VicTrack AC C ESS Contents
1 Letter to the Minister
2 Chairman’s Report
4 Chief Executive Officer’s Report
6 Victorian Rail Network
7 Corporate Governance
9 Board of Directors
10 Report of Operations
12 Commercial
16 Property
17 Asset Management
18 Customer Services
19 Environmental
20 Rollingstock Holdings Pty Limited
21 Human Resources
22 Financial Performance
23 Statutory Information
25 Financial Statements
Head Office: Level 17 589 Collins Street Melbourne Victoria 3000
Postal Address: GPO Box 1681P Melbourne Victoria 3001
Telephone: 9619 8850
Facsimile: 9619 8851
Website: www.victrack.com.au 1
Letter to the Minister
27 October 2003
The Hon Peter Batchelor MP Minister for Transport Level 26 Nauru House 80 Collins Street Melbourne Vic 3000
Dear Minister,
I have much pleasure in submitting the Annual Report for Victorian Rail Track (VicTrack) for the period 1 July 2002 to 30 June 2003.
During the year in review, VicTrack has continued to successfully develop new opportunities, particularly in the commercial and property areas. In addition, a number of new projects have commenced which we expect to enhance the rail industry in Victoria.
I am also pleased to report that in 2002-03, VicTrack met its operational and financial targets.
The Board and management are committed to ensuring that the strong performance of VicTrack over the past few years continues into the future.
Regards,
Dr Thomas W Quirk Chairman 2
Chairman’s Report
The ongoing challenge for VicTrack is to continue to maintain a balance between the pursuit of value adding commercial activities with our aim of providing social and environmental benefits to the community.
VicTrack’s charter is to create and add value to assets under our custodial ownership. We seek to increase the utilisation of these assets, many of which are considered idle or single purpose, to generate benefits for our shareholder.
Value adding activities undertaken during the year included facilitating the redevelopment of the former Bendigo Workshops site, which has been leased to Empire Rubber as part of their expanded operations in this regional centre, and continuing the project to install fibre optic cabling to Geelong, Ballarat, Bendigo and the LaTrobe Valley.
A significant financial return was also achieved from the sale and lease of land at Melbourne Central Railway Station as part of the redevelopment of this facility and by renegotiating the contract for the management of VicTrack’s outdoor advertising portfolio. In addition, the negotiation of a number of new commercial leases and the ongoing pursuit of commercial development opportunities all added value to the bottom-line financial position.
The success of our core business operations, combined with the positive impact of these initiatives, enabled us to fund our operations with no additional Government supplementation being required. In addition, all of the financial and operational performance targets set by the Board for the year were achieved.
Aside from these important financial achievements, VicTrack continues to provide benefits to the broader community in a number of ways. For instance, community safety is enhanced through the management of projects to improve protection at level and pedestrian crossings. The granting of leases for the use of railway property by community groups at nominal rentals, the investment of funds to an ongoing program to protect and restore heritage rail assets, and the funding of a $9 million upgrade of the rail line between Geelong and Warrnambool, to improve passenger comfort and reduce travel times, are all examples of social benefits provided to the community.
The knowledge and expertise of VicTrack staff is particularly useful in the implementation of major Government projects. The management of land acquisitions for the regional fast rail, Wodonga by-pass and Craigieburn electrification projects and the project to upgrade stations in preparation for the reintroduction of passenger services to Ararat and Bairnsdale, are two examples where VicTrack’s expertise has facilitated major State projects.
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VicTrack continues to proactively address its environmental responsibilities – at Spotswood, in Melbourne’s West, we have co-operatively worked with community stakeholders and the Environment Protection Authority to develop an action plan for the remediation of soil contamination at this site.
As we move forward, new projects and challenges will present themselves. Developments in the telecommunications sphere – particularly in train radio, closed circuit television, fibre optic and wireless internet access, will create opportunities for VicTrack to improve and expand services to existing customers as well as providing benefits to the broader community in terms of increased passenger security and reduced incidence of vandalism and graffiti. VicTrack will be at the forefront of these developments and we are already investing in trials and feasibility studies of the new technology.
The acquisition by VicTrack of Rollingstock Holdings Pty Limited and its subsidiary companies on 30 June 2003, will diversify our role to include that of owner and lessor of new country passenger trains.
VicTrack will also be involved during the coming year in a number of major Government initiatives, including the regional fast rail and Wodonga by-pass projects and various transit cities developments.
During 2003-04, our challenge will be to successfully combine the pursuit of these initiatives, whilst at the same time balancing the objectives of increasing returns in our core business sectors and addressing our social and environmental responsibilities.
In closing, I would like to extend my thanks to John Sutton and all VicTrack staff for an excellent job this year. The commitment and professionalism of staff is the primary reason for VicTrack’s ability to continually exceed financial and operational targets set by the Board. I would also like to thank my colleagues on the Board for their continued enthusiasm and support. My thanks also to the Minister for Transport, the Hon Peter Batchelor, and to Professor Lyndsay Neilson and Howard Ronaldson for their support for VicTrack and the Board during the year.
Dr Thomas W Quirk Chairman
VicTrack Annual Report 2003 4
Chief Executive Officer’s Report
It is with pleasure that I report on another successful year of VicTrack’s operations.
VicTrack owns the majority of the State’s fixed train and tram infrastructure. Most of these assets are leased to the Director of Public Transport (DPT), who then sub-leases the infrastructure to various passenger and freight operators and access providers. Land and infrastructure owned by VicTrack, but not leased to the DPT, includes land not required for transport purposes, air space above leased land, trunk telecommunications infrastructure and various buildings.
VicTrack’s main commercial focus is to add value to assets not leased to the DPT as well as exploring and pursuing opportunities to commercialise leased assets in non-transport areas.
To increase the commercial focus within the organisation a new Commercial Group has been established with primary responsibility for initiating major commercial opportunities and exploiting potential developments in retail and wholesale telecommunications, property and air space development, transport facilities and outdoor advertising.
During the year, significant progress was made on a number of projects that were in the development stages last year. Physical works have commenced on the project to install a fibre optic network along the regional fast rail corridors, the trial to investigate the feasibility of transmitting real-time closed circuit television images and data from moving trains to a central monitoring point was successfully completed, as was the redevelopment of the Bendigo Workshops site.
Other major initiatives/projects completed during the year included commercial developments at Elsternwick and East Camberwell, the sale and lease of land to facilitate the redevelopment of the shopping complex adjacent to, and above, the Melbourne Central Railway Station, upgrading of the rail line between Geelong and Warrnambool, the finalisation of contractual arrangements for the management of the outdoor advertising portfolio and the negotiation of a number of significant new property leases.
Managing and protecting the environment continues as a priority, particularly as VicTrack is one of the largest landowners in Victoria. During the year, assessment/remediation works were undertaken at 20 locations to either facilitate commercial development or leasing opportunities, improve our understanding of the impact on the environment of past practices, as well as the environmental risk of current activities undertaken on land owned by VicTrack.
VicTrack has continued to invest in the restoration of heritage rail assets. Heritage rail assets are prioritised for restoration by the Heritage Advisory Panel, which is chaired by John Anderson, a VicTrack Director. During the year, restoration works were carried out on eight sites.
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A highlight of the year was the opening by the Minister for Transport, the Hon Peter Batchelor, of the redeveloped and restored Hawthorn Tram Depot. The Depot now houses 20 of Melbourne’s finest heritage tramcars and is open to the public on a regular basis, staffed by enthusiastic volunteers.
VicTrack continues its investment in public safety, with ongoing project management of the Government’s level crossing improvement program. Upgrading works were undertaken at 39 sites during the year. Other significant public safety initiatives being managed include upgrading protection at pedestrian crossings as well as undertaking trials of a new low cost device as a possible alternative for protection at remote, lower risk road crossings.
Investing in new technology in the Property Group will improve the availability of, and access to, land records. The new Geographic Information System, currently being developed, will contain details of boundaries, leases, infrastructure constructed on the land and aerial photographs of all land parcels owned by VicTrack, assisting staff to deal with the many queries that are received each year.
From a financial perspective, it is pleasing to note that all budget targets set by the Board were achieved and that the bottom-line contribution by each of the major business sectors improved from the previous year. A profit of $48.6 million, a $201.4 million increase in net assets and a cash surplus from operating activities in excess of $29.8 million combine to represent a very satisfying financial outcome for the year.
During the coming year, our focus will be to continue to perform our key day-to-day functions in an efficient and effective manner, but also to deliver a number of significant projects. VicTrack will be responsible for the delivery of both its own major projects (i.e. regional fibre optic) as well as making a substantial contribution towards various significant State Government initiatives (i.e. transit cities developments and land acquisitions for the regional fast rail, Wodonga by-pass and Craigieburn electrification projects). In addition, the acquisition of Rollingstock Holdings Pty Limited and its subsidiary companies represents an expansion of VicTrack’s role into that of the owner and lessor of new country passenger trains – this change will itself bring about a new set of challenges and issues that will need to be managed.
In closing, I would like to thank the dedicated staff at VicTrack for their assistance and loyalty in helping us achieve our objectives for the year. I would also like to thank our customers for their continued support. My thanks go to our colleagues at the Department of Infrastructure for their co-operation and involvement. I also wish to express my appreciation to the Board for its valued support and positive contribution during the year.
John Sutton
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Victorian Rail Network
Map References 1 Installation of new flashing lights at the Telephone Road crossing at Melton and pedestrian gates at the Grange Road, Caulfield level crossing 2 Establishment of the VicTrack Spotswood Community 3 Consultative Forum 3 Managing land acquisitions for the Craigieburn 1 electrification project 4 5 6 4 Sale and lease of land at Melbourne Central 2 1 Railway Station 5 Redevelopment of the Hawthorn Tram Depot 6 Commercial development successfully completed at East Camberwell
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11 SEE INSET 12 12 10 14
7 Development of a Master Plan for the Mildura 11 Upgrade of station buildings and train communication links Riverfront Precinct between Ballarat and Ararat and Sale and Bairnsdale 8 Installation of new boom barriers at the Hazel Street, related to the reopening of passenger services Horsham level crossing 12 Installation of fibre optic cabling to Geelong, Ballarat, 9 Restoration of historic Manangatang Station Bendigo and the LaTrobe Valley 10 $9 million spent on upgrading the rail line between 13 Redevelopment of the former Bendigo Workshops site Geelong and Warrnambool 14 Restoration of bridges and track upgrade works between Korumburra and Leongatha 15 Purchase of land for the Wodonga by-pass project
VicTrack Annual Report 2003 6 7
Corporate Governance
VicTrack has a Board of Directors who report to Chairman the Minister for Transport. The Board is responsible Dr Thomas W Quirk is VicTrack’s independent for corporate governance practices and VicTrack’s non-executive Chairman. Dr Quirk has held the overall business performance. position of Chairman of the Board since 1997. The functions of the Board include: John Chambers, Deputy Chairman, has also • Ensuring appropriate controls, systems and been a Director since 1997. procedures are in place to manage business Chief Executive Officer risks and ensure compliance with Government, The Chief Executive Officer (CEO) is appointed occupational health and safety, community, by the Board and is subject to annual performance environmental and other regulatory requirements. reviews, also by the Board. The CEO recommends • Reviewing and adopting annual financial budgets strategies and policies for Board approval and is and assessing and monitoring results on a regular responsible for VicTrack’s day-to-day operations. basis as well as approving the annual financial John Sutton has held the position of CEO since statements. VicTrack’s inception in April 1997. • Reviewing and evaluating the performance Board Meetings of senior management. The VicTrack Board meets regularly on a monthly • Preparing a three-year Corporate Plan for basis (apart from January), and holds additional the approval of the Minister for Transport. meetings should the need arise. A total of thirteen • Considering management’s recommendations Board meetings were held during the year. on major investments and strategies to achieve The attendance of Directors was as follows: VicTrack’s objective of creating and adding Dr Thomas W Quirk 13 value to assets under its custodianship. Mr John Chambers 12 Board Composition Ms Christine O’Reilly 13 The VicTrack Board comprises of five independent Mr John Anderson 9 non-executive Directors, including the Chairman. In January 2002, the Minister for Transport Ms Elana Rubin 12 reappointed the Directors for a further three year term (commencing 1 January 2002). The Board sets itself objectives for the year and monitors its performance against these objectives.
