01
To us, being a Kiwi company means we’re
committed to New Zealand, including
its people, communities and our natural
environment. New Zealand is the only market
we operate in. All of our customers are here.
All of our people live here and are a part of our
local neighbourhoods across the country.
Welcome to
Z’s annual report
for the financial year ended 31 March 2015
This year we’ve decided to take our commitment to sharing everything
to the next level, by creating an annual report that compares our
performance against external environmental, social and economic
standards. We’re doing this as part of our commitment to sustainability,
transparency and to best practice reporting. As a result, this is Z’s first
annual report that’s in accordance with the Global Reporting Initiative
(GRI) international sustainability reporting framework.
Z Annual Report 2015 02
Z is a different kind of company – how
we go about our business is different,
how we communicate is very different,
the culture we aspire to is different and
how we invest in our people and our local
communities is different.
Z keeps New Zealand moving – literally. We sell around 30 per cent of New Zealand’s
total transport fuel to a wide range of customers – airlines, shipping and fishing
companies, trucking companies, farmers and heavy industry – as well as our retail
customers through our national network of retail service stations.
We own a stake in New Zealand’s only refinery at Marsden Point. We’re one of New
Zealand’s top 20 publicly listed companies with around 10,000 shareholders and
8,000 retail bondholders, and we’re listed on the New Zealand (NZX) and Australian
(ASX) stock exchanges.
This report is dated 7 May 2015 and is signed on behalf of the board of Z Energy Limited:
Peter Ward Griffiths
Abigail Kate Foote
03
A quick summary
of what you can expect in this report
This year, we’ve structured our report to reflect the things that matter most to us and our stakeholders:
How we win
Our people
Our
communities
Our
environment
Our finances
In this report you’ll see what we’ve been up to over the last 12 months, including the progress we’ve
made on sustainability, the progress we’ve made with the Z brand and what we’ve done to keep
people healthy and safe. This report doesn’t just include our wins; we’re also sharing what hasn’t gone
so well or things that aren’t quite on track. This is all part of our commitment to being straight up.
Z Annual Report 2015 04
Sharing matters
what
with people
who matter
Two of Z’s founding organisational values are ‘share
everything’ and ‘be straight up’. This demands that
we take stakeholder engagement seriously, and at
Z we do.
Stakeholder engagement and the way we
go about it is an area in which Z strives to
be distinctive – we’re committed to being
proactive, direct and straight up, and
listening more than we talk.
Often Z’s approach to stakeholder
engagement is met with surprise and at
times a level of suspicion – we’ve learned
it’s not common for a fuel company to
meet with a wide range of environmental
or non-governmental organisations
(NGOs) to discuss climate change,
sustainability and alternative fuels. It’s
not common for a fuel company to invite
government and motoring advocates to
discuss our financial performance twice
a year. Our stakeholders tell us they find
it refreshing that we can be straight up
about what we haven’t done well, as
well as where we have enjoyed success.
This report is another example of this
approach in action.
We regularly check our engagement
programme to ensure we are building
relationships with the right people. We
listen to their concerns and ideas about
what matters most to them.
As a result, we know that the core interests of Z’s stakeholder base fall into the following broad groupings:
05
Community
Sustainability
Financials
How we contribute to the
communities of which our
people and our operations
are a part.
What we are doing, and
what we could do more of, to
improve environmental and
social sustainability.
How our business is performing,
how much money we are making,
whether we are behaving properly
in a commercial context and
whether we are delivering value.
Health
and safety
How we are developing and
building a healthier and safer
company and therefore a
healthier and safer New Zealand.
Our engagement this year
Below is a short list of primary
stakeholders with which Z engaged over
the year, and what we talked about.
•
Central government (including
Ministry of Business, Innovation and
Employment; Treasury; Ministry for
the Environment; Energy Efficiency
and Conservation Authority; New
Zealand Transport Agency; Ministry
of Transport; Department of Prime
Minister and Cabinet; Ministry for
Primary Industries; various political
parties): fuel sales and the macro-
•
economic environment, supply
chain resilience, impact of potential
industrial action at Refining NZ, fuel
margins and industry profitability,
Z’s financial performance, alternative
fuels development.
Media: ongoing daily engagement
with a wide range of media around
the full range of issues – from the
outlook on global crude oil markets,
to Z’s position on sustainability,
to an incident on a retail site. By
way of context, and to support the
way we talk about Z’s commitment
to transparency, in the month of
•
December, Z was mentioned in stand-
alone media coverage 30 times more
often than our closest competitor.
When people, including the media,
want to know what’s happening in our
industry, they tend to talk to Z.
Local government, community
organisations and NGOs:
environmental and social
sustainability; biofuels – availability,
supply and resource consenting for
Z’s Wiri biodiesel plant; environmental
management of retail service
station properties; environmental
policy development; best practice
•
in community investment and
sponsorship.
Sustainability sector (including
World Wildlife Fund, Greenpeace,
Sustainable Business Network,
National Energy Research Institute,
Sustainable Business Council, Motu
Economic and Public Policy Research
Climate Change dialogue group,
environmental education groups): our
sustainability goals and how we strive
to deliver them, as well as where we
need help.
Z Annual Report 2015 06
What’s in
the report?
07
29
Our people
31 Meet Z’s board
33 Meet Z’s executive team
34 Leadership at Z
35
Our communities
36 Our community aspirations
38
Our environment
41 Waste
42
Health, safety, security and the environment
44 Energy
45 Emissions
47 Water
48 Being part of the solution
50
Our finances
52 Corporate governance
72 Our financial results
2
Introduction
8
Z performance snapshot for
the year ended 31 March 2015
11 The best of Z FY15
12 Chairman’s and CEO’s report
15
How we win
17 Keeping things speedy
18 Super heroes: a win-win
21 World famous customer service
23 Getting to the heart of dissatisfaction
24 More than just a fuel company
24 Z into Xero
25 Making sustainability easy
27 Our supply chain
28 Getting the most out of local refining
Z Annual Report 2015 08
Z performance snapshot
for the year ended 31 March 2015
($)1
$7m
$241m
$121m
Historical cost net profit after tax
Replacement cost2 operating EBITDAF3 profit
Replacement cost net profit after tax
Dividends per share
Replacement cost earnings per share
Capital expenditure
24.2c
30c
$70m
1 All amounts are New Zealand dollars ($) unless stated otherwise.
2 Z’s replacement cost earnings adjust the cost of sales as if inputs had been procured at the time of sale. For the 2015 financial year, the replacement cost approach to valuing stock sold has resulted in a reduction in cost of goods sold of $158 million.
This is not reflected in Z’s statutory earnings. Z’s management focuses on (and Z provides guidance on) replacement cost operating earnings, which Z considers better reflect the underlying trading performance of the business.
3 Replacement cost operating earnings before interest, taxation, depreciation (including gains and (losses) on the sale of fixed assets), amortisation and fair value movements in interest rate derivatives.
Key replacement cost1 financial results
Revenue
Replacement cost gross margin
Operating costs (excluding primary
distribution costs and community)
Community 3
Realised and unrealised (losses)/gains
on foreign exchange and commodity
transactions
Replacement cost operating EBITDAF
Share of earnings in associates
Replacement cost EBITDAF
Depreciation and amortisation
Net financing expense
Profit and loss on sale of assets
Other
Taxation (including tax on COSA)
Replacement cost net profit after tax
Dividends declared
Economic value retained
FY15
$m
3,064
562
(294)
-
(27)
241
10
251
(43)
(37)
-
(7)
(43)
121
(97)
24
FY142
$m
3,371
500
(287)
(1)
7
219
(1)
218
(39)
(33)
(4)
(1)
(40)
101
(88)
13
Reconciliation from statutory NPAT
to replacement cost NPAT for FY154
Net profit per the statutory accounts
Replacement cost of sales adjustment
Tax on cost of sales adjustment
Replacement cost NPAT
Var
%
(9)
12
(7)
(100)
<>
10
<>
15
(10)
(12)
(100)
(6)
(8)
20
(9)
11
$m
7
158
(44)
121
1.
Please refer to footnotes 2 and 3 on page 8 and the ‘financial commentary’ section for discussion of our
replacement cost performance measurement.
2. FY14 results are prepared on a pro forma basis.
3. The FY15 Good in the Hood campaign started in May 2015.
4. Please refer to page 109 for a more comprehensive reconciliation.
Financial commentary
In its first full year of performance as a
company listed on the NZX Main Board
and ASX, Z has delivered a statutory
historical cost net profit after tax (HC
NPAT) for the year ended 31 March 2015
of $7 million, down $88 million (93 per
cent) on FY14.
The reduction in HC NPAT is due to the
sharp fall in crude and product prices
during the second half of the financial
year. On a replacement cost basis – the
measure widely used as a more meaningful
performance measure by the downstream
fuels industry – Z delivered a full-year
replacement cost NPAT of $121 million, up
$20 million (20 per cent) over FY14.
Z’s management consistently focuses
on (and Z provides guidance on)
replacement cost operating earnings,
which better reflect the underlying
trading performance of the business.
Z’s replacement cost operating EBITDAF
of $241 million reflects the ability of
the company to deal with challenging
operating conditions, manage volatility
and deliver quality earnings. Over this
period, and through the full-year result, Z
has demonstrated the value of operating
as a genuinely integrated company with
the ability to “flex” different parts of
the business to get the best result in
changing conditions.
During the second half of the financial
year, the business operated in a volatile
market environment. Between October
2014 and January 2015, the price of crude
oil fell from US$95 per barrel to as low as
US$45 per barrel.
09
The second half
of the financial year was
a period of recovery and
increasing momentum
for the company.
As a result of this market volatility, FY15
was a game of two very different halves.
The first half of the year was the most
challenging period in Z’s short history
(since being sold by Shell in 2010), as an
extended refinery outage and adverse
market conditions drove refining margins to
the lowest levels since 1999. These factors
contributed towards Z failing to achieve its
financial targets for the half year.
The second half of the financial year
was a period of recovery and increasing
momentum for the company – the
opposite of the conditions in the first
half. Refining margins improved
markedly, Z sold more fuel than in the
previous corresponding period, and fuel
margins and store sales improved. The
underperformance relative to financial
targets in the first half of the year,
resulting from costs associated with the
low refining margins in that half, was
reversed in the second half.
Z Annual Report 2015 10
Highlights of Z’s FY15 financial performance
Disciplined margin management across
the business allowed Z to more actively
manage fuel volumes, competing on
price across the country to ensure Z
maintained its competitive position.
Z grew underlying fuel margins(1) and non-fuel
margins(2) in FY15 by six per cent and seven
per cent respectively.
Z has redeveloped 28 sites to
include its expanded food and
coffee offer, delivering what
we call an ‘everyday awesome’
service to a greater number
of customers.
Z also opened four new-to-
industry sites, plus knocked
down and redeveloped a
further seven sites to ensure
that its network meets the
needs of its customers.
Through careful management and by
working closely with Refining NZ, Z was
able to manage the volatility in refining
margins over the year. This included
delivering targeted full year refining
margins and realising the benefits in the
first year of the company’s agreement
with Refining NZ and another customer
of Refining NZ to jointly procure and
process crude oil products.
1. Replacement cost basis.
Historical cost basis.
2.
Z became the market leader in
car wash sales in FY15.
Investment
Z invested $60 million of capital
expenditure during the financial
year, which included new sites
and store upgrades, systems and
people, and the maintenance
and integrity of our core assets,
including bulk fuel storage
terminals. Z also invested $10
million during the financial year in
a new biodiesel production facility
at Wiri, Auckland, which will begin
production in FY16.
FY15 was the first full year of
the company’s ‘Strengthening
the Core’ strategy, from which
Z seeks to deliver an incremental
$40 to $50 million of replacement
cost operating EBITDAF uplift
over its four to five year duration.
The best of Z FY15
Earnings continue to grow
On a replacement cost basis, operating EBITDAF lifted
from $219 million in FY14 to $241 million in FY15. This was
achieved in an increasingly competitive market. Since 2010,
we’ve increased replacement cost operating earnings by
53 per cent and replacement cost NPAT by 81 per cent.
Z has declared $97 million in dividends to its shareholders
in respect of FY15.
11
Bringing
super heroes to
New Zealand
Kiwis loved Z’s eight-week
Super Heroes campaign. In
fact, they took home over
four million pint-sized DC
Super Hero Blokhedz.
Engagement goes
through the roof
Z’s employee engagement result
increased to 78 per cent – a nine per
cent increase from 69 per cent in FY14.
A new deal on imported
refined fuel
This year Z signed another very competitive
12-month deal with a South Korean refiner
for the supply of around 400 million litres of
refined fuel.
Kiwis are
zipping thru Z
With 120 sites around
the country with Pay
at Pump technology,
customers are getting
in and out of Z quicker
than ever.
New sites
Z continues to lead the way when it comes
to investing in our industry – in FY15
another four Z service stations arrived on
the scene. At a cost of up to $3.5 million
each, this is a significant investment in our
future growth.
Z Annual Report 2015 12
Ko mihi nui ki a koutou. Ko tēnei tau he wā whakahirahira
mō Z Energy. Ko te tamanako kia whakapai tō tātou
herenga ki mua. Na reira, tēnā koutou katoa.
Welcome to Z Energy’s Annual Report 2015. We’ve had
a successful financial year to the end of March 2015 in
conditions that have been the most volatile in the global
and domestic fuel markets for many years.
A year of two halves
Chairman’s and CEO’s report
Given the volatility in both the markets
and in the marked difference in Z’s
performance – from one half to
another – investors could be forgiven
for asking whether our strong full-year
performance is the result of good luck or
good management, and we have asked
ourselves the same question.
Health, safety, security and
the environment
Luck doesn’t get you far when it comes to
HSSE and few things have the potential to
impact the bottom line more profoundly
than getting HSSE wrong. So before we
discuss financial performance, we need to
discuss our HSSE performance.
We summarise this financial year as
one of solid HSSE performance while
continually taking ground towards our
ultimate goal of becoming a zero harm
workplace. You can read more about how
we performed in this area on pages 42
to 43.
Over the period, Z has participated in
the development of legislation currently
working its way through Parliament that
will overhaul New Zealand’s occupational
health and safety framework. We’ve also
redeveloped and launched Z’s health and
safety management system, and ensured
we have the right people in the right
roles to enable us to continue to build a
generative HSSE culture at Z.
Z has been
focused and disciplined
in its margin management
over the period,
including running the
business in a genuinely
integrated way.
13
In February 2015 we welcomed Julian
Hughes to the Z team in a new position
as general manager of health, safety,
security and the environment (HSSE).
Julian comes to Z following his last position
as executive director of the Business
Leaders’ Health & Safety Forum and his
appointment reflects Z’s commitment to
best practice HSSE leadership.
Our financial performance
We summarise Z’s first full financial year
as a company listed on the NZX Main
Board and ASX simply as having delivered
against what we said we would. For all
of its ups and downs, we’ve delivered
financial results at the top end of our
guided range in a highly competitive
environment and we’ve done it safely.
Investors will recall that we failed to hit
our financial targets at the half year, and
that we were unsatisfied with that result.
So, did conditions swing and provide a
favourable tailwind for the second half,
or did we manage our business carefully
and deliberately to ensure we hit our
unchanged guidance to the market?
The answer is both.
Z has been focused and disciplined in
its margin management over the period,
including running the business in a
genuinely integrated way. ‘Integrated’
is one of those popular corporate terms,
but what we mean by it is we managed
each of the revenue generating parts of
the business to ensure we delivered the
end result.
We also took the decision in the second
half of FY15 to tackle increasing levels of
regional price discounting head-on and
match our competitors on the price board.
This deliberate shift in pricing tactics
has had the predictable effect of firming
Z’s volume position as, prices being
equal, customers tend to prefer Z over
other brands.
We’ve remained focused on executing
our strategy: disciplined portfolio
management in our commercial business,
continued investment in new retail sites
and store upgrades, and continued drive
for additional value out of our crude oil
and refined fuel supply chains.
We point to this focus on strategy and on
integrated business operations in order
to manage volatility as being deliberate
management.
So where was the luck?
Luck is probably not the word we would
choose, but swings in the fortunes of
refining are a factor that is unfortunately
well outside of Z’s control. We can and did
work to successfully offset the negative
impact of very low refining margins in the
first quarter of the year but a remarkable
recovery in refining margins saw Z’s
first quarter fee floor payments to the
refinery paid back in full before the end
of December 2014. In the last quarter
of FY15, refining margins consistently
averaged $13 per barrel, enabling Z
to deliver a higher than forecast total
refining margin contribution of $31 million
towards full year earnings.
We’ve also realised the benefits that we
outlined when we announced a project to
collaborate in the crude oil supply chain
with another refinery customer to ensure
more efficient refinery processing.
Investors and commentators might
also point to the rapidly declining oil
and refined fuel price as a favourable
tailwind condition. While a halving of the
barrel price between October 2014 and
mid-January 2015 enabled Z to lead the
market through 18 retail price cuts, any
volume increase as a result of lower fuel
prices has been marginal.
The numbers
The result of all of this has been that we
have delivered a full year historical cost
operating profit of $7 million. Under New
Zealand Generally Accepted Accounting
Principles (GAAP), we are required to
disclose profits using the historical cost
methodology.
Z’s historical cost performance was
accordingly negatively impacted by the
61 per cent drop in the price of crude
oil and refined fuels over the financial
year. Given that the value of inventory
is material to operating profitability, the
downstream fuels industry globally tends
to focus on replacement cost earnings as
a more accurate measure of performance.
Z delivered replacement cost operating
EBITDAF of $241 million, $22 million ahead
of the previous financial year’s results.
The company delivered full year
replacement cost NPAT of $121 million,
up $20 million from the previous financial
year.
This is a solid financial result that
represents double-digit replacement cost
earnings growth from the 2014 financial
year. The result has been delivered under a
diverse range of operating and competitive
conditions and is – with the exception of
Z Annual Report 2015 14
There’s always
a high level of public
interest in fuel pricing and
our job involves satisfying
three very different
groups: our customers,
our shareholders and our
stakeholders.
those external conditions no single party
can control – a reflection of the integration,
professionalism and commitment of the
Z Energy team. In our minds, more good
management than good luck.
Dividend
The Board has approved a final dividend
of 16.5 cents per share, consistent
with our policy of paying dividends of
approximately 80 per cent of replacement
cost NPAT to shareholders.
The final dividend for FY15 will be paid
on 3 June 2015.
Neither good luck nor good
management
Our shareholders own this business and
we manage it on their behalf. As such, we
need to share not only what went well,
but also the instances where good luck
and, particularly, good management were
missing. These are the instances from
which we learn and improve.
In May 2014, Z launched a new breakfast
offer across its retail network that,
through inadequate planning and
supervision, and a lack of appreciation for
the nature of the products involved, did
not go smoothly. As a result, the eventual
breakfast range was pared back and we
will build upon this with the rest of the
product range over the next financial year.
In taking the time to ensure we learned
from this, we also decided to delay the full
roll-out of the company’s frozen yoghurt
offer. Consequently, we missed the full
roll-out over the summer months but our
confidence for success is much higher as
a result of taking this time.
Over the period we also chose to pull the
plug on an IT project in the commercial
part of the business and realised a small
loss rather than accept a looming cost
blowout.
As you will see in the report, while we
operated the business with a high degree
of safety, the number of recorded injuries
that caused people to take time off work
increased from the previous period.
Public interest in pricing
Over December 2014 and January 2015,
when global oil prices were collapsing,
there was some public and political
interest in industry fuel pricing and
profitability.
There’s always a high level of public
interest in fuel pricing and our job
involves satisfying three very different
groups: our customers, our shareholders
and our stakeholders. We are satisfied
that Z has delivered value to each: we’ve
delivered fair and appropriate returns to
our shareholders by delivering value and
choice to our customers.
We’ve continued to engage openly
and transparently with those groups
and individuals with an interest in our
business and to lead on the things
that matter most to them, such as
transparency, sustainability and a
continued commitment to investment in
New Zealand and its infrastructure.
Conclusion
Through disciplined and integrated
management, Z has turned a
disappointing half-year result into a
strong full-year performance at the
top end of guidance. In doing so, we
believe we’ve added unique value to our
customers, our shareholders and our
stakeholders.
