities) in the consolidated cash flow statement.
REGIONAL EXPRESS HOLDINGS LIMITED
45
Under AASB 16, right-of-use assets will be tested for impairment in accordance with AASB 136 Impairment of Assets. This will also replace
the previous requirement to recognise a provision for onerous lease contracts. For short-term leases (lease term of 12 months or less)
and leases of low-value assets (such as personal computers and office furniture), the Group will elect to recognise a lease expense on a
straight-line basis as permitted by AASB 16.
The Group has substantially completed its implementation assessment of the new standard, however certain technical and judgemental
aspects of the revised accounting policy remain open, primarily the determination of lease terms for leases in holdover, which could have
a material impact on the outcomes under the new standard.
The Group is a party to a small number of operating lease agreements. As at 30 June 2019, the Group has non-cancellable operating
lease commitments of $6M. Subject to the conclusion of the matter relating to holdover leases above, the Group’s assets, liabilities and
equity will be impacted as follows on 1 July 2019:
•
•
•
•
$3,327 thousand increase in right-of-use assets,
$3,954 thousand increase in lease liabilities,
$188 thousand decrease in deferred tax,
$439 thousand decrease in retained earnings.
The assessment is that operating EBITDA will increase by $1.1M in FY2020.
Under AASB 117, all lease payments on operating leases are presented as part of cash flows from operating activities. The impact of
the changes under AASB 16 would be to reduce the cash generated by operating activities by $1.1M and the increase net cash used in
financing activities by the same amount.
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..
KEY SOURCES OF ESTIMATION UNCERTAINTY
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:
IMPAIRMENT OF GOODWILL AND PROPERTY, PLANT AND EQUIPMENT
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.
No impairment losses were recognized with respect to goodwill and property, plant and equipment during the year (2018: nil).
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.
46
REGIONAL EXPRESS HOLDINGS LIMITED
04 REVENUES AND EXPENSES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
Other revenue
Training income
Net sales proceeds (engineering parts)
Rental income
Insurance claim
Training subsidy
Engineering services
Other income
Finance income
Interest
Other gains / (losses)
Gain on disposal of business
Net foreign currency gain / (loss)
(Loss) / Gain on disposal of property, plant and equipment
Salaries and employee-related costs
Wages and salaries (including bonus – profit share scheme)
Superannuation costs - defined contribution plan
Expense of share-based payments
Workers’ compensation costs
Office and general administrative costs
Bad debts recovered
Finance costs
Interest on bank borrowings and finance leases
Interest expense
The weighted average interest rate on borrowings is 9.1% per annum, and 4.1% per annum for finance leases.
Depreciation and amortisation
Depreciation and amortisation of property, plant and equipment
Amortisation of development costs and software
Lease payments included in consolidated statement of profit or loss
Included in flight and port operation costs
Minimum lease payments – operating lease
2019
$’000
2018
$’000
4,621
3,338
1,599
761
254
266
727
168
30
112
104
110
582
707
7,917
5,462
895
1,153
895
1,153
808
-
372
(394)
(69)
683
1,111
289
(102,881)
(98,622)
(7,051)
(6,800)
(1,316)
(1,323)
(990)
(981)
(112,238)
(107,726)
-
38
-
38
(1,956)
(1,975)
(1,956)
(1,975)
(17,057)
(15,996)
(121)
(222)
(17,178)
(16,218)
(822)
(783)
(822)
(783)
REGIONAL EXPRESS HOLDINGS LIMITED
47
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
Total tax expense
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:
2019
$’000
2018
$’000
8,180
11,300
-
581
(496)
(3,719)
7,684
8,162
Profit before tax from operations
25,201
25,075
Tax expense calculated at 30%
Tax on non-deductible expense / (non-assessable income)
Prior period tax expense
Tax expense
Effective tax rates
7,560
7,523
124
58
-
581
7,684
8,162
30.5%
32.5%
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits
under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.
The following current and deferred tax amounts have been recognised in the statement of financial position.
Current tax assets and liabilities
Current tax payable
Income tax attributable:
Parent entity
Deferred tax balances
Deferred tax assets comprise:
Temporary differences
Deferred tax liabilities comprise:
Temporary differences
2019
$’000
2018
$’000
2,452
5,728
2,452
5,728
7,511
7,276
7,511
7,276
(5,614)
(5,691)
(5,614)
(5,691)
Net deferred tax assets
1,897
1,585
48
REGIONAL EXPRESS HOLDINGS LIMITED
Taxable and deductible temporary differences arise from the following:
Opening balance
$’000
Charged to income
$’000
Charged to equity
$’000
Closing balance
$’000
30 June 2019
Gross deferred tax liabilities
Inventories
Prepayments
(3,533)
(229)
-
(3,762)
(1,043)
251
-
(792)
Subsidy receivable
(266)
(84)
-
(350)
Property, plant & equipment
(743)
54
-
(689)
Other items
(106)
193
(108)
(21)
(5,691)
185
(108)
(5,614)
Gross deferred tax assets
Employee-related provisions
Property, plant & equipment
Payables
Other liabilities
Other items
3,486
445
-
3,931
2,111
(364)
-
1,747
763
59
-
822
810
201
-
1,011
106
(106)
-
-
7,276
235
-
7,511
Net deferred tax
1,585
420
(108)
1,897
30 June 2018
Gross deferred tax liabilities
Inventories
Prepayments
Subsidy receivable
(6,445)
2,912
-
(3,533)
(1,165)
122
-
(1,043)
(303)
37
-
(266)
Property, plant & equipment
(761)
18
-
(743)
Other items
(172)
45
21
(106)
(8,846)
3,134
21
(5,691)
Gross deferred tax assets
Employee-related provisions
Property, plant & equipment
Payables
Other liabilities
Other items
2,987
499
-
3,486
2,063
48
-
2,111
901
(138)
-
763
659
151
-
810
312
(206)
-
106
6,922
354
-
7,276
Net deferred tax
(1,924)
3,488
21
1,585
REGIONAL EXPRESS HOLDINGS LIMITED
49
06 TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Loss allowance
Term deposits
Sundry debtors and other debtors
Prepayments
Non-current
Other receivables – at amortised cost
2019
$’000
2018
$’000
8,579
7,504
(31)
(31)
8,548
7,473
1,968
1,946
3,521
2,693
2,637
1,915
16,674
14,027
6,679
5,808
6,679
5,808
Trade receivables are non-interest bearing and are generally on 30 day terms. The Group measures the loss allowance for trade
receivables at an amount equal to lifetime ECL. The expected credit losses on trade receivables are estimated using a provision
matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for
factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment
of both the current as well as the forecast direction of conditions at the reporting date.
The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and
there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy
proceedings, or when the trade receivables are over two years past due, whichever occurs earlier. None of the trade receivables that
have been written off is subject to enforcement activities.
