2014 Annual Report Palmerston North Airport Limited Contents
04 Joint Report 08 Board & Management Profiles 11 Corporate Report 15 Service Performance 20 Financial Statements 25 Notes to the Financial Statements 48 Audit Report 50 Historical Financial Highlights 51 Company Directory
2 Palmerston North Airport Limited Annual Report 2014 CASE STUDY Fly Palmy / Explore Central New Zealand
Palmerston North Airport’s central location makes it easy for inbound visitors to access the diverse range of activities on offer within the Airport’s catchment which covers Ruapehu, Rangitikei, Wanganui, Manawatu, Tararua and the Horowhenua. Activities that can be easily accessed include two Department of Conservation Great Walks – the Tongariro Northern Circuit and the Whanganui Journey, and the emerging Manawatu Te Apiti Gorge walk on the edge of Palmerston North. In addition cycle ways and trails include Mountains to Sea, the Old Coach Road and the Manawatu Cycleway. The National Grand Prix and Toyota Racing series are held annually at Manfeild while Wanganui’s Cemetery circuit is a draw-card for motorbike enthusiasts each year on Boxing Day. Sporting options available from Palmerston North Airport include a range of country golf courses, the Rangatira Golf course built on three levels, offers stunning views of the Rangitikei River, and a ride in the Electric Cable Car, the only one of its kind in New Zealand. The iconic Tui brewery located in Mangatainoka also offers golf packages at the neighbouring Pahiatua Golf Club.
The Experience begins... walk central New Zealand!
up to nonstop40 flights daily from around new zealand in and out of palmy Tongariro Northern Circuit Tongariro National Park book now at pnairport.co.nz
Palmerston North Airport Limited Annual Report 2014 3 Joint Report THE CHAIRMAN AND CHIEF EXECUITIVE’S JOINT REPORT FOR THE YEAR ENDED 30 JUNE 2014
OVERVIEW the year included replacement of the car park payment and control system and the first stage of Palmerston North Airport plays a critical, the three year runway overlay programme. strategic role as the gateway to central New Zealand facilitating air traffic flows from and to PNAL continues to pursue development of the Manawatu, Ruapehu, Rangitikei, Whanganui, its property holdings. During the year PNAL Tararua and Horowhenua districts. undertook considerable work with a client to establish a large distribution development In undertaking this role, Palmerston North Airport on airside land, but unfortunately, the client Limited (PNAL) is guided by its vision to grow decided to make alternative arrangements. The shareholder and regional economic value through commercial property market remains quiet locally, the operation of a safe, efficient, attractive and but PNAL is continuing to pursue opportunities. profitable airport serving the central region. The Directors and Management Team are FINANCIAL therefore pleased to present the 2013/14 Annual Report which reports on PNAL’s progress over EBITDA was $1,846,945 and is 4.6% above the the last year in meeting strategic and business previous financial year and 6.1% below PNAL’s objectives. Statement of Intent. From a financial perspective, a surplus after tax Revenue of $4,818,000 increased 5% on the of $544,861 was achieved, a 10.7% increase previous financial year. on the previous financial year, and 10.6% below Aeronautical revenue of $2,566,000 increased by PNAL’s Statement of Intent target for financial year 2.3% on the back of the 9% increase in passenger 2013/14. volumes. Passenger volumes increased by 9% versus the Non-aeronautical revenue of $2,252,000 prior year and were 2% above PNAL’s Statement increased 8%. Non-aeronautical revenue now of Intent target. represents 46% of total revenue and consists of Visitor development and air service development concessionaires payments, advertising, property are core elements of the PNAL Strategic Plan. and land rental and car parking. A highlight of the 2013/14 year is the growth This year’s performance was driven primarily by achieved in passenger volumes and seat stronger than projected patronage of the car park capacity. The relaunch of non-stop Palmerston and the benefits associated with the move to a North – Nelson services in July, together with concession based retail model. increased capacity on the Auckland and Christchurch routes have been the key drivers of Costs of $4,062,484 were 5% above the Statement this growth. of Intent and 4.5% above the previous financial year. Major capital investments undertaken during
4 Palmerston North Airport Limited Annual Report 2014 Operating expenses were 11% above the Statement of Intent and 1% below the previous financial year. Operational maintenance cost overruns were the primary reason for the negative variance. Administrative costs were 6% above the Statement of Intent and 14% above the previous financial year. PNAL’s investment in Visitor Development was the primary driver of the negative variance. PNAL’s balance sheet remains strong with shareholder’s equity increasing to $35.8 million. All banking covenants have been met during the financial year. Net cash flow from operating activities was $1,359,845. Capital expenditure of $831,000 was incurred on phase one of the runway overlay project, and $903,000 on other major capex projects including apron overlay and car park automation. Capital expenditure was 4.8% above PNAL’s amended Statement of Intent, primarily the result of the car park automation projects timing. A dividend of 2.37 cents per share will be made for the financial year ended 30 June 2014.
AERONAUTICAL Capacity growth of scheduled services was driven by a combination of new routes, frequency increases and aircraft upgrades by Air New Zealand and reflects growing optimism within the regional air travel market to and from Palmerston North Airport and the efforts of the PNAL team in air service and visitor development. The launch of 11 weekly non-stop services between Palmerston North and Nelson was a major achievement for the PNAL team, and performance during the first year of operations has exceeded expectations. During the financial year Air New Zealand capacity was also increased on services from Palmerston North to Christchurch and Auckland. PNAL, in conjunction with regional airport and airline partners, continues to work on domestic air service development priorities which include consolidating performance on existing services and the evaluation of opportunities to launch new and sustainable domestic routes from Palmerston North. Critical to the success of these initiatives is the continued growth in passenger volumes using Palmerston North Airport, both outbound and inbound. A major focus at PNAL has been the on-going development of outbound passenger volumes by improving connectivity from Palmerston North to international destinations especially via the Auckland International Airport gateway. PNAL’s Virtual trans-Tasman promotion in association with strategic
Palmerston North Airport Limited Annual Report 2014 5 partners including Auckland International Airport The development of non-aeronautical business was launched in June and has proved very is also a strategic priority for the PNAL team. The successful in promoting the ease with which our Masterplan has assisted PNAL in identifying zones regional travellers can commence Trans-Tasman, which may be developed for non-aeronautical Pacific Island or long haul travel from Palmerston activities for which proximity to the airport North Airport. The promotion’s objective is to build and the associated business activity may be on the awareness amongst the travelling public of advantageous. the ease of use of Palmerston North Airport as the A number of initiatives have been completed starting point for their travels. as part of PNAL’s on-going strategy to improve PNAL’s Visitor Development Strategy focuses on the airport experience for passengers and other the development of inbound demand to the central terminal users alike. region via the Palmerston North Airport gateway. In February, Stage 1 of PNAL’s car park The objective is also to build awareness amongst upgrade program was completed. The car park inbound travellers on the convenience of using management system and car park hardware Palmerston North Airport as the gateway to the were replaced and brought the car park system central region which extends from Ruapehu in the up to a best in class standard. Improvements North to Horowhenua in the South and across the include 24/7 car park access, automated pay ranges to Tararua and South. PNAL continues to stations providing cash or electronic payment work with regional RTO partners, wholesalers and options, and the introduction of a prepaid frequent Air New Zealand in the development of inbound car park user product. Additional features and product. Examples include “Fly Palmy - Ski service enhancements are being evaluated and Ruapehu” an initiative targeting Christchurch and are planned for introduction during the 2014/15 Nelson residents. financial year. The renovation and upgrade of Café Ignition COMMERCIAL located on the mezzanine floor of the terminal was PNAL continues to identify and target growth completed during the year. The renovation was opportunities in both aeronautical and non- a joint initiative between the café owner/operator aeronautical activities. and PNAL. Property development remains a core strategic LS Travel, arguably the world’s most recognised focus for the Board and Management Team. travel retail brand opened its doors on the terminal An Airport Masterplan review was completed ground floor during the year. Under the “Relay” during the year and has provided clarity on the brand the store offers passengers a range of future direction of PNAL’s property development books, press, convenience, gifts and essential including the identification of airport zones with travel products, it is also a Lotto agency. associated land use options, and development The PNAL team are continuing to evaluate terminal prioritisation. The development of aeronautical related business activities to further improve the support services located at Palmerston North airport terminal experience. Airport remains a strategic priority. This includes pilot and aviation technical training and engineering support services. INFRASTRUCTURE / AIRPORT OPERATIONS Palmerston North Airport’s 24 hour, seven day operating capability, combined with our This year airside improvements have been geographic location, provides a comparative substantial with Stage 1 of runway resurfacing advantage for the further development of airfreight and another stage of our apron rehabilitation and associated support operations. Already a programme successfully completed. strategic base for Freightways and NZ Post, PNAL Stage 1 of the upgrade of the runway was continues to actively pursue opportunities to grow successfully completed during the financial year, the airfreight/logistics footprint at Palmerston North and involved the resurfacing of one-third of the Airport.