Over the period we’ve made good
progress in the first year of our five-year
strategy and we will remain focused on
realising the $40 to $50 million annual
replacement cost operating EBITDAF
growth that this strategy is designed to
generate over its duration.
We have one of the most committed
and engaged teams of any New Zealand
company and we want to thank every
member of the Z team for their passion
and commitment, and our shareholders
and customers for their continued
support.
Nō reira, tēnā koutou tēnā koutou tēnā
koutou katoa.
Peter Griffiths and Mike Bennetts
15
We reckon we’re winning when we
achieve lower unit costs than our
competitors, when we differentiate
our offer so that our customers receive
additional value from Z and when we
build a distinctive local brand that
customers prefer.
How wewin
Z Annual Report 2015 16
How we win
in retail
We win in retail by investing in new and existing sites around
New Zealand where our customers need them to be, great
customer service, and initiatives that get our customers
faster to where they really want to be. We understand that
some customers are driven solely by price, and we’ve got that
covered, but we also know our customers love Z because they
get our famous fast, friendly and hassle-free experience, and
all the things our brand stands for, like sustainability and
giving back to local communities.
17
Keeping things
speedy
We reckon there’s a couple of fundamental
ways we can keep our customers happy
and keep them coming back. It’s all about
the speed and the service we provide,
and through our investment in ‘Zip Thru
Z’ initiatives over the last few years, we
reckon we’re winning at both.
Our customers have told us they want a
fast, friendly and hassle-free experience.
To achieve this, we’ve installed Pay at
Pump at 120 sites, and diesel in all lanes
at 197 sites across the country. We know
we’re on to a good thing here, with the
metrics we use to measure speed for our
customers increasing from 43 per cent to
51 per cent in the last 12 months.
Our customers
have told us they want a
fast, friendly and hassle-
free experience.
Z Annual Report 2015 18
Super heroes:
a win-win 5.4%
increase
We reckon New Zealand has lots of
heroes doing great things around the
country every day, but we couldn’t resist
bringing Batman, Superman and a few of
their friends to New Zealand by way of
the now famous Blokhedz. Our customers
loved them, taking home over four million
pint-sized DC Super Heroes throughout
our eight-week campaign.
And not only did our customers love
them, so did our Chief Financial Officer:
Blokhedz helped increase our total fuel
volume by 5.4 per cent against the same
period in 2013.
The increased vehicle and foot traffic
across our forecourts also provided us
with the opportunity to showcase our
new initiatives (like Zip Thru Z) and our
awesome Z experience.
Fuel volumes against the
same period last year
19
Z Annual Report 2015 20
Forecourt Concierge, Tony Albano, helping a customer use Pay at Pump technology at Z Harbour City.
World famous
customer
service
We’re committed to providing an
extraordinary experience each and every
time a customer chooses to fill up at
Z – it’s a core part of our commitment to
becoming a distinctive and world-class
Kiwi company.
Since we’ve been
around, we’ve raised the
bar for service in our
industry.
In 2012, we rolled out a comprehensive
front-line staff training programme called
‘the Z Factor’. It focused on helping
our front-line staff provide excellent
customer service so our customers leave
with a smile on their face.
Since we’ve been around, we’ve raised
the bar for service in our industry and,
21
as a result, our customers expect more
from us. In the beginning, just seeing a
concierge on the forecourt wowed our
customers. Not anymore. We know we
have to continue to raise the bar, so we
rolled out the second edition of Z Factor
training, which consists of four key areas:
connecting fast with the customer; being
yourself; knowing who your customers
are and what they need; and knowing
your stuff, like what promotions are
currently running or where the local
farmer’s market is.
We reckon we’re off to a great start, but
watch out; there’s more to come.
Z Annual Report 2015 22
23
Getting to the heart
of dissatisfaction
Commercial customers – those to whom
we sell fuel directly, or those businesses
buying through a retail forecourt or truck
stop – typically use more fuel than the
average consumer. They make up roughly
half of our fuel sales, and that fuel is often
a major input cost to their business.
We know that our industry has generally
done a pretty poor job of looking after
these customers and giving them the
service they deserve. As a result –
and hardly surprisingly – commercial
customers are more dissatisfied with
their fuel supplier than any other group.
Turning this around and converting
dissatisfied customers into satisfied ones
is a critically important focus for Z – we
measure satisfaction regularly and we
hold ourselves accountable for delivering
significant improvement.
We’ve focused on addressing the causes
of dissatisfaction, delivering the service
these valuable customers deserve and
enabling them to get on with what they’re
passionate about: their business.
Listening and solving
When it comes to the commercial fuel
market, our focus has been on listening to
what our customers need and delivering
on the things we said we would –
sometimes, good business can actually
be that simple.
We’ve focused on fixing what has
previously frustrated our customers.
For example, although our network of
93 truck stops has recorded operational
availability of 99 per cent, we’ve focused
on improving on the one per cent they’re
unavailable for our customers to use.
We invested in fixing our systems and
infrastructure, and our availability is now
typically around 99.9 per cent.
Our fourth round of commercial customer
research was completed in December
last year. Our customers told us we have
been successful in further reducing their
causes of dissatisfaction.
Because time is money
We all know what it’s like to have the all-
too-common bad call centre experience
and we’re determined for Z to continue to
be very different from the norm.
Responsiveness has been an area of
focus for our Kiwi customer call centre,
with our first-time resolution percentage
increasing from 64 per cent to 78 per
cent over the last 12 months – this
equates to a huge amount of time saved
for our customers and ultimately a more
satisfying experience with us.
Z Annual Report 2015 24
More than just a fuel company
We aim to solve what matters for a
moving world. That includes helping our
customers run their businesses more
effectively and minimise their fuel costs.
We’ve established a project team to
develop products and services that help
our customers do just that.
We’re currently developing and piloting
an affordable tool for drivers of light
commercial vehicles that supports,
measures and rewards fuel-efficient
driving.
We completed a phase one trial, including
19 commercial customers and 57 of their
drivers. From the trial, we generated new
insights into the design and functionality,
which has set us up well for the second
phase of our solution.
We’ve partnered with Xero, which has
helped hundreds of Z Card customers
spend more time on the things that really
matter and less time on accounts.
By joining forces with the team at Xero,
a number of our Z Card customers can
now receive a copy of their invoice data
directly into their Xero feed, saving them
a significant amount of time manually
entering transactions every month.
Z is New Zealand’s first fuel retailer to
provide this free, time-saving service to
customers, and feedback from customers
has been overwhelmingly positive.
Z into Xero
25
diesel and emission cleaner at the same
time, making life on the road easier, more
convenient and cleaner for all of us.
Providing customers with the ability to fill
up at the Z truck stop pump means they
don’t have to worry about the issues that
go with buying and storing diesel exhaust
fluids, such as cleaning and disposing
of the product in an environmentally
friendly way.
With Z DEC now
available nationwide at
selected Z truck stops,
customers can fill up
with diesel and emission
cleaner at the same time.
Making
sustainability
easy We’ve upgraded our nationwide truck stop
network to provide customers with easier
access to our diesel emission cleaner,
Z DEC.
Z DEC is a diesel exhaust fluid that, in
conjunction with Selective Catalytic
Reduction (SCR) technology, is designed
to help reduce emissions from heavy
vehicles, namely nitrogen oxides. With Z
DEC now available nationwide at selected
Z truck stops, customers can fill up with
Z Annual Report 2015 26
We focus on making the right choices across our
integrated supply and distribution system, in order to
run a safe and highly efficient supply chain.
We seek out sustainable improvement in all we do right
across our supply chain, which spans half of the globe.
l
n
i
a
h
c
y
p
p
u
s
r
u
O
1
It’s extracted
Crude oil is extracted from beneath the
earth’s surface via oil wells from all over
the world. Z does not explore or drill
for oil, so we have to purchase it on the
international market
3
It’s shipped
Crude oil and refined fuel products are then
shipped from international ports to New
Zealand. By using different shipping suppliers,
we have extensive knowledge of the shipping
market, which enables us to minimise shipping
costs while maintaining flexibility.
5
We distribute it
The refined fuels are shipped to terminals
around New Zealand. We will continue to
enhance our extensive local distribution
network. This year our haulers introduced
three bigger trucks to their fleet, meaning
less road exposure, fewer kilometres travelled,
less carbon dioxide emissions and bigger
distribution cost savings. Next year, we will
contract one of our shipping fleet providing
shipping capacity with a lower environmental
footprint for years to come.
27
2
We buy it
We buy crude oil and refined fuels (petrol and diesel)
on the international market. Most of the crude oil
Z imports is from the Middle East and Asia. The
refined fuels we buy are currently imported from a
world-scale refiner in Asia. A quarter of all fuel sold
by Z is directly imported as finished refined fuel,
with the remainder refined locally from imported
crude oil. Year-on-year, we’ve delivered improved
value through choosing better crude oils for the local
refinery, sequencing deliveries more efficiently and
negotiating better financial terms with our refined
fuel supplier.
4
It arrives
Approximately 12 million barrels per year of crude oil
for Z arrives at the Marsden Point refinery where it is
refined into petrol, diesel, jet fuel, fuel oil and bitumen.
Refined fuel imports are shipped directly to port fuel
terminals around New Zealand. We also have the
ability to deliver refined fuels from the international
market directly to our distribution centres across New
Zealand. We supply three million barrels of fuel this
way every year.
6
You use it
The fuel is then trucked to service stations,
truck stops, aviation pumps and commercial
customers around New Zealand, ready for
customers to use. We sell approximately 2.3
billion litres to our customers every year and
trucks travel around six million kilometres per
year getting it to where it’s needed.
Z Annual Report 2015
28
Getting the most
out of local refining
Our desired
outcome is to better match
the refinery’s production
requirements with our
supply needs and, in doing
so, enable the refinery to
run more efficiently and
cost effectively.
To generate the most value, an oil refinery
needs to run optimally – this means at
full capacity for as long as possible while
being flexible to process the right type of
crude oils at the right time.
In our 2014 annual report, we shared
with you our intention to work with New
Zealand’s only oil refinery, Refining NZ,
and another major refinery customer to
jointly procure and process crude oil.
Our desired outcome is to better match
the refinery’s production requirements
with our supply needs and, in doing so,
enable the refinery to run more efficiently
and cost effectively. A win-win situation.
A year on, we are pleased with how this
arrangement is playing out. However, the
year didn’t start well. In the early months
of Z’s 2015 financial year, a substantial
downturn in refining margins, exacerbated
by a major unplanned outage at Refining
NZ, led to Z making payments totalling
$8.2 million to Refining NZ to help cover
its fixed operating costs. This meant that,
although we had delivered the capability
to jointly procure and process crude oil
with our partner and Refining NZ, we
could not realise the financial benefits
until refining margins recovered. As the
crude oil price declined towards the end
of 2014 and refining margins recovered,
Z’s payments to Refining NZ were paid
back and the full benefits of the refinery
optimisation were delivered.
29
Ourpeople
Z Annual Report 2015 30
Paul Fowler
Abby Foote
Marko Bogoievski
Dr Bruce Harker
Justine Munro
Peter Griffiths
Alan Dunn
31
including Global Women and DiverseNZ.
She is a former McKinsey & Company
consultant, lawyer and is a NZ Rhodes
Scholar.
Dr Bruce Harker
Director
BE (Elect) (Hons), PhD (Elect Eng), FIPENZ
Bruce has extensive experience in
corporate governance and energy markets,
with a particular focus on renewable
electricity developments. He is the director
of H.R.L. Morrison & Co Limited’s Energy
Group and is chairman of NZX listed
renewable electricity company Trustpower
Limited. He has previously chaired the
Australian hydro business Southern Hydro
Partnership and was deputy chair of ASX
listed Energy Developments Limited.
Also in Australia, Bruce chaired start-up
electricity retailer Victoria Electricity
between 2004 and 2012, from its first
signed customer through to having over
400,000 customers.
Meet Z’s
board
Peter Griffiths
Chairman
BSc (Hons)
Peter is an oil industry veteran having
held various roles in New Zealand and
overseas. Until 2009, he was managing
director of BP New Zealand. Peter has
previously served on the boards of
The New Zealand Refining Company
Limited, Liquigas Limited, Energy Direct,
Whanganui Gas Limited and Bitumix
Limited. He is currently a director of
Marsden Maritime Holdings, New Zealand
Oil & Gas Limited, New Zealand Diving
and Salvage Limited and also a member
of the Civil Aviation Authority.
Paul Fowler
Director
BS (Marine Engineering), ME (Nuclear Engineering),
MBA, Fellow of Australian Institute of Company
Directors
Paul has primary industries in his blood.
He was the founding chief executive
officer of Nyrstar NV, the world’s largest
producer of zinc metal. Before that he
was chief operating officer of Zinifex,
an Australian zinc and lead mining and
smelting company. He has also been
chief executive officer of Fletcher
Challenge Forests and Carter Holt Harvey
Forests and spent 15 years with BP in
crude oil trading, strategic planning,
refining and retail marketing. Paul has
served on the boards of The New Zealand
Refining Company Limited and Evergreen
Forests Limited.
Marko Bogoievski
Director
BCA, MBA, ACA
Marko is chief executive officer of Infratil
Limited and H.R.L. Morrison & Co Limited.
He was previously chief financial officer of
Telecom New Zealand Limited, responsible
for corporate finance, mergers and
acquisitions, and group strategy. He is a
director of Infratil Limited and Trustpower
Limited. Marko holds a MBA from the
Harvard Graduate School of Business.
Alan Dunn
Director
Member, Institute of Directors in New Zealand
Al knows all about retail and business
leadership. He was chief executive officer
and chairman of McDonald’s Restaurants
New Zealand Limited from 1993 to 2004
before heading to Chicago to become
vice president of operations then regional
vice president in the Nordic region, and
managing director of McDonald’s Sweden.
These days he manages his own business,
Trumpeter Consulting, specialising in
business leadership and development.
He is also a director of New Zealand Post
Limited, Burger Fuel Worldwide Limited
and a number of private companies.
Abby Foote
Director
LLB (Hons), BCA, CMInstD, INFINZ (Cert)
Abby is a professional director with
experience on both publicly listed and
Crown companies. Based in Christchurch,
she has worked in a range of corporate,
treasury and legal roles over the last
20 years. Abby holds a number of
directorships, including the New Zealand
Local Government Funding Agency
Limited, Livestock Improvement Limited,
BNZ Life Insurance Limited and is a
former director of Transpower New
Zealand Limited.
Justine Munro
Director
LLB (Hons) (Vic), MLitt (Law) (Oxon)
Justine is a change leader who works
across the private, public and non-profit
sectors with a focus on innovation,
partnership, and leadership and culture.
Currently a director of Z Energy and a
number of non-profits, she was formerly
Executive Director of Education at Social
Ventures Australia and has led or helped
establish a number of organisations
Z Annual Report 2015 32
Mark Forsyth
Lindis Jones
Meredith Ussher
Rob Wiles
Chris Day
Sharlene Taylor
David Binnie
Jane Anthony
Julian Hughes
Mike Bennetts
33
Meet Z’s
executive
team
Rob Wiles
GM Corporate
BE (Hons), MsC (Finance),
Postgraduate Diploma in Banking
Mike Bennetts
CEO
BBS and Postgraduate Diploma in Corporate
Management. Member, Institute of Directors in
New Zealand
Mike became CEO of Z after 25 years
with BP in a variety of downstream roles
in New Zealand, China, South Africa,
the United Kingdom and Singapore.
Mike is also a director of New Zealand
Refining Company Limited and Loyalty
New Zealand Limited, the company that
operates FlyBuys.
Chris Day
CFO
BBS, CA, CTP.
Member, Institute of Directors in New Zealand
Before moving to Z, Chris has held general
management, chief financial officer
and financial controller roles in a range
of listed and commercial companies,
most recently as financial controller for
Contact Energy and before that as chief
financial officer for AXA New Zealand. He
is a member of Chartered Accountants
Australia and New Zealand and is a
director of Landcorp Farming Limited.
Rob has had an international career in
corporate finance, infrastructure treasury
management, mergers and acquisitions,
strategy and business development. He
also has experience in the development of
start-up businesses. Rob has held senior
positions with the National Australia
Bank, Bank of New Zealand, South Pacific
Merchant Finance and National Bank of
New Zealand.
Meredith Ussher
General Counsel
& Company Secretary
LLB, BA
Previously with Todd Energy Limited
and the New Zealand Racing Board/TAB,
Meredith is an experienced corporate
lawyer in both the energy and retail
network industries. She also has a strong
private practice history, having worked
at Minter Ellison Rudd Watts as a senior
associate. Within Z, she has responsibility
for all group legal risks as well as relevant
strategic and legal advice in respect
of all operational matters including
major contracts with key suppliers and
customers.
David Binnie
GM Supply & Distribution
BEng (Hons.) Mechanical Engineering, MBA
Member, Institute of Directors in New Zealand
Before moving to New Zealand in 2011
to lead the New Zealand Government’s
petroleum and minerals division, Dave
held a number of senior roles in the
global energy industry. He started a
25-year career with BP as an engineer
in Scotland, progressed through oil
refining and chemicals manufacturing
roles to commodity trading management
and ultimately to lead BP’s alternative
energy business development in Abu
Dhabi. Prior to embarking on his New
Zealand adventures, he was managing
director of the United Kingdom’s oil and
gas industry’s skills and competence
development organisation, OPITO.
Mark Forsyth
GM Retail
BCom, Member, Institute of Directors in New Zealand
Mark has held management positions with
Shell in New Zealand, the United Kingdom
and Ireland. He oversees Z’s 200+ service
stations and nearly 100 truck stops,
as well as marketing, brand and asset
management. Mark is a director of Loyalty
New Zealand Limited.
Lindis Jones
GM Commercial
BCom (Hons), BSc, Masters in Finance
Before joining Z, Lindis was the head of
property at ANZ Bank. Prior to that he
was with Shell for 13 years, primarily in
retail operations and strategy in Europe,
Asia and New Zealand. Lindis became
the General Manager of Commercial in
September 2011 after joining Z in the role
of General Manager Corporate in May
2010 and is responsible for all business-
to-business activity including Z Card.
Sharlene Taylor
GM People & Culture
PgCert
Before moving to Z, Sharlene held various
HR roles across Fletcher Building Limited
including in the Building Products and
Corporate divisions and most recently as HR/
change manager for the ICT Transformation
project. Prior to this, she was with Goodman
Fielder for four years, primarily working in
HR operational roles within the Dairy and
Home Ingredients businesses followed by
managing Remunerations and Benefits
across Australasia.
Julian Hughes
GM HSSE
BSc, Masters of Health Science
Julian has worked in the fields of health,
safety, rehabilitation and wellness
management for nearly 20 years. Most
recently he helped set up and head the
Business Leaders’ Health & Safety Forum,
a group of over 200 chief executives who
committed to working together to improve
workplace health and safety in New Zealand.
Prior to this Julian was the national manager
of safety and well-being at the New Zealand
Fire Service and he also has experience in
the road transport, construction and health
sectors as a consultant.
Jane Anthony
GM Marketing
BCom
Jane has been marketing manager with Z for
the past five years and has been responsible
for building the Z brand and the company’s
marketing programme over this time. Prior
to that, Jane was with Shell for 14 years in a
variety of local and global brand, marketing
and operations positions in New Zealand,
Australia, the United Kingdom and Europe.
Z Annual Report 2015 34
We invest in the growth and development of our people because
it is our people who deliver our results. It remains our strong
belief that extraordinary leadership is critical to producing
extraordinary results.
Leadership at Z
In 2014, we were awarded the Aon Hewitt
award for Top Companies for Leaders in
Australia and New Zealand.
We have focused on taking leadership
development to our front-line teams, and
75 people participated in our internal
leadership programme. Charging
our front-line team with fundamental
leadership capabilities enables them to
deliver on our customer promise and the
service we aspire to. We aim to make the
same leadership development available to
another 75 members of our front-line team
this year. Our ultimate goal is to provide
the training to all 250 front-line leaders in
our service stations.
Why employee
engagement matters
When we talk about employee
engagement, we simply mean the level of
emotional commitment that an employee
has to the organisation they work for
and then how that translates into going
beyond just getting the job done.