The strength of the Board comes from the interaction of experienced and informed Directors who provide the diverse range of knowledge and business experience necessary to meet VicTrack’s objectives.
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Corporate Governance – continued
Access to Information The role of the Audit Committee is to advise the Board on matters of accountability and internal Directors are entitled to full access to information control affecting VicTrack’s operations. This includes required to discharge their responsibilities. ensuring that appropriate processes are in place Directors may obtain independent professional to support the Board in fulfilling its responsibilities advice, at VicTrack’s expense, subject to prior to exercise due care, diligence and skill in consultation with the Chairman, on matters arising relation to the : in the course of Board duties. Directors also have access to senior VicTrack managers and documents • Reporting of financial information; held by the organisation. • Application of accounting policies; • Financial management; and Indemnity • Internal financial control systems. During the year, VicTrack entered into an Access Corporate Plan and Indemnity Deed with each Director. These Deeds provide for access to documentation, The Rail Corporations Act, 1996 requires the indemnification against liabilities arising out of preparation of a Corporate Plan which is to be the conduct of the business or from the discharge agreed between the Board and the Minister for of Directors’ duties (other than any liability relating Transport. The Corporate Plan is prepared each to a wilful breach of duty or trust), and the financial year for that year and the following maintenance of Directors’ and Officers’ insurance. two years. This establishes the framework for business strategies and performance monitoring. Board Committees
Matters relating to Remuneration and Risk Management are considered by the VicTrack Board as part of regular meetings held during the year.
Audit Committee
The Audit Committee comprises all independent non-executive Directors and is chaired by Mr John Chambers. The Audit Committee schedules to meet on a quarterly basis and may hold additional meetings as required. The Chief Executive Officer and the General Manager, Finance attend meetings of the Committee except when the Committee wishes to meet alone. The Audit Committee has access to internal and external auditors as required.
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Board of Directors
Dr Thomas W Quirk MSc, DPhil, MA, SMP – Chairman Tom is a Principal of Quirk Partners, which has interests in publishing and direct marketing. He is Chairman of Virax Ltd, Deputy Chairman of VENCorp and a Director of Biota Holdings Ltd. He has worked for CRA as Chief Consultant primarily engaged in new business development. He has also worked in the United States’ venture capital industry for James D Wolfensohn. Prior to joining CRA in 1979 he was a Fellow and Lecturer at the University of Oxford. He was appointed Chairman Ms Christine O’Reilly in 1997. BBus, Dip Securities Inst. Christine is the Chief Executive Officer of GasNet Australia Group, in addition to being a Director of The Australian Gas Association and VENCorp. Christine has worked with Centaurus Corporate Finance, specialising in mergers and acquisitions, equity raisings and corporate strategy. She qualified as a Chartered Accountant with Price Waterhouse. She was appointed a Director in1997.
Ms Elana Rubin MA, ASIA Elana is Executive Director – Investments, of Australian Retirement Fund, and was Chairperson of the Fund from 1994 - 1997. She is Chairperson of Development Australia Fund, and is a Director of the Unisuper Superannuation Scheme, Industry Superannuation Property Trust, Hotel Leisure & Tourism Trust of Australia, the Victorian Workcover Authority and Victorian Transport Accident Commission. Mr John Chambers Prior to working full time in superannuation, she was a senior BCom, MBA (Melb), CA, ASIA, FAICD – Deputy Chairman, industrial officer with the Australian Council of Trade Unions. Chairman of the Audit Committee She was appointed a Director in 2000. John is Chairman of Tectonica Australia Pty Ltd and a Director of McDouall Stuart Corporate Finance Pty Ltd. John is a member of the recently convened Heritage Advisory Panel. His previous roles have included Director, Corporate Finance with William Noall Limited and Managing Director of Daiwa Securities Stockbroking Ltd. He has held Directorships with the Victorian Power Exchange, Australian Meat and Livestock Corporation and Potter Warburg Ltd. He was also Chairman of Potter Warburg Discount Ltd and the Authorised Dealers Association Inc. He is an Affiliate of the Australian Stock Exchange and Fellow of the Australian Institute of Company Directors. Primarily involved in investment banking and finance, he also has diverse experience in product promotion and international marketing. He is also a Committee Member of the Victoria Day Council. Mr John Anderson He was appointed Deputy Chairman in 1997. Cert EDP, MACS John is a Director of the West Gippsland Healthcare Group. He has an Asia Pacific role with Sun Microsystems. He was appointed a Director in 2000 and is the current Chairman of the Heritage Advisory Panel. VicTrack Annual Report 2003 10 11
Report of Operations
Establishment Overview of VicTrack’s Role
Victorian Rail Track (VicTrack) was established on VicTrack seeks opportunities to create and 1 April 1997 following proclamation of Section 8 add value to the rail assets under its custodial of the Rail Corporations Act 1996 (the Act). ownership, in areas other than public transport
VicTrack’s functions are: delivery and rail freight.
• To establish, manage and maintain railways VicTrack is not directly involved in the provision and rail infrastructure; of passenger or freight transport services.
• To direct, control and charge for access to, The majority of the infrastructure owned by and movement of rolling stock on, railways; VicTrack is leased to the Director of Public Transport (DPT). The DPT then sub-leases the • To develop, and promote the development of, infrastructure to various transport operators land vested in it; and and track access providers (see The Rail • Any other functions conferred on VicTrack Infrastructure Leases – page 11). by the Act or any other Act of Parliament. Under the leases to the DPT, VicTrack reserves In undertaking its functions, VicTrack’s powers the exclusive right to undertake non-transport are generally consistent with those normally commercial activities in the areas of granted to a Government Business Enterprise. telecommunications, property leasing and licensing, outdoor advertising and commercial VicTrack’s Assets property development. Through a series of statutory allocation statements, VicTrack creates and adds value primarily by VicTrack has been allocated assets and liabilities providing access to its assets on commercial from other Government rail corporations, in terms to private and public sector customers particular the Public Transport Corporation. as well as directly investing in asset VicTrack owns all Victorian train and tram fixed development opportunities. infrastructure apart from the Spencer Street Station In addition, VicTrack itself is a direct supplier of Precinct, privately owned sidings and certain tourist telecommunications services to the rail industry. lines. Infrastructure owned by VicTrack includes: Utilising its communications network and • All land and interests in the land; telecommunications expertise, VicTrack supplies • Track; a full range of voice and data communications • Signals; services in both general business and rail operations • Buildings and structures; applications, under fully-competitive conditions. • Overhead wiring; • Power substations; • Communications networks; and • Communications base stations.
VicTrack Annual Report 2003 10 11
VicTrack’s customer base for these activities is The Rail Infrastructure Leases primarily confined to rail operators in Victoria, Although VicTrack owns most of Victoria’s rail including their contractors and associated bodies. and tram fixed infrastructure, the vast majority Utilising its property access rights and spare is leased to the Director of Public Transport (DPT), network capacity, VicTrack participates in the who in turn sub-leases the infrastructure to various wholesale telecommunications market. In transport operators and track access providers. arrangements with telecommunications carriers, Certain closed rail lines in Victoria and other VicTrack leases spare capacity or land in return land surplus to transport requirements are not for income or network enhancements of included in these leases, with responsibility for mutual benefit. maintenance and management of these assets Apart from these clear commercial activities, remaining with VicTrack. VicTrack undertakes a range of administrative tasks Under the leases, VicTrack reserves the exclusive and manages a wide range of responsibilities that rights to commercialise the assets in areas other come with the role of being one of Victoria’s largest than transport operations (see Overview of property owners and landlords. These custodial VicTrack’s Role – previous page). tasks and responsibilities include environmental However, in undertaking its non-transport management, heritage preservation, public safety activities, VicTrack must not adversely interfere issues and community liaison. with transport operations.
The infrastructure leases mentioned above also specifically exclude communications trunk infrastructure - these assets remain under the direct management of VicTrack.
The metropolitan lease to the DPT commenced in August 1999 and is for a term of twenty years.
The lease of non-electrified, intrastate infrastructure to the DPT commenced in May 1999 and is for a period of fifteen years with two further options of fifteen years each.
The lease of the non-electrified interstate infrastructure to the DPT commenced in July 1999 and is for a period of fifteen years.
Under each of these infrastructure leases,
Construction of retail outlets on day-to-day responsibility for conducting transport the concourse level of Melbourne operations and maintaining the infrastructure is Central Railway Station. effectively contracted to the lessees/sub-lessees.
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Commercial
The recently completed Mews Nursing Home complex adjacent to East Camberwell Railway Station.
VicTrack’s newly-formed Commercial Group brings Commercial Property Development together different business development arms of The Commercial Group, in conjunction with private the organisation. In doing so, VicTrack is able to sector developers, identifies and facilitates the make the most of commercial expertise within commercial development of VicTrack’s surplus land the organisation and better integrate commercial and air space. The primary purpose of this activity opportunities with other key objectives, such as is the upgrading of public transport facilities and the improvement of public transport facilities and the achievement of a substantial financial return. the use of new technology. Typically, projects undertaken involve the sale Formed during the year, the Commercial Group of land or air space for a widely variable range is active in: of residential, retail, commercial or industrial • Commercial property development; developments. Whilst the Commercial Group • Outdoor advertising; directly manages and implements these projects, • Telecommunications services; and it does so in conjunction with, and in support of, • Transport communications and technology. the existing transport franchisees and other Government initiatives (such as transit cities developments), to ensure that a “whole of Government” perspective is maintained at all times. To this end, it maintains close links with the Director of Public Transport, rail operators and other relevant Government agencies.
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Major achievements during the year were: • Completion of negotiations with Melbourne
• Facilitation of the $6.5 million refurbishment Central Custodian Pty Ltd for the sale and lease of the disused Bendigo Workshops, to enable of VicTrack land at Melbourne Central Railway Empire Rubber to lease the premises for the Station, to facilitate a $200 million redevelopment manufacture of vehicle components; of the shopping complex adjacent to, and above, the station. • Completion of a residential/retail development at Elsternwick Railway Station, resulting in A number of other potential development sites are the provision to rail commuters of a secure, in the preliminary/investigatory stage, including multi-deck, undercover car park, improved Bow Crescent, Camberwell; Thornbury Tram Depot; passenger access to the station and an overall and Commercial Road, Prahran. The Commercial improvement in the appearance of the site; Group will continue to be pro-active in identifying development opportunities. In particular, it will • Completion of a 74 bed nursing home adjacent focus on projects with shorter delivery times that to the East Camberwell Railway Station, resulting can provide more immediate returns. in a financial return to VicTrack and improved car park facilities, lighting and security; and
Recently refurbished Bendigo Workshops now leased by Empire Rubber.
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Commercial – continued
Outdoor Advertising
VicTrack owns a portfolio of outdoor advertising panels situated primarily in metropolitan Melbourne. During the year, the Commercial Group completed a thorough strategic review of its advertising asset portfolio, culminating in the finalisation of contractual arrangements with Cody Outdoor to take over management of the portfolio for the next five years. Visionstream personnel operate a directional drilling rig at South Yarra The new arrangements will totally re-shape as they install conduit on the regional and improve the VicTrack advertising portfolio. fibre optic project. The number of panels will decrease by 70%, new and more attractive panels will be erected and VicTrack will also enjoy a substantial also open up opportunities to telecommunications increase in revenue. carriers and other users to utilise spare capacity on the link in regional areas. Other initiatives to use outdoor advertising to help reduce vandalism, graffiti and illegal Other achievements during 2002-03 were: billposting will continue to be explored. • Upgrading the central telephone exchanges at Flinders Street, West Tower and Spencer Street, Telecommunications Services replacing equipment almost 20 years old; The Commercial Group includes VicTrack’s • A refreshment of VicTrack’s procurement Telecommunications Services Department. arrangements with external carriers leading to This Department provides a wide range of a 15% reduction in external call costs, which has telecommunications services to Victoria’s rail been passed on to VicTrack’s customers; operators under fully-competitive commercial contracts. The services range from general • Calling Line Identification being made available telephony services to rail-specific applications, to our customers; and such as driver radio communications. • Reinstallation of country radio services from Sale The Department manages and develops VicTrack’s to Bairnsdale and from Ballarat to Ararat for the telecommunications network to support existing reintroduction of passenger rail services. services and to provide for a future of increased The Commercial Group also endeavours to leverage use of technology and communications in rail. demand for spare capacity in its telecommunications In 2002-03, the Commercial Group finalised network to generate commercial returns or provide contractual arrangements for a major investment better services to our customers. During the year, in fibre optic cable links to the regional centres of VicTrack entered into several agreements with Geelong, Ballarat, Bendigo and the LaTrobe Valley. external users and other carriers to make productive use of the VicTrack network for mutual benefit. This project is being undertaken in conjunction with the Government’s regional fast rail project, but will
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Studying some of the CCTV images transmitted from moving trains.