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.
Term deposits are interest-bearing deposits held under the Group's workers compensation obligations. The amounts are restricted
under these obligations.
Ageing of past due but not impaired
60 - 90 days
91 - 120 days or more
Total
Average age (days)
Movement in loss allowance
Balance at the beginning of the year
Movement during the year
Balance at the end of the year
Ageing of impaired trade receivables
120+ days
Total
07 INVENTORIES
Consumable spares at cost
Current
Non-current
50
REGIONAL EXPRESS HOLDINGS LIMITED
2019
$’000
2018
$’000
-
5
-
-
-
5
30
30
(31)
(31)
-
-
(31)
(31)
(31)
(31)
(31)
(31)
2019
$’000
2018
$’000
13,439
11,778
8,055
12,356
08 PROPERTY, PLANT AND EQUIPMENT
At 30 June 2019
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
Leasehold improvements
Motor vehicles
Furniture and fittings
Computer equipment
Opening gross
carrying amount
$’000
Additions
$’000
Disposals /
Reclassification
$’000
Closing gross
carrying amount
$’000
187,421
5,912
(2,711)
190,622
83,311
3,869
(3,014)
84,166
10,908
6,628
(3,800)
13,736
12,020
750
(1,397)
11,373
37,166
366
(25)
37,507
1,357
37
-
1,394
2,696
62
(84)
2,674
1,021
34
(305)
750
1,891
344
(145)
2,090
Other property, plant and equipment
150,370
12,090
(8,770)
153,690
Total property, plant and equipment
337,791
18,002
(11,481)
344,312
At 30 June 2018
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
Leasehold improvements
Motor vehicles
Furniture and fittings
Computer equipment
185,249
6,536
(4,364)
187,421
79,273
8,654
(4,616)
83,311
9,944
1,183
(219)
10,908
11,888
762
(630)
12,020
36,160
1,006
-
37,166
1,340
17
-
1,357
2,574
166
(44)
2,696
1,080
64
(123)
1,021
2,791
96
(996)
1,891
Other property, plant and equipment
145,050
11,948
(6,628)
150,370
Total property, plant and equipment
330,299
18,484
(10,992)
337,791
REGIONAL EXPRESS HOLDINGS LIMITED
51
At 30 June 2019
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
Opening accumulated
depreciation and
impairment
$’000
Disposals /
Reclassification
$’000
Depreciation
charge for the year
$’000
Closing accumulated
depreciation and
impairment
$’000
(94,330)
2,711
(9,825)
(101,444)
(16,465)
2,947
(3,810)
(17,328)
(3,422)
1,414
(766)
(2,774)
(7,227)
1,383
(999)
(6,843)
(6,815)
24
(988)
(7,779)
Leasehold improvements
(1,219)
-
(78)
(1,297)
Motor vehicles
Furniture and fittings
Computer equipment
(1,695)
84
(188)
(1,799)
(853)
301
(41)
(593)
(960)
145
(362)
(1,177)
Other property, plant and equipment
(38,656)
Total property, plant and equipment
(132,986)
6,298
9,009
(7,232)
(39,590)
(17,057)
(141,034)
At 30 June 2018
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
(88,537)
3,462
(9,255)
(94,330)
(17,554)
4,426
(3,337)
(16,465)
(2,759)
58
(721)
(3,422)
(6,810)
627
(1,044)
(7,227)
(5,845)
-
(970)
(6,815)
Leasehold improvements
(1,165)
-
(54)
(1,219)
Motor vehicles
Furniture and fittings
Computer equipment
(1,536)
33
(192)
(1,695)
(926)
121
(48)
(853)
(1,583)
996
(373)
(960)
Other property, plant and equipment
(38,178)
6,261
(6,739)
(38,656)
Total property, plant and equipment
(126,715)
9,723
(15,994)
(132,986)
52
REGIONAL EXPRESS HOLDINGS LIMITED
At 30 June 2019
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
93,091
89,178
66,846
66,838
7,486
10,962
4,793
4,530
30,351
29,728
138
97
1,001
875
168
157
931
913
111,714
114,100
Total property, plant and equipment
204,805
203,278
At 30 June 2018
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
96,712
93,091
61,719
66,846
7,185
7,486
5,078
4,793
30,315
30,351
175
138
1,038
1,001
154
168
1,208
931
106,872
111,714
Total property, plant and equipment
203,584
204,805
REGIONAL EXPRESS HOLDINGS LIMITED
53
09 GOODWILL AND OTHER INTANGIBLE ASSETS
At 30 June 2019
Cost
Accumulated amortisation
Net carrying amount
Total goodwill and other intangible assets
Reconciliation
Goodwill
$’000
Software and
development costs
$’000
518
2,648
-
(2,435)
518
213
731
At 1 July 2018, net of accumulated amortisation
518
306
Additions
Amortisation at 30 June 2019
-
28
-
(121)
At 30 June 2019, net of accumulated amortisation
518
213
Total goodwill and other intangible assets
731
At 30 June 2018
Cost
Accumulated amortisation
Net carrying amount
Total goodwill and other intangible assets
Reconciliation
518
2,351
-
(2,045)
518
306
824
At 1 July 2017, net of accumulated amortisation
518
335
Additions
Amortisation at 30 June 2018
-
193
-
(222)
At 30 June 2018, net of accumulated amortisation
518
306
Total goodwill and other intangible assets
824
IMPAIRMENT TESTING OF GOODWILL AND PROPERTY, PLANT AND
EQUIPMENT
The Group has identified the following Cash Generating Units (CGUs) for assessing the carrying value of the Group’s assets:
• Regional Express Holdings Limited (Rex)
•
Pel-Air Aviation Pty Limited (Pel-Air)
Goodwill of $518 thousand relating to the passenger routes acquired in the acquisition of Air Link Pty Limited was transferred into
the Rex CGU, as these routes are now operated by Rex.
54
REGIONAL EXPRESS HOLDINGS LIMITED
VALUE-IN-USE CALCULATIONS
The recoverable amount of Rex and Pel-Air CGUs has been determined based on value-in-use calculations.
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.
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
10.25%
2.00%
2.00%
2.00%
Pel-Air CGU
11.00%
1.50 - 2.00%
2.00%
2.00%
(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.
Cash outflows include expenditure for the purchase of aircraft and other property, plant and equipment and are based on the long
term capital expenditure requirements of the Group.
As a result of the impairment testing performed at the CGU level, the Group assessed that the recoverable amount was greater than
carrying amount and no impairment loss on these CGUs has been recognised in the current year (FY2018: nil).
SENSITIVITY ANALYSIS
The Group has performed a sensitivity analysis by considering reasonable changes in key assumptions, including discount rate,
revenue growth, operating cost escalation, and fuel cost escalation.