6 Palmerston North Airport Limited Annual Report 2014 runway. To minimise the impact on 24/7 airport To support these objectives PNAL will continue operations, the project will be staged over three to seek opportunities to enhance airport user financial years. Stage 2 is planned for early 2015 experiences through a program of initiatives and Stage 3 in early 2016. At the completion of focussed on further enhancements to terminal, the Project it is envisaged that the runway surface airport offerings and infrastructure. will have a life of 20 years before further major PNAL’s visitor development priorities will continue resurfacing will be required. to focus on the development of relationships with The overlay of the main apron was completed in tourism and business partners, on the promotion December and has restored the main apron area of our wider region as an inbound destination, and to a 15-20 year pavement life. the ease of use of Palmerston North Airport for locally based outbound travellers. PNAL continues to seek effective energy-saving strategies, with a current focus on energy-efficient Palmerston North Airport’s designation as a 24/7 lighting. This focus has gained momentum with operational airport is a key strategic advantage the engagement of energy-saving specialists and which will enable us to continue to seek business the trialling of improved LED technology within the and logistics growth at the Airport. terminal and surrounding areas. A staged program of development for strategic All Part 139 and other statutory requirements land holdings will continue to be advanced. relating to the airport and its operations were met PNAL will continue to work with existing airport during the financial year. These were supported customers on their future growth plans and land by continuing monthly internal audits and quality requirements, and also identify new customers control checks undertaken by an independent and land development opportunities. body. PNAL continues to maintain a strong focus on Health, Safety and Environment issues. We work David Lanham with other organisations involved in providing Chief Executive services on the airport to ensure we continue to provide a safe and secure environment for all airport users. Derek Walker Chairman OUR PEOPLE David Lanham was appointed Chief Executive, commencing April 2014 and replaced Darin Cusack. David brings to the PNAL team extensive experience in airline, logistics, airport, retail and property development. The Board are pleased to welcome David to the PNAL Management Team and wish Darin well in his new aviation endeavours.
THE FUTURE OUTLOOK Our strategic priorities will remain focussed on the sustainable growth of domestic air services and connectivity to international services via New Zealand’s international gateway airports. In turn this will require an on-going focus on the growth of inbound and outbound passenger volumes.
Palmerston North Airport Limited Annual Report 2014 7 Board & Management Profiles
DL GP RB
DW JN OS
Board of Directors of Palmerston North Airport DW: Derek Walker (Chairman) JN: Jon Nichols OS: Ormond Stock JA: Josie Adlam GG: Gerard Gillespie
8 Palmerston North Airport Limited Annual Report 2014 ZP AS
JA GG
Management of Palmerston North Airport DL: David Lanham (Chief Executive) GP: Glen Pleasants (Manager Aeronautical & Infrastructure) RB: Roy Bodell (Manager Transition & Projects) ZP: Zoe Palmer (Acting Manager Business Services & Board Secretary) AS: Angela Scott (Visitor Development Manager)
Palmerston North Airport Limited Annual Report 2014 9 CASE STUDY Fly Palmy / Virtual Trans-Tasman
Palmerston North Airport’s “Check in at Palmy to Check out Oz” campaign is an example of outbound tactical promotion run during the financial year. In conjunction with local House of Travel outlets, Auckland International Airport and Air New Zealand the campaign’s primary objective was to grow local resident numbers commencing their trans-Tasman holidays from Palmerston North Airport. The campaign focussed on the ease and convenience associated with connecting over Auckland via Palmerston North Airport including baggage through-check and access to Air New Zealand’s 82* weekly trans- Tasman services operating from Auckland. A range of incentives were used to stimulate interest including complimentary carparking, retail vouchers for use at Palmerston North Airport, Auckland International Airport offers and giveaways, and monthly travel prizes. For many travellers the Palmerston North Airport experience was a surprise with positive feedback received on the convenience of the new automated carpark system, refurbished terminal facilities, the retail offering at the recently opened Relay outlet, and Café Ignition’s gourmet offering. The promotion ran from June to August 2014 and targeted passengers from Wanganui, Manawatu, and the Wairarapa with great results. The Palmerston North Airport team are now busy planning the next outbound initiative.
10 Palmerston North Airport Limited Annual Report 2014 Corporate Report
The Directors have pleasure in presenting to shareholders the Annual Report and audited financial statements of Palmerston North Airport Limited for the year ended 30 June 2014. This report and the audited financial statements are dated 20th August 2014 and cannot be amended for any reason without the Board’s approval. Palmerston North Airport Limited is a ‘Council-Controlled Trading Organisation’ pursuant to the Local Government Act 2002.
PRINCIPAL ACTIVITIES The principal activities of the Company during the year were: • to provide airport facilities and services to airlines and airport users (both commercial and non- commercial) through the ownership and operation of Palmerston North Airport. OWNERSHIP Palmerston North Airport Limited is a Public Limited Liability Company incorporated and registered under the Companies Act 1993 and is 100% owned by the Palmerston North City Council. FINANCIAL REPORT Here are the financial results for the year under review. Details of these financial results are shown on pages 21 to 24.
2014 2014 2014 2013 Actual Amended SOI Actual SOI PERFORMANCE Revenue 4,818,407 4,706,000 4,706,000 4,589,800 EBITDA 1,846,945 1,969,000 1,969,000 1,765,104 Net Profit after tax 544,861 609,500 609,500 491,883 Passengers 484,890 475,000 475,000 445,147
FINANCIAL POSITION CASH AND CASH EQUIVALENTS 486,407 289,259 110,150 344,304 Current Assets 886,915 605,698 426,488 688,251 Property, Plants & Equipment 44,044,501 44,565,633 44,244,633 43,039,088 Shareholder Funds 35,823,396 35,913,533 35,913,382 35,475,288
Palmerston North Airport Limited Annual Report 2014 11 COMPANY’S AFFAIRS The Directors regard the state of the Company’s affairs to be satisfactory. Details of the year under review are included in the joint Chairman’s and Chief Executive’s Report and the statutory accounts of the Company published herewith. DIRECTORS Reappointments During the year the following Directors were reappointed to the board: Mr. D N Walker 16 December 2013 Retirements at 2014 AGM The following Directors will retire during the next financial year. They have advised that they are available for reappointment: Ms. J Adlam 31 August 2014 Mr. G F Gillespie 30 September 2014 Mr. J Nichols 30 September 2014 Directors’ remuneration The amount of $76,500 per annum in 2014 and $76,500 per annum in 2013 was paid, or due and payable, to members of the Board as authorised by the shareholders as follows:
Gross Gross Amount Amount 2014 2013
Mr. D N Walker 22,948 22,948 Mr. G F Gillespie 13,388 13,388 Mr. O B Stock 13,388 13,388 Mr. J E Nichols 13,388 13,388 Ms. J M K B Adlam 13,388 13,388 76,500 76,500
No other remuneration or benefits other than reimbursement of expenses has been paid or given to Directors. Directors’ indemnity and insurance The Company is responsible for the payment of the Directors’ indemnity insurance premiums. Use of company information by Directors There were no notices from Directors of the Company requesting to use company information received in their capacity as Directors that would not otherwise have been available to them. Shareholding by Directors During the year there were no shareholding transactions involving the Directors.
12 Palmerston North Airport Limited Annual Report 2014 Directors’ interests During the course of the financial year to 30 June 2014, Directors declared interest in the following entities:
Interest Nature of Interest Relationship to PNAL
Mr. O B Stock Director & Shareholder Steel Pencil Holdings Ltd None Shareholder Steel Pencil IPD Ltd None Director Steel Pencil Philippines Ltd None Director Aorangi Hospital Ltd None Director Steel Pencil New Zealand Ltd None
Mr. D N Walker Director & Shareholder Elmira Consulting Ltd None Director & Shareholder Third Bearing Ltd None Director & Shareholder TBL Investments Ltd None Consultant Palmerston North City Council Shareholder & Supplier Director The Bio Commerce Centre Ltd & Subsidiaries None Director NZ Wind Farms Ltd & Subsidiaries None Director Speirs Group Ltd & Subsidiaries Customer Director Wilson Cook Ltd None Board Member Vision Manawatu Customer Trustee Wildbase Recovery Centre Trust None
Mr. G F Gillespie Director Tui Products None Director & Shareholder Max Fashions None Director & Shareholder Ezibuy (resigned 29th August 2013) Customer
Mr. J E Nichols Director Port of Napier Ltd None Director Centralines Ltd None Director Nichols Consulting Ltd None Mid Central Zone NZ Rugby League Director None (Resigned 9th April 2014)
Ms. J M K B Adlam Trustee The Sustainability Trust None Board Member Tautoko Services None Director Mojo Coffee Ltd None Coach The Ice House None Coach Business Changing None Chair Brava Limited None Advisory Board Rosa Foods None
Palmerston North Airport Limited Annual Report 2014 13 All Directors have interest in the Directors and Officers Liability Insurance Policy. Details of transactions made during the year are given in note 22 of the Notes to the Financial Statements. Remuneration of employees The number of employees, who are not Directors, whose total remuneration and benefits exceeded $100,000 in the financial year were:
2014 2013 $160,000 - $170,000 1 0 $200,000 - $210,000 0 1
AUDITORS As provided for by Section 70 of the Local Government Act 2002, Audit New Zealand, on behalf of the Auditor General, is hereby re-appointed as Auditor to the Company. Auditor’s remuneration of $28,000 (GST exclusive) for the 2014 annual audit is reflected in the financial statements as due and payable and includes $1,500 for FreightGate. This includes estimated disbursements of $1000.