Transport Communications and Technology • Investigated the replacement of the analogue train radio system currently VicTrack’s Commercial Group has developed in use in metropolitan Melbourne; extensive expertise in modern communications technology and its potential application to public • Investigated the use of wireless transport and transport in general. internet or “wifi hot spots” in and around rail stations; and VicTrack believes public transport can gain much in the future from a greater use of technology and • Investigated the use of CCTV cameras actively promotes projects and investments in this on Melbourne’s trams. area to improve passenger security, passenger information, operational efficiency and safety.
During the year, the Commercial Group:
• Successfully completed a trial to investigate the feasibility of transmitting real-time closed circuit television (CCTV) images and data from moving trains to a central monitoring point – use of this technology in the future will enhance passenger security;
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Property
VicTrack is one of the largest landowners in Victoria. Land owned by VicTrack includes land used for both rail operations (rail reserves) and for non-rail purposes (land close to stations that may be used for carparks, stations/station extensions, shops or other businesses). For the latter category, VicTrack seeks to earn a commercial return on these properties through leases.
The Property Group is responsible for managing VicTrack’s land holdings, leases and licences. Its activities encompass rent collection of $24.2 million in respect of the approximate 2,200 leases Staff in the Property Group in place, the purchase and sale of land and the inspecting maps. management of land records (including compliance with all relevant legislation). During 2002-03, 93 new leases were negotiated, representing income in The Property Group continues to facilitate excess of $1 million per annum. a number of important Government initiatives, A priority of the Property Group is to increase being involved in managing land acquisitions returns on non-rail land to commercial levels. and disposals for the regional fast rail, Wodonga Excluding non-core infrastructure leases (where by-pass and Craigieburn electrification projects. both land and significant improvements are leased) In addition, work has commenced on sub-dividing and community rentals (where a fixed minimum disused railway land at Cohuna and Lockington as rent is made available to recognised community part of the process of disposing of these valuable, groups), VicTrack currently achieves an average but under-utilised, assets. return of 5.7% on its non-rail properties. Reducing During the year, a contract was awarded to develop vacancy rates and disposing of surplus land are VicTrack’s Geographic Information System (GIS) to also being targeted as part of the overall strategy enable registered users to access information to increase returns from property assets. regarding property boundaries, land tenure details, lease details, rail tracks, buildings and other data, including aerial photographs, through the internet.
VicTrack is also playing a major role in working with the Mildura City Council on the development of a Master Plan for the Mildura Riverfront Precinct.
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Asset Management
New pedestrian gates at Humffray St, Ballarat.
The Asset Management Group is responsible for During 2002-03, the Asset Management Group infrastructure management and agency liaison. managed the majority of VicTrack’s capital The Group manages and maintains assets that expenditure program through its specialised are not covered by infrastructure leases with project management role.
the Director of Public Transport. Major activities during the year included:
The management task undertaken by the Group • Ongoing project management of the level involves the inspection, supervision, repair, crossing improvement program, which maintenance and upgrade of common access involved upgrade works at 39 sites; railway track, 130 country railway stations, closed • Project management of the new pedestrian railway lines and a number of road over rail crossing protection upgrade program, bridges. The majority of these tasks are contracted where contracts were let for the first 9 sites; out to organisations specialising in this work. • Restoration of heritage listed stations, in The Asset Management Group also provides conjunction with Heritage Victoria, at Minyip, engineering support and advice within VicTrack Manangatang, Rosedale and Malmsbury; as well as providing a point of contact and liaison for external agencies such as Municipal Councils, • Managed station upgrade works as part VicRoads, Heritage Victoria and the Department of the project to reopen passenger services of Infrastructure on matters affecting the rail to Bairnsdale and Ararat; and infrastructure or land. • Project managed the restoration of timber bridges and track upgrade works on the Korumburra to Leongatha portion of the South Gippsland line in preparation for the reopening of tourist train operations.
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Customer Services
The Minister for Transport, the Hon Peter Batchelor, at the opening of The Customer Services Group is responsible for the the newly restored and redeveloped management of shared infrastructure facilities and Hawthorn Tram Depot. increasing the usage of under-utilised rail assets.
The management of shared infrastructure Services Group contributes significant operational at Dynon, the “E-Gate Precinct” and at Newport expertise as well as advice and direction on land Workshops continues to be a major focus governance and management issues to these of activity. These assets are not leased to the initiatives/reviews. Director of Public Transport (DPT) and therefore VicTrack has direct responsibility for their A highlight of the year was the official opening, management and maintenance. by the Minister for Transport, the Hon Peter Batchelor, of a Tramway Museum at the former The Group is also responsible for developing Hawthorn Tram Depot. A significant redevelopment valuable land parcels and facilities that are not of the former Depot has been completed as part leased to the DPT. Development opportunities are of a joint public/private sector initiative. being investigated at a number of sites, including The development consisted of two components Spotswood and Brooklyn. – a Tramway Museum was constructed by VicTrack An important role of the Customer Services to house a display of Melbourne’s heritage trams, Group involves participating in a number of State whilst a private developer constructed a number Government strategic planning initiatives/reviews. of residential apartments in the former tram shed. Some of the more significant planning initiatives/ The Tramway Museum is open to the public reviews currently underway include Melbourne on the second Saturday of each month between Portal, Port Rail Link, Dandenong Corridor, 1.00pm and 5.00pm. Tocumwal to Narrandera, Lilydale to Healesville and Melbourne Transport Museum. The Customer
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Environmental
Biosite No: 3525 – South Sunbury Rail Reserve. This site is listed as Nationally significant and is protected under the Environment Protection and Biodiversity Conservation Act 1999. As part of VicTrack’s commitment to the environment, listed sites are being fenced off to protect the important species they contain.
The Environmental Group is responsible for range of environmental management challenges managing VicTrack’s environmental issues, and opportunities.
including addressing problems that have arisen VicTrack’s Environmental Action Plan provides from past practices, reviewing the operational the framework for environmental management practices of lessees and tenants, and optimising activities by identifying a series of actions to opportunities for environmental improvement. improve environmental performance. Contaminated The diversity of uses that is, and historically was, land management remains the most significant made of land owned by VicTrack presents a wide environmental issue and a targeted program of assessment and remediation has been implemented. Over the past 12 months, 20 locations have been investigated to facilitate commercial development or leasing opportunities, improve our understanding of the environmental impact of past practices, and to assess the environmental impact of current activities being undertaken on land owned by VicTrack.
Plains Rice-Flower, Spiny Rice-Flower and Prickly Pimelea growing in the rail reserve at Sydenham (Nationally listed Biosite No: 3551)
VicTrack Annual Report 2003 20 21
Environmental – continued Rollingstock Holdings Pty Limited (RSH)
An example of the benefits of VicTrack’s On 30 June 2003, VicTrack purchased RSH and its environmental management strategy can subsidiary companies from the Department of be seen in the identification of the need for Infrastructure. RSH has been established to facilitate remediation of a site in Spotswood. With the the manufacture and supply of country passenger co-operation and participation of community rollingstock for use primarily on the regional fast stakeholders and the Environment Protection rail corridors. A total of 38 Diesel Multiple Units Authority (EPA), the VicTrack Spotswood (DMUs) are being purchased – the first vehicles are Community Consultative Forum has been scheduled to commence revenue service in late established to develop an Environmental 2004. VicTrack, through RSH, will act as the owner Improvement Plan to define remediation action and lessor of the DMUs as, upon delivery, the and future monitoring methods at this location. vehicles will be leased to V/Line Passenger Pty Ltd
The environmental practices of VicTrack and those for a term of 15 years. of our tenants are closely reviewed to ensure that current environmental regulatory standards are met. For example, VicTrack is committed to ensuring compliance by tenants with the new EPA underground petroleum storage tank guidelines.
VicTrack has also undertaken substantial consultation with the EPA and community groups regarding environmental issues affecting various sites around metropolitan Melbourne. The Department of Primary Industries has worked closely with VicTrack and the regional fast rail project to identify and protect regional, state or national “Biosites” (sites of floral and faunal significance) along the respective rail corridors.
VicTrack Annual Report 2003 20 21
Human Resources
The strategy of the Human Resources Group during the year was two-fold – continue to strengthen and develop the skills and core competencies of existing staff within each of the business sectors and to recruit additional staff, where necessary, to increase the organisation’s commercial and technical expertise to deal with forthcoming challenges and to ensure adequate succession planning for key staff members.
Asset Management staff out on site Total Staff 2003 2002
Commercial 61 60 Workplace Health and Safety In 2002-03, VicTrack achieved its target of Property 26 26 zero workplace injuries (compared to one lost Asset Management 6 4 time injury in 2001-02).
Customer Services 3 3 Rail Safety An audit conducted in February 2003 renewed Corporate 9 6 VicTrack’s Rail Safety Compliance Accreditation, Total 105 99 with no non-conformances being noted.
Equal Opportunity VicTrack arranges rail safety awareness training VicTrack is an equal opportunity employer. for its employees and contractors. During 2002-03, Its policies and practices in relation to the 46 staff and 44 contractors successfully completed recruitment, reward, promotion and termination Level One training, nine contractors completed of staff are based on principles of equity, merit Level Two training and eight employees and five and fairness. A Merit and Equity Policy has been contractors completed Level Three training. developed, covering the key issues of Employee Relations discrimination, harassment, victimisation During the year, no time was lost due to and equal employment opportunity. industrial disputes.
Staff from VicTrack’s Call Centre
VicTrack Annual Report 2003 22 23
Financial Performance
2002-03 was another successful year for VicTrack from a financial perspective with all budget targets being met.
VicTrack’s net profit for the year was $48.6 million, compared to $55.3 million last year. The major reason for the reduction in the profit for the year was lower revenue from leasehold improvements – in the previous year (2001-02) revenue brought to account included some retrospective adjustments relating to prior financial years. Increased expenditure on land tax and the establishment of a significant provision for doubtful debts relating to services provided to the National Express Group up to 22 December 2002 also contributed to the lower profit for the year.
VicTrack’s net assets increased by $201.4 million during 2002-03, representing the value of improvements to Property, infrastructure, plant and equipment undertaken by lessees/sub-lessees.
5 Year Financial Summary
Note 2003(*) 2002 2001 2000 1999 ($M) ($M) ($M) ($M) ($M)
Revenue 1 150.8 157.5 152.3 85.2 105.4 Expenditure 2 102.2 102.2 94.4 96.3 85.3 Net Profit/ (Loss) 48.6 55.3 57.9 (11.1) 20.1 Net Cash Inflow from Operating Activities 3 29.8 31.8 23.2 21.0 47.7 Total Assets 4 4,496.4 3,948.1 3,641.0 3,353.2 815.7 Total Liabilities 5 (360.5) (13.6) (14.5) (7.8) (12.9) Net Assets 4,135.9 3,934.5 3,626.5 3,345.4 802.8
Total Staff 6 105 99 97 99 114
(*) Consolidated results, including Rollingstock Holdings Pty Limited Notes
1 Revenue in 1999 includes track access fees from rail operators. Revenue from 2001 onwards includes leasehold improvements. Revenue excludes the capital assets charge.
2 Depreciation of metropolitan infrastructure assets included in expenditure from 2000 onwards. Expenditure excludes the capital assets charge.
3 1999 result reflected impact of track access fees and other payments from rail operators.
4 2003 includes funds on deposit, works in progress and intangible assets relating to Rollingstock Holdings Pty Limited. Increased assets in 2000 reflects transfer of metropolitan infrastructure in July 1999.
5 2003 includes interest bearing liabilities relating to Rollingstock Holdings Pty Limited.
6 Reduction in staff numbers in 2000 due to transfer of train control and signalling staff to other organisations, partly offset by the transfer to VicTrack of property, commercial development and telecommunications staff.