In 2012, Z achieved a high performance
result of 66 per cent employee
engagement in its annual employee
survey. Since then, we have seen
incremental increases, with a score of 69
per cent in 2014 and 78 per cent in 2015.
Our female engagement score is 84 per
cent and our male engagement score is
74 per cent.
These results put us in the top quartile
(of results by our engagement partners,
Aon Hewitt), and move us one step closer
towards our goal of being named as a
Best Employer.
Through our survey results in 2014,
we learned that career opportunities,
employee motivation, and performance
versus reward are areas that matter
most to our people. So we’ve focused on
providing consistent tools, processes,
and support for career opportunities;
developing an employment promise that
defines what we expect from our people
and what they will get in return; and
establishing an internal communication
channel that promotes celebration of
success.
We know that increasing engagement is
a long game and, even given our current
strong results, we reckon increasing
employee engagement is a game worth
playing for.
We have a framework designed to help employees set
goals, work towards them and be rewarded for how
they perform. Performance contracts provide clarity
about each employee’s annual objectives and how they
contribute to company-wide goals. Development plans
form the foundation for the development of key skills
and behaviours that are critical to improving individual
performance and helping our people work towards
their long-term career goals.
The table below sets out details of current permanent
employees who have received regular performance
reviews and have a career development plan as at
31 March 2015.
By gender
Performance
reviews
Career
development
plan
Female
Male
100%
100%
85%
99%
By employee category
Senior
management
Overall
organisation
Performance
reviews
100%
100%
Career
development
plan
100%
93%
35
Our
communities
Z Annual Report 2015 36
Our community
aspirations
Community matters a lot to us
at Z.
As a Kiwi company, we want
to be a force for good in the
communities where we live and
operate.
In 2014, we turned our minds to how Z
can do even more good in the future. We
brought together a group of people from
across Z, and spoke with our retailers
and their staff, some of our customers,
suppliers and partners, and a range of
community groups. We decided where
to focus our expertise and resources
to have the most positive impact in our
communities and make a significant
difference to people’s lives.
As part of Z’s new community strategy,
we have committed to:
•
•
community aspirations and
achievement: reducing inequality and
creating opportunity
safe and healthy communities:
leading on healthier lifestyles and
safer roads
•
neighbourhood solutions:
supporting more of what matters in Z’s
neighbourhoods year round.
Over the next year, we’ll work with the
wider Z family and others outside of
Z to land how we’ll deliver on these
commitments, and then get into action.
Doing even more Good in
the Hood
‘Good in the Hood’ is the name of
our flagship community investment
programme that lets our customers
choose at each retail site which of their
neighbourhood groups we’ll support.
We’ve been doing good in our ‘hoods
since 2012, and have contributed more
than $3 million to a wide range of
neighbourhood groups and projects
across the country to help people in need.
Good in the Hood is more than simply
donating money to our neighbourhoods
across New Zealand. It has enabled our
retail operators and their site teams
to build enduring and meaningful
relationships with their local communities
and to continue supporting them in the
things that matter. The Z sites in Waikato,
run by Selwyn Cook and his team, are a
great example of doing just this.
Selwyn recently won the Attitude ACC
Employer Award for 2014, and it’s no
surprise that community is at the heart
of how he runs his business. True Colours
Children’s Health Trust received funding
through Good in the Hood last year,
but it’s the ongoing support shown that
means the most to them. Cynthia Ward
(CEO of True Colours) said that she feels
like Selwyn and his team are an extension
of the True Colours team.
Nigel Andrews (Nelsonian of the Year for
Business 2015) runs Z sites in Nelson,
and is another true community champion.
Nigel and his team have helped support
groups such as Ronald McDonald House,
Age Concern, Cancer Society, The
Salvation Army and Blind Foundation (to
name a few), Nigel and his team assist at
the local community centre; they clean
the nurses’ cars and help maintain their
outdoor furniture at the Nelson Hospice;
and they help keep the yards tidy at
Riding for the Disabled. This is only half
of what Nigel and his team do to support
what matters in their ‘hood.
We’re thrilled to have created a platform
that moves beyond cash contributions to
something that allows our people to form
enduring and meaningful connections
with their local neighbourhoods.
Make-A-Wish
New Zealand
Supported by Z Gladstone,
Z Botany Downs, Z Palm
Beach, Z Tamatea, Z Kaiapoi,
Z Wairoa, Z Kepa Rd, Z
Sanson, Z Curletts Rd
and Z Newton
Wellington
@ Heart
Supported by
Z Broadway, Z Kapiti
Road and Z Seaview
Here’s a snapshot of some
of the groups and organisations
we supported in FY15.
Growing
Through
Grief
Supported by
Z Heretaunga St,
Z Tamatea, and
Z Taradale
24-7
YouthWork
Supported by
Z Bishopdale
Dunedin Land
SAR (Search
and Rescue)
Supported by
Z Mosgiel
The
UpsideDowns
Education
Trust
Supported by
Z Pakuranga
and Z Remuera
‘Good in the Hood’ is the name of
our flagship community investment
programme that lets our customers
choose which of their neighbourhood
groups we’ll support.
38
Turning Kai into Compost truck driver
collecting food waste from Z Vivian Street.
39
Z Annual Report 2015 40
Environmental concerns are becoming
increasingly relevant to our customers,
who we believe are looking for
alternatives to fossil fuels and to
support companies that are prepared
to lead on the issues that matter, like
climate change and sustainability.
We have a robust and aspirational
sustainability strategy that covers the
breadth of our environmental impact.
What we do at home
We wondered how our corporate team was
committed to sustainability at home. So we asked!
We found out that out of 114 people surveyed…
100 people
recycle all the time
72 people
get to work by foot, bike,
public transport or carpool
86 people
use energy-saving light
bulbs at home
60 people
never use disposable
coffee cups
41 people
have a compost at home
77 people
take reusable bags to
the supermarket
38 people
volunteer their time
outside of work
66 people
buy local and support
local vege markets
55 people
have their own garden
at home growing fruit
or veg
96 people
switch it off when they
are not using lights,
TVs and laptops
Waste
We have a goal of reducing our waste to
landfill from our retail sites by 70 per cent
by the end of 2015, and our corporate
offices aspire to be zero waste operations.
So, with the aim of minimising waste, we
apply a ‘reduce, reuse and recycle’ policy
to everything we do. As part of this, we’ve
rolled out help-yourself stands for coffee
grounds at 33 retail sites, with more on
their way across the network. This helps
to highlight an alternative use for food
waste rather than sending it to landfill.
We collect data for approximately 50 per
cent of our waste streams from our retail
sites. We then calculate the total volume
of waste we generate as a business.
So far, we reckon we’ve reduced our waste
to landfill from our retail operations by just
under 65 per cent compared with 2012.
With the aim of achieving further
reductions, we are continuing to run our
successful Waste Warriors competition
in which retail sites compete for glory.
Each retailer nominates a recycling champ
from a site and competes in a two-month
competition to see who can recycle the
most. Our winner this year, Ashleigh
Atkinson from Z Rangiora, recycled 87
per cent of the site’s waste over the
competition period.
In our corporate offices, we conduct
yearly waste assessments that provide
an insight into where we can do better.
These assessments show that our waste
volumes per person have remained the
same. This year, we’ve rolled out full
recycling (including organics) to our new
Auckland office and implemented an
organic collection for our Christchurch
office in an effort to reduce the amount
we send to landfill.
41
Total weight of waste from retail and
corporate sites by disposal method
Composting
531 tonnes
Recycling
(plastic, cans & glass)
606 tonnes
Landfill
1,304 tonnes
Recycling
(cardboard & paper)
2,858 tonnes
Total waste
5,299 tonnes
Z Annual Report 2015
42
Health, safety, security
and the environment
We have maintained
board, management
and worker committees
that ensure we provide
leadership, allocate
appropriate resources,
monitor performance and
engage with our people on
HSSE matters.
At Z, nothing matters more to us than the health and safety of
our people, the people we engage with and the environment we
operate in.
Over the year, we’ve refreshed our HSSE
operational risk management system
and we have built a new forward-looking
reporting framework to highlight areas of
concern before they become incidents.
We have worked with our board,
management team and worker
committees to ensure we provide
leadership, allocate appropriate
resources, monitor performance and
engage with our people on HSSE matters.
The board and management team
have thoroughly reviewed their own
HSSE performance and the board has
commissioned an external governance
review, due for completion later this
month. The management review resulted
in additional HSSE resources, including
the creation of a new executive role of
General Manager HSSE.
We created a new retail representative
committee in FY15 to help generate more
worker engagement with this critical
part of our business, and we are already
seeing impressive results.
Our standing corporate worker
committee, made up of a cross section
of staff from across the business, has
maintained its focus on managing
initiatives that promote the health and
well-being of our people. The committee
membership is about six percent of our
total workforce.
We welcome the reforms to New
Zealand’s health and safety system,
including new legislation. We spoke to
our submission supporting the Health
and Safety Reform Bill at the Select
Committee, and members of our team
are participating in industry working
groups held by the Ministry of Business,
Innovation and Employment to help
structure supporting HSSE regulations.
Read our submission here: http://z.co.nz/
assets/Health-and-Safety-Reform-Bill-Z-
Energy-submission.pdf
We are preparing for the new legislative
environment and in doing so are
continuing to emphasise our commitment
to healthy and safe people, secure assets
and an unaffected environment.
Our significant investment and efforts
to prevent robberies and maintain the
personal security of our people is paying
off. There were three robberies across
the network in FY15. While any robbery
is devastating for those involved, this
outcome represents the lowest on record
for Z.
Unfortunately 14 people suffered injuries
at work in FY15 that required at least one
day off work. This represents a slight
increase on previous years. Most of
these incidents (11) occurred in our retail
network. In total, 65 days were lost due to
injuries suffered at work in FY15.
Our analysis showed that six of the 14
lost-time injuries (LTIs) occurred as a
result of an individual slipping while
working at a retail site, so we looked into
why these incidents were occurring and
have made improvements to prevent this
type of accident.
Health, safety, security
and the environment
(HSSE)
Key performance indicators -
financial year ending
31 March 2015a
Exposure hours (millions)
Life-saving rules infringement (total number)
Safety-critical maintenance completed on time
Lost-time injuries (number)
Total
Employees
Contractorsb
Total
Employees
Notes:
Injury, occupational disease, and lost workday
information following New Zealand record
requirements. These are classified and measured by
applying criteria based on US OSHA guidelines.
a) April 2014 to March 2015.
b) In this table, contractors are workers of
independent contractors working at Z sites and
operations. These include retail site staff, Mini-
Tankers, maintenance and repair, construction
and transport contractors.
c)
In FY15, the scope of recording incidents
involving contractors is further defined to align
with Z’s Persons Conducting a Business or
Undertaking or PCBU Policy to separate retail
site staff and Mini-Tankers (recordable scope)
from other contractors (non-recordable).
d) Time in calendar days that could not be worked
as a consequence of the worker or workers being
unable to perform their usual work because of a
work injury or occupational disease.
e) Frequency rates are calculated per 200,000
exposure hours as per Global Reporting Initiative
(GRI) protocols.
f)
TRC – total recordable cases – include medical
treatment cases (MTC), restricted work cases
(RWC) and lost-time injuries (LTI).
g) LOC – loss of containment – represents
reportable cases as per API RP754 classification.
Lost work days (number)d
Lost-time injury frequency (LTIF)e
TRCf (number)
TRCFe,f
Occupational diseases rate
Absentee rate
Work-related fatalities
Number of spills (loss of containment)g
Contractors (recordable scope)c
Contractors (non-recordable)c
Total
Employees
Contractors (recordable scope)c
Contractors (non-recordable)c
Total
Employees
Contractorsb
Total
Employees
Contractors (recordable scope)c
Contractors (non-recordable)c
Total
Employees
Contractorsb
Total
Employees
Contractors (recordable scope)c
Contractors (non-recordable)c
Employees
Total
Employees
Contractors (recordable scope)c
Contractors (non-recordable)c
43
FY 2015
FY 2014
FY 2013
4.4
0.3
4.1
12
4.5
0.3
4.1
12
4.6
0.3
4.3
32
100%
100%
100%
14
2
12
4
65
5
60
13
0.63
1.33
0.58
20
3
17
5
0.91
1.99
0.83
0
0
0
0
13
0
13
50
0
50
0.58
0.00
0.63
21
1
20
0.94
0.62
0.97
0
0
0
8
0
8
66
0
66
0.35
0.00
0.37
15
0
15
0.66
0.00
0.70
0
0
0
1.21%
0.87%
0.85%
0
0
0
0
0
0
0
0
1
0
0
0
8
Z Annual Report 2015 44
Energy
Energy consumption within Z
Total 168,131,551 MJ
Electricity
Non-renewable fuel
Consumption
32,259,982 kWh
kJ equivalent
116,135,936 MJ
Consumption
730,791 litres
kJ equivalent
25,997,808MJ
One of our sustainability commitments
addresses using less and wasting less
in our business: this includes using less
energy. Our main use of energy is the
electricity that powers our retail sites and
offices. We have a reduction target of 10
per cent less electricity use on retail sites
by the end of 2015, and so we monitor and
manage our usage on a monthly basis.
This year we finished installing LED lights
at 171 retail forecourts throughout our
network. We’ve also installed internal LED
lights in more than 20 retail stores. The
reduction in energy use from the lights
has offset much of the additional energy
consumption from our increased food and
drink offers.
We also use energy in fuel for deliveries
and conducting our business. We have a
target to reduce the distance we travel to
deliver fuel by an average of 15 per cent
for every litre of fuel delivered and to also
reduce delivery emissions by 25 per cent.
We’ve increased our average drop size,
reducing the kilometres travelled to
deliver fuel per vehicle. We’ve added three
50-MAX trucks to the delivery fleet, which
carry 25 per cent more fuel, and rolled out
SAFEDNZ (Safe and Fuel Efficient Driving)
driver training to 46 truck drivers.
45
Emissions
Our second sustainability commitment
states, ‘In the way that we conduct our
business and the tools we have provided
to customers, we have reduced the
carbon emissions of Z and our customers.’
Our specific carbon targets for the end of
2015 are to:
•
•
•
•
reduce the carbon footprint of our
head office by 25 per cent
reduce the carbon footprint of our
retail stores by 10 per cent
work with suppliers to reduce the
intensity of our shared activities by 25
per cent
reduce our customers’ fuel
consumption.
This year we have changed our carbon
footprint reporting from a calendar year
to align with our financial year (1 April to
31 March). We haven’t changed our base
year, which remains as the calendar year
2012.
Reductions in Z’s emissions have
resulted from reductions in waste to
landfill, reductions in electricity usage by
switching to LED lights, and reductions
in our fuel use through changing our
corporate car fleet to hybrids. These
reductions have been offset through
increases in other areas.
We’ve failed to meet our commitment
to reduce our corporate carbon profile
through travel, which makes up almost
80 per cent of our corporate carbon
footprint. We’ve asked the business some
hard questions and have set some internal
goals to make cuts in this area and we’ve
enabled better technology solutions to
avoid the need to travel in order to meet
face-to-face.
This was a hard target given we have
grown our employee base by about 50
per cent since setting the goal. While way
off any absolute reduction, our carbon
footprint (excluding our value chain) per
employee has reduced from 51 tCO2e to
29 tCO2e.
We’ve reduced emissions by 4.5 per
cent by reducing the distance we travel
to deliver every litre of fuel, as well as
ensuring that our own heavy vehicle fleet
is driven as efficiently as possible.
We are currently working with 23 of our
suppliers to see how we can reduce
the carbon footprint of our supply
chain. We’ve continued our initiative
to change out our leased vehicles
to hybrids resulting in a 40 per cent
reduction in emissions. We’ve decreased
the temperature at which we keep the
bunker fuel oil in our marine fuel barge,
the Awanuia, and reduced associated
emissions by an estimated five per cent
per annum. We are also investigating
whether we can connect this vessel to
mains electricity when we are in port to
avoid running the diesel generator.
We introduced ‘follow me’ printing and
double sided printing as a standard to our
corporate offices and estimate we have
reduced emissions from printing by 38
per cent.
Supplier assessment
•
Thirty-eight suppliers were subject to
assessments of emissions impact on
our supply chain
•
•
Twenty-six of these suppliers
identified as having significant actual
and potential negative emissions
impact
We estimate these suppliers
contribute approximately 216,964
tCO2 to our supply chain (this
excludes production of fuel)
We haven’t agreed any improvements nor
terminated relationships with suppliers as
a result of these assessments.
Tonnes CO2e
Calendar year
2012 (base year)
Scope 1 - Z offices & retail sites
Scope 2 - Z offices & retail sites
Scope 3 - Z offices & retail sites
Scope 3 - New Zealand supply chain
Scope 3 - share of refinery
Scope 3 - rest of supply chain
Scope 3 - Z product emissions
from our customers
797
5,984
5,140
21,167
542,590
612,911
6,101,736
FY15
2,250
5,323
2,463
23,213
430,645
522,062
5,649,743
Total emissions
7,290,325
6,635,699
Z Annual Report 2015 46
47
60%
recycled water
in our new
carwashes
Saving water reduces the energy required
to process and deliver water and, in
the end, saves us money. As part of
our use less, waste less sustainability
commitment, we’ve targeted using 50
per cent less water in our retail network
operations by the end of 2015. However,
since setting this aspirational goal,
we’ve discovered that there are no quick
wins for us to reduce our water usage,
and as such we will not deliver on this
commitment. Part of that comes from
recognising that when we set the targets
we didn’t consider the impact of selling
70,000 cups of coffee a week through our
upgraded stores.
Over the last couple of years we’ve
installed 40 high-tech recyclers in our
new car washes, meaning 60 per cent
of the water used in those car washes is
recycled – while still ensuring a quality
wash for your car. Between them these
car washes recycle and reuse 44,033
kilolitres of water per year (about 18 per
cent of our total water use).
We regularly ask sites to check for leaks,
report dripping taps and reduce water
usage. We have trialled a rainwater
capture tank at one of our sites and are
currently looking at where these might
best be implemented.
We’ve estimated that we use around
241,135 kilolitres of water in our retail sites
and offices per year; this is equivalent to
about eight average households’ usage
per site. On our retail sites we use water in
car washes, washing windscreens, making
coffee, providing fresh food and flushing
toilets.
Water
Z Annual Report 2015 48
Being part of
20m
litres
of high quality
sustainable
biodiesel per
annum
the solution
Our commitment to being at the heart
of sustainability solutions is made truly
evident through our investment in New
Zealand’s first commercial-scale biodiesel
plant. The plant in Wiri, South Auckland,
will produce 20 million litres of high
quality, sustainable biodiesel per annum.
The plant is currently in construction
and we aim to have renewable biodiesel
available to our commercial customers in
FY16.
The biodiesel will use inedible tallow –
a by-product from New Zealand’s meat
rendering industry – as its primary
feedstock and will meet New Zealand
and European fuel quality standards
and specifications. Z’s biodiesel will be
safe and high quality, with substantially
fewer carbon emissions and particulate
emissions.
Our commercial customers have shown a
commitment to start using a sustainable
alternative to mineral diesel, and have
supported us from the early stages of
the project. We’re delighted to give our
commercial customers the opportunity
to use a product that will help reduce
their carbon footprint and ultimately
New Zealand’s.
49
Z’s proposed biodiesel manufacturing plant in Wiri, South Auckland.
Z Annual Report 2015 50
51
Our finances
Z Annual Report 2015 52
This section sets
out our commitment to
good corporate governance
and measures our
compliance with the eight
fundamental principles
of the ASX Principles
throughout the financial
year ended 31 March 2015.
Corporate
governance
Our approach to corporate
governance
Z Energy Limited was incorporated in New
Zealand and is not subject to chapters
6, 6A, 6B and 6C of the Australian
Corporations Act 2001. The acquisition
of securities in Z may be limited under
New Zealand law by the Takeovers Act
1993 (which restricts the acquisition by
a person and/or associate of more than
20 per cent of Z other than via a takeover
offer, or other ancillary rights, under
the Code) or the effect of the Overseas
Investment Act 2005 (which restricts
the acquisition of New Zealand assets by
overseas persons).
Framework
Z shares are listed on the NZX Main
Board (NZSX) of NZX Limited, and on the
Australian Securities Exchange (ASX).