$35.8m Ownership $4.8m Shareholder Funds Palmerston North City Council Revenue for 2014 year
Principal Activities $44m FreightGate Airport Facilities Property Plant & Equipment Value Subsidiary Company
14 Palmerston North Airport Limited Annual Report 2014 CASE STUDY Fly Palmy / Ski Ruapehu
The Fly Palmy-Ski Ruapehu campaign launched in July 2014 is an example of a specific inbound visitor development initiative of Palmerston North Airport Limited. The objective of the campaign has been to raise awareness amongst Christchurch and Nelson residents of the ease with which the North Island’s ski fields can be accessed from Palmerston North Airport. The Palmerston North - Nelson route was launched in July 2013 with 11 weekly direct flights, while over 30 weekly flights are offered on the Palmerston North – Christchurch route. Palmerston North Airport worked with a number of partners including Ruapehu Alpine Lifts, Air New Zealand and other ground operators in developing attractive packages. Bus backs and terminal advertising was used in Nelson to raise awareness along with targeted social media advertising.
Palmerston North Airport Limited Annual Report 2014 15 Service Performance FOR THE YEAR ENDED 30 JUNE 2014
• The Company’s initial Statement of Intent is • The ratio of consolidated shareholder funds to dated May 2013. A subsequent amended total assets has been maintained above 70%, Statement of Intent was produced and inclusive of revaluations of land and buildings. approved in December 2013. • Palmerston North Airport has been maintained • The Company is trading as Palmerston North as an airport certificated pursuant to Civil Airport Limited. Aviation Rule Part 139 and has achieved satisfactory audits during the period. • The Company has an interest in FreightGate Limited, a wholly owned subsidiary company • All obligations under the Resource which was formed in October 2001 Management Act and the District Plans of the and may be used for the management of non- Palmerston North City Council and Manawatu operational property. District Council have been met.
Objective: * To grow the shareholder’s and regional economic value by operating a safe, efficient, attractive and profitable airport that serves the Central Region.
OUR VISION – WHAT WE WANT TO BE Vision statement 2 - Businesses serving During the year the company adopted a new the airport are our partners. Company Vision to grow shareholder and regional We will provide an efficient, commercial economic value by operating a safe, efficient, environment and work in close cooperation with attractive and profitable airport that serves the our partners and stakeholders to ensure our Central Region. mutual success. Vision statement 1 - All persons visiting or Vision statement 3 - The safety and using the airport are our customers. security of our people, customers and We will provide quality services that are partners is our critical concern. welcoming, and that enhance the convenience We will meet and exceed all standards and and enjoyment of travellers and those greeting regulations relating to airport operations. them or bidding them farewell.
16 Palmerston North Airport Limited Annual Report 2014 Vision statement 4 - Our people are the key Vision statement 5 - Shareholder value is to our success. our key business objective. We will meet our goals through the skill, We will operate a successful enterprise that allows commitment, resourcefulness and hard work of us to invest in the future. This benefits all our everyone at Palmerston North Airport. We will stakeholders: customers, partners, owners and facilitate their development and recognise their staff. achievement. Below is a graph of how we have grown over the years in five-year intervals
$50m
$45m
$40m Total Assets $35m
$30m
Shareholder Funds $25m
$20m
$15m
$10m
$5m
1992 1997 2002 2007 2012 2013 2014
PERFORMANCE MEASURES
30-Jun-14 30-Jun-14 30-Jun-14 30-Jun-13 Amended Actual SOI SOI Actual Ratio of Net Surplus before Interest and 1. 2.53% 2.8% 2.0% 2.56% Tax to Total Assets Ratio of Net Surplus after Interest and Tax 2. 1.5% 1.7% 1.4% 1.39% to Consolidated Shareholders Funds Interest Cover Ratio of Net Surplus before 3. 2.97 >2.5 >2.5 2.73 Interest and Tax to Interest, at or above : Maintain a Tangible Net Worth (of or 4. $35.8m > $35 m > $35m $35.4m above) $35m 5. Total passenger throughput 484,890 475,000 475,000 445,147 Maintain a high level of 6. 98% 90% 90% 96% customer satisfaction * 98% are either “Quite satisfied” or “very satisfied” - Customer Satisfaction Survey November 2013
Palmerston North Airport Limited Annual Report 2014 17 FINANCIAL RESULTS
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Revenue Operation Costs EBITDA Net Operating Profit
2014 2014 Amended SOI 2014 SOI 2013 Actual
2.53% 2.97 $35.8m Ration of Net Surplus before tax Interest Cover Ratio Tangible Net Worth
98% 485,061 1.50% Customer Satisfaction Total Passenger Throughput Ration of Net Surplus after tax
18 Palmerston North Airport Limited Annual Report 2014 CASE STUDY Fly Palmy/ up to 40 Flights Daily Over the past twelve months Palmerston North Airport has worked closely with Air New Zealand in growing capacity by 7% year on year, giving regional travellers more choice in domestic destinations, service frequency and connectivity to and from international services offered from New Zealand’s international gateway airports. With up to 40 direct flights a day into and out of Palmerston North Airport it is one of the busiest provincial airports in New Zealand. Services are offered to Auckland, Hamilton, Wellington, Nelson and Christchurch. Capacity on services to Christchurch and Auckland has grown due to a combination of increased frequency and up gauging to larger aircraft, supported by the launch of Palmerston North-Nelson services in July 2013. Palmerston North Airport continues to work with Air New Zealand in growing passenger volumes and is hopeful of securing new domestic destinations within the current financial year.
Palmerston North Airport Limited Annual Report 2014 19 Financial Statements Contents
21 Statement of Comprehensive Income 22 Statement of Changes in Equity 23 Statement of Financial Position 24 Statement of Cash Flow 25 Notes to the Financial Statements 48 Audit Report 50 Historical Financial Highlights 51 Company Directory
20 Palmerston North Airport Limited Annual Report 2014 STATEMENT OF COMPREHENSIVE INCOME - Parent & Consolidated for the Year ended 30 June 2014
30-Jun-14 30-Jun-14 30-Jun-14 30-Jun-13 Amended Note Actual SOI SOI Actual $ $ $ $ REVENUE 4 4,818,407 4,706,000 4,706,000 4,589,800
OPERATING EXPENSES Operations and Maintenance: Airfield Services 476,503 493,500 493,500 493,503 Other Operating Expenses 5 1,178,860 1,004,000 1,004,000 1,180,906 TOTAL OPERATIONS AND MAINTENANCE 1,655,363 1,497,500 1,497,500 1,674,409
Administration: Audit Fees 6 28,000 28,000 28,000 27,083 Loss on Sale of Assets 2,069 - - 2,812 Bad Debts Written Off 10,602 5,000 5,000 13,367 Changes in Doubtful Debt Provision - 500 500 - Directors Fees 76,500 76,500 76,500 76,500 Employee Expenses 7 657,479 825,253 825,253 700,649 General Administration 541,449 304,247 304,247 329,876 TOTAL ADMINISTRATION: 1,316,099 1,239,500 1,239,500 1,150,287
TOTAL OPERATING EXPENSES 2,971,462 2,737,000 2,737,000 2,824,696 Operating Surplus Before Interest, 1,846,945 1,969,000 1,969,000 1,765,104 Taxation, Depreciation & Amortisation:
Finance Costs, Depreciation & Amortisation Finance Costs 8 382,930 411,500 411,500 408,709 Depreciation & Amortisation 16/17 708,092 711,500 711,500 647,477 TOTAL FINANCE COSTS, DEPRECIATION 1,091,022 1,123,000 1,123,000 1,056,186
Operating Surplus Before Taxation 755,923 846,000 846,000 708,918
Taxation Expense on Operating Surplus 9 211,062 236,500 236,500 217,035
NET SURPLUS AFTER TAXATION 544,861 609,500 609,500 491,883
For and on behalf of the Board Derek Walker Ormond Stock Chairman Director
The accompanying accounting policies and notes form part of and are to be read in conjunction with these financial statements
Palmerston North Airport Limited Annual Report 2014 21 STATEMENT OF COMPREHENSIVE INCOME - Parent & Consolidated for the Year ended 30 June 2014
30-Jun-14 30-Jun-14 30-Jun-14 30-Jun-13 Amended Note Actual SOI SOI Actual $ $ $ $ NET SURPLUS AFTER TAXATION 544,861 609,500 609,500 491,883
Gains (loss) on Revaluation of 19 (d) - - - - Land and Buildings Movement in Deferred 18 - - - - Tax at Revaluation
Comprehensive Income Attributed to 544,861 609,500 609,500 491,883 the Shareholder
STATEMENT OF CHANGES IN EQUITY - Parent & Consolidated for the Year ended 30 June 2014