VicTrack Annual Report 2003 22 23
Statutory Information
Statutory Framework National Competition Policy
Victorian Rail Track is a Victorian statutory authority All infrastructure leases to the Director of Public established under the Rail Corporations Act 1996 Transport (DPT) allow for open access to Victoria’s and operating under the registered business rail infrastructure. The DPT’s sub-leases to Freight name VicTrack. Australia Ltd, the Australian Rail Track Corporation Ltd and metropolitan train and tram franchisees Engagement of Consultants facilitate the State’s open access regime, fostering VicTrack commissioned seven consultancies competition among intrastate and interstate during 2002-03 at a total cost of $364,180 (2001-02 transport operators. five consultancies at a total cost of $154,481). VicTrack has approached its other non-transport Building Standards opportunities within the framework of maintaining an open access regime. That is, no one party is VicTrack is working towards full compliance with given exclusive rights to the rail corridor to the the building and maintenance provisions of the detriment of competition. Building Act 1993.
The vast majority of buildings were leased out Telecommunications Carrier Licence during the year, with the contractual responsibility VicTrack holds a telecommunications carrier licence for compliance transferred to lessees/sub-lessees. which, under the Telecommunications Act 1997, A compliance program has been developed is required in order to provide telecommunications in order to meet all guidelines. services in the privatised environment.
Freedom of Information (FOI) Sponsorship of Committees
VicTrack received six FOI requests during VicTrack is a member of the Australasian Railway 2002-03 (two in 2001-02). Association Inc.
A valid request under the FOI Act 1982, Acts of Parliament as amended, must be made in writing, The Transport (Miscellaneous Amendments) Act be accompanied by a $20 lodgement fee 2003, was assented to on 27 May 2003. This Act and clearly identify the document required. inserts a new section into the Rail Corporations Requests should be submitted to the Act 1996 which provides that VicTrack must not Chief Executive Officer, Victorian Rail Track, form, participate in the formation of, be a member GPO Box 1681P, Melbourne, Victoria 3001. of, or hold shares in, a company that carries out the functions of a public transport industry Availability of Information ombudsman or enter into an agreement with In accordance with Part 9 of the Directions of respect to participating in a public transport the Minister for Finance under the Financial industry ombudsman scheme, without the Management Act 1994, the information detailed written approval of the Minister for Transport. in Part 9.1.3(iv) has been prepared and is fully available to the relevant Minister, Members of Parliament and the public on request.
VicTrack Annual Report 2003 24 25
Statutory Information – continued
The Victorian Urban Development Authority Act Records and Documents 2003, was assented to on 16 June 2003. This Act In line with the requirements of the Public Record gives the Victorian Urban Development Authority Act, the FOI Act, the Evidence Act, the Privacy Act (the Authority) the power to construct, extend, and all other Federal and State Acts, VicTrack and realign, relocate, open, close or remove roads, its contractors maintain computerised record railways, transport facilities and tunnels within management systems. Records relating to matters a project area. However, the Act provides that the of policy and procedure, reference material and Authority cannot do anything affecting a road, documents of organisation-wide interest are railway, transport facility or tunnel vested in maintained. the control of VicTrack without first obtaining During the year, VicTrack contracted the Department VicTrack’s approval. of Infrastructure to maintain records from The Whistleblowers Protection Act 2001 became antecedent Transport Authorities. operative on 1 January 2002. Correspondence to the Board, Chief Executive The purposes of this Act are – Officer and senior management is maintained in (a) to encourage and facilitate disclosures their respective offices unless belonging to the of improper conduct by public officers categories described above. Records are kept and public bodies; by subject matter.
(b) to provide protection for: Records and documents not required for active (i) persons who make those disclosures; use are retained in secondary storage at a facility (ii) persons who may suffer reprisals in relation in Spotswood, Melbourne. to those disclosures; and Amendment of Personal Records (c) to provide for the matters disclosed to be Applicants may request the amendment of any properly investigated and dealt with. information held on their file where it is considered There have been no disclosures made relating inaccurate, incomplete or misleading. Where to VicTrack since the commencement of the Act. management cannot agree, the applicant is entitled to have a concise note setting out the reasons for Regulations disagreement placed in their file. Such requests No statutory regulation of significance was made must be in writing and must identify the information affecting VicTrack during the year. alleged to be inaccurate, incomplete or misleading.
Judicial Decisions Disclosure of Major Contract
No significant judicial decisions affecting VicTrack During the year, a contract was awarded to were made during the year. Visionstream Pty Ltd for the installation of fibre optic cabling to the regional centres of Geelong, Ballarat, Bendigo and the LaTrobe Valley.
VicTrack Annual Report 2003 24 25
Financial Statements For the year ended 30 June 2003
VicTrack Annual Report 2003 26 27
Auditor-General’s Report
To the Members of the Parliament of Victoria, responsible Ministers and Members of the Board of Victorian Rail Track.
Audit Scope The accompanying financial report of Victorian Rail Track for the financial year ended 30 June 2003 comprising statement of financial performance, statement of financial position, statement of cash flows and notes to the financial statements, has been audited. The financial report includes the consolidated financial statements of the economic entity, comprising the Victorian Rail Track and the entities it controlled at the year’s end or from time to time during the financial year as disclosed in note 1(a) to the financial statements. The Members of the Board are responsible for the preparation and presentation of the financial report and the information it contains. An independent audit of the financial report has been carried out in order to express an opinion on it to the Members of the Parliament of Victoria, responsible Ministers and Members of the Board as required by the Audit Act 1994. The audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the financial report is free of material misstatement. The audit procedures included an examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements in Australia, and the financial reporting requirements of the Financial Management Act 1994, so as to present a view which is consistent with my understanding of the Victorian Rail Track’s and the economic entity’s financial position, and their financial performance and cash flows. The audit opinion expressed in this report has been formed on the above basis.
Audit Opinion In my opinion, the financial report presents fairly in accordance with applicable Accounting Standards and other mandatory professional reporting requirements in Australia, and the financial reporting requirements of the Financial Management Act 1994, the financial position of Victorian Rail Track and the economic entity as at 30 June 2003 and their financial performance and cash flows for the year then ended.
Melbourne J.W. Cameron 27 October 2003 Auditor-General
VicTrack Annual Report 2003 26 27
Statutory Statement
In our opinion, 1. The financial statements of Victorian Rail Track set out in this report present fairly the financial transactions and cash flows for the financial year ended 30 June 2003, and the financial position at 30 June 2003 of the Consolidated entity and the Parent entity; 2. The financial statements have been prepared in accordance with theFinancial Management Act 1994 and comply in all material respects with the Directions (Part 9) issued from time to time by the Minister for Finance under the Act. The financial statements are also prepared in accordance with any applicable Australian Accounting Standards and other mandatory reporting requirements; and 3. At the date of this statement, we are not aware of any circumstances that would render any particulars included in these financial statements to be misleading or inaccurate.
Signed in accordance with a resolution of the Directors:
Dr Thomas W Quirk Dated 10 October 2003 Chairman
John Sutton Dated 10 October 2003 Chief Executive Officer
Mark Scully Dated 10 October 2003 General Manager, Finance
VicTrack Annual Report 2003 28 29
Statement of Financial Performance For the year ended 30 June 2003
Consolidated Parent 2003 2003 2002 Note $’000 $’000 $’000 Revenue from ordinary activities:
Customers
Telecommunications services 12,361 12,361 12,343 Property related income 24,246 24,246 26,594 Leasehold improvements/renewals received under lease agreements 1(d) 87,343 87,343 90,969 Other revenue 2 26,875 26,875 27,562 150,825 150,825 157,468
Capital assets charge 1(v) 501,000 501,000 489,000 501,000 501,000 489,000 Total revenue 651,825 651,825 646,468
Expenses from ordinary activities:
Employee benefits 3 8,244 8,244 7,873 Depreciation 4 68,196 68,196 66,140 Capital assets charge 1(v) 501,000 501,000 489,000 Supplies and services 5 19,515 19,515 20,163 Other operating expenses 6 6,259 6,259 7,993
Total expenses 603,214 603,214 591,169
Profit from ordinary activities 48,611 48,611 55,299
Tax equivalent expense 1(f) – – –
Net profit for the reporting period 48,611 48,611 55,299
Net increase in asset revaluation reserve 13(b) – – 255,387
Total changes in equity other than those resulting from transactions with the Victorian State Government in its capacity as owner 48,611 48,611 310,686
The Statement of Financial Performance should be read in conjunction with the accompanying notes.
VicTrack Annual Report 2003 28 29
Statement of Financial Position As at 30 June 2003
Consolidated Parent 2003 2003 2002 Note $’000 $’000 $’000 Current assets
Cash assets 3,421 3,414 7,876 Other financial assets 7 87,447 66,153 56,752 Receivables 8 13,087 9,556 10,360 Inventory 9 493 493 697 Prepayments 2,273 2,273 2,599
Total current assets 106,721 81,889 78,284
Non-current assets
Other financial assets 7 140,980 – – Receivables 8 145 145 178 Property, infrastructure, plant and equipment 10 4,181,821 4,069,827 3,869,590 Intangible assets 1(a)(m) 66,754 – –
Total non-current assets 4,389,700 4,069,972 3,869,768
Total assets 4,496,421 4,151,861 3,948,052
Current liabilities
Payables 13,995 10,008 7,660 Employee benefits 11 2,001 2,001 1,705
Total current liabilities 15,996 12,009 9,365
Non-current liabilities
Employee benefits 11 3,964 3,964 4,207 Interest bearing liabilities 12 340,573 – –
Total non-current liabilities 344,537 3,964 4,207
Total liabilities 360,533 15,973 13,572
Net assets 4,135,888 4,135,888 3,934,480
Equity
Contributed capital 13(a) 3,392,857 3,392,857 3,240,060 Asset revaluation reserve 13(b) 558,870 558,870 558,870 Accumulated surplus 13(c) 184,161 184,161 135,550
Total equity 4,135,888 4,135,888 3,934,480
The Statement of Financial Position should be read in conjunction with the accompanying notes.
VicTrack Annual Report 2003 30 31
Statement of Cash Flows For the year ended 30 June 2003
Consolidated Parent 2003 2003 2002 Note $’000 $’000 $’000 Cash flows from operating activities
Receipts from customers (inclusive of GST) 53,156 53,156 55,994 Interest received 3,105 3,098 2,291
Receipts from Victorian Government for: – Capital assets charge(*) 501,000 501,000 489,000 – Capital and related works and termination payments (inclusive of GST) 10,628 10,628 11,794 567,889 567,882 559,079 Payments to:
Suppliers and employees (inclusive of GST) (37,061) (37,061) (38,318) Capital assets charge(*) (501,000) (501,000) (489,000) (538,061) (538,061) (527,318) Net cash inflow from operating activities 14 29,828 29,821 31,761
Cash flows from investing activities
Payments for: Investments (9,401) (9,401) (20,137) Acquisition of property, plant and equipment (26,180) (26,180) (13,840)
Proceeds from: Sale of property, plant and equipment 1,298 1,298 5,577
Net cash (outflow) from investing activities (34,283) (34,283) (28,400)
Net increase/(decrease) in cash held (4,455) (4,462) 3,361
Cash at the beginning of the financial year 7,876 7,876 4,515
Cash at the end of the financial year 3,421 3,414 7,876
(*) The receipt and payment of the capital assets charge does not represent physical movements of cash between Victorian Rail Track and the Victorian Government. In accordance with the provisions of the Financial Management Act 1994, the capital assets charge is considered a cash equivalent item and is therefore included in the Statement of Cash Flows.
The Statement of Cash Flows should be read in conjunction with the accompanying notes.