Z must comply with the NZX Main Board
and ASX Listing Rules. Z has also issued
three series of retail bonds, which are
quoted on the NZX Debt Market (NZDX),
and as a result must also comply with the
NZX Debt Market Listing Rules.
Z’s investor relations website http://z.
co.nz/investor-centre/governance/,
contains copies of the following corporate
governance documents referred to in this
section.
• Director Code of Ethics
• Z Constitution
• Z Board Charter
• Audit and Risk Committee Charter
• Human Resources and Nominations
Committee Charter
• HSSE and Reputation Committee Terms
of Reference
• ASX Corporate Governance Statement
(given to ASX on listing)
• Disclosure Policy
• Diversity Policy
• External Auditor Independence Policy
• Risk Management Policy
• Shareholder Communication Policy
• Code of Conduct
• Insider Trading Policy
The Board is responsible for establishing
and implementing Z’s corporate
governance framework and is committed
to doing so according to recommendations
issued by NZX Limited, ASX Limited
and the New Zealand Financial Markets
Authority, including the NZX Corporate
Governance Best Practice Code (NZX
Code) and the Corporate Governance
Principles and Recommendations issued
by the ASX Corporate Governance Council
(ASX Principles).
This section sets out our commitment
to good corporate governance and
measures our compliance with the
eight fundamental principles of the ASX
Principles throughout the financial year
ended 31 March 2015 (and through that,
our compliance with the NZX Code).
Z considers that during the reporting
period, the corporate governance
principles adopted and followed by it did
not materially differ from the NZX Code.
53
Wellington Retailer, Ras Singh, lending a helping hand to the site staff at Z Hutt Road.
Z Annual Report 2015 54
Principle 1
Lay solid foundations for
management and oversight
The Board has the final responsibility for
all decision-making within Z, having a core
objective to represent and promote the
interests of shareholders with a view to
adding long-term value to the company.
The preparation of the annual report,
including the financial statements that
comply with GAAP, is the responsibility of
the directors.
The Board Charter describes the Board’s
role and responsibilities and internal
procedures. The Board has delegated
some of its powers to committees and to
the CEO. This framework also establishes
the authority levels for decision-making
within the management team.
The Board directs the business and
supervises the management of Z including:
• ensuring that the company’s goals are
clearly established and that strategies
are in place for achieving them
• ensuring that performance is reviewed
against these strategic objectives
• approving transactions relating to
acquisitions and divestments and capital
expenditure above delegated authority
limits
• ensuring that business risks are regularly
assessed and that there are appropriate
control and accountability systems in
place to manage them
• establishing policies aimed at
strengthening the performance of the
company, including through innovation,
initiative, technology and new products
• monitoring the performance of
management.
The performance of the CEO and the
senior management team is reviewed
annually in accordance with formal review
procedures disclosed in Z’s Corporate
Governance Statement given to ASX on
listing.
In the financial year ended 31 March 2015,
each member of the senior management
team participated in a formal performance
review process in accordance with these
formal review procedures, which formed
the basis of a review by the CEO. The
performance review included assessment
against targeted key performance
indicators and company values. The
performance of the CEO was also reviewed
in accordance with these procedures
with the review being undertaken by the
chairman of the Board.
The performance of the senior
management team was reviewed in the
previous financial year in accordance with
this process.
Principle 2
Structure the board to add value
The Board’s structure and its governance arrangements are set out in its Board Charter. The directors on the Board as at 31 March 2015
(and their respective appointment dates and periods in office) are as follows.
Peter Griffiths
Chairman –
Independent
2 April 2010
(5 years)
Marko
Bogoievski
1 April 2010
(5 years)
Paul Fowler
Independent
2 April 2010
(5 years)
Justine Munro
Independent
15 May 2013
(1 year, 10
months)
Alan Dunn
Independent
2 April 2010
(5 years)
Bruce Harker
19 February 2014
(1 year, 1 month)
Abby Foote
Independent
15 May 2013
(1 year, 10 months)
The skills, experience and expertise of each director are set out in the profiles on page 31.
The Board actively seeks to ensure that it has an appropriate mix of diversity, skills and expertise to enable it to effectively discharge
its responsibilities and be well equipped to provide the range of knowledge, views and experiences relevant to the company’s business.
Matters relating to Board (and Board committee) composition are considered by the Human Resources and Nominations Committee.
Principle 2
(Continued)
55
The Board has determined that for the
purposes of the NZSX Listing Rules and
the ASX Principles:
• Peter Griffiths, Abby Foote, Alan Dunn,
Paul Fowler and Justine Munro are
independent directors, and
• Marko Bogoievski and Bruce Harker are
not independent directors.
In order for a director to be considered
independent, the Board must affirmatively
determine that the director does not
have a disqualifying relationship (other
than solely as a consequence of being
a director). The basis for determining
whether a director has a disqualifying
relationship is set out in the Board
Charter. In accordance with the Board
Charter, NZSX and NZDX Listing Rules
and ASX Principles, only relationships
that are material will be considered
for the purposes of assessing director
independence. Materiality is considered
from the perspective of Z, the relevant
director and the person or organisation
with which the director is related (for
example, the customer, supplier or
adviser).
Board access to
independent professional
advice and training
The Board has adopted a procedure
under which directors may take
independent professional advice and
training at Z’s expense as described in the
Board Charter.
Board committees
The Board has three standing
committees to assist in carrying out its
responsibilities.
Audit and Risk Committee
(ARC)
The Audit and Risk Committee helps the
Board oversee all matters relating to risk
management, financial management,
accounting, audit and reporting.
Risk management and internal audit
(assurance) are critical governance
and management functions within the
company. Robust policy and compliance
assurance in both risk management
and financial audit is important for
investors in Z, financial markets more
generally and for internal assurance as
to the transparent, safe and financially
responsible management of the company.
Chair: Abby Foote
Members: Paul Fowler, Marko
Bogoievski, Peter Griffiths and Justine
Munro
Human Resources and
Nominations Committee
(HRN)
The Human Resources and Nominations
Committee helps the Board oversee
people policies and strategies and
promotes the continual improvement
of good corporate governance, as
expected of a NZX Main Board, NZX Debt
Market and ASX listed organisation, in
accordance with the framework set out in
the Human Resources and Nominations
Committee Charter.
The HRN is responsible for developing
and recommending to the Board for its
approval an annual evaluation process
of the Board and its committees. This
includes identifying and recommending
individuals for nomination (including
rotation and reappointment) to
membership of the Board and Board
committees, taking into account such
factors that it considers are appropriate.
These factors will include skills,
experience and expertise in transport
fuels, marketing, retail and sales,
finance and legal, as well as relevant
qualifications, judgements, the ability to
work with other directors and fit with the
culture of Z.
The HRN also recommends to the Board
annual remuneration increase guides and
budgets.
Chair: Alan Dunn
Members: Justine Munro and Marko
Bogoievski
Z Annual Report 2015
56
Principle 2
(Continued)
Health, Safety, Security,
Environment (HSSE) and
Reputation Committee
The role of the HSSE and Reputation
Committee is to assist the Board to fulfil
its responsibilities and objectives in
relation to HSSE and reputational matters
arising out of the activities of Z, as these
activities affect employees, contractors,
communities and the environment in
which Z operates.
The HSSE and Reputation Committee
provides a specific governance focus on
risks arising from the company’s physical
(not financial) operations, HSSE policy
and risk mitigation programmes, and any
matters that may affect the company’s
reputation outside of the financial
risks addressed by the Audit and Risk
Committee.
Chair: Paul Fowler
Members: Alan Dunn, Abby Foote and
Bruce Harker
Review of Board and
director performance
The performance evaluation for the
Board, its committees and directors
has taken place in the reporting period
and was done so in accordance with the
process disclosed in the Board Charter.
During the 2015 financial year, the Board
engaged an external third party, Propero,
to review the performance of the Board
and its committees.
Attendance at Board meetings
The table below sets out attendance at the Board and Board committee meetings held in the year ended 31 March 2015.
Director
Board meetings
ARC
HRN
Total number of meetings held
Peter Griffiths
Marko Bogoievski
Alan Dunn
Abby Foote
Paul Fowler
Justine Munro
Bruce Harker
8
8/8
7/8
7/8
8/8
8/8
8/8
8/8
4
2/4
4/4
-
4/4
4/4
4/4
-
5
-
4/5
5/5
-
-
5/5
-
HSSE and
Reputation
6
-
-
6/6
6/6
6/6
-
6/6
Principle 3
57
The ASX Principles recommend
establishing and disclosing measurable
objectives for achieving gender diversity,
as well as reporting on progress towards
achieving the objectives. Z has not
established measurable objectives
for achieving gender diversity, as it is
working towards developing a diversity
strategy before implementing such
objectives for the future. Through Z’s
commitment to Women’s Empowerment
Principles, the Board evaluates the
company’s performance as having met
the objectives of the Diversity Policy,
other than the measurable objectives for
achieving gender diversity as they are
yet to be developed. Z intended to have
completed this development in FY15,
however Z is working to set targets on a
broader measure rather than just gender.
Promote ethical and
responsible decision-
making
Code of Conduct
The Board maintains high standards
of ethical conduct, and the CEO is
responsible for ensuring these standards
are maintained by all staff. The Code
of Conduct (which can be found on Z’s
website) is a cornerstone of expected
behaviour and company culture.
This Code is designed to help guide and
inform the choices that Z employees
make on a daily basis and ensure they do
the right thing. It is designed to help Z’s
people succeed through making choices
that are consistent with two key parts of
the company’s foundations: Z’s values
and policies.
Diversity at Z
The Board is committed to a culture that
promotes diversity and inclusiveness
because it believes that diversity within
Z’s workforce makes our organisation
stronger and more capable. For
Z, diversity encompasses gender,
race, ethnicity, disability, age, sexual
orientation, physical capability, family
responsibilities, education and cultural
background.
With a diverse team, we are better able to
understand our broad-ranging customer
and stakeholder needs and to respond
effectively to them. In practice, this means
that we actively seek out people with a
variety of thinking styles, backgrounds
and abilities. This enables Z to increase
the breadth of the recruitment pool and
for Z people to be the best they can be at
work. The principal criteria for selection
and promotion in Z are an individual’s
relative prospects for adding value to,
and his or her probability of contributing
to, Z’s objectives. A copy of our Diversity
Policy is available on our website.
Consistent with our values, we want to
make sure that diversity and inclusion
are central to our policies and practices
throughout our organisation. Z believes
that embracing diversity in its workforce
contributes to the achievement of its
corporate objectives and enhances its
reputation. It enables Z to:
• recruit the right people based on
merit from a diverse pool of talented
candidates
• make more informed and innovative
decisions, drawing on the wide range
of ideas, experiences, approaches and
perspectives that employees from
diverse backgrounds, with differing
skill sets, bring to their roles and so
better represent the diversity of its
stakeholders and markets.
Z Annual Report 2015 58
Principle 3
(Continued)
Z gender composition
The gender composition at various levels of the Z workforce (permanent employees only) as at 31 March 2015 is outlined below,
alongside comparable figures for the past two years.
Female
Board
Senior management
Overall organisation
Male
Board
Senior management
Overall organisation
FY2015
%
29
30
44
FY2015
%
71
70
56
#
2
3
113
#
5
7
143
FY2014
%
29
25
39
FY2014
%
71
75
61
#
2
2
95
#
5
6
150
FY2013
%
0
25
37
FY2013
%
100
75
63
#
0
2
96
#
5
6
161
Z age composition
The age profile of Z’s staff and Board as at 31 March 2015 is as follows.
By age
Under 30 years old
30-50 years old
Over 50 years old
Board
Senior management
Overall organisation
0%
29%
71%
0%
80%
20%
14%
66%
20%
Z gender pay ratios
The ratios of female-to-male average pay for permanent Z employees as at 31 March 2015 are set out below.
Average basic salary woman to man
Average remuneration woman to man
Senior management
Overall organisation
68%
65%
87%
85%
The senior management category ratios reflect the fact that the
Chief Executive and general managers of the revenue-generating
parts of the business are male and remuneration benchmarks for
these roles are higher than non-revenue generating roles.
Gender details of Z’s new employee hires and employee turnover
during the reporting period follow, together with data on the
company’s return to work and retention rates after parental leave
for permanent employees only.
59
Principle 3
(Continued)
Total number and rates of new employee hires and employee turnover
by age group and gender
Male
Female
Under 30 years old
30-50 years old
Over 50 years old
New employees
Rate of new
employee hires
Employee turnover
Rate of employee
turnover
20
27
9
28
10
7.5%
10.2%
3.4%
10.5%
3.8%
26
8
3
21
10
9.8%
3.0%
1.1%
7.9%
3.8%
Return to work and retention rates after parental leave
All employees who meet legislative requirements are entitled to parental leave, although no male employees have taken parental leave
during this period.
Male
Female
Employees who
took parental
leave
Employees who
returned to work
after parental
leave ended
Employees still
employed twelve
months after
return to work
0
14
0
7
0
6
Return to work
rate
Retention rate
88%
86%
Principle 4
Safeguard integrity in
financial reporting
Financial reporting
The Board is committed to a transparent
system of auditing and reporting on the
company’s financial performance. The
Audit and Risk Committee is central to
achieving this.
The Audit and Risk Committee’s principal
functions are:
• to ensure the efficient and effective
management of business risks.
• to assist the Board in ensuring that
appropriate accounting policies and
internal controls are established and
followed
• to assist the Board in producing
accurate financial statements that
comply with all applicable legal
requirements and accounting standards
The external auditors are invited to attend
meetings when the committee considers
it appropriate. The committee comprises
five non-executive directors, four of which
are independent directors, and is chaired
by an independent director who is not the
chairman of the Board. A full description
of the Audit and Risk Committee’s role
is contained in its charter, which can be
found on the Z website.
Z Annual Report 2015
60
Principle 5
Principle 6
Principle 7
Make timely and balanced disclosure
Z is committed to maintaining a fully
informed market for its securities through
effective communication and complying
with the NZX Main Board/Debt Market
Listing Rules and the ASX Listing Rules.
Our Disclosure Policy is available on the
Z website. This policy assists the Board
with keeping Z’s investors and markets
informed in a timely, clear and balanced
way that includes both positive and
negative news.
During the financial year ended 31
March 2015, the General Counsel and
Company Secretary was the Market
Disclosure Officer, and in this capacity
has created a Disclosure Committee
(made up of the Board chairman, the chair
Respect the rights of shareholders
Z is committed to high standards of
communication with its shareholders
and other stakeholders and to ensuring
they have all the information required
to make informed assessments of Z’s
value and prospects. Z believes effective
communication is achieved by providing
equal access to timely, accurate and
complete information. Z’s Shareholder
Communication Policy shows how
we ensure shareholders and other
stakeholders have access to all relevant
information.
of the Audit and Risk Committee, the
CEO, the Chief Financial Officer and the
Corporate Communications and Investor
Relations Manager) which is ultimately
responsible for ensuring that Z complies
with its disclosure obligations. All market
disclosures are made to the NZX and ASX,
and on Z’s website.
The Board encourages active
participation by shareholders at the
annual meeting of the company, and
shareholders can submit questions for the
Board prior to or at the meeting.
Recognise and manage risk
The identification and effective
management of Z’s risks is a priority of
the Board.
The Board is responsible for overseeing
and approving risk management strategy
and policies, as well as ensuring effective
audit, risk management and compliance
systems are in place. The Audit and
Risk Committee assists the Board in
fulfilling its risk assurance and audit
responsibilities, while the HSSE and
Reputation Committee has a particular
focus on health, safety, security and
environment operational risks.
Z has in place an overarching Enterprise
Risk Framework supported by a suite
of risk management policies, including
a Risk Management Policy (available
on Z’s website), a HSSE Policy and a
HSSE Management System, a Treasury
Policy and a Manual of Authorities. The
framework aims to embed within Z a
group-wide capability in risk management
and a consistent method of identifying,
assessing, controlling, monitoring and
reporting existing and potential risks
faced by Z. The Risk Management Policy
sets out the risk management objectives
and requirements and from there Z
management conducts structured risk
management.
As a New Zealand company, section 295A
of the Australian Corporations Act 2001 is
not applicable to the company. However, the
company’s CEO and Chief Financial Officer
have provided equivalent assurances to
the Board as part of the annual external
audit process, which confirm Z’s financial
statements are based on a sound system of
risk management and internal control, and
that the system is operating effectively in
all material respects in relation to financial
reporting risks.
Z’s management has provided the
Board with reports as to the effectiveness
of our management of our material
business risks.
Principle 8
61
Remunerate fairly and
responsibly
Human Resources and
Nominations Committee
Z’s remuneration framework and
policies are managed by the Human
Resources and Nominations Committee
in accordance with the Human Resources
and Nominations Committee Charter
(available from the Governance section of
Z’s website). The purpose and roles of the
committee are described under Principle
2, where attendances at the meetings of
the committee are also disclosed.
The remuneration of senior executives
and the leadership team is made up of
three components: fixed remuneration,
short-term performance incentives and
a long-term incentive plan (with grants
that vested up until 31 March 2015), which
has now been replaced with a Restricted
Share Long-Term Incentive Plan – which
vests over three years resulting in the
first payment potentially being made in
April 2016.
No directors are entitled to any retirement
benefits.
Transactions in associated
products
Z’s Insider Trading Policy prohibits
directors, officers, employees,
contractors or secondees of Z or any of
its subsidiaries, where they are entitled
to participate in any equity-based
remuneration scheme, from entering
into any transaction that would limit
the economic risk of participating in
any unvested entitlement that they are
eligible for under that remuneration
scheme.
Remuneration
Remuneration
The Z Board and management are
committed to a remuneration framework
that aims to achieve a high-performance
culture, linking remuneration to the
achievement of the company strategy
and business objectives.
As part of ensuring management
is motivated to create sustainable
shareholder wealth, the Board has
established a Human Resources and
Nominations Committee, which operates
under the delegated authority of the
Board. The role and membership of the
committee is set out under Principle 2 in
the Corporate Governance section.
Z’s remuneration strategy aims to
attract, retain and motivate high-
calibre employees to all levels of the
organisation, in turn driving performance,
a strong customer focus and personal
growth. Underpinned by a company-wide
philosophy of paying for performance,
this strategy supports and promotes
strategic business objectives, behaviours
and values and is based on a practical
set of guiding principles that provide
consistency, fairness and transparency.
All permanent Z employees have a fixed
remuneration and short-term incentive
(STI) component in their remuneration
packages. A limited number of Z’s most
senior employees are also entitled to
participate in a Restricted Share Long-
Term Incentive Plan (RSLTIP).
Fixed remuneration
The fixed remuneration model is
informed and adjusted each year based
on data from independent remuneration
specialists. Employees’ fixed
remuneration is based on a matrix
of their own performance and their
current position in the market range.
Short-term incentive scheme
(STI)
STI values are calculated as a percentage
of fixed remuneration and determined
based on the complexity and seniority
of the roles. Employees’ STI payments
are determined following a review of the
company’s performance and individual
performance and may be paid out at a
multiplier of zero time to three times an
individual’s target STI value. This model
is focused on articulating performance
goals, driving for outcomes with
appropriate behaviours, differentiating
high performance and rewarding delivery.
Long-term incentive scheme
(LTI)
Z has historically operated a cash-based
LTI scheme for selected employees
who have been classified as a senior
executive or part of the leadership team
(currently, this covers 19 employees).
The LTI scheme was designed to reward
and retain our key talent, align those
employees’ interests with the interest of
our shareholders and encourage longer-
Z Annual Report 2015 62
term decision-making and performance.
The final date in which the cash-based LTI
scheme vests is April 2015.
Restricted Share Long-Term
Incentive Plan (RSLTIP)
Following listing, Z replaced its LTI
scheme with a restricted share, long-term
incentive plan (RSLTIP) for selected senior
employees. The RSLTIP is intended to
incentivise these employees to achieve
long-term shareholder returns by providing
a proportion of their remuneration on an
‘at-risk’ basis aligned to the achievement of
defined performance targets. The first time
this scheme may vest is April 2016.
Employee Share Purchase Plan
(ESPP)
Post listing, Z established an employee
share purchase plan for eligible employees
of Z to buy and hold shares in the company
at a discount to the listing price. The plan
is an Inland Revenue Department approved
DC12 plan and has a three-year vesting
period on the shares purchased. One
hundred and thirty-nine employees are
currently participating in the plan.