30-Jun-14 30-Jun-14 30-Jun-14 30-Jun-13 Amended Note Actual SOI SOI Actual $ $ $ $ EQUITY AT THE BEGINNING OF 35,475,288 35,304,033 35,303,882 35,176,500 THE YEAR
Total Comprehensive (Loss) Income 544,861 609,500 609,500 491,883 Distribution to Shareholder During the Year (196,753) (243,800) (243,800) (193,095)
EQUITY AT THE END OF THE YEAR 35,823,396 35,913,533 35,913,382 35,475,288
The accompanying accounting policies and notes form part of and are to be read in conjunction with these financial statements
22 Palmerston North Airport Limited Annual Report 2014 STATEMENT OF FINANCIAL POSITION - Parent & Consolidated As at 30 June 2014
30-Jun-14 30-Jun-14 30-Jun-14 30-Jun-13 Amended Note Actual SOI SOI Actual $ $ $ $ CURRENT ASSETS Cash & Cash Equivalents 10 486,407 289,259 110,150 344,304 Trade Accounts Receivable 11 357,652 300,762 300,762 332,516 Inventory 12 63 - - - Sundry Receivables & Prepayments 42,793 15,677 15,677 11,431 TOTAL CURRENT ASSETS 886,915 605,698 426,488 688,251
Less: CURRENT LIABILITIES Income in Advance 70,218 90,000 90,000 79,380 Trade Accounts Payable 13 152,148 120,000 120,000 172,265 Other Creditors 163,376 156,000 156,000 70,892 Employee Benefit Liabilities 14 14,308 54,000 54,000 36,035 Tax Payable 147,867 86,054 85,995 17,362 Current Portion of Borrowings 15 27,376 200,000 200,000 - TOTAL CURRENT LIABILITIES 575,293 706,054 705,995 375,934
WORKING CAPITAL 311,622 (100,356) (279,507) 312,317
Add: NON CURRENT ASSETS Property, Plant & Equipment 16 44,026,791 44,565,633 44,244,633 43,014,650 Intangible Assets 17 17,710 - - 24,438 TOTAL NON CURRENT ASSETS 44,044,501 44,565,633 44,244,633 43,039,088
Less: NON CURRENT LIABILITIES Deferred Tax Liability 18 2,832,727 2,751,744 2,751,744 2,876,117 Borrowings 15 5,700,000 5,800,000 5,300,000 5,000,000 TOTAL NON CURRENT LIABILITIES 8,532,727 8,551,744 8,051,744 7,876,117
NET ASSETS 35,823,396 35,913,533 35,913,382 35,475,288
Represented by: SHAREHOLDER’S EQUITY Paid in Capital 19 (a) 9,380,400 9,380,400 9,380,400 9,380,400 Retained Earnings 19 (b) 16,309,782 16,399,919 16,399,768 15,961,674 Asset Revaluation Reserve 19 (d) 10,133,214 10,133,214 10,133,214 10,133,214 TOTAL SHAREHOLDER'S EQUITY 35,823,396 35,913,533 35,913,382 35,475,288
For and on behalf of the Board Derek Walker Ormond Stock Chairman Director
The accompanying accounting policies and notes form part of and are to be read in conjunction with these financial statements
Palmerston North Airport Limited Annual Report 2014 23 STATEMENT OF CASH FLOW - Parent & Consolidated for the Year ended 30 June 2014
30-Jun-14 30-Jun-14 30-Jun-14 30-Jun-13 Amended Note Actual SOI SOI Actual $ $ $ $ CASH FLOWS FROM OPERATING ACTIVITIES Cash was provided from: Receipts from Customers 4,568,655 4,690,518 4,690,518 4,345,606 Interest Received 5,262 9,000 9,000 5,715 Tax Refund 206,257 - - 201,579 4,780,174 4,699,518 4,699,518 4,552,900
Cash was disbursed to: Payment to Suppliers & Employees 2,706,287 2,646,109 2,646,318 2,731,547 Tax Loss Payment to PN City Council 204,076 - - 131,773 Payment of Income Tax 125,000 218,000 218,000 200,000 Interest Payments 384,966 411,585 411,585 408,709 3,420,329 3,275,694 3,275,903 3,472,029
Net cash flows from operating activities 20 1,359,845 1,423,824 1,423,615 1,080,871
CASH FLOWS FROM INVESTING ACTIVITIES Cash was applied to: Purchase of Property, Plant & Equipment 1,748,365 1,667,290 1,346,290 650,368 Net Cash Flow from Investing Activities (1,748,365) (1,667,290) (1,346,290) (650,368)
CASH FLOW FROM FINANCING ACTIVITIES Cash was provided from: Borrowing 1,000,000 500,000 - 300,000
Cash was applied to: Repayment of Borrowings 300,000 200,000 200,000 700,000 Payment of Dividends 19(c) 196,753 213,802 213,802 193,095 Net Cash from Financing Activities 503,247 86,198 (413,802) (593,095)
Net Increase/(Decrease) in Cash and 114,727 (157,268) (336,477) (162,592) Cash Equivalents Cash and Cash Equivalents at the 344,304 446,527 446,527 506,896 Beginning of the year
Cash & Cash Equivalents at the 10 459,031 289,259 110,050 344,304 End of the Year
CLOSING CASH BALANCE 459,031 289,259 110,050 344,304
The accompanying accounting policies and notes form part of and are to be read in conjunction with these financial statements
24 Palmerston North Airport Limited Annual Report 2014 Notes to the Financial Statements STATEMENT OF ACCOUNTING POLICIES FOR THE YEAR ENDED 30 JUNE 2014 (NOTES 1-3)
1. REPORTING ENTITY Palmerston North Airport Limited is a New Zealand company registered under the Companies Act 1993. The Company and its wholly owned subsidiary (FreightGate Limited) comprise the Palmerston North Airport Limited reporting entity. The financial statements of Palmerston North Airport Limited are reported as parent and consolidated due to FreightGate Limited being a non-trading company during the year to 30 June 2014.
2. BASIS OF PREPARATION Statement of compliance The financial statements of Palmerston North Airport Limited have been prepared in accordance with the requirements of the Airport Authorities Act 1966, Airport Authorities Amendment Act 2000, the Local Government Act 2002, Airport Authorities (Airport Companies Information Disclosure) Regulations 1999 the Companies Act 1993, and the Financial Reporting Act 1993. The financial statements have been prepared in accordance with NZ GAAP. They comply with NZIFRS and other applicable Financial Reporting as appropriate for public benefit entities. Measurement base The financial statements have been prepared on a historical cost basis except where modified by the revaluation of land and buildings. Functional and presentation currency The financial statements are presented in New Zealand dollars and all values are rounded to the nearest dollar. The functional currency of the company is New Zealand Dollars. Changes in accounting policies There have been no changes in accounting policies during the financial year. Standards, amendments, and interpretations issued that are not yet effective and have not been early adopted Standards, amendments, and interpretations issued but not yet effective that have not been early adopted, and which are relevant to the Company are: NZ IFRS 9 Financial Instruments will eventually replace NZ IAS 39 Financial Instruments: Recognition and Measurement. NZ IAS 39 is being replaced through the following 3 main phases: Phase 1 Classification and Measurement, Phase 2 Impairment Methodology, and Phase 3 Hedge Accounting. Phase 1 on
Palmerston North Airport Limited Annual Report 2014 25 the classification and measurement of financial assets has been completed and has been published in the new financial instrument standard NZ IFRS 9. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in NZ IAS 39. The approach in NZ IFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The financial liability requirements are the same as those of NZ IAS 39, except for when an entity elects to designate a financial liability at fair value through the surplus/deficit. The new standard is required to be adopted for the year ended 30 June 2016. However, as a new Accounting Standards Framework will apply before this date, there is no certainty when an equivalent standard to NZ IFRS 9 will be applied by public benefit entities. The Minister of Commerce has approved a new Accounting Standards Framework (incorporating a Tier Strategy) developed by the External Reporting Board (XRB). Under this Accounting Standards Framework, Palmerston North Airport Limited is classified as a Tier 2 reporting entity and it will be required to apply Public Benefit Entity Accounting Standards with Reduced Disclosure Requirements (RDR). These standards are being developed by the XRB based on current International Public Sector Accounting Standards. The effective date for the new standards for public sector entities is expected to be for reporting periods beginning on or after 1 July 2014. This means the Airport Company expects to transition to the new standards in preparing its 30 June 2015 financial statements. As the RDR are still under development, the company is unable to assess the implications of the new Accounting Standards Framework at this time. Due to the change in the Accounting Standards Framework for public benefit entities, it is expected that all new NZ IFRS and amendments to existing NZ IFRS will not be applicable to public benefit entities. Therefore, the XRB has effectively frozen the financial reporting requirements for public benefit entities up until the new Accounting Standard Framework is effective. Accordingly, no disclosure has been made about new or amended NZ IFRS that exclude public benefit entities from their scope.