VicTrack Annual Report 2003 30 31
Notes to and forming part of the 2003 Financial Statements
Note 1 – Summary of Significant Accounting Policies This general-purpose financial report has been prepared in accordance with the Financial Management Act 1994, Australian Accounting Standards, Statements of Accounting Concepts and other authoritative pronouncements of the Australian Accounting Standards Board, and Urgent Issues Group Consensus Views. It is prepared in accordance with the historical cost convention, except for certain assets allocated to Victorian Rail Track which were valued by the previous owner at valuations other than historical cost and land which is recorded at independent valuation. The accounting policies adopted, and the classification and presentation of items, are consistent with those of the previous year, except where a change is required to comply with an Australian Accounting Standard or Urgent Issues Group Consensus View, or an alternative accounting policy or an alternative presentation or classification of an item, as permitted by an Australian Accounting Standard, is adopted to improve the relevance and reliability of the financial report.
a) Principles of Consolidation The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Victorian Rail Track (Parent entity) as at 30 June 2003 and the results of all controlled entities for the year then ended. Victorian Rail Track and its controlled entities together are referred to in this financial report as the Consolidated entity. The effects of all transactions between entities within the Consolidated entity are eliminated in full. Where control of an entity is obtained during a financial year, its results are included in the consolidated Statement of Financial Performance from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control existed. On 30 June 2003, the share capital of Rollingstock Holdings Pty Limited (RSH) and its subsidiary companies were purchased for $1. RSH has been established to facilitate the purchase of country passenger rollingstock for use primarily on the regional fast rail corridors. 38 Diesel Multiple Units are being purchased – upon delivery (expected to commence in late 2004), the vehicles will be leased to V/Line Passenger Pty Ltd for a term of 15 years. As at the date of purchase, the fair value of RSH and its subsidiaries’ assets and liabilities were: $’000 Cash 7 Other financial assets 162,274 Receivables 3,531 Property, infrastructure, plant and equipment 111,994 Intangible assets 66,754 Payables (3,987)
Interest bearing liabilities (340,573)
Net Assets –
The following entities are controlled by Victorian Rail Track (Parent entity) as at 30 June 2003: Rollingstock Holdings (Victoria) Pty Limited Rollingstock (Victoria – VL) Pty Limited Rollingstock (VL – 1) Pty Limited Rollingstock (VL – 2) Pty Limited Rollingstock (VL – 3) Pty Limited
VicTrack Annual Report 2003 32 33
Notes – continued
Note 1 – Summary of Significant Accounting Policies – continued
b) Contributed Capital The Consolidated entity’s contributed capital comprises the value (at the date of transfer) of the majority of the State’s rail and tram fixed infrastructure as well as leasehold improvements undertaken by lessees/sub-lessees. The major movements of contributed capital (comprising property, rights and liabilities) from the inception of the Consolidated entity have been as follows: Financial Year $’000 1997-1998 Non-electrified rail infrastructure 772,981 1999-2000 Electrified rail infrastructure 2,560,180 2000-2001 Spencer Street Station infrastructure to Spencer Street Station Authority (80,528) 2001-2002 Leasehold improvements 62,068 2001-2002 Surrender of land (Birrarung Marr) to the State (64,800) 2002-2003 Leasehold improvements 150,347
During the 2002-03 financial year, a number of additional assets were transferred from the Public Transport Corporation (plant and equipment at Preston Workshops and historical train and tram rollingstock), with a value (at the time of transfer) of $2.450 million.
c) Acquisitions of Assets All assets acquired, including property, infrastructure, plant and equipment (but excluding goodwill), are initially recorded at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition.
d) Revenue Recognition Amounts disclosed as revenue are, where applicable, net of returns, allowances, duties and taxes. Revenue for telecommunications services, property related income, payments from VicRoads for the level crossing program, lease of the interstate rail corridors and Government contributions towards capital and related costs are recognised when services are provided by the Consolidated entity. Leasehold improvements/renewals undertaken by lessees/sub-lessees and assets provided by other parties are recognised as works are performed on the assets/improvements. Proceeds from asset sales are recognised at the time the asset is sold, while interest revenue is brought to account when earned. The following is a brief description of the Consolidated entity’s major revenue sources: Telecommunications services The Consolidated entity provides a wide range of telecommunications services to rail operators in Victoria, including train radio and train control communications, in-cabin radio repairs in locomotives, mobile and fixed voice communications, data and switchboard services and other related services.
VicTrack Annual Report 2003 32 33
d) Revenue Recognition – continued Property related income Income streams in this category include property rentals from both public transport operators as well as the wider community and licences for services that transgress the Consolidated entity’s property. Included within property related revenue is $8.5 million per annum for various leases with Victorian public transport franchisees and $12 million from more than 2,000 leases with various organisations, community groups and individuals. Leasehold improvements/renewals received under lease agreements Capital improvements and major renewal works undertaken by lessees/sub-lessees on leased assets are recognised as revenue, except to the extent that they represent contributions by the owner (the Victorian Government), in which case they are recognised as contributed capital. Leasehold improvements/renewals are recognised at cost which equates to fair value. The following leasehold improvements/renewals have been recognised as revenue in the 2002-03 and 2001-02 financial years:
Year Ended Year Ended 30 June 2003 30 June 2002 $’000 $’000 Australian Rail Track Corporation Ltd(*) 5,845 13,495 Department of Infrastructure/Victorian Public Transport Franchisees(**) 81,498 77,474 Total 87,343 90,969 (*) Interstate tracks. (**) Metropolitan train and tram tracks and intrastate train tracks. Interest Interest revenue represents earnings on funds invested with Treasury Corporation of Victoria. Assets provided by other parties Represents revenue received from VicRoads for the level crossing upgrade program – this program is project managed by the Consolidated entity on behalf of Government. Also included within this category is the value of infrastructure improvements undertaken as part of commercial developments at various sites owned by the Consolidated entity. Proceeds from sale of assets The majority of asset sales relate to the disposal of surplus parcels of land that are not required for current or planned future transport purposes. Lease of the interstate rail corridors Railway infrastructure on the interstate corridors is leased to the Director of Public Transport (DPT) who sub-leases these assets to the Australian Rail Track Corporation Ltd (ARTC). Government contributions towards capital and related works Various payments are received from Government, principally to reimburse the Consolidated entity for property related expenses.
e) Borrowing Costs Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings and the amortisation of ancillary costs incurred in connection with the arrangement of borrowings. Ancillary costs incurred in connection with the arrangement of borrowings are capitalised and amortised over the life of the borrowings.
VicTrack Annual Report 2003 34 35
Notes – continued
Note 1 – Summary of Significant Accounting Policies – continued
e) Borrowing Costs – continued Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the assets. Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is that amount incurred in relation to the borrowing, net of any interest earned on those borrowings.
f) National Tax Equivalent Regime (NTER) By direction of the Treasurer of Victoria under the State Owned Enterprises Act 1992, the Consolidated entity is subject to the NTER in 2002-03, but limited to the Income Tax component of the NTER. Any NTER expense payable is calculated on operating profit or loss adjusted for permanent and timing differences between NTER income and accounting income (see reconciliation in Note 15). In 2002-03, the Consolidated entity incurred a loss for tax purposes of $6.7 million ($6.9 million in 2001-02), hence no NTER expense has been recorded in the financial statements. The tax effect of timing differences arising from items being brought to account for tax and accounting purposes in different reporting periods has not been carried forward in the Statement of Financial Position as a future income tax benefit or a provision for deferred income tax on the basis of uncertainty regarding the future taxation regime that will apply to the Consolidated entity. If the NTER were to continue to apply to the Consolidated entity in the future, the future income tax benefit has been calculated as $86.7 million ($84.7 million in 2001-02).
g) Cash Assets For the purposes of the Statement of Cash Flows, cash includes short-term deposits that are readily convertible to cash on hand and which are subject to an insignificant risk of changes in value, net of outstanding cheques yet to be presented.
h) Other Financial Assets Other financial assets represent fixed term deposits held by the Consolidated entity and investments with Treasury Corporation of Victoria and are valued at their fair value. The fair value assessment of fixed term deposits has been undertaken by KPMG. Fixed term deposits are subject to draw down restrictions and a fixed rate of return. Investments with Treasury Corporation of Victoria are held on deposits ranging from 30 days to 90 days – these investments are ear-marked for use on future infrastructure improvement projects.
i) Receivables All debtors are recognised at the amounts receivable as they are due for settlement at no more than 30 days from the date of recognition. The collectability of debtors is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. A provision for doubtful debts is raised when some doubt as to collection exists.
j) Inventory Items held in stores at the reporting date are valued at cost and include spare parts and componentry generally used for the maintenance of rail infrastructure assets. The provision for stock obsolescence relates to inventory which has not moved for three years or more, excluding inventory specifically held for emergency situations.
k) Property, Infrastructure, Plant and Equipment All rail infrastructure assets owned by the Consolidated entity when it commenced operations were transferred to the Consolidated entity from the previous owners, the Public Transport Corporation (PTC) and the V/Line Freight Corporation, by way of statutory allocation under the Rail Corporations Act 1996, effective from 1 July 1997. The Allocation Statement (as amended) included the carrying value for the rail infrastructure assets to be adopted by the Consolidated entity.
VicTrack Annual Report 2003 34 35
k) Property, Infrastructure, Plant and Equipment – continued There have been a number of subsequent Allocation Statements since the commencement of operations, having the effect of transferring ownership both to and from the Consolidated entity. These Allocation Statements also included the carrying value of the rail infrastructure assets adopted by the Consolidated entity at the time of transfer. The initial Allocation Statement (and amendment) and subsequent Allocation Statements were ratified by the relevant Minister under Section 40 of the Rail Corporations Act 1996 (as amended), and as such, the values ascribed to the rail infrastructure assets, apart from land, have been adopted by the Directors of the Consolidated entity as the appropriate valuation for reporting purposes. Pursuant to Australian Accounting Standard AAS10 – Recoverable Amount of Non-Current Assets, the recoverable amounts test generally applied when valuing non-current assets, is not applicable to the rail infrastructure assets of the Consolidated entity. The Consolidated entity has commenced the process of revaluing its rail infrastructure assets in accordance with the requirements of AASB 1041 Revaluation of Non-Current Assets. In accordance with the Victorian Government’s Department of Treasury and Finance’s Accounting & Reporting Bulletin No. 42, Plant and equipment was reverted to cost as at 1 July 2001. The Consolidated entity will have completed the process of revaluing its rail infrastructure assets (other than land) by June 2005 in accordance with the requirements of the Victorian Government’s Department of Treasury and Finance’s Accounting & Reporting Bulletin No. 44. Work is currently underway on reviewing the basis on which the rail infrastructure assets are recorded as the first step in the revaluation process. The rail infrastructure assets will be revalued on the basis of written down replacement cost, which will involve identifying the current replacement cost of the asset and assessing its remaining useful life to determine the extent to which the replacement cost is to be written down. At 30 June 2003, apart from land, rail infrastructure assets are stated at either Allocation Statement valuation (if allocated to the Consolidated entity) or at cost if the assets were constructed by the Consolidated entity or lessees/sub-lessees. Land The Consolidated entity recognises two classes of land – rail corridor land and non-rail corridor land. Non-rail corridor land is used for commercial purposes whilst rail corridor land is used as a rail reserve. Rail corridor land was revalued in June 2002, while non-rail corridor land was revalued in June 2001. Advice received from external valuers (Charter Keck Cramer) indicates that during the period from the latest revaluation to 30 June 2003 there has not been a material movement in the valuation of either rail corridor land or non-rail corridor land, and therefore no adjustment has been reflected in the financial statements. Other rail infrastructure assets The previous owner of the allocated rail infrastructure assets, the Public Transport Corporation (PTC), had conducted a series of valuations over recent years, which included the assets transferred from V/Line Freight Corporation. The methods of valuation used by the PTC were as follows: 1984 Valuation Property, plant and equipment (excluding land) vested in the former Metropolitan Transit Authority (MTA) is stated at 1984 valuation. 1985 Valuation Property, plant and equipment (excluding land) vested in the former State Transport Authority (STA) is stated at 1985 valuation. 1996 Valuation Certain buildings were revalued to recoverable amounts based on external valuations carried out by valuers engaged by the Valuer-General. Lease of infrastructure assets The Consolidated entity leases the majority of its rail infrastructure assets to the Director of Public Transport (DPT) for the purposes of conducting passenger and freight train and tram operations. The DPT then sub-leases the assets to various transport operators and access providers. Under the leases, responsibility for conducting transport operations and maintaining the infrastructure assets is effectively transferred to the lessees/sub-lessees. The Consolidated entity reserves the exclusive right to engage in non-transport activities on its assets and specifically excludes trunk telecommunications infrastructure from the leases.