Chief executive remuneration
Mike Bennetts’s employment agreement for
his role as CEO commenced on 1 April 2010.
The key terms of Mike’s employment are
as follows.
• Mike currently has a base salary of
$725,000 per annum, which is reviewed
annually with effect from 1 April each year.
• In addition to his base salary, Mike may
also be paid an annual STI payment with
an on-target value of 50 per cent of his
base salary and a maximum payment
of up to 150 per cent of his base salary.
Payment of a STI amount is at the
Board’s discretion and is assessed in
the first quarter of each financial year,
based on the business’s performance in
the previous financial year and Mike’s
performance in reference to certain key
performance indicators. If Mike is made
redundant, then he will be entitled to
a proportional STI-based performance
payment up to his departure.
• Mike may also be entitled to LTI payments
calculated against his base salary. Mike’s
potential entitlements to LTI payments
(including under the RSLTIP) may be paid
in 2015 and 2016, based on the business’s
performance against specific financial
objectives for each year. The maximum
LTI payments to which Mike may be
entitled to in 2015 total $1,092,000. The
maximum entitlements to which Mike
may be entitled to under the RSLTIP is
$428,532 in 2016 and $485,747 in 2017.
• Z has also agreed to pay Mike’s
reasonable accommodation and living
expenses in Wellington, and reasonable
travel expenses for national travel
(particularly between Wellington and
Auckland).
• Either Z or Mike can terminate his
employment on three months’ notice.
Z can also terminate his employment
for redundancy or for ill health (in both
cases, also on three months’ notice).
• Mike has also agreed to non-solicitation
commitments (applying to Z’s suppliers
and staff) and a restraint of trade
(restricting him from involvement in the
downstream oil industry in New Zealand).
Both of these generally apply for 12
months after the end of his employment
as CEO, but the restraint of trade does
not apply if Mike is made redundant.
Remuneration of directors
None of the directors is entitled to any
remuneration from Z other than by way
of directors’ fees and reasonable travel,
accommodation and other expenses
incurred in the course of performing duties
or exercising powers as directors.
The total remuneration pool for Z’s non-
executive directors has been set at $900,000
per annum. This pool enables flexibility to
deal with any changes in the Board.
The directors’ remuneration is paid in the
form of directors’ fees. Additional fees are
paid to the chair and members in respect
of work carried out by directors on various
Board committees to reflect the additional
time involved and responsibilities of these
positions.
Details of the total remuneration of each
director of Z (including the value of all
benefits received) during the financial
year ended 31 March 2015 are as follows.
Director 1
Peter Griffiths
Marko Bogoievski
Paul Fowler
Alan Dunn
Abby Foote
Justine Munro
Bruce Harker
Fee
$160,000
$95,000
$105,000
$105,000
$105,000
$95,000
$85,000
1.
Abby Foote, Justine Munro and Bruce Harker
also received $17,500, $23,750 and $10,625
respectively in relation to directors’ fees paid
in FY15 relating to FY14.
63
Employee remuneration
As at 31 March 2015, Z’s total workforce equalled 2,292 comprising 292 corporate employees (of which 266 are permanent) and
approximately 2,000 retail staff members (employed by retailers).
There were 157 Z employees (or former employees) who received remuneration and other benefits in excess of $100,000 in their
capacity as employees during the year ended 31 March 2015, as set out in the table below.
Amount of remuneration
Employees
Amount of remuneration
Employees
$100,000 to $110,000
$110,001 to $120,000
$120,001 to $130,000
$130,001 to $140,000
$140,001 to $150,000
$150,001 to $160,000
$160,001 to $170,000
$170,001 to $180,000
$180,001 to $190,000
$190,001 to $200,000
$200,001 to $210,000
$210,001 to $220,000
$220,001 to $230,000
$230,001 to $240,000
$240,001 to $250,000
$260,001 to $270,000
$270,001 to $280,000
14
18
18
12
10
17
9
11
5
7
5
1
2
6
2
1
2
$280,001 to $290,000
$300,001 to $310,000
$310,001 to $320,000
$320,001 to $330,000
$370,001 to $380,000
$380,001 to $390,000
$390,001 to $400,000
$410,001 to $420,000
$420,001 to $430,000
$430,001 to $440,000
$470,001 to $480,000
$610,001 to $620,000
$640,001 to $650,000
$680,001 to $690,000
$740,001 to $750,000
$2,021,001 to $2,030,000
1
1
1
1
1
1
1
2
1
1
1
1
1
1
1
1
This includes salary, short- and long-term performance bonuses, settlement payments and redundancy payments for all
permanent employees.
Z Annual Report 2015 64
Disclosure of directors’ interests
The following disclosures of interests have been made by directors in terms of section 140(2) of the New Zealand Companies Act 1993.
Director
Position
Company
Peter Griffiths
Director
Marko Bogoievski
Director
New Zealand Oil & Gas Limited, New Zealand Diving and Salvage Limited, NZDS Properties
(No 2) Limited, Shoman Limited, Hemnestral Limited, Kupe Royalties Limited, National
Petroleum Limited, Nephrite Enterprises Limited, NZOG Services Limited, Petroleum
Equities Limited, Stewart Petroleum Co Limited, Marsden Maritime Holdings Limited, Island
Leader Limited, Z Energy Limited, Civil Aviation Authority
Zig Zag Farm Limited, Morrison & Co International Limited, Infratil No. 5 Limited, NZ
Airports Limited, Infratil Gas Limited, Infratil Energy Limited, Swift Transport Limited, Infratil
Australia Limited, Morrison & Co. Ventures Limited, Morrison & Co Funds Management
Limited, Infratil 1998 Limited, Morrison & Co Infrastructure Management Limited, Infratil
Securities Limited, Infratil No. 1 Limited, H.R.L. Morrison & Co Limited, Woodward Capital
Limited, Infratil Ventures Limited, Infratil UK Limited, H.R.L. Morrison & Co Offshore Limited,
Morrison & Co Wealth Management Limited, H.R.L. Morrison & Co Group GP Limited, Infratil
Infrastructure Property Limited, Morrison & Co Property Group Limited, Morrison Leasing
Limited, Infratil Europe Limited, North West Auckland Airport Limited, Infratil Insurance
Co Limited, Woodward Partners Funds Management Limited, Infratil Investments Limited,
Morrison Asian Investments Limited, Infratil Limited, Morrison Capital Limited, Infratil
Energy New Zealand Limited, Z Energy LTI Trustee Limited, Infratil Asia Limited, Infratil
Outdoor Media Limited, Morrison & Co PIP Limited, Trustpower Limited, Aotea Energy
Holdings Limited, Aotea Energy Holdings No 2 Limited, Aotea Energy Limited, Z Energy
Holdings Limited, Z Energy ESPP Trustee Limited, Infratil Finance Limited, Z Energy Limited
Alan Dunn
Director
Burger Fuel Worldwide Limited, New Zealand Post Limited, Z Energy Limited, Z Energy
ESPP Trustee Limited, Z Energy LTI Trustee Limited
Abby Foote
Director
Transpower New Zealand Limited, New Zealand Local Government Funding Agency Limited,
BNZ Life Insurance Limited, BNZ Insurance Services Limited, Livestock Improvement
Corporation Limited, Z Energy Limited
Paul Fowler
Justine Munro
Director
Director
Z Energy Limited
Z Energy ESPP Trustee Limited, Z Energy LTI Trustee Limited, Z Energy Limited,
Maia Consulting Limited, Munro Crockett Trustees Limited
Bruce Harker
Director
IKEGPS Group Limited, Trustpower Metering Limited, Trustpower Limited, Z Energy Limited
65
Directors’ interests in share transactions
No director disclosed any acquisition or disposal of a relevant interest in shares to the company pursuant to section 148 of the New
Zealand Companies Act 1993 during the year ended 31 March 2015.
Directors’ interests in shares and bonds
Directors disclosed the following relevant interests in shares and bonds as at 31 March 2015.
Director
Marko Bogoievski
Peter Griffiths
Abby Foote
Paul Fowler
Bruce Harker
Number of shares or bonds in which a relevant interest is held
Infratil Limited – 1,618,299 shares
Z Energy Limited – 42,847 shares
The New Zealand Refining Company Limited – 18,744 shares
Infratil Limited – 22,783 shares
Z Energy Limited – 14,285 shares
Infratil Limited – 21,292 shares held by The Balmerino Trust
Caltex Australia Limited – 500 subordinated notes
Bondholder of:
ZEL010 - $300,000
ZEL030 - $125,000
Both bonds are held by the BJ & JS Harker Trust
Z Annual Report 2015 66
Executives’ interests in shares and bonds
Executives disclosed the following relevant interests in shares and bonds as at 31 March 2015.
Executive
Mike Bennetts
Chris Day
Mark Forsyth
Lindis Jones
Meredith Ussher
Jane Anthony
Julian Hughes
Sharlene Taylor
David Binnie
Robert Wiles
Number of shares or
bonds in which a relevant
interest is held
Z RSLTIP interest
Z ESPP interest
Z Energy Limited –
28,571 shares
Z Energy Limited –
7,142 shares
Z Energy Limited -
5,714 shares
Z Energy Limited –
4,285 shares
Z Energy Limited –
1,428 shares
122,438 shares for the period ending 31 March 2016
126,421 shares for the period ending 31 March 2017
53,600 shares for the period ending 31 March 2016
39,234 shares for the period ending 31 March 2017
44,209 shares for the period ending 31 March 2016
32,618 shares for the period ending 31 March 2017
40,766 shares for the period ending 31 March 2016
30,078 shares for the period ending 31 March 2017
22,914 shares for the period ending 31 March 2016
24,063 shares for the period ending 31 March 2017
-
19,331 shares for the period ending 31 March 2017
Z Energy Limited –
340 shares
-
-
-
-
13,881 shares for the period ending 31 March 2017
Z Energy Limited -
14,285 shares
30,558 shares for the period ending 31 March 2016
28,358 shares for the period ending 31 March 2017
786
786
-
786
-
786
-
-
-
-
67
Donations
For the year ended 31 March 2015, Z made
donations of $897,000. Z’s subsidiaries
made no donations during the period.
Indemnity and insurance
disclosure
As permitted by its Constitution, Z
has entered into a deed of indemnity
indemnifying its directors and its
personnel who serve as directors of
related companies for potential liabilities
or costs they may incur for acts or
omissions in their capacity as directors
of Z or its related companies. Z has a
directors’ and officers’ liability insurance
policy in place. This provides insurance
for the liabilities of the directors and
employees of Z for acts or omissions in
their capacity as directors or employees.
Neither the indemnity nor the insurance
policies cover dishonest, fraudulent,
malicious, or wilful acts or omissions.
NZX Main Board and
ASX waivers
Z has no waivers from the requirements of
the NZSX Main Board Listing Rules.
As part of its application to list on the
ASX, Z applied for and was granted
waivers from the ASX Listing Rules that
are standard for a New Zealand company
listed on both the NZX Main Board and
the ASX:
• Z has a waiver from ASX Listing Rule
6.10.3 to the extent necessary to permit
Z to set the specified time to determine
whether a security holder is entitled
to vote at a shareholders’ meeting in
accordance with the requirements of the
relevant New Zealand legislation.
• Z has a waiver from ASX Listing Rule 7.1
to permit Z to issue securities without
security holder approval, subject to the
following conditions:
- Z remains subject to, and complies
with, the NZSX Listing Rules with
respect to the issue of new securities.
- Z certifies to ASX on an annual basis
(on or about 30 June each year) that
it remains subject to, has complied
with, and continues to comply with
the requirements of the NZSX Listing
Rules with respect to the issue of new
securities.
- If Z becomes aware of any change
to the application of NZSX Listing
Rules with respect to the issue of new
securities, or that Z is no longer in
compliance with the requirements of
the NZSX Listing Rules with respect
to the issue of new securities, it must
immediately advise ASX.
Without limiting ASX’s right to vary or
revoke its decision pursuant to ASX
Listing Rule 18.3, ASX reserves the right
to revoke this waiver from ASX Listing
Rule 7.1 if:
- Z fails to comply with any of the above
conditions, or
- there are changes to the NZSX Listing
Rules in respect of the issue of new
securities such that, in ASX’s opinion,
the regulation of the issue of new
securities under those NZSX Listing
Rules ceases to be comparable to
the regulation of the issue of new
securities under the ASX Listing Rules.
• Z has a waiver from ASX Listing Rule 15.7
to permit Z to provide announcements
simultaneously to both ASX and NZX.
• Z has a waiver from ASX Listing
Rules 15.13, 15.13A and 15.13B to the
extent necessary to permit Z to divest
shareholders of less than a minimum
holding in accordance with the
procedure set out in Z’s Constitution.
Z Annual Report 2015 68
Results disclosure
The reporting period for this annual report relates to the 12 months to 31 March 2015.
The previous reporting period relates to the 12 months to 31 March 2014.
Operational results
Revenues from ordinary activities
Profit (loss) from ordinary activities after tax attributable to security holders
Net profit (loss) attributable to security holders
Dividend disclosure
2015 interim dividend
Record date
Payment date
2015 final dividend
Record date
Payment date
12 months to
31 March 2015 ($m)
Percentage change
3,064
7
7
(9)%
(93)%
(93)%
Amount per
security (cents)
Imputed amounts
per security (cents)
7.7
2.9944
21 November 2014
3 December 2014
16.5
6.4167
22 May 2015
3 June 2015
Professional fees and audit
fee disclosure
Total fees paid to KPMG in their capacity
as auditors for the year ended 31 March
2015 was $225,360 (2014: $246,030).
Total fees paid to KPMG for other
professional services for the year ended
31 March 2015 was nil (2014: $520,918).
KPMG has been the external auditor of
Z and its subsidiaries for five years. The
tenure and reappointment procedure
of the external auditor is detailed in the
external auditor Independence Policy
which is available on our website. The
Audit and Risk Committee oversees
and monitors the performance of the
external auditor and assesses the external
auditor’s independence to ensure that
independence is maintained and its ability
to carry out its statutory duties is not
impaired. All non-audit work performed by
the external auditor must be approved by
the chair of the Audit and Risk Committee
which will detail what work is to be
performed and how auditor independence
and objectivity is maintained. Note 5 of
the financial statements details what
non-audit work has been performed.
The audit report is based on the audited
group financial statements. KPMG has
provided an audit report on the financial
statements.
69
Net tangible assets per security
Net tangible assets per security as at 31 March 2015 is 57 New Zealand cents (31 March 2014: 67 New Zealand cents).
Group disclosures – subsidiaries
Harbour City Property Investments Limited (HCPIL)
Directors as at 31 March 2015: Michael John Bennetts and Mark Andrew Forsyth.
The directors of HCPIL are employees of Z and do not receive any remuneration in their capacity as directors of HCPIL.
HCPIL does not have employees.
Disclosure of directors’ interests – HCPIL
Director
Michael John Bennetts
Position
Director
Company
Auckland Iron Works Limited
Loyalty New Zealand Limited
The New Zealand Refining Company Limited
Mark Andrew Forsyth
Director
Loyalty New Zealand Limited
Z Energy ESPP Trustee Limited
Directors as at 31 March 2015: Marko Bogoievski, Alan Dunn, Justine Munro.
Z Energy LTI Trustee Limited
Directors as at 31 March 2015: Marko Bogoievski, Alan Dunn, Justine Munro.
The directors’ interests in Z Energy ESPP Trustee Limited and Z Energy LTI Trustee Limited are disclosed on page 64.
The directors of Z Energy ESPP Trustee Limited and Z Energy LTI Trustee Limited do not receive any remuneration in their capacity as
directors of those companies. Both Z Energy ESPP Trustee Limited and Z Energy LTI Trustee Limited do not have any employees.
Z Annual Report 2015 70
Shareholder information
Z shares are quoted on the NZX Main
Board and on the ASX. Z trades under the
ticker codes ZEL (NZSX) and ZNZ (ASX).
Z has registered with the Australian
Securities and Investment Commission
(ASIC) as a foreign company. Z has been
issued an Australian Registered Body
Number (ARBN) of 164 438 448.
As at 31 March 2015, there were
400,000,000 fully paid ordinary shares
in Z (Z Shares) on issue. Each Z Share
confers on its holder the right to attend
and vote at a shareholder meeting of Z,
including the right to cast one vote on a
poll on any shareholder resolution.
The content of this Shareholder
Information section was prepared on 31
March 2015, being a date not more than
six weeks before the release of this annual
report.
There is currently no on-market buy back
of Z Shares.
Shareholders holding less than
a marketable parcel
As at 31 March 2015, there were five
shareholders holding between one and
99 Z Shares (less than a minimum holding
number according to the NZSX Listing
Rules) and, based on the market price of
A$5.02 at that date, there were 11 holders
that held less than a marketable parcel
of A$500 of Z Shares under the ASX
Listing Rules.
Distribution of ordinary shares and shareholders
As at 31 March 2015
Size of holding
Number of shareholders
Percentage of holders
Number of shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Totals
1,379
5,317
1,711
993
61
9,461
14.58%
56.21%
18.08%
10.49%
0.64%
100%
1,036,630
13,756,309
12,150,235
20,877,351
352,179,475
400,000,000
Percentage of
issued capital
0.26%
3.44%
3.04%
5.22%
88.04%
100%
Substantial product holders
As at 31 March 2015, Z had received notices under section 26 of the Securities Markets Act 1988 (which was replaced by the Financial
Markets Conduct Act 2013 on 1 December 2014) that the following shareholders were substantial product holders in respect of Z Shares.
Substantial product holders
NZSF Aotea Limited
Aotea Energy Investments Limited
Infratil Limited
Coopers Investors Pty Limited
H.R.L Morrison & Co Group Limited
Number of voting products in
substantial holding (ordinary Z Shares)
80,000,000
80,000,000
80,000,000
24,937,044
160,000,000
Date of notice
28 February 2014
28 February 2014
28 February 2014
20 September 2013
21 August 2013
* The total number of ordinary Z Shares on issue as at 31 March 2015 was 400,000,000.
71
Twenty largest shareholders
As at 31 March 2015
Rank
Holder name
Holding
Percentage
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Aotea Energy Investments Limited
New Zealand Superannuation Fund Nominees Limited
National Nominees New Zealand Limited
National Nominees Limited
HSBC Nominees (New Zealand) Limited
HSBC Nominees (New Zealand) Limited
HSBC Custody Nominees (Australia) Limited
Accident Compensation Corporation
RBC Investor Services Australia Nominees Pty Limited
J P Morgan Nominees Australia Limited
FNZ Custodians Limited
JPMORGAN Chase Bank, N.A.
Citibank Nominees (New Zealand) Limited
Custodial Services Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
Forsyth Barr Custodians Limited
Cogent Nominees Limited
RBC Investor Services Australia Nominees Pty Limited
Private Nominees Limited
80,000,000
80,000,000
25,476,573
14,055,400
13,680,302
10,109,610
10,029,561
9,531,586
9,115,538
8,543,698
8,192,091
7,469,555
6,852,300
6,039,695
5,800,429
5,135,195
4,865,447
4,153,071
3,882,609
3,290,504
20.00%
20.00%
6.37%
3.51%
3.42%
2.53%
2.51%
2.38%
2.28%
2.14%
2.05%
1.87%
1.71%
1.51%
1.45%
1.28%
1.22%
1.04%
0.97%
0.82%
In the above table, the shareholding of New Zealand Central Securities Depository Limited (NZCSD) has been re-allocated to the
underlying beneficial owners.
Z Annual Report 2015 72
Our
financial
results
Statement of
comprehensive income
for the year ended 31 March 2015
Revenue
Excise and carbon expense
Purchases of crude and product
Primary distribution expenses
Operating expenses
Share of earnings/(losses) of associate companies (net of tax)
Earnings before interest, taxation, depreciation (including gains and (losses) on sale of
fixed assets), amortisation and fair value movements in interest rate derivatives (EBITDAF)
Depreciation and amortisation
Impairment
Loss on sale of fixed assets
Net financing expense
Loss on interest rate derivatives
Net profit before taxation
Taxation benefit/(expense)
Net profit for the year
Notes
4
5
14
11,12
11
6
16
Net profit attributable to owners of the company
Other comprehensive income that will not be reclassified to profit or loss
Asset revaluation reserve after tax
Share of associate other comprehensive income after tax
Other comprehensive (loss)/income net of tax
Total comprehensive income for the year
Total comprehensive income attributable to owners of the company
Basic and diluted earnings per share (cents)
19
The accompanying notes form part of
these financial statements.