3. SIGNIFICANT ACCOUNTING POLICIES Specific accounting policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements. (a) Basis of Consolidation The consolidated financial statements include the parent company and its subsidiary accounted for using uniform accounting policies prepared as of the same date. All inter-company transactions are eliminated in full on consolidation. In the Company’s financial statements, investments in subsidiaries are recognised at cost. Subsidiaries The Company consolidates in the group financial statements all entities where the Company has the capacity to control their financing and operating policies so as to obtain benefits from the activities of the subsidiary. This power exists where the Company controls the majority voting power on the governing body or where such policies have been irreversibly predetermined by the Company or where the determination of such policies is unable to materially affect the level of potential ownership benefits that arise from the activities of the subsidiary. The cost of a business combination is measured as the aggregate of: • The consideration transferred, which is generally measured at acquisition date fair value;
26 Palmerston North Airport Limited Annual Report 2014 • The amount of any non-controlling interest measured at either fair value or the non-controlling interest in the fair value of the net identifiable assets of the acquiree; and • The acquisition date fair value of the previously held equity interest in the acquiree, if any. Any excess of the cost of the business combination over the Company’s interest in the net fair value of the identifiable assets, liabilities, and contingent liabilities is recognised as goodwill. If the Company’s interest in the net fair value of the identifiable assets, liabilities, and contingent liabilities recognised exceeds the cost of the business combination, the difference will be recognised immediately in the surplus or deficit. Investments in subsidiaries are carried at cost in the Company’s parent entity financial statements. (b) Revenue Measurement and Recognition Revenue is measured at fair value of goods and services rendered and recognised at the time when the goods and services are rendered. Interest received is recognised using the effective interest rate method. (c) Property Plant and Equipment Property Plant and Equipment consists of: Operational Assets These include land, buildings, furniture and fittings, motor vehicles and various plant and equipment. Infrastructure Assets Infrastructure assets are the fixed utility systems owned by the Company. Measurement All items of property, plant and equipment that qualify for recognition as an asset shall be measured at cost less accumulated depreciation and impairment loses with the following exceptions: Land Land is valued at fair value, being the amount for which the land could be exchanged between knowledgeable, willing parties in an arm’s length transaction. Buildings Buildings are valued at fair value. Fair value is the amount that an asset could be exchanged between knowledgeable and willing parties in an arm’s length transaction. Revaluations An independent registered valuer conducts the valuations on a systematic basis with sufficient regularity to ensure that the carrying value does not differ materially from fair values and at least once every three years. All revalued assets are assessed annually to ensure that they do not differ materially from their fair values. If there is a material difference, then the off-cycle asset classes are revalued. Accounting for Revaluations Palmerston North Airport Limited accounts for revaluations on a class of assets basis. The results of revaluing are credited or debited to an asset revaluation reserve for that class of asset. Where this results in a debit balance in the asset revaluation reserve, this balance is expensed in the profit and loss account. Any subsequent increase on revaluation that offset a previous decrease in value recognised in the profit and loss account will be recognised first in the profit and loss account up to the amount previously expensed, then credited to the revaluation reserve for that class of asset.
Palmerston North Airport Limited Annual Report 2014 27 Additions The cost of an item of property, plant and equipment is recognised as an asset only when it is probable that future economic benefit or service potential associated with the item will flow to the Company and the cost can be measured reliably. Where an asset is acquired at no cost, or for a nominal cost, it is recognised at fair value when control over the asset is obtained. Disposals Gains and losses on disposal are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposal are included in the profit and loss account. When revalued assets are sold, the amount included in revaluation reserve in respect of those assets is transferred to retained earnings. Subsequent cost Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to the company and the cost of the item can be measured reliably. The costs of day to day servicing of property, plant and equipment are recognised in the profit and loss account as they are incurred. Depreciation Depreciation is provided on a straight-line basis on all items of property, plant and equipment other than land at rates calculated to allocate the cost of the assets over their estimated useful lives. The useful lives and associated depreciation rates of the major categories have been estimated as follows:
Land Improvements 99 years Roading & Carparks 2 - 99 years Buildings & Building services 8 - 99 years Runway, Taxiways, Aprons 2 - 99 years Plant and Equipment 2 - 50 years Furniture & Fittings 3 - 99 years Computer Equipment 3 - 6 years Motor Vehicles 5 years Land and capital work in progress are not depreciated. The total cost of capital work in progress is transferred to the fixed assets system upon its completion or availability for use, and then depreciated. (d) Intangible Assets Internally generated intangible assets Cost associated with the development of the Company’s web-site are recognised as an intangible asset and are capitalised on the basis of the cost incurred to bring to use the intangible asset. The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised. The amortisation charge for each period is recognised in the surplus or deficit. The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows: Website Development 4 years 25%
28 Palmerston North Airport Limited Annual Report 2014 Goodwill on business combination is subjected to an impairment test annually with the impairment written off in the Profit and Loss Account. Software acquisition Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring the specific software to use. Costs associated with maintaining computer software are recognised as and when incurred. Staff training costs are recognised as an expense when incurred. Software amortisation Computer software licenses are amortised on a straight line over their useful life. Amortisation begins when the asset is available for use and ceases when the asset is disposed of. The amortisation charge is recognised in the profit and loss account. (e) Trade and Other Receivables Accounts receivable are stated at their expected realisable value after writing off any known bad debts and providing for any doubtful debts. Trade receivables are due for settlement no more than 60 days from the date of recognition. Impairment of trade receivables is reviewed on an ongoing basis. Debts, which are known to be uncollectible, are written off. A provision for doubtful receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement. (f) Impairment of Non-Financial Assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment annually. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Where the future economic benefits of an asset are not primarily dependent on the asset’s ability to generate net cash inflows, and where the Company would, if deprived of the asset, replace its remaining future economic benefits, value in use is determined as the depreciated replacement cost of the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). For assets not carried at revalued amount the total impairment loss is recognised in the profit and loss account. The reversal of an impairment loss on revalued asset is credited to the revaluation reserve. However, to the extent that impairment loss for that class of asset was previously recognised in the profit and loss account, a reversal of the impairment loss is also recognised in the profit and loss account. (g) Inventories Inventories are stated at the lower of net realisable value or cost, and include any costs associated with bringing the inventories to their current location and condition. The cost of the inventory is determined using the first in first out method. Where inventories are acquired at no cost or at nominal value the cost will be deemed to be the current replacement cost at the date of acquisition. The amount of any write-down for the loss of service potential or cost to net realisable value is recognised in the statement of financial performance in the period of the write-down.
Palmerston North Airport Limited Annual Report 2014 29 (h) Cash and Cash Equivalents Cash and Cash Equivalents includes cash on hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less. Transactions in foreign currencies are converted at the New Zealand rate of exchange applicable at the date of transaction. At balance date, foreign monetary assets and liabilities are translated at the closing rate based on the Bank of New Zealand’s reported closing rate. Any net exchange differences of foreign currency are recognised in the Profit and Loss account. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. (i) Income Tax Income tax expense in relation to the surplus or deficit for the period comprises current tax and deferred tax. Current tax is the amount of income tax payable based on the taxable profit for the current year, plus any adjustments to income tax payable in respect of prior years. Current tax is calculated using rates that have been enacted or substantively enacted by balance date. Deferred tax is the amount of income tax payable or recoverable in future periods in respect of temporary differences and unused tax losses. Temporary differences are differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences or tax losses can be utilised. Deferred tax is not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of an asset and liability in a transaction that is not a business combination, and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax is recognised on taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the company can control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, using tax rates that have been enacted or substantively enacted by balance date. Current tax and deferred tax is charged or credited to the statement of financial performance, except when it relates to items charged or credited directly to equity, in which case the tax is dealt with in equity. (j) Goods and Services Tax All items in the financial statements are stated exclusive of Goods and Services Tax (GST) with the exception of receivables and payables, which are stated, with GST included. Where GST is irrecoverable as an input tax then it is recognised as part of the related asset or expense. The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD) is included as part of receivables or payables in the balance sheet. The net GST paid to, or received from the IRD, including the GST relating to investing and financing activities, is classified as an operating cash flow in the statement of cash flows. Commitments and contingencies are stated exclusive of GST.
30 Palmerston North Airport Limited Annual Report 2014 (k) Employee Entitlements Employee entitlements for salaries and wages payable and annual leave as at balance sheet date are accrued and recognised as a liability in the Balance Sheet. The liability is based on actual entitlements calculated at current rates of pay. The Company recognises a liability for sick leave to the extent that compensated absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year. The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent the Company anticipates it will be used by staff to cover those future absences. The Company had no long service or retirement leave obligations as at 30 June 2014. Superannuation schemes Obligations for contributions to KiwiSaver are accounted for as contributions to defined Superannuation schemes and are recognised as an expense in the profit and loss account when incurred. (l) Leases Finance Leases Leases that effectively transfer to the Company and group substantially all the risks and benefits of ownership of the leased item are classified as finance leases. These are capitalised at the lower of the fair value of the asset or the present value of the minimum lease payments. The lease assets and corresponding lease liabilities are recognised in the Balance Sheet. The leased assets are depreciated over the period that the Company and group are expected to benefit from their use on a straight-line basis. Operating Leases Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases. Payments under these leases are charged as expenses in the periods in which they are incurred. (m) Financial Instruments All financial instruments are initially recognised in Balance sheet at fair value. The Company is party to financial instruments as part of its normal operation. These instruments include bank accounts, short term deposits, debtors, creditors and loans. All financial instruments are recognised in the Balance Sheet and all revenues and expenses in relation to financial instruments are recognised in the Profit and Loss Account. Interest bearing loans are initially recorded at fair value and subsequently measured at amortised cost. Loans and receivable Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance date, which are included in non-current assets. The Company’s loans and receivables comprise cash and cash equivalents, debtors and other receivables, term deposits and related party loans. After initial recognition they are measured at amortised cost using the effective interest method less impairment. Gains and losses when the asset is impaired or derecognised are recognised in the profit and loss account.
