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Stronger Connections. Better New Zealand

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Stronger Connections. Better New Zealand Stronger Connections. Better New Zealand. ANNUAL INTEGRATED REPORT 2018 F.18a Welcome – Tēnā koutou Contents Rail’s proud 155-year history of KiwiRail’s purpose, developed this the decades to come. Technological Overview of our business Capitals review Governance review enabling growth in New Zealand has year, of ‘Stronger Connections. Better disruption, changing demographics, the At a glance............................................4 Financial .............................................28 The KiwiRail Board .............................. 54 been revitalised over the past year with New Zealand’ evokes this plan for a future of work and new skills, a surge in Awards ..................................................5 Case study - Record season The KiwiRail Executive Team ............. 56 a new coalition Government signalling bigger, bolder role for rail. rail commuters, a burgeoning tourism for Interislander tourism ...................30 its strong support for expanding rail’s market and the advent of big ships Our purpose..........................................6 How we are governed.......................... 58 People ................................................31 role in the economy. In the 1800s engineers designed a in our ports will guide much of our rail network that could operate in New strategy over the next few years. Management review Case study - Revitalising Statutory review health and safety action teams ........34 For KiwiRail, this revival of rail is the Zealand’s uncompromising landscape, Our reporting approach ........................9 Key Performance Indicators ................ 62 Assets .................................................35 culmination of four years of reform, building wooden infrastructure Driving economic growth across New How KiwiRail creates value ................10 Vote Transport .................................... 64 with our plan to standardise our assets, to carry the steel tracks that ran Zealand’s cities and regions is part of Case study - Supporting Chair’s message .................................12 Financial statements............................ 66 simplify our business and invest in our across swamps, rugged mountains, KiwiRail’s DNA. It is where we come regional development ........................37 After the earthquake ...........................13 Independent Auditor’s Report .............. 96 people to deliver improved productivity dense forests and rivers, connecting from, it is who we are now, and it is Skills and know-how ...........................38 Milestones ..........................................14 Directory .............................................. 99 and lay the groundwork for an exciting otherwise isolated communities and what we will strive to be in the decades Case study - Safety technology .......40 Chief Executive’s report ......................16 future of growth. industries to the market. and generations to come. Relationships ......................................41 Our progress 2014-2018 ....................19 Case study - Toi Toi ..........................45 Our history is one of adapting to That mission has not changed, though The Value of Rail in New Zealand ......20 Environment .......................................46 meet customers’ needs and evolving the way we service those customers United Nations Sustainable as global supply chains develop. has. That change will continue in Business review Development Goals ............................49 Performance of our business units ..... 22 Strategic outlook .................................51 Case study - Our integrated business ..26 Front cover photo: KiwiRail commissioned local artist Ben Foster to create a sculpture of rail recovered during our rebuild efforts etched with the names of the many impacted communities, to mark the rebuild of the rail line and the challenges faced by the local communities following the Kaikoura earthquake. See page 13 for more details. KiwiRail haka Te Iho Matua being performed at Toi Toi Maori Leaders Programme 2018 graduation. 