The changes in the following table to assumptions used in the impairment review would, in isolation, lead to an increase or decrease
in the recoverable amount. 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 %
Rex recoverable amount
Pel-Air recoverable amount
Increase/
Decrease by
(Decrease) / Increase
$’000
Increase / (Decrease)
$’000
(Decrease) / Increase
$’000
Increase / (Decrease)
$’000
0.5%
0.5%
0.5%
0.5%
(8,637)
62,318
(46,307)
(8,083)
9,728
(60,932)
45,285
7,905
(465)
2,337
(1,793)
(318)
490
(2,292)
1,755
311
REGIONAL EXPRESS HOLDINGS LIMITED
55
10 TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables
Total
2019
$’000
10,095
10,844
20,939
2018
$’000
9,537
9,276
18,813
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
2019
$’000
23,412
1,090
24,502
Effective
interest rate %
2019
$’000
2018
$’000
24,037
656
24,693
2018
$’000
9.1%
3,852
3,519
-
3,990
3,852
7,509
9.1%
4,220
8,072
-
973
4,220
9,045
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 liabilities are secured over the assets being funded, the carrying value of which exceeds the
outstanding liabilities.
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. In November 2018, the Group fully discharged the finance leases, ahead of the original expiry date of
August 2019.
56
REGIONAL EXPRESS HOLDINGS LIMITED
13 PROVISIONS
Current
Employee benefits
Profit share, pilot retention bonus
Annual leave and long service leave
Non-current
Employee benefits
Pilot retention bonus
Long service leave
2019
$’000
2018
$’000
2,605
2,876
6,612
5,248
9,217
8,124
1,589
1,204
659
611
2,248
1,815
Total employee benefits provisions
11,465
9,939
Profit share, pilot retention bonus
Balance at the beginning of the year
Arising during the year
Utilised
Balance at the end of the year
Annual leave and long service leave
Balance at the beginning of the year
Arising during the year
Utilised
Balance at the end of the year
14 ISSUED CAPITAL
4,080
3,247
2,662
2,768
(2,548)
(1,935)
4,194
4,080
5,859
5,296
8,128
6,900
(6,716)
(6,337)
7,271
5,859
Fully paid ordinary shares
At the beginning of the year
Movement during the year
At the end of the year
2019
No. ’000
$’000
No. ’000
$’000
2018
110,155
72,024
110,155
72,024
-
-
-
-
110,155
72,024
110,155
72,024
Share held as reserved shares by subsidiary company were 1,093 thousand (2018: 1,857 thousand).
REGIONAL EXPRESS HOLDINGS LIMITED
57
15 RESERVED SHARES AND OTHER RESERVES
Reserved shares
Balance at the beginning of the year
Shares purchased as reserved shares
Share gift issued
Balance at the end of the year
Share-based payments reserve
Balance at the beginning of the year
Share gift issued
Share gift plan provision transfer
Share gift plan provision
Balance at the end of the year
Cash flow hedge reserve
Balance at the beginning of the year
Revaluation of cash flow hedges, net of tax
Balance at the end of the year
General reserve
Balance at the beginning of the year
Movement during the year
Balance at the end of the year
2019
$’000
(2,256)
-
1,093
(1,163)
2018
$’000
(3,246)
(86)
1,076
(2,256)
1,605
1,358
(1,093)
(1,076)
(277)
-
1,316
1,323
1,551
1,605
-
49
252
(49)
252
-
1,590
1,590
-
-
1,590
1,590
Reserved share account represents on market purchase of shares by the Group which is eventually granted to executives and
employees as part of their remuneration.
The share-based payments reserve arises on the grant of shares to executives and employees under the employee share gift plan.
Amounts are transferred out of the reserve and into issued capital when the shares are issued. Rex has established the share gift
plan for its executive directors and eligible employees since FY2006.
The board decided that this plan will be offered to EA groups that opt for the plan, and all non-EA employees who are not the
subject of an adverse recommendation by the 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.
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.
58
REGIONAL EXPRESS HOLDINGS LIMITED
16 EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
2019
Cents per share
2018
Cents per share
16.1
15.7
16.1
15.7
The earnings used in the calculation of basic and diluted earnings per share are as follows:
Net profit
Earnings used in the calculation of basic earnings per share
Earnings used in the calculation of diluted earnings per share
2019
$’000
2018
$’000
17,517
16,913
17,517
16,913
17,517
16,913
The weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows:
Weighted average number of ordinary shares for the purpose of basic earnings per share
109,061
107,966
Weighted average number of ordinary shares for the purpose of diluted earnings per share
109,061
107,966
2019
No. ‘000
2018
No. ‘000
17 DIVIDENDS PAID AND PAYABLE
During the year, the Group paid 12 cents per share of fully franked dividend to holders of fully paid ordinary shares:
•
•
8 cents per share amounting to $8,812 thousand, was paid on 15 November 2018 in respect of results for FY2018, and
4 cents per share amounting to $4,406 thousand, was paid on 1 April 2019 in respect of results for FY2019’s half year ended
31 December 2018.
$192 thousand of these dividends related to reserve shares held by the group (2018: $359 thousand).
In respect of financial year ended 30 June 2019, the directors have recommended 8 cents per share of fully franked dividend be
paid to holders of fully paid ordinary shares (2018: 8 cents). This has not been included as a liability in these financial statements and
the dividend will be paid to all shareholders on the Register of Members. The total estimated dividend to be paid is $8,812 thousand
(2018: $8,812 thousand).
The movement in the franking account balance, including impact for dividends declared after the year end, is noted below:
Adjusted franking account balance
44,086
38,213
Franking credit recognised that will arise from income tax payable as at the end of financial year
2,452
5,728
Impact on franking account balance of dividends not recognised
(3,777)
(3,777)
2019
$’000
2018
$’000
18 COMMITMENTS FOR EXPENDITURE
(A) CAPITAL EXPENDITURE COMMITMENTS
There are no commitments for the acquisition of property, plant and equipment as at 30 June 2019 (2018: nil)
(B) OPERATING LEASE COMMITMENTS
Not later than one year
Later than one year and not later than five years
Later than five years
2019
$’000
2018
$’000
1,111
1,048
1,349
2,203
3,567
3,698
6,027
6,949
REGIONAL EXPRESS HOLDINGS LIMITED
59
(C) FINANCE LEASE LIABILITIES
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. In November 2018, the Group fully discharged the finance leases, ahead of the original expiry date of August 2019.
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
2019
$’000
-
-
-
-
-
2018
$’000
4,140
984
5,124
(161)
4,963
2019
$’000
-
-
-
-
-
-
-
-
2018
$’000
3,990
973
4,963
-
4,963
3,990
973
4,963
19 CONTINGENT LIABILITIES AND CONTINGENT ASSETS
There are neither contingent liabilities nor contingent assets as at 30 June 2019 (2018: nil).