VicTrack Annual Report 2003 36 37
Notes – continued
Note 1 – Summary of Significant Accounting Policies – continued
k) Property, Infrastructure, Plant and Equipment – continued The following table sets out details of the infrastructure leases: Description of Leased Assets Lessee Asset Value Start Date Term Rental Metropolitan train and DPT $2,766 M 29 August 1999 20 years Nil tram infrastructure
Country non-electrified 15 years, plus two DPT $778 M 1 May 1999 Nil intrastate infrastructure 15 year options.
Non-electrified interstate < 1 yr. $2.3M DPT $170 M 1 July 1999 15 years infrastructure(*) 1 to 10 yrs. $27.7M
(*) Under the interstate lease, rental is payable to the Consolidated entity by the DPT’s sub-lessee of the interstate track, the Australian Rail Track Corporation Ltd (ARTC). Leasehold improvements Infrastructure improvements undertaken by lessees/sub-lessees have been recorded as assets of the Consolidated entity in accordance with a direction from the Victorian Government’s Department of Treasury and Finance. Infrastructure improvements undertaken by the ARTC have also been recognised as assets of the Consolidated entity. These leasehold improvements have been recognised at cost which equates to fair value. Significant leasehold improvements recognised as assets during the year include costs incurred on the Box Hill tram extension, regional fast rail and Burnley-East Camberwell resignalling projects as well as various other track upgrading works undertaken on the metropolitan train and tram networks. Rollingstock under construction The Consolidated entity has entered into contracts for the supply and manufacture of new country passenger rollingstock. As at 30 June 2003, $112 million is recorded as works in progress for these assets.
l) Capital Works in Progress The Consolidated entity’s works in progress includes rail infrastructure and rollingstock projects underway, but not yet complete or ready for service. The incomplete rail infrastructure projects are recorded at cost. The recorded value of rollingstock works in progress includes payments made to the manufacturer and borrowing costs. The funds acquired specifically method has been used to capitalise borrowing costs – where the amount of borrowing costs capitalised is that amount incurred in relation to the borrowing, net of any interest earned on those borrowings.
m) Intangible Assets (Goodwill) Where an entity or operation is acquired, the identifiable net assets acquired are measured at fair value. The excess of the fair value of the cost of acquisition over the fair value of the identifiable net assets acquired, is brought to account as goodwill and amortised on a straight-line basis over 20 years i.e. the period during which the benefits are expected to arise.
n) Depreciation All non-current assets, including leasehold improvements and renewals but excluding land, have been depreciated using the straight-line method of depreciation over their estimated useful lives to the Consolidated entity. The range of depreciation rates used for each class of asset is as follows: % • Buildings and structures 1.7 - 5.0 • Track 2.0 - 5.0 • Signals and communications 2.0 - 7.7 • Plant and equipment 2.0 - 33.0 The above rates are the same as those applied in the 2001-02 financial year.
VicTrack Annual Report 2003 36 37
o) Leased Assets The Consolidated entity operates a fleet of motor vehicles under an operating lease from the Commonwealth Bank of Australia. The Consolidated entity also leases certain office equipment. Lease payments have been expensed in the period incurred.
p) Payables These amounts represent liabilities for goods and services provided to the Consolidated entity prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition.
q) Employee Benefits (i) Wages, salaries and annual leave Liabilities for wages, salaries and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date and are measured as the amounts expected to be paid when the liabilities are settled. (ii) Long service leave The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for employee benefits and is measured in accordance with (i) above. The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the provision for employee benefits and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using interest rates on Commonwealth Government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows. (iii) Superannuation The amount charged to the Statement of Financial Performance in respect of superannuation represents the employers’ contributions made by the Consolidated entity to superannuation funds of which employees are members. Further details are provided in Note 16. (iv) Employee benefit on-costs Employee benefit on-costs, including payroll tax, are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities.
r) Interest Bearing Liabilities Secured loans are carried on the Statement of Financial Position at their fair value. The fair value assessment was undertaken by KPMG. Interest expense is accrued at the contracted rate and is included in Payables at year end. Interest expense represents interest incurred by the Consolidated entity during the year.
s) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of GST except where the amount of GST incurred is not recoverable, in which case it is recognised as part of the cost of acquisition of an asset or part of an item of expense. The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included as part of receivables or payables in the Statement of Financial Position. The GST component of a receipt or payment is recognised on a gross basis in the Statement of Cash Flows in accordance with Australian Accounting Standard AAS 28 – Statement of Cash Flows.
t) Assets Received By Allocation Statement Assets received by Allocation Statement are recognised at the value at which the assets were recorded in the financial statements of the transferring entity.
u) Dividends The Consolidated entity has not received any determination from the Victorian Government that a dividend will be payable for the 2002-03 financial year ($ Nil in 2001–02). Consequently, no provision for a dividend has been made in the financial statements.
VicTrack Annual Report 2003 38 39
Notes – continued
Note 1 – Summary of Significant Accounting Policies – continued
v) Capital Assets Charge The capital assets charge is the estimate of the cost of capital investment in Government assets i.e. the return that could be achieved were the Government to direct its capital towards the next best investment of comparable risk. It is imposed on the Consolidated entity by the Victorian Government’s Department of Treasury and Finance. The purpose of this notional charge is to increase the awareness of the costs of assets for management to make improved resource allocation and investment decisions. The capital assets charge is shown as both a receipt and an expense from ordinary activities in the Statement of Financial Performance, meaning that there is no impact on the operating result for the year nor on the Statement of Financial Position as at 30 June 2003. Although the receipt and payment of the capital assets charge does not represent physical movements of cash, the capital assets charge has been disclosed in the Statement of Cash Flows as it is considered a cash equivalent item under the provisions of the Financial Management Act 1994. The charge equates to approximately 12% on the Parent entity’s average net assets for the 2002-03 financial year. The Directors of the Consolidated entity believe the rate at which the capital assets charge is applied does not reflect recent changes in interest rates, however it is noted that the charge is fully funded by Government.
w) Comparatives Where practicable, comparative amounts are presented and classified on a basis consistent with the current year.
x) Rounding All amounts shown in the financial statements are expressed by reference to the nearest thousand dollars unless otherwise specified. Note 2 – Other Revenue Consolidated Parent 2003 2003 2002 Note $’000 $’000 $’000 Advertising 830 830 805 Interest received 3,100 3,100 2,242 Assets provided by other parties 4,180 4,180 5,518 Proceeds from sale of assets 2,984 2,984 6,274 Lease of the interstate rail corridors 3,318 3,318 2,297 Government contributions towards capital and related works 10,133 10,133 7,267 Other 2,330 2,330 3,159
Total Other Revenue 26,875 26,875 27,562
VicTrack Annual Report 2003 38 39
Note 3 – Employee Benefits
Consolidated Parent 2003 2003 2002 Note $’000 $’000 $’000 Salaries and wages 6,638 6,638 6,049 Associated labour costs: On-costs 804 804 605 Superannuation contributions 682 682 583
Sub-total associated labour costs 1,486 1,486 1,188
Increase in provision for employee entitlements 18 18 544 Termination payments 102 102 92
Total Employee Benefits 8,244 8,244 7,873
Note 4 - Depreciation
Buildings and structures 20,422 20,422 20,097 Track 28,701 28,701 27,566 Signals and communications 14,541 14,541 13,999 Plant and equipment 4,532 4,532 4,478
Total Depreciation 68,196 68,196 66,140
Note 5 – Supplies and Services
Property services (including land tax) 8,073 8,073 8,295 Telecommunications expenses 5,179 5,179 5,644 Contract payments 3,109 3,109 3,130 Other 3,154 3,154 3,094
Total Supplies and Services 19,515 19,515 20,163
VicTrack Annual Report 2003 40 41
Notes – continued
Note 6 – Other Operating Expenses Consolidated Parent 2003 2003 2002 Note $’000 $’000 $’000 Increase/(Decrease) in provision for doubtful debts 1,241 (*) 1,241 (*) (135) Increase in provision for stock obsolescence 162 162 223 Bad debts 23 23 51 Insurance premiums 574 574 207 Legal fees 505 505 536 Occupancy costs 635 635 623 Written down value of assets sold and costs incurred in selling assets 2,609 2,609 5,979 External audit fees 72 72 50 Other expenses 438 438 459
Total Other Operating Expenses 6,259 6,259 7,993
(*) The majority of the increase in the provision for doubtful debts relates to unpaid services provided to the National Express Group (PLC) up to 22 December 2002 (the date they withdrew from their Victorian public transport franchise contracts).
VicTrack Annual Report 2003 40 41
Note 7 – Other Financial Assets Consolidated Parent 2003 2003 2002 Note $’000 $’000 $’000 Funds on deposit – at fair value 1(h) 162,274 – – Investments – Treasury Corporation of Victoria 66,153 66,153 56,752
Other Financial Assets 228,427 66,153 56,752
Reported as:
Current Funds on deposit – at fair value 21,294 – – Investments – Treasury Corporation of Victoria 66,153 66,153 56,752 87,447 66,153 56,752 Non-current Funds on deposit - at fair value 140,980 – – Investments – Treasury Corporation of Victoria – – – 140,980 – –
Total Other Financial Assets 228,427 66,153 56,752
Use of funds on deposit is restricted to payments of interest on borrowings and payments to suppliers in relation to the construction of new rollingstock (trains). The amount on deposit is subject to a fixed interest rate of 5.15% with quarterly payments of interest. Funds currently held with Treasury Corporation of Victoria are ear-marked for use on future infrastructure improvement projects.
Note 8 – Receivables Receivables 14,729 11,198 10,794 Less provision for doubtful debts (1,497) (1,497) (256)
Receivables 13,232 9,701 10,538
Reported as:
Current Receivables 14,584 11,053 10,616 Less provision for doubtful debts (1,497) (1,497) (256) 13,087 9,556 10,360 Non-current Receivables 145 145 178 Less provision for doubtful debts – – – 145 145 178
Total Receivables 13,232 9,701 10,538
VicTrack Annual Report 2003 42 43
Notes – continued
Note 9 – Inventory Consolidated Parent 2003 2003 2002 Note $’000 $’000 $’000 Stores and materials 912 912 954 Less provision for stock obsolescence (419) (419) (257)
Total Inventory 493 493 697
All inventory has been classified as current as it is likely to move in the next 12 months. A provision for stock obsolescence is raised when stock has not moved for a period of three years or more, excluding stock held for emergency situations.
Note 10 – Property, Infrastructure, Plant and Equipment Land Rail corridor land – at independent valuation – 30 June 2002 1,152,068 1,152,068 1,152,398 Non-rail corridor land – at cost 2,284 2,284 1,689 Non-rail corridor land – at independent valuation – 30 June 2001 451,958 451,958 452,003
Land 1,606,310 1,606,310 1,606,090
Buildings and structures Allocation statement valuation 799,450 799,450 799,450 Accumulated depreciation (84,861) (84,861) (65,883) 714,589 714,589 733,567
Leasehold improvements/renewals 30,321 30,321 24,456 Accumulated depreciation (1,774) (1,774) (697) 28,547 28,547 23,759
Cost 19,993 19,993 12,646 Accumulated depreciation (1,468) (1,468) (1,101) 18,525 18,525 11,545 Buildings and structures after depreciation 761,661 761,661 768,871
Track Allocation statement valuation 895,468 895,468 895,468 Accumulated depreciation (103,264) (103,264) (81,141) 792,204 792,204 814,327
Leasehold improvements/renewals 169,618 169,618 124,563 Accumulated depreciation (7,694) (7,694) (3,471) 161,924 161,924 121,092
Cost 58,823 58,823 57,738 Accumulated depreciation (10,266) (10,266) (7,943) 48,557 48,557 49,795 Track after depreciation 1,002,685 1,002,685 985,214
VicTrack Annual Report 2003 42 43
Notes – continued
Note 10 – Property, Infrastructure, Plant and Equipment – continued Consolidated Parent 2003 2003 2002 Note $’000 $’000 $’000 Signals and communications Allocation statement valuation 313,028 313,028 313,028 Accumulated depreciation (52,758) (52,758) (41,467) 260,270 260,270 271,561
Leasehold improvements/renewals 48,698 48,698 43,161 Accumulated depreciation (4,242) (4,242) (1,925) 44,456 44,456 41,236
Cost 21,026 21,026 13,090 Accumulated depreciation (2,620) (2,620) (1,688) 18,406 18,406 11,402 Signals and communications after depreciation 323,132 323,132 324,199
Plant and equipment Cost 93,272 93,272 92,913 Accumulated depreciation (8,174) (8,174) (4,862) 85,098 85,098 88,051 Plant and equipment after depreciation 85,098 85,098 88,051
Capital works in progress Leasehold improvements/renewals 264,819 264,819 84,648 Rollingstock under construction 111,994 – – Other 26,122 26,122 12,517
Capital works in progress 402,935 290,941 97,165
Total Property, Infrastructure, Plant and Equipment 4,181,821 4,069,827 3,869,590
VicTrack Annual Report 2003 44 45
Notes – continued
Note 10 – Property, Infrastructure, Plant and Equipment – continued
2003 Land Buildings & Track Signals & Plant & W.I.P. Total Consolidated Structures Comms. Equipment $’000 $’000 $’000 $’000 $’000 $’000 $’000
Carrying amount at start of year 1,606,090 768,871 985,214 324,199 88,051 97,165 3,869,590
Additions(*) 595 13,212 46,172 13,474 3,206 305,770 382,429
Disposals (375) – – – (1,627) – (2,002)
Depreciation expense – (20,422) (28,701) (14,541) (4,532) – (68,196)
Carrying Amount at the end of the Financial Year 1,606,310 761,661 1,002,685 323,132 85,098 402,935 4,181,821
(*) Includes 111,994 relating to new rollingstock – the majority of the remaining additions relates to infrastructure improvements/renewals undertaken by lessees/sub-lessees.