Palmerston North Airport Limited Annual Report 2014 31 (n) Statement of Cash Flows Cash and Cash Equivalents means cash balances on hand, held in bank accounts and demand deposits / investments in which the Company invests as part of its day-to-day cash management, with a maturity of less than three months. Operating activities include cash received from all income sources of the Company and records the cash payments made for the supply of goods and services. Investing activities are those activities relating to the acquisition and disposal of non-current assets. Financing activities comprise the change in equity and debt capital structure of the Company. (o) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of liability for at least 12 months after balance sheet date. The Company and group have elected to defer the adoption of NZ IAS 23 Borrowing Costs (Revised 2007) in accordance with its transitional provisions that are applicable to public benefit entities. Consequently, all borrowing costs are recognised as an expense in the period in which they are incurred. (p) Capital Contributions Government grants related to the purchase of assets have been recognised as revenue and the carrying amount of the associated assets are recognised at full cost. (q) Critical accounting estimates and assumptions In preparing these financial statements the Company has made estimates and assumptions concerning the future. These estimates and assumptions may differ from subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations or future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below: Property, plant and equipment useful lives and residual values At each balance date the Company reviews the useful lives and residual values of its property, plant and equipment. Assessing the appropriateness of useful life and residual value estimates of property, plant and equipment requires the Company to consider a number of factors such as the physical condition of the asset, expected period of use of the asset by the Company, and expected disposal proceeds from the future sale of the asset. An incorrect estimate of the useful life or residual value will impact on the depreciable amount of an asset, therefore impacting on the depreciation expense recognised in the statement of financial performance, and carrying amount of the asset in the statement of financial position. The Company minimises the risk of this estimation uncertainty by: • Physical inspection of assets; • Asset replacement programs; • Review of second hand market prices for similar assets; and • Analysis of prior asset sales. The Company has not made significant changes to past assumptions concerning useful lives and residual values. The carrying amounts of property, plant and equipment are disclosed in note 16.
32 Palmerston North Airport Limited Annual Report 2014 (r) Provisions Provisions for future expenditure, as a result of past event, and of uncertain amount or timing are only recognised when it is probable that the obligation will materialise and the extent of the obligation can be reliably estimated. Provisions are not recognised for future operating loses. Provisions are measured at the present value of the expenditure to be required to settle the obligation using a pre-tax discount rate. The increase in provision due to passage of time is recognised as a finance cost. (s) Equity Equity is measured through the following components: • Retained Earnings; • Paid in Capital; • Asset revaluation reserve; Asset revaluation reserves This reserve relates to the revaluation of land and buildings to fair value.
2014 2014 2014 2013 Actual Amended SOI Actual SOI 4. ANALYSIS OF OPERATING REVENUE Landing, Departure & Facility Fees 2,565,891 2,567,629 2,567,629 2,508,860 Car Park, Rent & Advertising 2,086,675 2,064,308 2,064,308 1,968,249 Other 160,579 65,063 65,063 106,976 Interest 5,262 9,000 9,000 5,715 4,818,407 4,706,000 4,706,000 4,589,800
5. OTHER OPERATING EXPENSES Rates 351,937 318,000 318,000 337,402 Power & Insurance 330,790 282,505 282,505 288,614 Repairs & Maintenance 496,133 403,495 403,495 554,890 1,178,860 1,004,000 1,004,000 1,180,906
6. AUDIT FEES Fees are for Audit of Financial Statements Palmerston North Airport Limited 25,500 26,500 26,500 25,583 Disbursements 1,000 - - - Freight Gate Limited 1,500 1,500 1,500 1,500 28,000 28,000 28,000 27,083 No other remuneration was paid or is payable to the auditor.
Palmerston North Airport Limited Annual Report 2014 33 2014 2014 2014 2013 Actual Amended SOI Actual SOI 7. EMPLOYEE EXPENSES Salaries & Wages 652,007 764,511 764,511 688,195 Employer Contribution to Kiwi Saver 14,292 6,742 6,742 9,432 Movement in Employee Entitlements (8,820) 54,000 54,000 3,022 657,479 825,253 825,253 700,649
8. FINANCE COSTS Interest on Secured Long Term Loans 382,930 411,500 411,500 408,709 382,930 411,500 411,500 408,709
9. TAXATION: Operating Surplus (deficit) before taxation 755,923 846,000 846,000 708,918
Taxation thereon @ 28% 211,658 236,500 236,500 198,497 plus (less) tax effect of: - permanent differences/non-deductible expenditure - - - - prior year under/(over) provision 24,964 - - (86,450) - deferred tax adjustment for the year (25,560) - - 104,988 Tax expense for the year 211,062 236,500 236,500 217,035
Components of Tax Expense Current Tax Expense 229,488 236,500 236,500 179,112 Prior year adjustments 24,964 - - (86,450) Deferred Tax Expense (43,390) - - 124,373 Total Tax Expense 211,062 236,500 236,500 217,035
During the year the company received an additional $206,600 tax refund as a result of the Palmerston North City Council tax losses being offset against the company’s tax liability (2013: $131,773). The tax refunds received were paid to the Palmerston North City Council.
10. CASH & CASH EQUIVALENTS Current Account - 289,259 110,050 13,393 Cash on hand 3,545 - - 1,000 Foreign Currency on Hand - - - - Short Term Investment Account 482,862 - - 329,911 Total 486,407 289,259 110,050 344,304
The interest rate and currency risks on these balances are detailed in note 26.
34 Palmerston North Airport Limited Annual Report 2014 Cash & cash equivalents and overdrafts include the following for the purposes of the Statement of Cash Flow:
2014 2013 Actual Actual Current Account - 13,393 Cash on hand 3,545 1000 Short Term Investment Account 482,862 329,911 Bank Overdraft (note 15) (27,376) - Total 459,301 344,304
2014 2014 2014 2013 Actual Amended SOI Actual SOI 11. TRADE ACCOUNTS AND OTHER RECEIVABLES Debtors & Other Receivables 357,652 300,762 300,762 331,773 Receivables from related party - - - 743 Provision for impairment - - - - Total 357,652 300,762 300,762 332,516
Debtors and other receivables are non-interest bearing and receipt is normally on 30-day terms. Therefore, the carrying value of debtors and other receivables approximates their fair value. As at 30 June 2014 and 2013, all overdue receivables were assessed for impairment and appropriate provisions applied as detailed below: 2014 Gross Impairment Gross Current to 1 month 322,437 - 322,437 1 to 2 months 26,409 - 26,409 2 to 3 months 6,582 - 6,582 3 months and over 2,224 - 2,224 Total 357,652 - 357,652
2013 Gross Impairment Gross Current to 1 month 312,121 - 312,121 1 to 2 months 10,819 - 10,819 2 to 3 months 9,576 - 9,576 3 months and over - - - Total 332,516 - 332,516
The provision for impairment is based on our assessment on specific debtors in our pool of debtors.
Palmerston North Airport Limited Annual Report 2014 35 Movements in the provision for impairment of receivables are as follows:
2014 2013 Actual Actual
Balance at 01 July - 25,457 Additional Provisons - - Provsions Reversed - (6,208) Receivables Written Off - (19,249) Total - -
Palmerston North Airport Limited holds no collateral or other credit enhancements for financial instruments that give rise to credit risk, including those instruments that are overdue or impaired.
2014 2014 2014 2013 Actual Amended SOI Actual SOI 12. INVENTORY Internet Cards 63 - - - Total 63 - - -
Palmerston North Airport Limited does not hold any inventories that are subject to retention of title clauses and no inventories are pledged as security for liabilities. 2014 2014 2014 2013 Actual Amended SOI Actual SOI 13. TRADE ACCOUNTS PAYABLE Trade Accounts Payable 149,319 115,000 115,000 170,023 Payables to Related Party 2,829 5,000 5,000 2,242 Total 152,148 120,000 120,000 172,265
All trade accounts payable are non-interest bearing and are normally settled on 30-day terms. The carrying amounts of trade accounts payable are the contractual amounts and approximate their fair value.