73
2015
$m
3,064
(562)
(2,073)
(25)
(321)
10
93
(43)
-
-
(37)
(7)
6
1
7
7
(3)
(1)
(4)
3
3
2
2014
$m
3,371
(546)
(2,311)
(25)
(281)
(5)
203
(39)
1
(4)
(25)
(2)
134
(39)
95
95
143
1
144
239
239
39
Z Annual Report 2015 74
Statement of
changes in equity
for the year ended 31 March 2015
Balance at 1 April 2013
Net profit for the year
Other comprehensive income
Disposal of revalued assets
Total comprehensive income for the year
Transactions with owners recorded
directly in equity:
Change in share capital
Own shares acquired
Dividends to equity holders
Total transactions with owners recorded
directly in equity
Balance at 31 March 2014
Balance at 1 April 2014
Net profit for the year
Other comprehensive income
Disposal of revalued assets
Total comprehensive income/(loss) for the year
Transactions with owners recorded
directly in equity:
Own shares acquired
Dividends to equity holders
Supplementary dividends to equity holders
Tax credit on supplementary dividends
Total transactions with owners recorded
directly in equity
Notes
Capital
$m
10
Retained
earnings
$m
587
18
-
-
-
-
422
-
-
422
432
432
-
-
-
-
-
-
-
-
-
95
1
2
98
-
-
(665)
(665)
20
20
7
(1)
3
9
-
(88)
(4)
4
(88)
The accompanying notes form part of
these financial statements.
Balance at 31 March 2015
432
(59)
Employee
share
reserve
$m
Asset
revaluation
reserve
$m
Total
equity
$m
597
95
144
-
239
422
(2)
(665)
(245)
591
591
7
(4)
-
3
(1)
(88)
(4)
4
(89)
-
-
143
(2)
141
-
-
-
-
141
141
-
(3)
(3)
(6)
-
-
-
-
-
135
505
-
-
-
-
-
-
(2)
-
(2)
(2)
(2)
-
-
-
-
(1)
-
-
-
(1)
(3)
Statement of
financial position
as at 31 March 2015
Approved on behalf of the Board
on 6 May 2015
Peter Griffiths
Chairman
Abigail Foote
Director
The accompanying notes form part of
these financial statements.
Shareholders’ equity
Represented by:
Current assets
Cash and cash equivalents
Accounts receivable and prepayments
Inventories
Derivative financial instruments
Income tax receivable
Total current assets
Non current assets
Property, plant and equipment
Intangible assets
Investments in associates and subsidiaries
Derivative financial instruments
Other non current assets
Total non current assets
Total assets
Current liabilities
Accounts payable, accruals and other liabilities
Income tax payable
Provisions
Derivative financial instruments
Total current liabilities
Non current liabilities
Other liabilities
Provisions
Derivative financial instruments
Bonds
Deferred tax
Total non current liabilities
Total liabilities
Net assets
Notes
10
7
9
22
16
11
12
14,15
22
8
16
17
22
17
22
21
16
75
2014
$m
591
178
227
479
1
-
885
511
35
96
12
1
655
2015
$m
505
206
163
304
4
16
693
536
32
105
6
1
680
1,373
1,540
351
-
10
6
367
17
27
9
430
18
501
868
505
424
12
11
2
449
17
21
10
430
22
500
949
591
Z Annual Report 2015 76
Statement of
cash flows
for the year ended 31 March 2015
The accompanying notes form part of
these financial statements.
Cash flows from operating activities
Receipts from customers
Dividends received
Proceeds from insurance recoveries
Interest received
Payments to suppliers and employees
Excise and carbon paid
Interest paid
Taxation paid
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds from sale of investments
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Purchase of The New Zealand Refining Company
Purchase of property, plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
Issue of shares
Cash from IPO settlement
Cash to IPO settlement
Purchase of shares
Dividends paid to owners of the company
Net cash (outflow)/inflow from financing activities
Net increase in cash
Cash balances at beginning of year
Cash at end of year
2015
$m
2014
$m
3,113
3,387
-
1
22
(2,328)
(550)
(51)
(25)
182
-
7
(4)
-
(63)
(60)
-
-
-
(2)
(92)
(94)
28
178
206
1
2
24
(2,714)
(546)
(44)
(29)
81
1
7
(10)
(100)
(63)
(165)
422
162
(324)
(2)
(111)
147
63
115
178
Reconciliation of net profit for the year to cash flows from operating activities
Net profit for the year
Adjustments to reconcile profit to net cash inflow from operating activities
Depreciation and amortisation
Impairment
Equity accounted earnings and income of associates
Bad debts expense
Fair value of derivatives
Gain on sale of fixed assets
Other
Changes in assets and liabilities, net of non-cash, investing and financing activities
Change in accounts receivable and prepayments
Change in inventories
Change in accounts payable, accruals and other liabilities
Change in taxation
Net cash flow from operating activities
77
2014
$m
95
39
(1)
5
4
2
4
(3)
14
3
(91)
10
81
2015
$m
7
43
-
(10)
4
9
-
(3)
63
175
(78)
(28)
182
The accompanying notes form part of
these financial statements.
Z Annual Report 2015 78
Notes to the financial statements
for the year ended 31 March 2015
(1)
Basis of accounting
Reporting entity
Z Energy Limited is registered in New Zealand under the Companies Act 1993 and is an issuer for the purposes of the Financial
Reporting Act 2013 and Financial Markets Conduct Act 2013. Z Energy Limited is party to listing agreements with the NZX Limited
and ASX Limited with its ordinary shares, and three series of bonds quoted on the NZX Debt Market. The Group financial statements
(referred to as “Z Energy” or “the Group”) at, and for the year ended 31 March 2015 comprise the Parent, its subsidiaries and the Group’s
interests in associates and jointly controlled operations.
Basis of preparation
The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (‘NZ GAAP’)
and the Financial Reporting Act 2013. They comply with the NZ equivalents to International Financial Reporting Standards (‘NZ IFRS’) as
appropriate for profit-oriented entities, and with International Financial Reporting Standards (‘IFRS’).
The functional and reporting currency used in the preparation of the financial statements is New Zealand dollars, rounded to the nearest
million ($m). The financial statements have been prepared on a GST exclusive basis except billed receivables and payables which
include GST.
The financial statements are prepared on the basis of historical cost, except certain financial derivatives which are valued in accordance
with the accounting policy in note 22 and Property, Plant and Equipment which is valued in accordance with the accounting policy in
note 11.
Basis of Consolidation
A list of subsidiaries and associates is shown in notes 14 and 15. Consistent accounting policies are employed in the preparation and
presentation of the Group financial statements. Intra-group balances and any unrealised income or expenses arising from intra-group
transactions are eliminated in preparing the Group financial statements.
(2)
Changes in accounting
policies
No changes to accounting policy have been made during the year and policies have been consistently applied to all years presented in
the financial statements.
Presentational changes
Certain amounts in the comparative information have been reclassified to ensure consistency with the current period’s presentation.
Adoption status of relevant new financial reporting standards and interpretations
Z has chosen not to early adopt NZ IFRS 9 Financial Instruments: Classification and Measurement (effective for annual periods beginning
on or after 1 January 2018), which has been issued. The adoption of this standard is not expected to have a material impact on the
financial statements.
79
(3)
Critical accounting
estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these
estimates.
The principal areas of judgement in preparing these financial statements are set out below.
Provisions
Liabilities are estimated for the decommissioning and restoration of certain sites of operation. Such estimates are valued at the net
present value of the expenditure expected to settle the obligation. Key assumptions have been made as to the expected amount and
timing of expenditure to remediate based on the expected lives of the assets employed on the sites, discounted using a market-based
risk-free interest rate.
Valuation of investments in associates and subsidiaries
Management performs an assessment of the carrying value of investments at least annually and considers objective evidence for
impairment on each investment taking into account observable data on the investment, the fair value, the status or context of capital
markets, its own view of investment value, and its long term intentions. For more detail refer to note 14 and 15.
Measurement of fair value
A number of the Group’s accounting policies and disclosures require the measurement of fair values. For further information about the
assumptions made in measuring fair values refer to the notes.
(4)
Revenue
Revenue comprises the fair value of consideration received or receivable for the sale of goods in the ordinary course of the Group’s
activities. Sales of goods are recognised when a Group entity has supplied products to the customer, the customer has accepted the
products and the collectability of the related receivables is reasonably assured.
Fuel
Non-Fuel
Chemicals
Total revenue
2015
$m
3,003
61
-
2014
$m
3,287
59
25
3,064
3,371
Z Annual Report 2015 80
(5)
Operating expenses
(6)
Net financing expenses
On-site expenses
Selling commissions
Secondary distribution
Employee benefits
Storage and handling
Insurance
Administration and other expenses
Marketing expenses
Professional fees
Operating expenses excluding realised/unrealised gains/(losses)
on foreign exchange and commodity transactions
Realised/unrealised (losses)/gains on foreign exchange
Realised/unrealised losses on commodity transactions
Total operating expenses
2015
$m
(51)
(59)
(44)
(44)
(14)
(6)
(34)
(21)
(21)
2014
$m
(46)
(56)
(46)
(50)
(18)
(8)
(26)
(19)
(19)
(294)
(288)
(11)
(16)
(321)
10
(3)
(281)
Included in Professional fees are fees paid to auditors. These include audit and audit related fees of $225,360 (2014: $246,030) and other
services of nil (2014: $520,918). Audit and audit related fees comprise $187,000 (2014: $172,000) for the audit and review of financial
statements, carbon emission reporting review of $16,860 (2014: $18,422), technical accounting opinions of $3,500 (2014: $37,608), fees
for audit of bank covenants and trustee reporting of $12,000 (2014: $12,000) and agreed upon procedures for license fee return of $6,000
(2014: $6,000). Other Services comprise tax compliance of nil (2014: $6,628), financial model review of nil (2014: $14,385) and continuous
improvement initiative of nil (2014: $499,905).
Included in Employee benefits are Directors fees of $0.8m (2014: $0.7m).
Interest revenues are recognised as accrued, taking into account the effective yield of the financial asset.
Interest income from cash
Interest income from swaps
Other finance income
Total financing income
Interest expense on swaps
Interest expense on bonds
Financing fees
Other finance expense
Total financing expense
Net financing expense
2015
$m
2
20
1
23
(20)
(30)
(4)
(6)
(60)
(37)
2014
$m
9
15
2
26
(13)
(31)
(4)
(3)
(51)
(25)
Receivables, classified as loans and receivables, are initially recognised at fair value. Thereafter they are measured at amortised cost
less any provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not
be able to collect the amount due. Receivables which are no longer collectible are written off.
81
(7)
Accounts receivable and
prepayments
Trade receivables
Provision for doubtful debts
Prepayments
Other receivables
(8)
Accounts payable,
accruals and other
liabilities
Accounts payable
Accruals and other liabilities
Employee benefits payable
2015
$m
149
(2)
10
6
163
2015
$m
308
27
16
351
2014
$m
211
(1)
9
8
227
2014
$m
397
13
14
424
Z Annual Report 2015 82
(9)
Inventories
(10)
Cash and cash equivalents
(11)
Property, plant and
equipment
Inventory is stated at the lower of cost or net realisable value. The cost of inventories is based on the first-in-first-out principle.
Net realisable value is the estimated selling price in the ordinary course of business less applicable variable selling expenses.
Raw materials and consumables
Finished goods/trading products
2015
$m
96
208
304
2014
$m
147
332
479
During the year the write down of inventories to net realisable value amounted to $9m (2014: $4m). The write down is included in
‘Purchases of crude and product’ in the Statement of Comprehensive Income.
Cash and cash equivalents comprise cash on deposit at banks and investments in money market instruments, excluding outstanding
bank overdrafts.
Property, plant and equipment (PPE) is measured at fair value based on periodical valuations by an independent valuer less
accumulated depreciation and any impairment after the date of revaluation. Additions to PPE subsequent to the most recent valuation
are recorded at cost. Cost includes expenditure that is directly attributable to the acquisition of the item, including: the cost of
all materials, direct labour, resource management consent costs, and an appropriate portion of variable and fixed overheads. An
assessment of fair value is performed annually to assess the underlying assumption of each asset class to determine whether a full
revaluation is required. At a minimum, a full revaluation will be performed every five years. The last full revaluation was performed on
1 April 2013.
Depreciation is provided on a straight line basis. The major depreciation periods (in years) are:
Buildings
Plant and machinery
Land improvements
10-35
5-35
15-35
(11)
Property, plant and
equipment
(Continued)
Year ended 31 March 2015
March 2015
Cost/valuation
Balance at beginning of year
Additions
Disposals
Transfers between asset classes
Balance at end of year
Accumulated depreciation and impairment losses
Balance at beginning of year
Depreciation
Disposals
Balance at end of year
Carrying amounts
At 1 April 2014
At 31 March 2015
83
Total
$m
542
67
(11)
-
598
(31)
(35)
4
(62)
Construction
in progress
$m
Buildings
$m
Land and
improvements
$m
Plant and
machinery
$m
289
-
(6)
53
336
(26)
(29)
4
(51)
47
67
-
(67)
47
-
-
-
-
47
47
52
-
(1)
8
59
(4)
(4)
-
(8)
48
51
154
-
(4)
6
156
(1)
(2)
-
(3)
153
153
263
285
511
536
Included in buildings $8m and plant and machinery $1m are assets held under finance leases (2014: buildings $9m and plant and
machinery $1m).
During the year no assets were transferred to Intangibles (2014: $5m cost, $1m accumulated depreciation).
Z Annual Report 2015 84
(11)
Property, plant and
equipment
(Continued)
Year ended 31 March 2014
March 2014
Cost/valuation
Balance at beginning of year
Offset of accumulated depreciation on
revaluation
Additions
Disposals
Revaluation adjustment
Transfers between asset classes
Balance at end of year
Construction
in progress
$m
Buildings
$m
Land and
improvements
$m
Plant and
machinery
$m
33
-
71
-
-
(57)
47
-
-
-
-
-
-
33
47
108
(80)
-
(1)
20
5
52
(80)
80
(4)
-
-
(4)
28
48
107
(30)
-
(4)
77
4
154
(30)
30
(1)
-
-
(1)
77
153
351
(177)
-
(5)
77
43
289
(178)
177
(27)
1
1
(26)
173
263
Total
$m
599
(287)
71
(10)
174
(5)
542
(288)
287
(32)
1
1
(31)
311
511
Accumulated depreciation and impairment losses
Balance at beginning of year
Offset of accumulated depreciation on
revaluation
Depreciation
Impairment
Transfers between asset classes
Balance at end of year
Carrying amounts
At 1 April 2013
At 31 March 2014
(11)
Property, plant and
equipment
(Continued)
85
Level 3 fair value
PPE is valued using a level 3 fair value measurement in accordance with the fair value hierarchy.
The following table shows the valuation technique used in measuring the fair value of PPE, as well as the significant unobservable inputs
used.
Valuation techniques
Significant unobservable inputs
Inter-relationship between key
unobservable inputs and fair
value measurement
The estimated fair value would
increase (decrease) if: throughput
margin were higher (lower); loyalty
participation rate were lower
(higher); shop rental rates were
higher (lower); capitalisation rate
were lower (higher).
Throughput rental rate (cents/litre)
1.20 - 1.75 (Retail)
Throughput rental rate (cents/litre)
0.70 - 0.80 (Truckstop)
Loyalty participation rate 5% - 15%
Shop rental $150 - $450 per square
metre
Capitalisation rate 6.50% - 10.25%
Land is valued using the direct capitalisation
approach. This method involves striking a
sustainable market rental which is capitalised at an
appropriate rate of return or yield derived from an
analysis of sales of comparable assets. The market
rental is built up from:
- Fuel throughput margin (adjusted downward for
loyalty participation rate where a percentage of
throughput is deemed to be derived from the
flybuys loyalty scheme) and
- Estimated shop rental (for non-fuel sales)
A total value for land and buildings is determined
by this approach. The value ascribed to the land is
then the residual value after deducting the building
value which is determined using the depreciated
replacement cost approach below.
Buildings, plant and machinery are valued using
the depreciated replacement cost approach. This
approach is based on the gross current replacement
cost, reduced by factors providing for age,
physical depreciation and technical and functional
obsolescence taking into account an asset’s total
estimated useful life and anticipated residual value
(if any).
Cost estimates sourced from:
contracting machinery suppliers
and cost analysis of recent projects.
The estimated fair value would
increase (decrease) if: cost was
higher (lower); remaining useful life
were higher (lower); technical and
functional obsolescence were lower
(higher).
Highest and best use
Z holds properties where the current market value in use is lower than the highest and best alternative use, however Z holds these
properties as part of its strategic network and therefore does not currently intend to change the use of these assets. The assets are
recorded at their highest and best alternative use valuation.
Z Annual Report 2015 86
(12)
Intangible assets
Emissions trading scheme
Units acquired are carried at cost less any accumulated impairment as they are held for settlement of emissions obligation. Currently,
overseas units have a finite life and NZ units an indefinite life.
Other intangibles
Other intangibles includes software, franchise rights, domain name, and occupation rights. Acquired computer software licenses
are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over
three years on a straight line basis. Intangible assets with indefinite 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.
Intangible assets – emissions units
Balance at beginning of year
Additions at cost
Utilised
Balance at end of year
Intangible assets – other
Balance at beginning of year
Additions at cost
Amortisation
Balance at end of year
Total intangible assets
2015
$m
20
3
(2)
21
15
4
(8)
11
32
2014
$m
16
46
(42)
20
11
11
(7)
15
35
(13)
Emissions trading scheme
The Group is required to deliver emission units to a government agency to be able to sell products which emit pollutants. A provision
is recognised in the Statement of Financial Position and is measured at the average cost of units acquired to satisfy the emissions
obligation.
Stock of units
Balance at beginning of year
Units acquired and contracted for
Units utilised
Balance at end of year
Obligation
Obligation payable at 31 March
87
2015
Units
millions
5
2
(2)
5
2014
Units
millions
7
1
(3)
5
2015
Units
millions
2014
Units
millions
3
3
(14)
Investments in associates
Associates are entities in which the Group has significant influence, but not control, over the operating and financial policies. The Group
financial statements include the Group’s share of the net surplus of associates on an equity accounted basis from the date significant
influence commences to the date significant influence ceases.
The Group is considered to have significant influence over its investment in The New Zealand Refining Company (Refining NZ) due to
the fact that it has representation on the Board of Directors and therefore has equity accounted this investment. Based on its closing
share price of $2.60 the fair value of the Group’s investment in Refining NZ is $125m (2014: $1.75, $84m).