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
Pel-Air Aviation Pty Limited
Australian Airline Pilot Academy Pty Limited
VAA Pty Ltd
Air Link Pty Limited
Country of incorporation
2019
2018
Ownership Interest %
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
-
100
100
100
100
100
100
100
Regional Express Holdings Limited is the head entity within the tax-consolidated group. These subsidiary companies are members of the
tax-consolidated group.
DISPOSAL OF SUBSIDIARY
In September 2018, the Group disposed of Air Link Pty Limited through the sale of the subsidiary’s shares and related aircraft for total
consideration of $1,009 thousand. Details of the disposal are presented below.
Consideration on sale
Less: cash disposed
Net cash received on disposal
Assets and liabilities disposed:
Inventories
Trade and other receivables
Deferred tax assets
Trade and other payables
Net assets disposed
Gain on disposal
60
REGIONAL EXPRESS HOLDINGS LIMITED
$'000
1,009
(101)
908
200
4
11
(115)
100
808
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
Short term deposits
2019
$’000
16,727
5,000
21,727
2018
$’000
9,019
15,000
24,019
(B) RECONCILIATION OF PROFIT/(LOSS) FOR THE YEAR TO NET CASH FLOWS FROM
OPERATING ACTIVITIES
Profit for the year
Depreciation and amortisation
Share-based payment
Unrealised foreign exchange (gain) / loss
Gain on disposal of business
(Gain) / loss on disposal of non-current assets
Interest received
Increase in receivables
Decrease in inventories
(increase) / decrease in other financial assets
Decrease in deferred tax
(Decrease) / increase in current tax payable
Decrease in other financial liabilities
Increase in trade payables
Increase in provisions
Increase / (decrease) 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)
Transaction negotiations authority
Letter of credit
Set off
Guarantee
Credit card
2019
$’000
2018
$’000
17,517
16,913
17,178
16,218
1,316
1,323
(33)
34
(808)
-
69
(683)
(895)
(1,153)
(3,522)
(2,515)
2,440
511
(360)
140
(323)
(3,509)
(3,276)
4,556
-
(70)
2,237
2,443
1,249
1,396
252
(49)
33,041
35,555
2019
Used
$’000
8,075
-
-
-
-
3,799
85
11.959
Limit
$’000
8,381
-
2,700
559
1,000
4,537
595
17,772
2018
Used
$’000
11,595
5,035
-
-
-
4,099
92
20,821
Limit
$’000
12,699
5,519
2,900
559
1,000
4,537
620
27,834
REGIONAL EXPRESS HOLDINGS LIMITED
61
The facilities are secured by the Group’s operating cash flows and properties located in South Australia, Adelaide, New South Wales at
Don Kendell Drive Forest Hill, and Robey Street Mascot..
The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes.
Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group's
statement of cash flows as cash flows from financing activities.
Opening Balance
$'000
Financing cash flows
$'000
Other non-cash flows
$'000
Closing balance
$'000
30 June 2019
Movements in financing activities:
Loan facility (Note 12)
Finance leases (Note 12)
30 June 2018
Movements in financing activities:
Loan facility (Note 12)
Finance leases (Note 12)
11,591
4,963
16,554
14,805
8,821
23,626
(3,519)
(4,963)
(8,482)
(3,214)
(3,858)
(7,072)
-
-
-
-
-
-
8,072
-
8,072
11,591
4,963
16,554
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 2018.
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.
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.
The Group’s financing facilities include a $29 million loan facility which is fixed-interest bearing and repayable over 10 years from July
2012 to June 2021.
During FY2014, the Group purchased 25 Saab 340B + aircraft, that 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. In November 2018, the Group fully discharged the
finance leases, ahead of the original expiry date of August 2019.
The net cash position at the end of the financial year was as follows:
2019
$’000
2018
$’000
8,072
16,554
21,727
24,019
13,655
7,465
205,419
6.6%
199,484
3.7%
Debt (i)
Cash and cash equivalents
Excess cash and cash equivalents over debt
Equity (ii)
Excess cash to equity ratio
(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.
62
REGIONAL EXPRESS HOLDINGS LIMITED
(B) CATEGORIES OF FINANCIAL INSTRUMENTS
Financial assets
Loans and receivables
Cash and bank balances
Derivative financial instruments
Investments – fair value through equity
Financial liabilities
Amortised cost
2019
$’000
2018
$’000
20,716
17,920
21,727
24,019
360
-
9
9
29,011
35,367
(C) FINANCIAL RISK MANAGEMENT OBJECTIVES
The Group is exposed to foreign exchange, fuel price, interest rate and liquidity risk. Management of these risks is governed by
the Group’s policy approved by the Board of Directors, which provides written principles on the management of financial risks.
Compliance with policies and exposure limits is reviewed by the Audit and Corporate Governance Committee and the Board on an
ongoing basis. The Group does not enter into trade financial instruments, including derivative financial instruments, for speculative
purposes. The Treasury function, which co-ordinates the hedging of financial risks from time to time, is managed by the Group’s
Corporate Services Department and reports regularly to the Board and Audit and Corporate Governance Committee.
(D) FOREIGN CURRENCY RISK MANAGEMENT
The Group undertakes certain transactions denominated in USD, hence exposures to exchange rate fluctuations arise. Exchange
rate exposures are managed using forward foreign exchange contracts.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the financial
year is as follows
Liabilities
2019
USD$’000
2018
USD$’000
Assets
2019
USD$’000
2018
USD$’000
1,306
1,394
-
-
FOREIGN CURRENCY SENSITIVITY ANALYSIS
The Group is mainly exposed to USD for the following main purchases, approximate amounts per annum are:
• USD 17 million for engineering purchases
• USD 16 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
2019
$’000
190
2018
$’000
190
The Group enters into forward foreign exchange contracts to manage the risk associated with anticipated sales and purchase
transactions up to twelve months and up to 100% of the exposure generated. Basis adjustments are made to the carrying amounts
of non-financial hedged items when the anticipated sale or purchase transaction takes place.
(E) FUEL PRICE RISK MANAGEMENT
The Group may use jet fuel swap contracts to hedge exposure to movements in the price of aviation fuel. Jet fuel swaps are taken out
from time to time to 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:
REGIONAL EXPRESS HOLDINGS LIMITED
63
Hedged price
$ per L
Notional amount
L’000
Less than 1 year
L’000
1 to 2 years
L’000
2 to 5 years
L’000
AUD fuel costs
2019
2018
0.70
-
13,692
-
13,692
-
-
-
-
-
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.