2 | KiwiRail Annual Integrated Report 2018 KiwiRail Annual Integrated Report 2018 | 3 Overview of our business: At a glance Overview of our business: Awards At a glance Awards Highlights from FY18 Financial • $49 million operating surplus1 • $94 million underlying operating surplus2 excluding $45 million impact from Kaikoura, exceeding FY17 underlying result • $7 million of efficiency and waste savings were delivered, building on the $45 million achieved in previous years • Forestry revenue up 12% with strong export demand • Bulk freight revenue up 6% with strong milk and coal volumes People • Staff engagement hits record high with Employee Net Promoter Score reaching +1 in 2018, from a low of -21 in 2016 and -7 in 2017 • Total Recordable Injury Frequency Rate decreases by 10% over previous year • 6,700 Safe Work Conversations recorded over the year • Toi Toi Maori Leadership programme launched • High Performance High Engagement (HPHE) project at Hutt Workshops traction motor maintenance facility leads to improved safety and efficiency Assets • Two major projects underway to consider long term strategy for interisland ferries and future rolling stock fleet July August September October • $171 million (including contributions from other parties) capital expenditure targeted on key freight KiwiRail wins the Australasian Great Journeys of New The Southdown 35/36 Roads KiwiRail wins the Supreme lines and improving resilience and operational capacity to meet increasing freight volumes Rail Industry Award for Freight Zealand’s TranzAlpine, project is awarded Public Award at the AUT Business • On Time Performance (OTP) of 91% for all freight trains Rail Excellence in recognition Coastal Pacific and Northern Sector Project of the Year Support Awards in recognition • Napier to Wairoa line sees first work train in six years preparing the line for resuming log trains of its efforts to keep Explorer scenic rail services, at the Project Management of its partnership with • Final testing of 15 new locomotives underway customers’ freight moving and the Interislander, are Institute Awards. KiwiRail’s the Port of Tauranga and around New Zealand following awarded Qualmark Gold Makatote Viaduct project is a Fonterra, which has improved the Kaikoura earthquake Status finalist in the same category productivity, supported regional development and reduced CO2 Skills and know-how KiwiRail’s Back to Basics emissions and costs programme is a finalist in the • Main North Line reopened to restricted freight services just 10 months after the Kaikoura Diversity Works New Zealand At the AUT Business Support earthquake, and work continues to enable daytime running of trains 2017 Skills Highway Award Awards, KiwiRail wins the • Workforce management system introduced in nine weeks using agile principles International Business Export Support and Advanced Security Group Government categories Relationship December March May June • Project Wā heke launches to help develop a customer-focused 10-year growth strategy • Customer satisfaction ratings for Interislander at 90% Video “Rail Safety Week 2017” KiwiRail is a finalist at KiwiRail and its partners in the KiwiRail receives the • KiwiRail wins Supreme Award at AUT Business Support Awards for work with Fonterra and Port of wins the Security and Safety the 2018 New Zealand North Canterbury Transport 2018 Rail Heritage Trust Tauranga to boost export growth category at the CINERAIL CFO Awards for Finance Infrastructure Recovery Restoration Award for its • Social media video “Rail Safety Week 2017” is viewed more than 300,000 times International Railway Team of the Year (NCTIR) alliance are awarded efforts in restoring the Parnell Corporate Film Competition the Railway Technical Society Railway Station building in Portugal; a second KiwiRail of Australasia’s Biennial safety video “Trackstoppers” Railway Project Award 2018 KiwiRail wins the Australasian receives a commendation in for the rebuild of the Main Reporting Awards Special Environment the same category North Line following the Award for Communication, • Rail freight reduces heavy vehicle impact on New Zealand roads by 1.1 million truck trips, saving Kaikoura earthquake Public Sector, for the second The Institution of Structural year running for its 2017 66.3 million litres of fuel and 180,212 tonnes of CO2 emissions • Reached EECA energy saving target in just eight months Engineers awards the Integrated Report Makatote Rail Viaduct project a Structural Engineering Award for Structural Heritage 1. Operating surplus represents earnings before depreciation & amortisation, interest, impairment, capital grants and fair value changes. 2. Underlying operating surplus is a non-GAAP measure used by management to assess the performance of the business. It is derived from KiwiRail’s group financial statements for the year ended 30 June 2018 and excludes Kaikoura impact. 4 | KiwiRail Annual Integrated Report 2018 KiwiRail Annual Integrated Report 2018 | 5 Overview of our business: Our purpose Overview of our business: Our purpose Our purpose Stronger Connections. Better New Zealand. We connect people and communities We keep freight moving 34 million One million 20% 18 million 16% 25% We help commuters make We carry more than We enable passenger We move 18 We carry around 16% of We transport more than 34 million low- one million tourist growth of 20% in Auckland million tonnes of New Zealand’s total freight around 25% of carbon journeys each year passengers each year over
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