Z Annual Report 2015 88
(14)
Investments in associates
(Continued)
Carrying amounts
Listed
The New Zealand Refining Company Limited (Refining NZ)
Unlisted
Loyalty New Zealand Limited (Loyalty)
New Zealand Oil Services Limited (NZOSL)
Wiri Oil Services Limited (WOSL)
Penagree Limited1 (Penagree)
Coastal Oil Logistics Limited (COLL)
1 On 29 December 2014 Penagree Limited was amalgamated into Coastal Oil Logistics Limited.
Movements in carrying amounts
Carrying amount at beginning of year
Dividends received / receivable
Share of profits/(losses) from associate
Share of other comprehensive income from associate
Purchase of investment
Carrying amount at end of year
2015
$m
103
1
-
-
-
1
2014
$m
95
1
-
-
-
-
105
96
2015
$m
96
-
10
(1)
-
105
2014
$m
1
(1)
(5)
1
100
96
(14)
Investments in associates
(Continued)
89
Summary financial information for equity accounted investments, not adjusted for the percentage ownership held by the Group (all
with a reporting date of 31 December, except for Loyalty NZ which has a 31 March reporting date):
Listed
New Zealand Refining Company Limited
Unlisted
Loyalty New Zealand Limited
New Zealand Oil Services Limited
Wiri Oil Services Limited
Penagree Limited
Coastal Oil Logistics Limited
2015
Current assets
Non current assets
Current liabilities
Non current liabilities
Income
Profit
Other comprehensive income
2014
Current assets
Non current assets
Current liabilities
Non current liabilities
Income
(Loss)/Profit
Other comprehensive income
Principal activity
Ownership
2015
2014
Refinery
15%
15%
Marketing
Fuel Storage
Fuel Storage
Ship Charterer
Shipping Operator
25%
50%
28%
-
25%
25%
50%
28%
25%
25%
Refining NZ
$m
Loyalty
$m
NZOSL
$m
WOSL
$m
COLL
$m
178
1,076
156
453
233
10
(10)
85
7
73
13
85
3
-
5
-
5
-
43
-
-
3
-
3
-
17
-
-
10
2
11
-
54
-
-
Refining NZ
$m
Loyalty
$m
NZOSL
$m
WOSL
$m
Penagree
$m
COLL
$m
122
942
122
351
223
(5)
27
77
15
70
19
83
2
-
6
1
7
-
45
-
-
2
-
2
-
16
-
-
1
12
2
11
2
-
-
11
2
11
-
52
-
-
Z Annual Report 2015 90
(15)
Investment in subsidiaries
and joint operations
Subsidiaries are those entities controlled, directly or indirectly, by Z. The purchase method of accounting is used to account for
the acquisition of subsidiaries by Z. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The
financial statements of subsidiaries are included in the Group financial statements from the date control commences to the date
control ceases.
The subsidiaries of the Group and their activities are shown below:
The financial statements of the subsidiaries are included in the Group’s financial statements. The financial year-end of all subsidiaries
is 31 March.
2015 Holding
2014 Holding
Principal activity
Country of incorporation
Subsidiaries
Harbour City Property Investments Limited
Z Energy ESPP Trustee Limited
Z Energy LTI Trustee Limited
100%
100%
100%
100%
100%
100%
Property
Trustee
Trustee
New Zealand
New Zealand
New Zealand
Joint operations are those entities over whose activities the Group has joint control, established by contractual agreement and requiring
unanimous consent for strategic financial and operating decisions. The Group financial statements includes the Group’s proportionate
share line by line.
The Group has participating interests in three unincorporated jointly controlled operations relating to the storage and distribution
of petroleum products. The revenues and expenses are allocated on a performance/usage basis rather than the share of the joint
arrangement. The Group has rights to the assets and obligations for the liabilities relating to the jointly controlled operations. As at 31
March 2015 there were no contingent liabilities in respect of the jointly controlled operations (2014: nil). The value of assets in these
interests is $9m (2014: $9m).
Joint Operations
Joint User Hydrant Installation
Joint Interplane Fuelling Services
Jointly Owned Storage Facility
2015 Holding
2014 Holding
Principal activity
25%
50%
50%
25%
50%
50%
Fuel Storage
Fuel Distribution
Fuel Storage
91
(16)
Taxation
Taxation expense comprises both current and deferred tax. Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the balance date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of the differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition
of assets or liabilities that affect neither accounting nor taxable profit.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the balance date. A deferred tax asset is recognised only to the
extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax asset is
reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that arise from
the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
Income tax is recognised as an expense or benefit in the Statement of Comprehensive Income, except when it relates to items credited
or debited directly to other comprehensive income or equity, in which case the deferred tax is also recognised directly in other
comprehensive income or equity.
Taxation expense or benefit is determined as follows:
Net profit before taxation
Less share of earnings of associate companies (net of tax)
Net (loss)/profit before taxation excluding share of earnings from associates
Taxation benefit/(expense) on (loss)/profit for the year at the corporate income tax rate of 28% (2014: 28%)
Plus taxation adjustments:
Over provision in prior periods
Tax subvention payment
Taxation benefit/(expense)
Comprising:
Current taxation
Deferred taxation
Taxation benefit/(expense)
2015
$m
6
(10)
(4)
1
(1)
1
1
(2)
3
1
2014
$m
134
5
139
(39)
-
-
(39)
(44)
5
(39)
Z Annual Report 2015 92
(16)
Taxation
(Continued)
Deferred tax
Deferred tax assets and liabilities are offset on the face of the Statement of Financial Position and presented as a net deferred tax asset/
(liability). The movement in deferred tax assets and liabilities is provided below:
Property,
plant and
equipment
$m
Intangible
assets
$m
Employee
benefits
$m
Finance
lease
$m
Other
provisions
$m
Derivative
financial
instruments
$m
Other items
$m
Total
$m
Balance at 1 April 2013
Recognised in
the Statement of
Comprehensive Income
Recognised in other
comprehensive income
Under/(Over) provision
in prior periods in
the Statement of
Comprehensive Income
Balance at
31 March 2014
(8)
2
(31)
3
(34)
Balance at 1 April 2014
(34)
Recognised in
the Statement of
Comprehensive Income
Recognised in other
comprehensive income
Over provision in prior
periods in the Statement
of Comprehensive
Income
Balance at
31 March 2015
1
1
(1)
(33)
(1)
-
-
-
(1)
(1)
1
-
-
-
2
(1)
-
-
1
1
-
-
-
1
-
-
-
5
5
5
-
-
-
5
2
-
-
-
2
2
-
-
-
2
2
(1)
-
-
1
1
1
-
-
2
7
1
-
4
1
(31)
(4)
4
4
4
-
-
1
5
(22)
(22)
3
1
-
(18)
93
(17)
Provisions
A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Estimated decommissioning and restoration costs are recognised at the estimated future cost. The estimated future cost is calculated
using amounts discounted over the estimated useful economic life of the assets. The discount rate applied is the risk free rate of return
which has been equated to be the New Zealand ten-year bond rate. Decommissioning and restoration costs expected to be settled
within one year are classified as current liabilities. Decommissioning and restoration costs expected to be settled between one and thirty
years are classified as non current.
Estimated remediation costs of sites are recognised on an accrual basis at the time there is a formal plan or obligation, legal or
constructive, in place. The remediation costs are expected to be settled between one and thirty years depending on the location.
For the year ended 31 March 2015
Decommissioning
and restoration
$m
Remediation
$m
Other
$m
Balance at beginning of year
Created
Utilised
Released
Unwind of discount
Balance at end of year
Current
Non current
Balance at end of year
20
6
(1)
-
1
26
2
24
26
4
-
(1)
-
-
3
-
3
3
8
3
(2)
(1)
-
8
8
-
8
For the year ended 31 March 2014
Decommissioning
and restoration
$m
Remediation
$m
Other
$m
Balance at beginning of year
Created
Utilised
Released
Unwind of discount
Balance at end of year
Current
Non current
Balance at end of year
20
2
(1)
-
(1)
20
4
16
20
4
1
(1)
-
-
4
1
3
4
4
5
(1)
-
-
8
6
2
8
Total
$m
32
9
(4)
(1)
1
37
10
27
37
Total
$m
28
8
(3)
-
(1)
32
11
21
32
Z Annual Report 2015 94
(18)
Share capital and
distributions
Ordinary shares (fully paid)
Total issued capital at beginning of year
Movements in issued and fully paid ordinary shares
Shares Issued
Total issued capital at end of year
Ordinary shares (fully paid) in millions of shares
Total issued capital at beginning of year
Movements in issued and fully paid ordinary shares
Shares Issued
Total issued capital at end of year
2015
$m
432
-
432
2015
400
-
400
2014
$m
10
422
432
2014
5
395
400
All fully paid ordinary shares have equal voting rights and share equally in dividends and equity. The issued shares have no par value.
All authorised shares are issued.
944,235 shares at a cost of $3.6m are held by Z Energy LTI Trustee Limited for Z’s restricted share long-term incentive plan (2014:
498,108, $1.8m).
Dividend
2013 Final dividend (paid June 13) 1
2014 Special dividend (paid June 13)1
2014 Non-cash dividend to settle intercompany balances1
2014 Interim dividend (paid December 13)
2014 Final dividend (paid June 14)
2015 Interim dividend (paid December 14)
Final dividend declared subsequent to balance date not provided (refer to note 29).
1
Dividends paid pre Initial Public Offering.
$m
29
50
555
31
57
31
cents per
share
580
1,000
11,100
8
14
8
(19)
Earnings per share
Profit after tax attributable to Shareholders of the parent company ($m)
Weighted average number of shares (million)
Basic and diluted earnings per share (cents)
(20)
Interest-bearing loans
and borrowings
Facilities not utilised at reporting date
Secured bank facilities
95
2015
7
400
2
2015
$m
400
2014
95
244
39
2014
$m
400
Financing arrangements
The Group’s debt includes bank facilities secured against certain assets of the Group. The facilities require Z to maintain certain
levels of shareholder funds and securities and operate within defined performance and gearing ratios. The arrangements also include
restrictions over the sale or disposal of certain assets without bank agreement.
Throughout the year the Group has complied with all debt covenant requirements as imposed by lenders.
At 31 March 2015 the Group had a secured bank debt facility of $400m (2014: $400m). No amounts were drawn on the bank debt
facility at 31 March 2015. The facility matures 21 October 2017.
The bank debt facilities are able to be drawn-down as required subject to Z being in compliance with undertakings in respect of those
facilities. All loans must be repaid on the relevant due dates. Interest rates are determined by reference to prevailing money market
rates at the time of draw-down plus a margin. Interest rates paid during the year ranged from 4.3% to 4.9% (2014: 3.7% to 3.9%).
Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are measured at
amortised cost with any difference between the initial recognised amount and the redemption value being recognised in the Statement
of Comprehensive Income over the period of the borrowing using the effective interest rate. Bond and bank debt issue expenses, fees
and other costs incurred in arranging finance are capitalised and amortised over the term of the relevant debt instrument or debt
facility using the effective interest rate method.
Z Annual Report 2015 96
(21)
Bonds
Balance at beginning of year
Amortisation
Unwind of fair value loss on substitution
Balance at end of year
Current
Non current
Balance at end of year
Repayment terms and interest rates
Maturing on 15 October 2016, 7.35% per annum fixed coupon rate
Maturing on 15 August 2018, 7.25% per annum fixed coupon rate
Maturing on 15 November 2019, 6.50% per annum fixed coupon rate
Balance at end of year
2015
$m
430
(1)
1
430
-
430
430
148
149
133
430
2014
$m
430
(1)
1
430
-
430
430
149
148
133
430
Fixed coupon
The fixed coupon bonds Z has on issue are at a face value of $1.00 per bond. Interest is payable bi-annually on the bond maturing 15
October 2016, and quarterly on the bonds maturing 15 August 2018 and 15 November 2019.
The bonds require Z to maintain certain levels of performance, security and gearing.
(22)
Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
• Credit risk
•
Liquidity risk
• Market risk
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The
Board has established an Audit and Risk Committee with responsibilities which include reviewing treasury practices and policies. The
Group has established a Treasury Management Committee to review and set treasury strategy within policy guidelines and report on
market risk positions and exposures. The Group has developed a comprehensive, enterprise wide risk management framework which
guides management and the Board in the identification, assessment and monitoring of new and existing risks.
Management report to the Audit and Risk Committee and the Board on the relevant risks and the controls and treatments for those risks.
Derivatives are not hedge accounted and are required to be accounted for at fair value through the Statement of Comprehensive
Income. Derivative financial instruments are recognised initially at fair value at the date they are entered into. Subsequent to initial
recognition, derivative financial instruments are stated at fair value at each Statement of Financial Position date. The resulting gain or
loss is recognised in the Statement of Comprehensive Income.
(22)
Financial risk management
(Continued)
97
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Group. The
Group is exposed to credit risk in the normal course of business including those arising from trade receivables with its customers,
financial derivatives and transactions (including cash balances) with financial institutions. The Group has adopted a policy to assure
the credit-worthiness of our counterparties, as a means of mitigating the risk of financial loss from defaults. The Group minimises its
exposure to credit risk of trade receivables through the adoption of counterparty credit limits and standard payment terms. Derivative
counterparties and cash deposit transactions are limited to high-credit-quality financial institutions and organisations in the relevant
industry. The Group’s exposure and the credit ratings of counterparties are monitored, and the aggregate value of transactions
concluded are spread amongst approved counterparties. The carrying amounts of financial assets recognised in the Statement of
Financial Position best represent the Group’s maximum exposure to credit risk at the reporting date. Generally, no security is held on
these amounts. Concentration of credit risk with respect to trade receivables is limited due to the Group’s large customer base. Less
than 1% (2014 : 2%) of the Group’s receivables are more than 30 days overdue.
Liquidity risk
Liquidity risk is the risk that assets held by the Group cannot readily be converted to cash to meet the Group’s contracted cash flow
obligations. Liquidity risk is monitored by continuously forecasting cash flows and matching the maturity profiles of financial assets and
liabilities. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stress conditions. The Group manages liquidity risk by maintaining an adequate amount
of committed credit facilities and spreading debt maturities in accordance with policy.
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on the earliest possible contractual
maturity date at the year end. The amounts in the tables below are contractual undiscounted cash flows, which include interest through
to maturity.
For the year ended
31 March 2015
6 months
or less
$m
6-12
months
$m
1 to 2
years
$m
Non-derivative financial liabilities
Accounts payable
Finance leases
Bonds
(308)
(1)
(15)
(324)
Derivative financial instruments liabilities
Interest rate swaps
Commodity hedges
-
(1)
(1)
-
(1)
(15)
(16)
-
-
-
-
(2)
(177)
(179)
-
-
-
2 to 5
years
$m
-
(7)
(325)
(332)
(2)
-
(2)
5 years
+
$m
Contractual
cash flows
$m
Statement
of financial
position
$m
-
(11)
-
(11)
(4)
-
(4)
(308)
(22)
(532)
(862)
(6)
(1)
(7)
(308)
(12)
(430)
(750)
(4)
(1)
(5)
Z Annual Report 2015 98
(22)
Financial risk management
(Continued)
For the year ended
31 March 2014
6 months
or less
$m
6-12
months
$m
1 to 2
years
$m
Non-derivative financial liabilities
Accounts payable
Finance leases
Bonds
(397)
(1)
(15)
(413)
Derivative financial instruments (liabilities)/assets
-
(1)
(1)
Interest rate swaps
Commodity hedges
Market Risk
-
(1)
(15)
(16)
-
-
-
-
(2)
(30)
(32)
(1)
-
(1)
2 to 5
years
$m
-
(7)
(361)
(368)
(2)
-
(2)
5 years
+
$m
Contractual
cash flows
$m
Statement
of financial
position
$m
-
(13)
(142)
(155)
8
-
8
(397)
(24)
(563)
(984)
5
(1)
4
(397)
(13)
(430)
(840)
2
(1)
1
Interest rate risk
The Group’s primary interest rate risk arises from its issued bonds (see note 21) which are sourced at fixed interest rates. In accordance
with the Treasury Policy, Z manages its exposure to interest rate risk by entering into interest rate swaps (IRS). By managing the interest
rate risk, Z aims to minimise the cost of debt and manage the impact of interest rate volatility on the Group’s earnings. The aggregate
notional principal amount of the outstanding IRS at 31 March 2015 is $790m (2014: $590m). The fair value of the IRS is $(4)m (2014: $2m).
Sensitivity analysis
At 31 March 2015, if bank interest rates at that date had been 100 basis points higher/lower with all other variables held constant, it would
change post-tax profit for the year by $7m lower/higher (2014: $0.2m).
Foreign currency risk
The Group has exposure to currency risk on the value of its sales contracts, commodity/product supply purchases, other transaction
flows, and assets/liabilities denominated in foreign currencies. The Group enters into forward exchange contracts under the terms of
its Treasury Policy to reduce the risk from price fluctuations of foreign currency commitments mainly associated with the purchase of
hydrocarbons.
(22)
Financial risk management
(Continued)
99
Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional
currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised
cost in the functional currency at the beginning of the period, adjusted for interest and payments during the period, and the amortised
cost in foreign currency translated at the exchange rate at the end of the period. The resulting gain or loss is recognised in the
Statement of Comprehensive Income immediately.
The aggregate notional principal amount of the outstanding forward foreign exchange contracts at 31 March 2015 was $68m (2014:
$17m). At balance date the fair value of forward foreign exchange contracts outstanding was $0.1m (2014: nil).
Sensitivity analysis
At 31 March 2015, if the New Zealand dollar had strengthened/weakened by 10% against the currencies with which the Group has foreign
currency risk with all other variables held constant, post-tax profit for the year would change by $6m higher/$7m lower. (2014: $21m
higher/$22m lower).
Commodity hedges risk
The Group has exposure to purchase timing risk on commodities. This is defined as the difference in timing of when purchases of crude
and product are priced, and when volumes of product are sold each month.
The Group enters into commodity swap contracts under the terms of its Treasury Policy to reduce the risk from price fluctuations, by
matching purchase and sales volumes in a particular month. All hedging is within a 6 month duration. At 31 March 2015 the fair value of
commodity hedges was $(1)m (2014: $(1)m).
Sensitivity analysis
At 31 March 2015, if the Oil commodity price had weakened/strengthened by 10% in which the Group has Commodity price risk with all
other variables held constant, the value of commodity derivatives would change post-tax profit for the year by $3m lower/higher (2014:
$0.2m).
Fair value measurement in the financial statements
The carrying amount of financial assets and financial liabilities recorded in the financial statements is their amortised cost, with the
exception of derivatives which are held at fair value.
The fair values of derivatives are calculated using observable market rates based on discounted cash flow analysis. The fair values
determined capture the applicable credit risk of the counterparties and are a level 2 fair value measurement per the requirements of NZ
IFRS 7 (explained below).
Where the fair value of a derivative is calculated using discounted cash flow analysis, the two key types of variables used by this
valuation technique are as follows:
•
•
forward price curve (for the relevant underlying interest rates, foreign exchange rates or commodity prices); and
discount rates.
The selection of variables requires judgement and therefore there is a range of reasonably possible assumptions in respect of these
variables that could be used in estimating the fair value of these derivatives.
Z Annual Report 2015 100
(22)
Financial risk management
(Continued)
Asset and liability fair value classification
2015
Assets
Cash and cash equivalents
Derivatives
Trade receivables
Total assets
Liabilities
Bonds
Derivatives
Finance leases
Accounts payable
Total liabilities
2014
Assets
Cash and cash equivalents
Derivatives
Trade receivables
Total assets
Held for
trading at
fair value
$m
Loans
and
receivables
$m
Total
carrying
amount
$m
-
10
-
10
206
-
149
355
206
10
149
365
Held for
trading at
fair value
$m
Financial
liabilities at
amortised
cost
$m
-
(15)
-
-
(15)
(430)
-
(12)
(308)
(750)
Total
carrying
amount
$m
(430)
(15)
(12)
(308)
(765)
Held for
trading at
fair value
$m
Loans
and
receivables
$m
Total
carrying
amount
$m
-
13
-
13
178
-
211
389
178
13
211
402
Fair
value
$m
206
10
149
365
Fair
value
$m
(465)
(15)
(12)
(308)
(800)
Fair
value
$m
178
13
211
402
(22)
Financial risk management
(Continued)
Liabilities
Bonds
Derivatives
Finance leases
Accounts payable
Total liabilities
101
Held for
trading at
fair value
$m
Financial
liabilities at
amortised
cost
$m
-
(12)
-
-
(12)
(430)
-
(13)
(397)
(840)
Total
carrying
amount
$m
(430)
(12)
(13)
(397)
(852)
Fair
value
$m
(451)
(12)
(13)
(397)
(873)
NZ IFRS 7 requires disclosure of fair value measurements using the following fair value measurement hierarchy:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
•
•
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (level 2)
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
At 31 March 2015, the fair value of Bonds disclosed in the table above was a Level 1 measurement (2014: level 1) and the fair value of
derivatives was a Level 2 measurement (2014: Level 2). The fair value disclosed for Bonds is the quoted price of the Bonds on the
NZDX as at 31 March 2015. The fair value disclosed for derivatives is calculated using observable market rates based on discounted cash
flow analysis and for the remaining financial instruments recorded in the Statement of Financial Position, carrying value approximates
fair value.