20% increase
20% decrease
2019
Derivative asset – jet fuel swap
Derivative liability – jet fuel swap
2018
Derivative asset – jet fuel swap
Derivative liability – jet fuel swap
Carrying amount
$’000
Profit/(loss)
$’000
360
-
360
-
-
-
-
-
-
-
-
-
Equity
$’000
1,917
-
1,917
-
-
-
Profit/(loss)
$’000
-
-
-
-
-
-
Equity
L’000
(1,917)
-
(1,917)
-
-
-
(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.
2019
Non-interest bearing
Interest bearing
2018
Non-interest bearing
Interest bearing
1 month
$’000
1-3 months
$’000
3 months to a year
$’000
1-5 years
$’000
5+ years
$’000
20,939
-
-
-
-
369
739
3,324
4,431
-
21,308
739
3,324
4,431
-
18,813
-
-
-
-
369
1,774
6,429
9,847
-
19,182
1,774
6,429
9,847
-
The interest-bearing liabilities have a weighted average effective interest rate of 9.1% per annum for the 10-year bank loan (FY2012
to FY2021), and 4.1% per annum for the bank finance leases which was fully discharged in November 2018.
64
REGIONAL EXPRESS HOLDINGS LIMITED
FAIR VALUE OF FINANCIAL INSTRUMENTS
(I)
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.
FAIR VALUE HEIRARCHY
(J)
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.
30 June 2019
Financial assets carried at fair value
Derivative asset – jet fuel swap
Derivative asset – foreign currency
Financial liabilities carried at fair value
Derivative liability – jet fuel swap
30 June 2018
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
360
-
-
-
-
Level 3
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
-
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 and foreign exchange derivative 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 1 or 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
2019
$
2018
$
2,214,282
2,055,820
179,960
166,846
29,555
27,690
29,751
27,845
2,453,548
2,278,201
REGIONAL EXPRESS HOLDINGS LIMITED
65
25 RELATED PARTY TRANSACTIONS
(A) EQUITY INTERESTS IN SUBSIDIARIES
Details of interests in subsidiaries are disclosed in Note 20 to the consolidated financial statements.
(B) TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
(I) KEY MANAGEMENT PERSONNEL COMPENSATION
Details of key management personnel compensation are disclosed in Note 24 to the consolidated financial statements.
(II) LOANS TO KEY MANAGEMENT PERSONNEL
There have been no loans made to key management personnel.
(C) OTHER RELATED PARTY TRANSACTIONS
The Branksome Residences Pty Ltd (“Branksome”), a related entity of the Chairman, provides hotel, conference and venue hire services
to the Group. Total purchases from Branksome, mainly room hire for aircrew, were $339 thousand during the year (2018: $177 thousand
for a 9-month period). In addition, the Group provides administrative services to Branksome and Greatland Development Pty Ltd, a related
entity of the Chairman. The total income earned by the Group from these entities was $60 thousand (2018: $60 thousand).
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.
2019
$
342,825
34,650
377,475
2018
$
305,550
36,225
341,775
27 EVENTS AFTER THE REPORTING PERIOD
In July 2019, Pel-Air submitted a RFT response for the NSW Health Fixed-wing Air Ambulance Service. This Tender asked for the
procurement of five new aircraft, along with the supply of pilots and maintenance to support the provision of 24/7 fixed-wing air
ambulance services from Mascot, commencing January 2022.
In August 2019, the Group signed a letter of intent with Vinpearl Air for pilot training in Australian Airline Pilot Pty Limited (AAPA), and
obtained a development approval to build a Simulator Centre at Rex’s facility at Mascot, Sydney.
66
REGIONAL EXPRESS HOLDINGS LIMITED
28 SEGMENT INFORMATION
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.
Information reported to the Group’s Chief Executive Officer for the purposes of resource allocation and assessment of performance is more
specifically focused on the category of customer for each type of service.
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.
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 gains / (losses)
Central administration costs and directors’ salaries
Finance costs
Profit before tax
Tax expense
Revenue
2019
$’000
2018
$’000
Segment result
2019
$’000
2018
$’000
289,134
269,802
27,945
28,994
28,515
25,735
5,044
4,295
317,649
295,537
32,989
33,289
895
1,153
1,111
289
(7,838)
(7,681)
(1,956)
(1,975)
25,201
25,075
(7,684)
(8,162)
Consolidated segment revenue and profit
317,649
295,537
17,517
16,913
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:
Continuing operations
Regular public transport
Charter
Total assets / liabilities
Assets
2019
$’000
220,967
51,882
272,849
2018
$’000
220,161
55,050
275,211
Liabilities
2019
$’000
46,034
21,396
67,430
Other segment information for the year is as follows:
Depreciation and amortisation
Additions to non-current assets
Continuing operations
Regular public transport
Charter
2019
$’000
12,708
4,470
17,178
2018
$’000
11,860
4,358
16,218
2019
$’000
17,920
110
18,030
2018
$’000
50,859
24,868
75,727
2018
$’000
18,591
86
18,677
REGIONAL EXPRESS HOLDINGS LIMITED
67
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 / (loss)
Total comprehensive income
2019
$’000
2018
$’000
43,941
40,470
176,056
185,931
219,997
226,401
53,911
57,471
1,816
3,144
55,727
60,615
72,024
72,024
90,274
91,972
1,404
1,474
252
(49)
316
365
164,270
165,786
11,070
12,840
252
(49)
11,322
12,791
(C)
GUARANTEES ENTERED INTO BY THE PARENT ENTITY IN RELATION TO
THE DEBTS OF ITS SUBSIDIARIES
During FY2011, 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’.
68
REGIONAL EXPRESS HOLDINGS LIMITED
Consolidated statement of comprehensive income and summary of movements in consolidated retained earnings
Set out below is a consolidated statement of comprehensive income and a summary of movements in consolidated retained earnings
of the closed group.
Passenger revenue
Freight revenue
Charter revenue
Other passenger services and amenities
Other revenue
Total revenue
Finance income
Consolidated
2019
$’000
278,433
1,505
28,515
1,279
7,917
317,649
Consolidated
2018
$’000
260,302
1,437
25,735
2,601
5,462
295,537
895
1,153
Other gains / (losses)
1,111
289
Flight and port operation costs (excluding fuel)
Fuel costs
Salaries and employee-related costs
Selling and marketing costs
Engineering and maintenance costs
Office and general administration costs
Finance costs
Depreciation and amortisation
Total costs and expenses
Profit before tax
Tax expense
Profit after tax
Other comprehensive income / (loss)
Hedge reserve
Revaluation of cash flow hedges
Income tax effect
Other comprehensive income / (loss), net of tax
(60,882)
(42,508)
(112,238)
(8,797)
(46,110)
(7,838)
(1,956)
(14,125)
(294,454)
(58,394)
(32,690)
(107,726)
(7,948)
(42,325)
(7,681)
(1,975)
(13,165)
(271,904)
25,201
25,075
(7,684)
(8,162)
17,517
16,913
360
(108)
252
(70)
21
(49)
Total comprehensive income
17,769
16,864
Summary of movements in consolidated retained earnings
Retained earnings at the beginning of the financial year
Profit for the period
Dividends paid
Adjustment on adoption of AASB 15 Revenue
Retained earnings at the end of the financial year
123,954
17,517
(13,027)
154
128,598
122,103
16,913
(15,062)
-
123,954
REGIONAL EXPRESS HOLDINGS LIMITED
69
Consolidated statement of financial position
Set out below is a consolidated statement of financial position of the closed group.