2003 Land Buildings & Track Signals & Plant & W.I.P. Total Parent Structures Comms. Equipment $’000 $’000 $’000 $’000 $’000 $’000 $’000
Carrying amount at start of year 1,606,090 768,871 985,214 324,199 88,051 97,165 3,869,590
Additions(#) 595 13,212 46,172 13,474 3,206 193,776 270,435
Disposals (375) – – – (1,627) – (2,002)
Depreciation expense – (20,422) (28,701) (14,541) (4,532) – (68,196)
Carrying Amount at the end of the Financial Year 1,606,310 761,661 1,002,685 323,132 85,098 290,941 4,069,827
(#) Includes infrastructure improvements/renewals undertaken by lessees/sub-lessees.
VicTrack Annual Report 2003 44 45
Note 11 – Employee Benefits Consolidated Parent 2003 2003 2002 Note $’000 $’000 $’000 Long service leave 3,580 3,580 3,727 Annual leave 2,160 2,160 2,011 Other 225 225 174
Employee Benefits 5,965 5,965 5,912
Reported as:
Current Long service leave 925 925 786 Annual leave 893 893 745 Other 183 183 174 2,001 2,001 1,705 Non-current Long service leave 2,655 2,655 2,941 Annual leave 1,267 1,267 1,266 Other 42 42 – 3,964 3,964 4,207
Total Employee Benefits 5,965 5,965 5,912
Note 12 – Interest Bearing Liabilities
Secured loan – at fair value 1(r) 340,573 – –
Interest Bearing Liabilities 340,573 – –
Reported as:
Current Secured loan – at fair value – – – – – – Non-current Secured loan – at fair value 340,573 – – 340,573 – –
Total Interest Bearing Liabilities 340,573 – –
VicTrack Annual Report 2003 46 47
Notes – continued
Note 13 – Equity and Movements in Equity – Consolidated Entity
(a) Contributed Capital Capital Capital Additional Capital 1 July 2002 Returned Capital 30 June 2003 $’000 $’000 $’000 $’000 Assets Inventory 205 – – 205 Receivables 2,715 – – 2,715 Land 1,061,765 – – 1,061,765 Buildings and structures 808,927 – – 808,927 Track 906,687 – – 906,687 Signals and communications 324,192 – – 324,192 Plant and equipment 104,125 – 2,450 106,575 Works in progress/other assets 38,403 – 150,347 188,750
Total assets 3,247,019 – 152,797 3,399,816
Liabilities Provision for employee benefits (6,959) – – (6,959)
Total liabilities (6,959) – – (6,959)
Contributed Capital at the end of the Financial Year 3,240,060 – 152,797 3,392,857
2003 2002 $’000 $’000 (b) Asset Revaluation Reserve Asset revaluation reserve at the beginning of the financial year 558,870 303,483 Revaluation increment – Rail corridor land – 298,587 Revaluation adjustment – Non-rail corridor land (Birrarung Marr) – (43,200)
Asset Revaluation Reserve at the end of the Financial Year 558,870 558,870
(c) Accumulated Surplus Accumulated surplus at the beginning of the financial year 135,550 80,251 Net profit for the reporting period 48,611 55,299
Accumulated Surplus at the end of the Financial Year 184,161 135,550
VicTrack Annual Report 2003 46 47
Note 14 – Reconciliation of profit from ordinary activities to net cash inflow from operating activities
1. Reconciliation of cash assets For the purpose of the Statement of Cash Flows, cash includes short-term deposits that are readily convertible to cash on hand and which are subject to an insignificant risk of changes in value, net of outstanding cheques yet to be presented.
2. Non-cash financing and investing facilities The Consolidated entity has no non-cash financing and investment facilities in place.
3. Credit facilities The Consolidated entity does not have any credit facilities in place.
4. Reconciliation of profit from ordinary activities to net cash inflow from operating activities:
Consolidated Parent 2003 2003 2002 $’000 $’000 $’000 Profit from ordinary activities 48,611 48,611 55,299 Depreciation 68,196 68,196 66,140 Increase/(decrease) in provisions 1,455 1,455 595 Decrease/(increase) in receivables 1,289 1,282 3,026 Decrease/(increase) in prepayments 326 326 (2,395) Decrease/(increase) in inventory 42 42 127 Cash receipts recognised as contributed capital 450 450 3,800 Assets received under lease agreements (88,413) (88,413) (92,474) Increase/(decrease) in payables (1,753) (1,753) (2,062) Loss/(profit) on sale of assets (375) (375) (295) Net Cash Inflow From Operating Activities 29,828 29,821 31,761
VicTrack Annual Report 2003 48 49
Notes – continued
Note 15 – National Tax Equivalent Regime Reconciliation of profit from ordinary activities to the tax loss:
Consolidated Parent 2003 2003 2002 $’000 $’000 $’000 Profit from ordinary activities 48,611 48,611 55,299 Permanent differences: Depreciation on assets subject to capital contribution 6,003 6,003 5,464 Other non deductible expenditure 671 671 1,112 Depreciation on other non tax depreciable assets 14,851 14,851 14,557 Profit on sale of assets not subject to Capital GainsTax (982) (982) (295)
Sub-total – permanent differences 20,543 20,543 20,838
Timing differences:
Difference in accounting and tax depreciation rates (77,344) (77,344) (81,860) Movement in prepayments 8 8 8 Movement in provisions 1,455 1,455 595 Movement in accruals (9) (9) (1,793)
Sub-total – timing differences (75,890) (75,890) (83,050)
Tax Loss Not Recognised (6,736) (6,736) (6,913)
Note 16 – Employee Superannuation Funds No liability is recognised in the Statement of Financial Position for the Consolidated entity’s share of the State’s unfunded superannuation liability. The State’s unfunded superannuation liability has been reflected in the financial statements of the Victorian Government’s Department of Treasury and Finance. However, the Consolidated entity’s (ie employer) superannuation contributions for the reporting period are included as part of employee benefits in the Statement of Financial Performance.
VicTrack Annual Report 2003 48 49
Note 16 – Employee Superannuation Funds – continued Details of employee superannuation funds to which the Consolidated entity contributes are as follows:
2002-03 Contributions 2001-02 Contributions Contributions Outstanding Contributions Outstanding as at 30/6/03 as at 30/6/02 Superannuation Fund (*) $’000 $’000 $’000 $’000 Transport Superannuation Scheme 240 – 226 – State Superannuation Scheme 376 – 340 – VicSuper Scheme 52 – 4 – Other (#) 14 – 13 – Total 682 – 583 –
(*) These superannuation contributions relate to VicTrack as the Parent entity – Rollingstock Holdings Pty Limited and its subsidiary companies, which form the Consolidated entity with the Parent entity, do not employ any staff. (#) The superannuation funds summarised under “Other” comprise no more than one employee in each fund.
Employer contributions to the Transport Superannuation Scheme and the State Superannuation Scheme are based on actuarial assessments as advised by the Government Superannuation Office. Employer contributions to the other funds are made in accordance with the Commonwealth Superannuation Guarantee Legislation.
Note 17 – Capital Commitments
Consolidated Parent 2003 2003 2002 $’000 $’000 $’000
Within one year 34,698 17,700 2,500 One year or later and not later than five years 159,035 – – Total Capital Commitments 193,733 17,700 2,500
Note 18 – Lease Commitments
Consolidated Parent 2003 2003 2002 $’000 $’000 $’000
Within one year 230 230 251 One year or later and not later than five years 434 434 312 Total Lease Commitments 664 664 563
VicTrack Annual Report 2003 50 51
Notes – continued
Note 19 – Contingent Liabilities
Environmental Contingent Liabilities Upon establishment, and in subsequent asset allocations, the Public Transport Corporation did not grant the Consolidated entity an indemnity for any environmental contamination of land and property that may have been transferred along with the ownership of the land and property. An action plan has been prepared for the rectification of environmental contamination at a number of high priority sites.
Indemnities On 1 May 1999, the Consolidated entity entered into a lease with the Director of Public Transport (DPT) for the intrastate non-electrified rail infrastructure for a period of fifteen years with the option to extend the term by a further two fifteen year periods. Under the lease, the Consolidated entity provided indemnities to the DPT consistent with its status as land and property owner. On 29 August 1999, the Consolidated entity entered into a lease with the DPT for the metropolitan electrified rail and tram infrastructure for a period of twenty years. Under the lease, the Consolidated entity provided indemnities to the DPT consistent with its status as land and property owner. On 28 October 2000, the Consolidated entity entered into a lease, effective from 1 July 1999, with the DPT for the interstate rail infrastructure for a period of fifteen years. Under the lease, the Consolidated entity provided indemnities to the DPT consistent with its status as land and property owner. The Consolidated entity has entered into Service Level Agreements, effective 1 July 1999, for the provision of telecommunications services with each of the rail operators and their sub-contractors in Victoria, including the Australian Rail Track Corporation Ltd. Under these Agreements, indemnities have been granted relating to the provision of the services under the Agreements that are generally consistent with normal commercial practice. Subject to the note below relating to litigation, the Directors of the Consolidated entity are unaware of any circumstances that would lead them to believe that these contingent liabilities will result in any material actual liability, and consequently no provisions are included in the financial statements in respect of these matters.
Litigation The Consolidated entity is currently the subject of a minor legal claim for personal damages. The Consolidated entity is involved in legal proceedings regarding an incident that occurred at Corio in October 2000. At this stage, it is too early to predict the outcome of this action and whether any significant liabilities will be incurred by the Consolidated entity as a result. The Consolidated entity is also involved in legal proceedings relating to works undertaken at the Kororoit Creek Bridge and involving the location of signal cables at Altona.
VicTrack Annual Report 2003 50 51
Note 20 – Minister, the Board of Directors and Accountable Officer The names of persons who were Responsible Persons of the Consolidated entity at any time during the financial year were:
Responsible Minister: The Hon Peter Batchelor MLA, Minister for Transport
Directors of the Board: Dr Thomas W Quirk Mr John Chambers Ms Christine O’Reilly Mr John Anderson Ms Elana Rubin
Accountable Officer: Mr John Sutton
Mr Peter Harris (Director of Public Transport) was the sole Director of Rollingstock Holdings Pty Limited and its subsidiary companies when they were acquired on 30 June 2003. On 1 July 2003, Mr Harris resigned as the Director of these companies, and Mr John Sutton was appointed as their sole Director.
VicTrack Annual Report 2003 52 53
Notes – continued
Note 20 – Minister, the Board of Directors and Accountable Officer – continued
Remuneration of Responsible Persons: Remuneration paid to Responsible Persons during the year was: Consolidated Parent 2003 2003 2002 $30,000 to $39,999 4 4 4 $60,000 to $69,999 1 1 1 $200,000 to $209,999 – – 1 $240,000 to $249,999 1 1 –
Total Remuneration of Responsible Persons: $441,333 ($408,346 in 2001-02)
Responsible Persons’ remuneration shown in aggregate above includes Directors’ fees and superannuation contributions paid on behalf of Directors by the Consolidated entity. The amount excludes insurance premiums paid by the Consolidated entity in respect of Directors’ and Officers’ Insurance contracts. The Accountable Officer’s remuneration, included above, includes the total salary package received during the year as well as performance bonuses relating to the 2001-02 year. In 2001-02, Mr Sutton was seconded to the Department of Infrastructure and was not included in the above table for that year. Mr Sutton resumed his role of Chief Executive Officer on 1 July 2002 and is therefore included in the above note for 2002-03.