2014 2014 2014 2013 Actual Amended SOI Actual SOI 14. EMPLOYEE BENEFIT LIABILITIES Accrued Pay (1,865) 0 0 11,042 Annual Leave 15,713 52,000 52,000 23,002 Sick Leave 460 2,000 2,000 1,991 Total 14,308 54,000 54,000 36,035
36 Palmerston North Airport Limited Annual Report 2014 2014 2014 2014 2013 Actual Amended SOI Actual SOI 15. BORROWINGS Term Borrowings 5,700,000 5,800,000 5,300,000 5,000,000 Current Portion of Borrowings 27,376 200,000 200,000 - Total 5,727,376 6,000,000 5,500,000 5,000,000 Interest Rates on Borrowings 5.35%- 8.3% 6.7%-9.23% 6.7%-9.23% 4.9%-8.2%
Registered mortgage over property owned by the Company secure the $5.7 million borrowings from Bank of New Zealand. This includes existing perfected security interest in all present and after acquired property of Palmerston North Airport Limited. Refer to Note 16 for the carrying value of the secured assets at balance date. The company is not to sell, transfer or encumber company assets over $50,000 without Bank of New Zealand’s prior consent. The Company has an approved overdraft facility of $100,000. The Company raises long term borrowings predominantly at fixed rates under a customised average rate loan (CARL) facility. The Company’s portfolio of debt is structured with a view to minimising interest rate risk and maximising certainty of the Company’s debt servicing costs in the current financial year. Maturity Analysis and effective interest rates The following is a maturity analysis of the Company’s borrowings. There are no early repayment options. Maturity Analysis and effective interest rates 2014
2014 Weighted Carrying Contractual average Amount Cash flow Loans Due interest rate
Between 1 & 5 years 7.2% 5,727,376 7,705,692 After five years - - Total 5,727,376 7,705,692
2013
After five years 7.51% 5,000,000 6,943,787 Total 5,000,000 6,943,787
The carrying value of borrowings is materially consistent with their fair value. Contractual Cash Flow calculation has been based on the assumption that as fixed loan rates mature and are re-fixed the interest rates remain the same. The same assumption is used for the floating component of the loan.
Palmerston North Airport Limited Annual Report 2014 37 16. PROPERTY, PLANT AND EQUIPMENT Infra- Plant & Furniture Computer Motor Land Buildings structure Equipment & Fittings Equipment Vehicles Total Balances 1 July 2013
Cost / Valuation 21,351,000 11,199,914 14,952,366 1,732,896 521,621 124,176 9,778 49,891,751
Accumulated Depreciation - (222,902) (5,213,441) (1,068,129) (263,702) (99,151) (9,778) (6,877,103)
Carrying Amount 21,351,000 10,977,012 9,738,925 664,768 257,919 25,025 - 43,014,648
Movements for the year Additions - 37,403 1,290,023 399,613 1,419 5,651 - 1,734,109
Disposals - - (17,945) (17,315) - - - (35,260)
Disposals - Accumulated Dep. - 14,655 - - - 14,655
Depreciation for the Year - (234,022) (350,093) (67,252) (38,819) (11,178) - (701,364)
Dep. Reversal on Revaluation ------
Closing Balances 30 June 2014 Cost/Revaluation 21,351,000 11,237,321 16,224,444 2,115,194 523,040 129,827 9,778 51,590,605
Accumulated Dep. - (456,924) (5,563,534) (1,120,726) (302,521) (110,329) (9,778) (7,563,811)
Carrying Amount 21,351,000 10,780,397 10,660,910 994,469 220,519 19,498 - 44,026,791
Capital work in progress included at cost 30-Jun-14 - 57,464 492,172 - - - - 549,636
Balances 1 July 2012
Cost / Valuation 21,351,000 11,066,944 14,575,055 1,764,137 555,475 124,701 9,778 49,447,090
Accumulated Depreciation - - (4,930,817) (1,076,653) (310,189) (95,430) (9,778) (6,422,867)
Carrying Amount 21,351,000 11,066,944 9,644,238 687,484 245,286 29,271 - 43,024,223
Movements for the year Additions - 132,970 426,844 24,913 48,970 5,038 - 638,735
Disposals - - (49,533) (56,154) (82,824) (5,563) - (194,073)
Disposals - Accumulated Dep. - - 49,533 54,723 80,839 6,165 - 191,260
Depreciation for the Year - (222,902) (332,157) (46,199) (34,352) (9,886) - 645,496
Dep. Reversal on Revaluation ------
Closing Balances 30 June 2013 Cost/Revaluation 21,351,000 11,199,914 14,952,366 1,732,896 521,621 124,176 9,778 49,891,752
Accumulated Dep. - (222,902) (5,213,441) (1,068,129) (263,702) (99,151) (9,778) (6,877,102)
Carrying Amount 21,351,000 10,977,012 9,738,925 664,768 257,919 25,025 - 43,014,650
Capital work in progress included at cost 30-Jun-13 - 55,043 128,800 - - - - 183,843
38 Palmerston North Airport Limited Annual Report 2014 Land and Buildings Fair Value Specialised buildings are valued at fair value using depreciated replacement cost because no reliable market data is available for such buildings. Depreciated replacement cost is determined using a number of significant assumptions. Significant assumptions include: The replacement asset is based on the reproduction cost of the specific assets with adjustments where appropriate for obsolescence due to over-design or surplus capacity. The replacement cost is derived from recent construction contracts of similar assets and Property Institute of New Zealand cost information. The remaining useful life of assets is estimated. Straight-line depreciation has been applied in determining the depreciated replacement cost value of the asset. Non-specialised buildings are valued at fair value using market-based evidence. Market rents and capitalisation rates were applied to reflect market value. The most recent valuation was performed by Messrs. B D Mainwaring, ANZIV,SPINZ, and H G Thompson, ANZIV,SPINZ, of Blackmore & Associates, effective 30 June 2012. Property Plant and Equipment pledged as security on borrowings Land and Buildings with a carrying amount of $27,875,000 (2013 – $27,875,000) has been pledged as security for the borrowings in note 15.
Website Development Total 17. INTANGIBLE ASSETS Balances 1 July 2013 Cost / Valuation 26,419 26,419 Accumulated Depreciation (1,981) (1,981) Carrying Amount 24,438 24,438
Movements for the year Additions - - Disposals - - Revaluation Writedown - - Reclassification of Renovations - - Disposals - Accumulated Dep. - - Amortisation for the Year (6,728) (6,728) Dep. Reversal on Revaluation - - Closing Balances 30 June 2014 Cost/Revaluation 26,419 26,419 Accumulated Dep. (8,709) (8,709) Carrying Amount 17,710 17,710 Capital work in progress included at cost 30-Jun-14 - -
Palmerston North Airport Limited Annual Report 2014 39 There are no restrictions over the title of intangible assets. No intangible assets are pledged as security for liabilities. Straight-line depreciation has been applied in determining the depreciated replacement cost value of the asset. Website Total Development
Balances 1 July 2012 Cost / Valuation 14,602 14,602 Accumulated Depreciation - - Carrying Amount 14,602 14,602
Movements for the year Additions 11,817 11,817 Amortisation for the Year (1,981) (1,981) Dep. Reversal on Revaluation - - Closing Balances 30 June 2013 Cost/Revaluation 26,419 26,419 Accumulated Dep. (1,981) (1,981) Carrying Amount 24,438 24,438 Capital work in progress included at cost 30-Jun-14 - -
Property, Plant & Employee Other Equipment Entitlements Provisions Total 18. DEFERRED TAX (ASSETS)/LIABILITIES: Balance at 1 July 2013 2,885,746 (9,629) - 2,876,117 Charged to Profit and Loss - Current Year (48,564) 7,443 (2,269) (43,390) Balance at 30 June 2014 2,837,182 (2,186) (2,269) 2,832,727
Balance at 1 July 2012 2,766,957 (6,152) (9,061) 2,751,744 Charged to Profit and Loss - Current Year 118,789 (3,477) 9,061 124,373 Balance at 30 June 2013 2,885,746 (9,629) - 2,876,117
2014 2014 2014 2013 Actual Amended SOI Actual SOI 19. EQUITY: (a) Share Capital 9,195,000 Ordinary Share Capital at 30 June 9,380,400 9,380,400 9,380,400 9,380,400 Closing Balance 9,380,400 9,380,400 9,380,400 9,380,400
40 Palmerston North Airport Limited Annual Report 2014 All shares carry equal voting rights and the right to any share in surplus on winding up of the Company. None of the shares carry fixed dividend rights.
2014 2014 2014 2013 Actual Amended SOI Actual SOI (b) Retained Earnings: Opening Balance 15,961,674 16,034,219 16,034,068 15,662,886
Net Operating Surplus 544,861 609,500 609,500 491,883 Dividends Paid during year (196,753) (243,800) (243,800) (193,095)
Closing Balance 16,309,782 16,399,919 16,399,768 15,961,674
(c) Proposed Dividends: The Directors having satisfied the solvency test have declared a fully imputed dividend of 2.37 cents per $1 paid up share capital (exclusive of any premium on issue) as at 30 June 2014 representing $ 217,921 for the 12 months ending 30 June 2014, (a dividend 2.1 cents per $1 paid up share capital representing $196,753 was declared for the 12 months ending 30 June 2013).