Current assets
Cash and bank balances
Trade and other receivables
Inventories
Other financial assets
Total current assets
Non-current assets
Other receivables
Inventories
Investments – fair value through equity
Deferred tax assets
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
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserved shares
Retained earnings
Share-based payments reserve
Other reserves
Total equity
2019
$’000
2018
$’000
20,413
16,674
13,439
22,705
14,027
11,778
360
-
50,886
48,510
6,679
5,808
8,055
12,356
9
9
1,897
1,585
76,964
114,100
77,824
111,714
731
824
208,435
259,321
210,120
258,631
18,049
24,502
16,390
24,693
-
3,990
9,217
8,124
2,452
5,728
54,220
58,925
-
973
2,248
1,815
2,248
2,788
56,469
61,714
202,852
196,917
72,024
72,024
(1,163)
(2,256)
128,598
123,954
1,551
1,605
1,842
1,590
202,852
196,917
(D) CONTINGENT LIABILITIES OF THE PARENT ENTITY
As at 30 June 2019, no contingent liabilities or assets existed (2018: nil).
(E)
COMMITMENTS FOR THE ACQUISITION OF PROPERTY, PLANT AND
EQUIPMENT BY THE PARENT ENTITY
As at 30 June 2019, the parent entity has no commitment for the acquisition of property, plant and equipment.
70
REGIONAL EXPRESS HOLDINGS LIMITED
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 23 August 2019.
(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 consolidated financial statements have been prepared on a going concern basis. In preparing the consolidated financial
statements the directors note that the Group and Company are in a net current asset deficiency position, due to the nature of the
operations whereby customers make payment for booked flights prior to the flights being taken. The directors have prepared a cash
flow forecast which indicates that the Group will have sufficient cash flows to meet all commitments and working capital requirements
for the 12 month period from the date of signing this financial report. Based on the cash flow forecasts and other factors referred to
above, the directors are satisfied that the going concern basis of preparation is appropriate.
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.
(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.
REGIONAL EXPRESS HOLDINGS LIMITED
71
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 9, when applicable, the cost on initial
recognition of an investment in an associate or a joint venture.
(D) REVENUE
REGULAR PUBLIC TRANSPORT, CHARTER AND FREIGHT REVENUE
The Group operates a number of air transport services:
• Regular public transport
• Charter services
•
Freight services
Revenue from these services is recognised as revenue when the transportation service is provided.
The value of passenger revenue which has been booked and paid for but not yet flown is recorded as unearned revenue in the
statement of financial position. The Group does not adjust the consideration for any effects of a significant financing component
as it is expected at contract inception that the period between the transfer of goods and services and customer payments will be
one year or less. Ancillary revenues which are not considered distinct from the travel component because they are not capable
of being separable are recognised as part of passenger revenue.
Breakage on passenger revenue is recognised in proportion to the pattern of rights exercised by the customer as reflected by
the point of flown to match the timing of revenue recognition with the underlying ticket performance obligations. This is based on
historical experience. This estimation is made such that the revenue recognised from passenger ticket breakage is not expected
to result in a significant reversal of cumulative revenue in the future.
Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract with a customer that it would
not have incurred if the contract had not been obtained, such as sales commissions. The Group recognises the incremental costs
of obtaining contracts in line with the timing of the revenue to which they relate.
TRAINING REVENUE
The Group operates a pilot academy, Australian Airline Pilot Academy (“AAPA”) which provides training services to the Group’s cadets
as well as for external customers. Training revenue from external customers is recognised over time in relation to the training services
being provided.
Cadet loans are offered to the Group’s cadets which defer payment of a portion of the training service fees over a period of seven
years from the date of the completion of the pilot training. These loans are interest bearing and are repaid over the service period.
The interest on the cadet loans is recognised as finance income in the statement of profit or loss.
(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
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Bank overdrafts are shown within borrowings in current liabilities in the consolidated statement of financial position.
REX holds term deposits for the purposes of meeting financial obligations for workers compensation insurance. In prior periods, these
were treated as cash equivalents and reported as part of cash on the statement of financial position. The term deposits are interest
bearing and have a maturity date of greater than 90 days at inception. Accordingly, these term deposits do not meet the definition of
cash equivalents and have been classified as part of other receivables. Comparatives have been restated to reflect the change.
(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).
72
REGIONAL EXPRESS HOLDINGS LIMITED
(H) DERIVATIVE FINANCIAL INSTRUMENTS
The Group enters into jet fuel swap and foreign exchange derivatives to hedge exposures to jet fuel prices and foreign exchange
respectively. 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 relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on
an ongoing basis, the Group documents whether the hedging instrument is effective in offsetting changes in fair values or cash flows of
the hedged item attributable to the hedged risk, which is when the hedging relationships meet all of the following hedge effectiveness
requirements:
•
•
•
there is an economic relationship between the hedged item and the hedging instrument;
the effect of credit risk does not dominate the value changes that result from that economic relationship; and
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually
hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective
for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances
the hedge) so that it meets the qualifying criteria again.
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as
cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited
to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is
recognised immediately in profit or loss, and is included in the ‘other gains and losses’ line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods
when the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the hedged forecast
transaction results in the recognition of a non financial asset or a non financial liability, the gains and losses previously recognised in other
comprehensive income and accumulated in equity are removed from equity and included in the initial measurement of the cost of the
non financial asset or non financial liability. This transfer does not affect other comprehensive income. Furthermore, if the Group expects
that some or all of the loss accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is immediately
reclassified to profit or loss. The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases
to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold,
terminated or exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income
and accumulated in cash flow hedge reserve at that time remains in equity and is reclassified to profit or loss when the forecast transaction
occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in cash flow hedge reserve is reclassified
immediately to profit or loss.
(I) EMPLOYEE BENEFITS
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and
sick leave when it is probable that settlement will be required and they are capable of being measured reliably.
Liabilities recognised in respect of short term employee benefits are measured at their nominal values using the remuneration rate
expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated future cash
outflows to be made by the Group in respect of services provided by employees up to reporting date.
FINANCIAL INSTRUMENTS
(J)
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.