Note 21 – Executive Officers’ Remuneration Remuneration paid to Executive Officers, excluding the Accountable Officer, during the year was: Consolidated Parent 2003 2003 2002 $120,000 to $129,999 2 2 1 $130,000 to $139,999 – – 1 $140,000 to $149,999 1 1 – $170,000 to $179,999 1 1 –
Total Remuneration of Executive Officers included above: $559,266 ($260,643 in 2001-02) Executive Officers’ remuneration shown in aggregate above includes the total salary packages received by the Executive Officers as well as performance bonuses relating to the 2001-02 year. Mr Tony Canavan acted as the Chief Executive Officer in 2001-02 and, as such, was reported as the Accountable Officer for that year (remuneration included in Note 20). For 2002-03, Mr Canavan is included in the above table.
VicTrack Annual Report 2003 52 53
Note 22 – Financial Instruments
Terms, conditions and accounting policies The Consolidated entity’s terms, conditions and accounting policies in respect of financial instruments, both recognised and unrecognised, are as follows: Financial Instrument Accounting Policy Terms and Conditions
Financial assets Cash assets Cash deposits are recognised Cash is held on deposit, earning interest at the account balance at reporting at a variable rate. date, including accrued interest. Interest is recorded as revenue as it accrues.
Other financial assets Fixed term deposits are recognised at The interest earned from fixed term fair value. Investments are recognised deposits is set at 5.15%, whilst at the nominal face value of the investments are placed for terms investment. Interest is recorded ranging from 30 to 90 days at a fixed as revenue as it accrues. interest rate for that term.
Receivables Receivables are carried at Receivables are on 30-day terms from amounts due, less any provision date of invoicing. Where debts become for doubtful debts. long overdue, e.g. in excess of 90 days, an assessment is made of collectibility, and provision is made for any doubtful accounts.
Financial liabilities Payables Liabilities are recognised for amounts Trade liabilities are normally settled to be paid in the future for goods or within 45 days from the date of services received, whether or not billed recognition. to the Consolidated entity.
Interest bearing liabilities Secured loans are recognised Secured loans are fixed interest and at their fair value. are repayable on an agreed plan to September 2021.
VicTrack Annual Report 2003 54 55
Notes – continued
Note 22 – Financial Instruments – continued Interest rate risk exposure The Consolidated entity is not exposed to any interest rate risk in respect of any financial liabilities. Interest payable on interest bearing liabilities is fixed at the rate of 6.59%. Interest earned on cash assets is equivalent to the 11.00am cash rate less a fixed premium agreed by the Consolidated entity and the bank. The weighted average interest rate for 2002-03 was 3.75% (4.00% in 2001-02). Earnings from interest vary according to movements in the 11.00am cash rate. Interest income from funds on deposit is fixed at the rate of 5.15%. Interest income earned on investments is fixed for the duration of the term. For the year ended 30 June 2003, the Consolidated entity had interest bearing investments with a weighted average interest rate of 5.04% (4.36% in 2001-02). The Consolidated entity’s exposure to interest rate risk is set out below:
2003 Consolidated Note Floating Fixed Fixed Fixed Non- Total Interest Interest Interest Interest Interest Rate Rate Rate Rate Bearing Maturing Maturing Maturing in 1 Year Over 1 to in More or Less 5 Years Than 5 Years $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Cash assets 3,421 – – – – 3,421 Other financial assets 7 – 87,447 140,980 – – 228,427 Receivables 8 – – – – 13,232 13,232 Total Financial Assets 3,421 87,447 140,980 – 13,232 245,080 Weighted Average Interest Rate 3.75% 4.86% 5.15% Financial liabilities Payables – – – – (13,995) (13,995) Interest bearing liabilities 12 – – (46,048) (294,525) – (340,573) Total Financial Liabilities – – (46,048) (294,525) (13,995) (354,568) Weighted Average Interest Rate 6.59% 6.59% Net Financial Assets 3,421 87,447 94,932 (294,525) (763) (109,488)
VicTrack Annual Report 2003 54 55
2002 Note Floating Fixed Fixed Fixed Non- Total Interest Interest Interest Interest Interest Rate Rate Rate Rate Bearing Maturing Maturing Maturing in 1 Year Over 1 to in More or Less 5 Years Than 5 Years $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Cash assets 7,876 – – – – 7,876 Other financial assets 7 – 56,752 – – – 56,752 Receivables 8 – – – – 10,538 10,538 Total Financial Assets 7,876 56,752 – – 10,538 75,166 Weighted Average Interest Rate 4.00% 4.36% Financial liabilities Payables – – – – (7,660) (7,660) Interest bearing liabilities 12 – – – – – – Total Financial Liabilities – – – – (7,660) (7,660) Net Financial Assets 7,876 56,752 – – 2,878 67,506
Reconciliation of net financial assets and net assets for the Consolidated entity 2003 2002 $’000 $’000
Net financial assets (109,488) 67,506
Inventory 493 697 Prepayments 2,273 2,599 Property, infrastructure, plant and equipment 4,181,821 3,869,590 Intangible assets 66,754 – Less: Employee benefits (5,965) (5,912)
Net assets 4,135,888 3,934,480
VicTrack Annual Report 2003 56
Notes – continued
Note 22 – Financial Instruments – continued
Credit risk exposure The Consolidated entity’s maximum exposure to credit risk at the reporting date is the carrying amount of receivables as indicated in the Statement of Financial Position. The receivables mainly relate to payment for the provision of telecommunications services by the Consolidated entity and property rentals outstanding. The Consolidated entity provided a range of telecommunications services under contract to a number of Government controlled and private companies during 2002-03. The nature of the entities, in the opinion of the Directors of the Consolidated entity, has created a low level of credit risk. The significant increase in the provision for doubtful debts for the year resulted from exceptional circumstances regarding the withdrawal of the National Express Group (PLC) from their Victorian public transport franchise contracts. The Consolidated entity’s credit exposure in the real estate industry is characterised by a large and diverse range of lessees and licensees. To this extent, the credit risk exposure is regarded as minimal.
Net fair value of financial assets and liabilities The net fair value of cash, other financial assets, non interest bearing receivables and payables and interest bearing liabilities of the Consolidated entity approximates their carrying amount and are as follows: 2003 2002 Carrying Net Fair Carrying Net Fair Amount Value Amount Value $’000 $’000 $’000 $’000 Financial assets
Cash assets 3,421 3,421 7,876 7,876 Other financial assets 228,427 228,427 56,752 56,752 Receivables 13,232 13,232 10,538 10,538
Total financial assets 245,080 245,080 75,166 75,166
Financial liabilities
Payables (13,995) (13,995) (7,660) (7,660) Interest bearing liabilities (340,573) (340,573) – –
Total financial liabilities (354,568) (354,568) (7,660) (7,660) Net financial assets (109,488) (109,488) 67,506 67,506
The Consolidated entity determines net fair values in the following manner: Cash assets The carrying amount represents fair value as it equates to the account balance withdrawable by the Consolidated entity at any time without notice.
Other financial assets For investments, the carrying amount represents fair value as it comprises a contractual obligation on the financial institution to repay principal to this value upon maturity. For funds on deposit, the carrying amount represents fair value as it comprises the present value of interest and the amount on deposit.
Receivables The carrying amount represents fair value as it is a contractual obligation on the debtor, usually payable within 30 days of the date of recognition.
Payables The carrying amount represents fair value as it comprises a contractual obligation on the Consolidated entity, usually payable within 45 days of the date of recognition.
Interest bearing liabilities The carrying amount represents fair value as it comprises the present value of interest and principal repayments.
VicTrack Annual Report 2003 Compliance Index
Compliance Index to Disclosure Requirements The Annual Report of Victorian Rail Track is prepared in accordance with the Financial Management Act 1994 and the Directions of the Minister for Finance. This index facilitates identification of compliance with the Directions of the Minister for Finance by listing references to disclosures in this financial report.
Clause Disclosure Requirement Page
Report of Operations Charter and purpose 9.1.3 (i) (a) Manner of establishment and relevant Minister 10,51 9.1.3 (i) (b) Objectives, functions, powers and duties 10 9.1.3 (i) (c) Nature and range of services provided 10 Management and structure 9.1.3 (i) (d) (i) Names of governing Board members, Audit Committee and Chief Executive Officer 7,8,9 9.1.3 (i) (d) (ii) Names of senior office holders and brief description of responsibility 21 9.1.3 (i) (d) (iii) Organisational structure 21 Financial and other information 9.1.3 (i) (e) Statement of workforce data and merit and equity 21 9.1.3 (i) (f) Application and operation of FOI Act 1982 23 9.1.3 (ii) (a) Summary of financial results for the year with previous four year comparatives 22 9.1.3 (ii) (b) Significant changes in financial position during the year 22 9.1.3 (ii) (c) Operational and budgetary objectives and performance against objectives 22 9.1.3 (ii) (d) Major changes or factors affecting achievement of objectives 22 9.1.3 (ii) (e) Events subsequent to balance date N/A 9.1.3 (ii) (f) Details of consultancies over $100,000 N/A 9.1.3 (ii) (g) Number and total cost of consulting engagements, each costing less than $100,000 23 9.1.3 (ii) (h) Extent of compliance with the Building Act 1993 23 9.1.3 (ii) (i) Statement that information listed in Part 9.1.3(iv) is available on request 23 9.1.3 (ii) (k) Compliance with National Competition policy 23
Financial Statements
Statement of financial performance 9.2.2 (i) (a) Statement of financial performance 28 9.2.3 (ii) (a) Operating revenue by class 28 9.2.3 (ii) (b) Investment income by class N/A 9.2.3 (ii) (c) Other material revenue, including disposal of non-current assets 38 9.2.3 (ii) (e) Depreciation 28,39 9.2.3 (ii) (f) Bad and doubtful debts 40 9.2.3 (ii) (g) Financing costs N/A 9.2.3 (ii) (h) Net increment or decrement arising from the revaluation of assets 28,46 9.2.3 (ii) (i) Audit expense 40 Statement of financial position 9.2.2 (i) (b) Statement of financial position 29 9.2.3 (iii) (a) (i) Cash at bank or in hand 29 9.2.3 (iii) (a) (ii) Inventories by class 42 9.2.3 (iii) (a) (iii) Receivables, including trade debtors, loans and other debtors 41 9.2.3 (iii) (a) (iv) Other assets, including prepayments 29 9.2.3 (iii) (a) (v) Investments 29 9.2.3 (iii) (a) (vi) Property, plant and equipment 42,43,44 9.2.3 (iii) (a) (vii) Intangible assets 29,36 9.2.3 (iii) (b) (i) Overdrafts N/A 9.2.3 (iii) (b) (ii) Other loans N/A 9.2.3 (iii) (b) (iii) Trade and other creditors 29 9.2.3 (iii) (b) (iv) Finance lease charges N/A 9.2.3 (iii) (b) (v) Provisions, including employee benefits 45 9.2.3 (iii) (c) (i) Authorised capital N/A 9.2.3 (iii) (c) (ii) Issued capital N/A 9.2.3 (iii) (d) Reserves and transfers to and from reserves N/A Statement of cash flows 9.2.2 (i) (c) Statement of cash flows during the year 30 Other disclosures in notes to the financial statements 9.2.3 (iv) (a) Charges against assets N/A 9.2.3 (iv) (b) Contingent liabilities 50 9.2.3 (iv) (c) Commitments for expenditure 49 9.2.3 (iv) (d) Government grants received or receivable N/A 9.2.3 (iv) (e) Employee superannuation funds 48, 49 9.2.3 (iv) (f) Assets received without adequate consideration 28 9.4 Transactions with responsible persons and their related parties 52 9.6 Disclosure of major contracts 24 9.7 Operating lease expenditure commitments 49 9.8 Occupational health and safety 21 VicTrack AC C ESS