Capital management
The key factors in determining Z’s optimal capital structure are:
• Nature of activities
•
Forecast of earnings and cash flows
• Capital needs over the forecast period
• Available sources of capital and relative cost
The Group’s capital includes share capital and retained earnings. The Company’s borrowings are subject to certain compliance ratios
relevant to the facility agreements or the trust deed applicable to the borrowings. The Group will seek to spread the maturities of its
debt with no more than 50% of core debt facilities maturing in any forward 12 month period. Discussions on refinancing of bank debt
facilities will normally commence at least 6 months before maturity with facility terms agreed at least 3 months prior to maturity.
Bank facilities are maintained with AA- or above rated financial institutions, with a syndicate of four bank counterparties to ensure
diversification.
Z Annual Report 2015 102
(23)
Leases
Operating leases
Operating lease payments, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items,
are charged to the Statement of Comprehensive Income on a straight line basis over the period of the lease term.
The Group has receivables from operating leases relating to the lease of premises. These receivables expire as follows:
Operating lease receivables as lessor
Between 0 to 1 year
Between 1 to 5 years
More than 5 years
2015
$m
2
9
26
37
The Group has various non-cancellable operating leases. The leases have varying terms, escalation clauses and renewal rights.
On renewal, the terms of the leases are renegotiated. The lease payables are predominantly for the lease of land and buildings.
Operating lease payables as lessee
Between 0 to 1 year
Between 1 to 5 years
More than 5 years
2015
$m
20
61
60
141
2014
$m
3
10
29
42
2014
$m
20
65
91
176
Lease costs expensed and sub-lease income received through the Statement of Comprehensive Income during the year was $23m
(2014: $23m) and $1m (2014: $1m) respectively.
103
(23)
Leases
(Continued)
Finance leases as lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased items, are
capitalised at the lower of fair value or present value of the minimum lease payments. The leased assets and corresponding liabilities
are therefore recognised and the assets are depreciated in line with the Group’s depreciation policy to reflect the estimated useful lives.
Each lease payment is allocated between the liability and finance charges so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each year.
The Group has finance leases arising from the sale and leaseback of buildings and plant and machinery with a carrying amount of $9m
(2014: $10m). These lease contracts expire within 5 to 14 years and have additional terms of renewal. The Group also receives some
sub-lease income on these assets but this does not have a significant impact on the Statement of Comprehensive Income.
Present value of minimum lease payments
Between 0 to 1 year
Between 1 to 5 years
More than 5 years
Present value of minimum lease payments
Lease liability under Finance Leases
Between 0 to 1 year
Between 1 to 5 years
More than 5 years
Minimum lease payments
Less interest attributable to future years
Present value of minimum lease payments
Present value of minimum lease payments - Short term
Present value of minimum lease payments - Long term
2015
$m
1
3
8
12
2014
$m
1
3
9
13
2015
$m
2014
$m
2
9
11
22
10
12
1
11
12
2
9
13
24
11
13
1
12
13
Z Annual Report 2015 104
(24)
Share based
payments
Z Energy Restricted Share Long Term Incentive (LTI) Plan
Z provides an LTI for selected senior Z employees. Under the LTI plan, ordinary shares in the Z Energy Limited (Parent) are issued
to, or purchased on-market by, Z Energy LTI Trustee Limited (the Trustee), a subsidiary of the Parent. Participants purchase shares
from the Trustee with funds lent to them by the Parent company. The amount of shares that vest will depend on Z’s total shareholder
return ranking within a peer group of the NZX50 over a three year period, although a reduced period may be used in some cases. If the
individual is still employed by the Parent at the end of the vesting period, the employee is provided a cash bonus which must be used
to repay the loan and the shares are then transferred to the employee.
Balance at
the start of
the year
Granted
during the
year
Exercised
during the
year
Forfeited
during the
year
Balance at
the end of
the year
Vested and
exercisable
at the end of
the year
Number
Number
Number
Number
Number
Number
Grant date
Vesting date
2015
19 August 2013
20 May 2014
Total
Weighted average exercise price
31 March 2016
31 March 2017
Exercise
price
$3.71
$3.84
498,006
-
498,006
-
458,432
458,432
2014
19 August 2013
31 March 2016
$3.71
-
498,006
-
-
-
-
(100,715)
(56,298)
(157,013)
$3.76
397,291
402,134
799,425
$3.78
-
498,006
-
-
-
-
Measurement of fair values
The fair value of the LTI plan has been determined using the framework of the Black-Scholes and Margrabe option pricing models.
Weighted average share price at grant date
Contractual life
Risk free rate
2015
$3.84
2014
$3.71
2.86 years
2.61 years
3.9%
3.7%
Standard deviation of Z share price
17.0%-22.5%
17.5%-22.5%
Standard deviation of NZX50
9.2%
9.0%
Correlation between Z share price and NZX50
0.32-0.54
0.28-0.57
Estimated fair value per share
$1.24
$1.26
The volatility and correlation measures were derived from measuring the standard deviation of Z’s share price with reference to the
standard deviation of returns for listed companies that operate in the NZ and Australian petroleum and retail sectors.
There was insufficient historical data to base the measures on Z’s share price alone. The standard deviation of the NZX50 was based
on historical returns for the NZX50 Gross Index over a three year period. The risk free rate was based on annualised government
bond yield for the term.
(24)
Share based
payments
(Continued)
Assumptions have been made that the participants will remain employed with Z and will achieve the minimum performance levels in each
period to the vesting date. Dividends paid on shares are not material to the value of the shares granted under the plan.
The fair value of the share based payments is recognised as an expense, with a corresponding increase in equity, over the vesting period
of the plan. The expense relating to the LTI plan in the year ended 31 March 2015 is $0.4m (2014: $0.2m). The unamortised fair value of
the remaining share at 31 March 2015 is $0.8m (2014: $0.5m).
An employee share purchase programme also exists which does not have a material impact on these financial statements.
105
(25)
Related parties
Included in the Statement of Comprehensive Income are sales and expenses which arise from transactions between Group and
associated companies. Such transactions comprise sales and purchases of goods and services in the ordinary course of business on
normal trading terms, but also include dividends and interest.
Certain Z Directors have relevant interests in a number of companies with which Z has transactions in the normal course of business.
A number of Z Directors are also Non-Executive Directors of other companies. Any transactions undertaken with these entities have
been entered into as part of the ordinary business.
Key management personnel have been defined as the Directors, the Chief Executive and the Executive team for the Group. Executive
members also participate in the Group’s restricted share LTI Plan (see note 24).
Z Annual Report 2015 106
(25)
Related parties
(Continued)
Transactions with related parties
Received/(paid)
Associates – sale of goods and services
Associates – purchase of goods and services
Refining NZ – processing fees, customs and excise duties
Coastal Oil Logistics Limited - distribution
Other
Infratil Group
Sales of goods and services
Tax subvention payment
Purchase of goods and services
Key management personnel
Short-term employee benefits
Other long-term benefits
Termination benefits
Balances at the end of the period
Associates – payable
2015
$m
2
(465)
(19)
(29)
1
(1)
-
5
2
-
2014
$m
2
(429)
(19)
(34)
1
-
(1)
4
2
1
Refining NZ – processing fees, customs and excise duties
Other
(41)
(1)
(40)
(3)
(26)
Commitments
(27)
Contingent liabilities
Capital commitments relate to property, plant and equipment and contracts for the purchase of ETS units.
Contracted but not provided for
107
2015
$m
21
2014
$m
18
The Group has a contingent liability in respect of back dated excise duty claims by the New Zealand Customs Service (“Customs”)
against WOSL (an associate of Z). The potential claims relate to duty arising on the volume of motor spirit manufactured as a result of
the common industry practice of blending motor spirit with other substances that do not attract excise duty. Z has recorded a provision
of $5m (2014: $5m) for any reassessed excise duty for the period January 2011 to March 2015. A letter was received by WOSL dated
4 May 2015 containing a reassessment of such excise duty and additional late payment duties for an amount in respect of which the
Group’s share could be up to $20m, and indicating that additional late payment duties for the period prior to 2007 may also be payable.
The Group is not yet in a position to assess either the claim or the Group’s share of it. Given this uncertainty, no additional or increased
provision has been recorded for such excise duties (nor any excise duty that may relate to periods before 2007). There is no other
contingent liability (2014: $5m).
(28)
Contingent assets
The Group has no contingent assets (2014: $2m).
(29)
Events after balance date
Subsequent to 31 March 2015 Directors have approved a fully imputed dividend of $0.165 per share, which is
equal to $66.0m to be paid on 3 June 2015 (2014: $57.2m, $0.143 per share).
Z Annual Report 2015 108
Independent auditor’s report
To the shareholders of Z Energy
Limited
We have audited the accompanying
consolidated financial statements of Z
Energy Limited and its subsidiaries (‘’the
group’’) on pages 73 to 107. The financial
statements comprise the consolidated
statement of financial position as at 31
March 2015, the consolidated statements
of comprehensive income, changes in
equity and cash flows for the year then
ended, and a summary of significant
accounting policies and other explanatory
information.
Directors’ responsibility
for the consolidated
financial statements
The directors are responsible for the
preparation and fair presentation of
the consolidated financial statements
in accordance with generally accepted
accounting practice in New Zealand
and the New Zealand Equivalents
to International Financial Reporting
Standards, and for such internal control
as the directors determine is necessary
to enable the preparation of consolidated
financial statements that are free from
material misstatement whether due to
fraud or error.
Auditor’s responsibility
Our responsibility is to express an
opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance
with International Standards on Auditing
(New Zealand). Those standards require
that we comply with ethical requirements
and plan and perform the audit to obtain
reasonable assurance about whether the
consolidated financial statements are free
from material misstatement.
An audit involves performing procedures
to obtain audit evidence about the
amounts and disclosures in the
consolidated financial statements.
The procedures selected depend on
the auditor’s judgement, including the
assessment of the risks of material
misstatement of the consolidated
financial statements, whether due to
fraud or error. In making those risk
assessments, the auditor considers
internal control relevant to the group’s
preparation and fair presentation of the
consolidated financial statements 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. An audit also
includes evaluating the appropriateness
of accounting policies used and the
reasonableness of accounting estimates,
as well as evaluating the presentation of
the consolidated financial statements.
We believe that the audit evidence
we have obtained is sufficient and
appropriate to provide a basis for our
audit opinion.
Our firm has also provided other services
to the group in relation to assurance and
general accounting services. Subject
to certain restrictions, partners and
employees of our firm also deal with
the group on normal terms within the
ordinary course of trading activities of
the business of the group. These matters
have not impaired our independence as
auditor of the group. The firm has no
other relationship with, or interest in,
the group.
Opinion
In our opinion, the consolidated financial
statements on pages 73 to 107 comply
with generally accepted accounting
practice in New Zealand and present fairly,
in all material respects, the consolidated
financial position of Z Energy Limited as
at 31 March 2015 and its consolidated
financial performance and cash flows for
the year then ended in accordance with
New Zealand Equivalents to International
Financial Reporting Standards.
6 May 2015
Wellington
Supplementary financial information
for the year ended 31 March 2015
The supplementary financial information does not form part of the financial statements. To assist in understanding the Group’s performance, the directors have provided additional
disclosure of the Group’s results for the year on a replacement cost basis.
109
Income statement on
replacement cost basis1
Revenue
Excise and carbon expense
Purchases of crude and product
Primary distribution expenses
Cost of sales adjustment (COSA) (net of tax)
Operating expenses
Replacement cost operating EBITDAF
Share of earnings/(losses) of associate companies (net of tax)
Notes:
1.
2.
Replacement cost is a non-GAAP measure
used by the downstream fuel industry to report
earnings on a replacement cost basis. The
difference between HC earnings and RC earnings
is the Cost of Sales Adjustment (COSA). Full
reconciliation from Statutory Net Profit After
Tax to RC operating EBITDAF is provided.
FY14 results are prepared on a pro forma
basis. The difference relates to the pro forma
information being prepared as if the listing and
all the associated transactions had occurred on
1 April 2013.
Replacement cost EBITDAF
Depreciation and amortisation
Impairment
Loss on sale of fixed assets
Net financing expense
Loss on interest rate derivatives
Replacement cost net profit before taxation
Taxation benefit/(expense)
Tax on COSA
Replacement cost net profit before taxation
Reconciliation from
statutory NPAT to
replacement cost
operating EBITDAF
Net profit for the year
Share of earnings in RNZ from 1 April to 18 August
Net financing expense from 1 April to 4 July
Replacement cost of sales adjustment (net of tax)
Taxation
Replacement cost net profit after tax
Depreciation and amortisation
Net financing expense
Other
Taxation (including tax on COSA)
Share of earnings in associates (net of tax)
Replacement cost net profit before taxation
2015
$m
3,064
(562)
(2,073)
(25)
158
(321)
241
10
251
(43)
-
-
(37)
(7)
164
1
(44)
121
2015
$m
7
-
-
158
(44)
121
43
37
7
43
(10)
241
20142
$m
3,371
(546)
(2,311)
(25)
11
(281)
219
(1)
218
(39)
1
(4)
(33)
(2)
141
(37)
(3)
101
2014
$m
95
4
(8)
8
2
101
39
33
5
40
1
219
Z Annual Report 2015 110
GRI index
We’ve applied the Global Reporting Initiative (GRI) G4 guidelines to a ‘Core’ level of
compliance. We’ve chosen not to have our first report third-party verified this year.
Standard
disclosure
Standard disclosure title
Identified Material Aspects and Boundaries
General Standard Disclosures
Standard disclosure title
Standard
disclosure
Strategy and Analysis
G4-1
Statement by CEO and chair
Organisational Profile
G4-3
G4-4
G4-5
G4-6
G4-7
G4-8
G4-9
G4-10
G4-11
G4-12
G4-13
G4-14
G4-15
G4-16
Name
Primary brands, products, services
Head office
Locations
Legal form
Markets served
Scale of organisation
Workforce
Collective agreements
Supply chain
Business changes
Precautionary approach
Charters
Memberships
G4-17
G4-18
G4-19
G4-20
G4-21
G4-22
G4-23
Organisation
Report content and boundaries
Material issues
Boundaries inside organisation
Boundaries outside organisation
Restatements
Changes
Stakeholder Engagement
G4-24
G4-25
G4-26
G4-27
Report Profile
G4-28
G4-29
G4-30
G4-31
G4-32
G4-33
Governance
G4-34
Stakeholder groups engaged
Selection of stakeholder
Organisation’s approach
Key topics and concerns
Reporting period
Date of previous report
Reporting cycle
Contact
GRI compliance
Assurance
Governance
Ethics and Integrity
G4-56
Values
Page
number
01 – 02
02
02
113
01
02
01 – 02
01 – 02,
72 – 109
63
NA
27
10 – 11
42
12, 52, 57
05
Page
number
72 – 109
03
04 – 05
all except
below
24, 25, 28
NA
45
04 – 05
04 – 05
04 – 05
04 – 05
01
73
01
113
Core
Not assured
52 – 56
58
Standard
disclosure
Standard disclosure title
Page
number
Standard
disclosure
Standard disclosure title
Page
number
111
Specific Standard Disclosures
Economic
Economic Performance
G4-DMA
G4-EC1
G4-EC2
Environmental
Energy
G4-DMA
G4-EN3
G4-EN6
Water
G4-DMA
G4-EN10
Emissions
G4-DMA
G4-EN15
G4-EN16
G4-EN17
Generic disclosures on management approach
08 – 09
Direct economic value generated and distributed
08 – 09
Financial implications and other risks and
opportunities for the organisation’s activities
due to climate change
Generic disclosures on management approach
Energy consumption within the organisation
Reduction of energy consumption
Generic disclosures on management approach
Percentage and total volume of water recycled
and reused
Generic disclosures on management approach
Direct greenhouse gas (GHG) emissions
(Scope 1)
Energy indirect greenhouse gas (GHG)
emissions (Scope 2)
Other indirect greenhouse gas (GHG) emissions
(Scope 3)
48
44
44
44
47
47
45
45
45
45
45
G4-EN19
Reduction of greenhouse gas (GHG) emissions
Effluents and Waste
G4-DMA
G4-EN23
Generic disclosures on management approach
Total weight of waste by type and disposal
method
G4-EN24
Total number and volume of significant spills
Transport
G4-DMA
G4-EN30
Generic disclosures on management approach
Significant environmental impacts of
transporting products and other goods and
materials for the organisation’s operations, and
transporting members of the workforce
Supplier Environmental Assessment
G4-DMA
G4-EN33
Generic disclosures on management approach
Significant actual and potential negative
environmental impacts in the supply chain and
actions taken
Social
Labour Practices and Decent Work
Employment
G4-DMA
G4-LA1
Generic disclosures on management approach
Total number and rates of new employee hires
and employee turnover by age group, gender
and region
G4-LA3
Return to work and retention rates after parental
leave, by gender
41
41
43
45
45
45
45
57
59
59
Z Annual Report 2015 112
Standard
disclosure
Standard disclosure title
Page
number
Standard
disclosure
Standard disclosure title
Page
number
Occupational Health and Safety
Equal Remuneration for Women and Men
G4-DMA
G4-LA5
G4-LA6
Generic disclosures on management approach
Percentage of total workforce represented in
formal joint management-worker health and
safety committees that help monitor and advise
on occupational health and safety programmes
Type of injury and rates of injury, occupational
diseases, lost days, and absenteeism, and total
number of work-related fatalities, by region and
by gender
Training and Education
G4-DMA
G4-LA10
G4-LA11
Generic disclosures on management approach
Programmes for skills management and
lifelong learning that support the continued
employability of employees and assist them in
managing career endings
Percentage of employees receiving regular
performance and career development reviews,
by gender and by employee category
Diversity and Equal Opportunity
G4-DMA
G4-LA12
Generic disclosures on management approach
Composition of governance bodies and
breakdown of employees per employee category
according to gender, age group, minority group
membership, and other indicators of diversity
42
43
43
34
34
34
57
58
G4-DMA
G4-LA13
Generic disclosures on management approach
Ratio of basic salary and remuneration of women
to men by employee category, by significant
locations of operation
Society
Local Communities
G4-DMA
G4-SO1
Generic disclosures on management approach
Percentage of operations with implemented local
community engagement, impact assessments,
and development programmes
57
58
36
36
Product Responsibility
Product and Service Labelling
G4-DMA
G4-PR5
Generic disclosures on management approach
Results of surveys measuring customer
satisfaction
16, 23
17, 23
Directory
Registered office
New Zealand and head office,
3 Queens Wharf, Wellington 6011
Contact us
General enquiries 0800 474 355 and
press ‘0’ or email general@z.co.nz
Directors
Peter Ward Griffiths (chairman)
Marko Bogoievski
Alan Michael Dunn
Abigail Kate Foote
Paul Lightle Fowler
Justine Mary Munro
Bruce Harker
Senior management
Michael Bennetts
Chief Executive
Chris Day
Chief Financial Officer
David Binnie
General Manager Supply and Distribution
Mark Forsyth
General Manager Retail
Lindis Jones
General Manager Commercial
Sharlene Taylor
General Manager People and Culture
Rob Wiles
General Manager Corporate
Jane Anthony
General Manager Marketing
Julian Hughes
General Manager Health, Safety,
Security and Environment
Bankers
ANZ Bank New Zealand Limited
215–229 Lambton Quay
Wellington
Bank of New Zealand
80 Queen Street
Auckland
Hong Kong and Shanghai Banking
Corporation
HSBC Tower
195 Lambton Quay
Wellington
Westpac New Zealand Limited
188 Quay Street
Auckland
Australia Registered Body Number
164 438 448
Meredith Ussher
General Counsel and Company Secretary
John Conlan
Acting General Counsel and Company
Secretary
Registered office – New Zealand
3 Queens Wharf
Wellington 6011
Registered office – Australia
TMF Group – Sydney
Level 16, 201 Elizabeth Street,
Sydney NSW 2000, Australia
PO Box A2224,
Sydney South NSW 1235, Australia
+61 2 8988 5836
Share registrar
Link Market Services – New Zealand
PO Box 91976
Auckland 1142
New Zealand
+64 9 375 5998
Link Market Services – Australia
Level 12, 680 George Street
Sydney, NSW, 2000
Australia
+61 2 8280 7100
Auditor
KPMG
Maritime Tower
10 Customhouse Quay
PO Box 996
Wellington 6140
z.co.nz