REGIONAL EXPRESS HOLDINGS LIMITED
73
The Group classifies its financial assets in the following measurement categories:
•
•
•
those to be measured subsequently at fair value through other comprehensive income
those to be measured subsequently at fair value through profit or loss; and
those to be measured at amortised cost.
The classification depends on the Group’s business model for managing financial assets and the contractual terms of the
cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive
income. For investments in equity instruments that are not held for trading, this will depend on whether the Group has
made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other
comprehensive income.
EFFECTIVE INTEREST METHOD
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected
life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through
profit or loss’.
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
The Group holds equity investments at fair value through other comprehensive income where an irrevocable election has been made
by the Group to present subsequent changes in fair value after initial recognition in other comprehensive income. On derecognition
of the investment, there is no subsequent reclassification of fair value gains and losses to profit or loss.
Dividends on investments at fair value through other comprehensive income are recognised in profit and loss when the Group’s right
to receive payments is established.
LOANS AND RECEIVABLES
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as ‘financial assets at amortised cost’. The Group holds loans and receivables with the objective to collect
contractual cash flows and therefore they are measured at amortised cost using the effective interest method less impairment.
Interest is recognised by applying the effective interest rate.
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial assets which do not meet the criteria for amortised cost or fair value through other comprehensive income are recognised
at fair value through profit or loss.
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.
IMPAIRMENT OF FINANCIAL ASSETS
The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade and other receivables.
The expected loss rates are based on the payment profiles of sales over a period of 36 months and the corresponding historical
credit losses experienced within this period. The historical loss rates are adjusted to reflect current and prospective information on
macroeconomic factors affecting the ability of the counterparty to settle the receivables.
Trade and other receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the entry of the debtor into administration or liquidation.
Impairment losses on trade and other receivables are presented as net impairment losses within profit or loss. Subsequent recoveries
of amounts previously written off are credited against the same line item.
DERECOGNITION OF FINANCIAL ASSETS
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor
retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises
a collateralised borrowing for the proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum
of the consideration received and receivable is recognised in profit or loss. On derecognition of an investment in equity instrument
which the Group has elected on initial recognition to measure at fair value through other comprehensive income, the cumulative
gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or loss, but is transferred to
retained earnings.
74
REGIONAL EXPRESS HOLDINGS LIMITED
(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 at amortised
cost.
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss.
The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Fair value is determined in the
manner described in Note 23.
OTHER FINANCIAL LIABILITIES AT AMORTISED COST
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
(L) GOODWILL
Goodwill acquired in a business combination is carried at cost established at date of the acquisition of the business less
accumulated impairment losses if any.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (CGUs), or groups of
CGUs, expected to benefit from the synergies of the business combination. CGUs (or groups of CGUs) to which goodwill has
been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill
might be impaired.
If the recoverable amount of the CGU (or group of CGUs) is less than the carrying amount of the CGU (or groups of CGUs), the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or groups of CGUs) and
then to the other assets of the CGU (or groups of CGUs) pro-rata on the basis of the carrying amount of each asset in the CGU
(or groups of CGUs). An impairment loss recognised for goodwill is recognised immediately in profit or loss and is not reversed
in a subsequent period.
On disposal of an operation within a CGU, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal of the operation.
(M) GOVERNMENT GRANTS
Government grants are assistance by the government in the form of transfers of resources to the Group in return for past or future
compliance with certain conditions relating to the operating activities of the entity. Government grants include government assistance
where there are no conditions specifically relating to the operating activities of the Group other than the requirement to operate in
certain regions or industry sectors.
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching
to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the
periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically,
government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets
are recognised as deferred revenue in the statement of financial position and transferred to profit or loss on a systematic and rational
basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving
immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they
become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference
between proceeds received and the fair value of the loan based on prevailing market interest rates.
Government assistance which does not have conditions attached specifically relating to the operating activities of the entity is
recognised in accordance with the accounting policies above.
REGIONAL EXPRESS HOLDINGS LIMITED
75
(N)
IMPAIRMENT OF OTHER TANGIBLE AND INTANGIBLE ASSETS OTHER
THAN GOODWILL
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-
generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and
whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of
the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately,
unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal
of the impairment loss is treated as a revaluation increase.
(O) TAXATION
Income tax expense represents the sum of the tax currently payable and deferred tax.
CURRENT TAX
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the
consolidated statement of profit or loss and other comprehensive income/statement of profit or loss because of items of income or
expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current
tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
DEFERRED TAX
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences
can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from
the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit.
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.
76
REGIONAL EXPRESS HOLDINGS LIMITED
(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.
The policies applied to finite intangible assets are as follows:
Intangible asset
Amortisation method used
Impairment test / recoverable amount testing
Computer software
4 years straight line
where an indicator of impairment exists
INVENTORIES
(Q)
Inventories are valued at the lower of cost and net realisable value. Cost of inventories is 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,
or replacement cost price in relation to the consumables.
Consumables expected to be consumed within 12 months are classified as current, or non-current where consumption are expected
in a period beyond 12 months.
(R) LEASING
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to
ownership to the lessee. All other leases are classified as operating leases.
GROUP AS LESSOR
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs
incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a
straight line basis over the lease term.
GROUP AS LESSEE
Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the
minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the
statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges are recognised immediately in profit and loss, unless they
are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on
borrowing costs. Refer to Note 30E. Contingent rentals are recognised as expenses in the periods in which they are incurred.
Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The
aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
(S) PROPERTY, PLANT AND EQUIPMENT
Land and buildings, plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less
accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the
event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable
in the future to their present value as at the date of acquisition.
Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated
on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value.
Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the
straight line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual
reporting period, with the effect of any changes recognised on a prospective basis.
REGIONAL EXPRESS HOLDINGS LIMITED
77
The rates applied are as follows:
Aircraft
Building
Computer Equipment
Engines
Furniture & Fittings
Leasehold Improvements over the unexpired lease period
Motor Vehicles
Plant & Equipment
Rotable Assets
15,000 to 60,000 hours
20 to 40 years
4 to 5 years
10 to 20 years
8 to 10 years
7 years
8 years
5 to 20 years
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising in the disposal or retirement of an item of property, plant and equipment
is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
(T) PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting
date, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present value of those cash flows (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.
Reserved share account represents on market purchase of shares by the Group which are eventually granted to executives and
employees as part of their remuneration.
(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.
(W) 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 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.
78
REGIONAL EXPRESS HOLDINGS LIMITED
DIRECTORS’ DECLARATION
The directors declare that:
(a)
(b)
(c)
in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable;
t he attached financial statements are in compliance with International Financial Reporting Standards, as stated in Note 30 to
the consolidated financial statements;
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
23 August 2019
REGIONAL EXPRESS HOLDINGS LIMITED
79
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 Audit of the Financial Report
Opinion
We have audited the financial report of Regional Express Holdings Limited (the “Company”) and
its subsidiaries (the “Group”), which comprises the consolidated statement of financial position
as at 30 June 2019, consolidated statement of profit or loss, consolidated statement of other
comprehensive income, consolidated statement of changes in equity and consolidated statement
of cash flows for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies and other explanatory information, and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the
Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the Group in accordance with the
auditor independence requirements of the Corporations Act 2001 and the ethical requirements
of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors
as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Member of Deloitte Asia Pacific and the Deloitte Network.
Liability limited by a scheme approved under Professional Standards Legislation.
80
REGIONAL EXPRESS HOLDINGS LIMITED
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report for the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How the scope of our audit addressed
the Key Audit Matter
Valuation of unearned revenue
As at 30 June 2019, the Group recognised
unearned revenue of $24.502 million as
disclosed in Note 11.
The Group’s calculation of unearned
revenue in respect of flights purchased but
not yet flown requires significant judgment,
requiring significant volumes of data from
flight booking systems and passenger
reports to be analysed and matched, along
with estimated adjustments to unearned
revenue such as the level of no-shows.
Our procedures included, but were not
limited to:
Assessing
the accounting policies
adopted by the Group in relation to
revenue recognition;
Testing a sample of controls in the
determination of unearned revenue;
Testing the flight booking systems and
passenger reports by comparing a
sample of flight information to the cash
receipt and flight data;
Agreeing the inputs in the reconciliation
of unearned revenue to external flight
booking systems; and
Challenging the assumptions used by
management in relation to the rate of
no-shows
the no-show
revenue to be recognised in profit or
loss.
to assess
We also assessed the appropriateness of the
disclosures in Note 4, Note 11 and Note 30
to the financial statements.
REGIONAL EXPRESS HOLDINGS LIMITED
81
Key Audit Matter
How the scope of our audit addressed
the Key Audit Matter
Our procedures included, but were not
limited to:
Assessing identification of the CGUs and
indicators of
determining whether
impairment exist;
Assessing management’s assertions
and estimates regarding estimated
useful lives and residual values using
valuation reports published by third
party specialists, industry data and the
Group’s historical experience and future
operating plans;
Challenging the assumptions used in
management’s impairment analysis by
assessing
of
management’s past estimates and
taking into account recent industry
developments and each CGU’s future
operating plans;
reliability
the
Assessing the reasonableness of the
basis adopted by management
in
determining the other key inputs and
assumptions underlying the calculations
in the models; and
Performing sensitivity analysis on the
key model inputs and assumptions.
We also assessed the appropriateness of the
disclosures in Note 9 to the financial
statements.
Carrying value of aircraft and other
property plant & equipment
As at 30 June 2019 the Group has
recognised aircraft and other property
plant & equipment of $89.178 million and
$114.100 million respectively.
Management conducts impairment tests
annually (or more frequently if impairment
indicators
the
recoverability of the carrying value of
aircraft and other property, plant &
equipment.
assess
exist)
to
Impairment indicators are assessed with
reference either to the asset in question or
the cash-generating unit (CGU) to which
the asset relates. The Group has identified
two CGUs for the purposes of assessing the
carrying value of aircraft and other
property, plant & equipment:
Pel-Air Aviation Pty Limited (Pel-Air);
and
Regional Express Holdings Limited
(REX).
The Group measures the recoverable
amount of the CGUs through value in use
models.
As disclosed in Note 9, there are a number
of key estimates made which require
significant judgement in determining the
inputs into these models which include:
Growth rates for revenue, operating
costs and fuel costs;
Capital expenditure; and
Discount rate.
82
REGIONAL EXPRESS HOLDINGS LIMITED
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2019, but does not include
the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information; we are required to report that fact. We have
nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors 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 preparing the financial report, the directors are responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole
is free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with the Australian Auditing Standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether
due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the
REGIONAL EXPRESS HOLDINGS LIMITED
83
financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including
the disclosures, and whether the financial report represents the underlying transactions
and events in a manner that achieves a fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial
report. We are responsible for the direction, supervision and performance of the Group’s
audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of
most significance in the audit of the financial report of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits
of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 21 to 23 of the Directors’ Report
for the year ended 30 June 2019.
In our opinion, the Remuneration Report of Regional Express Holdings Limited, for the year
ended 30 June 2019, complies with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of Regional Express Holdings Limited 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.
DELOITTE TOUCHE TOHMATSU
Damien Cork
Partner
Chartered Accountants
Sydney, 23 August 2019
84
REGIONAL EXPRESS HOLDINGS LIMITED
ASX ADDITIONAL INFORMATION AS AT 17 SEPTEMBER 2019
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 2,325 individual shareholders.
All issued ordinary shares carry one vote per share and carry the rights to dividends.
DISTRIBUTION OF HOLDERS OF EQUITY SECURITIES
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Unmarketable Parcels
SUBSTANTIAL SHAREHOLDERS
Ordinary Shareholders
KIM HAI LIM
JOE TIAU TJOA
THIAN SOO LEE
MING YEW SEE TOH & HUI ING TJOA
JOO CHYE CHUA
HUI LING TJOA
Fully Paid Ordinary Shares
Investors
734
1,028
241
264
58
2,325
218
Fully Paid
Securities
392,334
2,769,548
1,892,984
7,304,702
97,794,807
110,154,375
27,744
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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
THIAN SOO LEE
MING YEW SEE TOH & HUI ING TJOA
JOO CHYE CHUA
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MS HUI LING TJOA
ANACACIA PTY LTD
LAY KHIM NG
REX INVESTMENT HOLDINGS PTY LIMITED
PACIFIC CUSTODIANS PTY LIMITED
CITICORP NOMINEES PTY LIMITED
MR NICHOLAS BARRY DEBENHAM
MR MICHAEL KARL KORBER
REX INVESTMENT HOLDINGS PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
STRATEGIC VALUE PTY LTD
MR THIAN SONG TJOA
MR GUY FARROW
NEWECONOMY COM AU NOMINEES PTY LIMITED
Number
18,998,346
16,234,094
7,722,181
7,454,362
7,454,362
6,606,712
5,755,513
3,727,181
2,869,997
2,573,383
2,250,317
1,757,118
1,222,701
1,100,000
1,093,185
1,040,585
918,115
800,000
557,616
523,010
Issued Capital (%)
0.36
2.51
1.72
6.63
88.78
100
0.03
Percentage
17.25
14.74
7.01
6.77
6.77
5.22
Percentage
17.25
14.74
7.01
6.77
6.77
6.00
5.22
3.38
2.61
2.34
2.04
1.60
1.11
1.00
0.99
0.94
0.83
0.73
0.51
0.47
REGIONAL EXPRESS HOLDINGS LIMITED
85