2014 2014 2014 2013 Actual Amended SOI Actual Note SOI (d) Asset Revaluation Reserve: Opening Balance 10,133,214 10,133,214 10,133,214 10,133,214 Revaluation movement - Land 16 - - - - Buildings 16 - - - - Less Deferred Taxation 17 - - - Movement - Buildings Closing Balance 10,133,214 10,133,214 10,133,214 10,133,214
2014 2013 Actual Actual Asset Revaluation Reserve Consists of Opening Balance Land 9,325,398 9,325,398 Building 807,816 807,816 10,133,214 10,133,214
Palmerston North Airport Limited Annual Report 2014 41 2014 2014 2014 2013 Actual Amended SOI Actual SOI 20. CASH FLOW RECONCILIATION: Net Surplus after taxation 544,861 609,500 609,500 491,883
Add / (Less) Non-cash items: Work in progress items subsequently expensed 32,356 Depreciation 708,092 711,500 711,500 647,477 L o s s o n s a l e o f a s s e t s 2,069 2,812 D e f e r r e d t a x m o v e m e n t (43,990) - - 124,373
Net Movements in Working Capital: (Increase) / Decrease in Trade Accounts (25,136) (13) (13) (28,978) Receivable, (Increase)/ Decrease in Accrued Revenue & (31,362) 12,229 12,229 6,381 Prepayments (Increase) / Decrease in Inventory (63) 6,725 6,725 10,472 Increase/(Decrease) in Accounts Payable & 42,513 66,665 66,456 (134,416) Accruals Increase/(Decrease) in Provision for Taxation 130,505 17,218 17,218 (39,133) Net Cash Flow from Operating Activities 1,359,845 1,423,824 1,423,615 1,080,871
21. IMPUTATION CREDIT ACCOUNT: Imputation credits available for subsequent report periods are $1,947,078 (*2013: 2,103,722) No adjustment has been made for credits associated with tax payable due to uncertainties regarding tax loss transfers from entities in the group.
22. RELATED PARTY TRANSACTIONS Palmerston North City Council (PNCC) holds 100% of the issued shares of the Company. The Company received services from PNCC during the 12 months ended 30 June 2014 for $342,642 exclusive of GST none of which related to capital expenditure (2013: $330,453 exclusive of GST none of which related to capital expenditure). In addition a tax loss offset of $ 728,842 resulted in a tax refund of $204,076 for the 2012/13-tax year. The tax loss offset for 2011/12 was $470,617 and resulted in a $131,773 tax refund. The tax refunds were paid to PNCC. The Company provided services to PNCC during the 12 months ended 30 June 2014 for $30,136 exclusive of GST. (2013: $32,833) Other than the tax loss, all transactions were conducted on normal commercial terms. The Company owed PNCC $2,460 exclusive of GST as at 30 June 2014, (the balance owing, as at 30 June 2012 was $2,243). PNCC owes the Company $0 inclusive of GST as at 30 June 2014, (the balance owing as at 30 June 2012 was $564).
42 Palmerston North Airport Limited Annual Report 2014 2014 2013 Other Related Party Transactions - Details:
Related Party Transaction Services provided to Ezibuy Limited 1,317 10,457 Ezibuy Limited owed the Company $179 in June 2013
Relationship of these parties to the Company is shown in Directors interests section on page 13.
Key Management Personnel - Remuneration:
Directors and Key Management Personnel Salaries & other short-term employee benefits 509,402 548,429 Post-employment benefits - - Other long-term benefits - -
Termination benefits - - Total 509,402 548,429
Key Management Personnel include all Directors, the Chief Executive and members of the management team.
2014 2013 23. COMMITMENTS Capital Commitments The Company has no capital commitments as at 30 June 2014. Commitments at 30 June 2013 was nil.
Operating Commitments as Lessee Less than 1 Year 27,968 16,501 Between 1 and 5 Years 8,771 11,879 Over 5 Years - - Total 36,739 28,380 These commitments are GST exclusive.
Operating Commitments as Lessor Less than One Year 529,440 722,424 Between 1 and 5 Years 706,680 969,184 Over 5 Years 483,044 538,114 Total 1,719,164 2,229,722
Palmerston North Airport Limited Annual Report 2014 43 2014 and 2013 commitments have been calculated until the end of the current right of renewal, or end of the contract, which ever comes first . These commitments relate to property leases, advertising, and rental agency contracts and are GST exclusive. There are other ongoing leases amounting to $281,892 per annum that are on a month to month base (2013: 67,786).
24. CONTINGENCIES The Company had no contingent assets or liabilities as at 30 June 2014 and 2013.
25. MAJOR VARIANCES EXPLAINED
Account Actual Budget/SOI Variance Notes
(a) Variances to Amended SOI Increase in revenue due to higher rates and Operating utilities collection, offset by an increase in rates 4,818,407 4,706,000 112,407 Revenue and power operating expenses.
A major focus was placed on airside Operating maintenance. Rates power and insurance were 1,655,363 1,497,500 (157,863) Expense all higher than budgeted.
Employees costs were much lower as a result of restructuring of the corporate office and an on- going vacancy. Reduced employee costs were partially offset by increased consultancy costs Total Admin 1,316,099 1,239,500 (76,599) around District Plan changes and noise contour modeling. An increased spend in marketing around regional vistors.
Cash and Cash Equivalents held were higher Current 886,915 605,698 281,217 than anticpated further drawn down borrowings. Assets Higher than budgeted trade payables due to Current 575,293 706,054 130,761 marketing tasks undertaken in the period. Liabilities CAPEX spend to budget for 2014 was higher Property, than budgeted. Whilst a planned property Plant, development did not go ahead, further capital Equipment 44,044,501 44,565,633 521,132 expenditure was undertaken on car park & Intangible automation. The budgeted closing position was Assets overstated.
Lower level of term debt at the end of 2014 as a result of the flexible debt structure along with Term 5,700,000 5,800,000 100,000 reduced CAPEX spend to budget. Planned Borrowings development did not go ahead.
Dividends Lower payment due to Net Profit after Tax being 196,753 213,802 17,049 Paid below SOI.
44 Palmerston North Airport Limited Annual Report 2014 Account Actual Budget/SOI Variance Notes
(b) Variances to SOI Increase in revenue due to higher rates and Operating utilities collection, offset by an increase in rates 4,818,407 4,706,000 112,407 Revenue and power operating expenses.
A major focus was placed on airside Operating maintenance. Rates power and insurance were 1,655,363 1,497,500 (157,863) Expense all higher than budgeted.
Employees costs were much lower as a result of restructuring of the corporate office and an on- going vacancy. Reduced employee costs were partially offset by increased consultancy costs Total Admin 1,316,099 1,239,500 (76,599) around District Plan changes and noise contour modeling. An increased spend in marketing around regional vistors.
Cash and Cash Equivalents held were higher Current 886,915 426,488 460,427 than anticpated further drawn down borrowings. Assets Higher than budgeted trade payables due to Current 575,293 705,995 130,702 marketing tasks undertaken in the period. Liabilities
Property, CAPEX spend to budget for 2014 was higher Plant, than budgeted. Further capital expenditure Equipment 44,044,501 44,244,633 200,132 was undertaken on car park automation. The & Intangible budgeted closing position was overstated. Assets Higher level of debt at the end of 2014, not all capital expenditure had been undertaken at Term 5,700,000 5,300,000 (400,000) year end and the balance of the drawn down Borrowings borrowing is held in cash and cash equivalents.
Dividends Lower payment due to Net Profit after Tax being 196,753 213,802 17,049 Paid below SOI.
Palmerston North Airport Limited Annual Report 2014 45 Rating* 2014 2013 26. FINANCIAL INSTRUMENTS The accounting policies for financial instruments have been applied to the line items below Financial Assets Cash & Cash Equivalents AA- 486,407 344,304 Trade Receivables 357,652 332,516 Total Financial Assets 844,059 676,820 * Standard & Poor’s Rating
Financial Liabilities Trade Accounts & Other Payable 385,742 322,537 Borrowings - Secured Loans 5,727,376 5,000,000 Total Financial liabilities 6,113,118 5,322,537
Palmerston North Airport Limited has a Finance and Treasury policy to manage the risks associated with financial instruments. The Company is risk averse and seeks to minimise exposure from its treasury activities. The Finance and Treasury policy do not allow any transactions that are speculative in nature to be entered into. Interest Rate Risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. This could particularly impact on the cost of borrowing or the return on investments.
2014 2013 Current and Call Account 0 – 3.15 % 0 – 1.75 % The interest rates on the Company’s borrowings are disclosed in note 15.
Interest Rate Sensitivity
-100bps +100bps Current and Call Account Profit Equity Profit Equity (4,829) 0 4,829 0
The Company has $482,862 on current and call account as at 30 June 2014 (2013: $344,304). A plus or minus 1.0% movement in interest rate basis points (bps) has an effect on interest income of $4,829. The Company has no other short-term deposits as at 30 June 2014 (2013: nil). Borrowings 74% of borrowings are on fixed term and will not be affected by movements in interest rates. $1,500,000 is floating (2013: $800,000) and at balance date there was a trading overdraft of $27,376. A plus or minus 1.0% movement in interest rate basis points (bps) has an effect on interest income of $15,273.
-100bps +100bps Borrowings Profit Equity Profit Equity (15,273) 0 15,273 0
46 Palmerston North Airport Limited Annual Report 2014 Currency Risk The Company has no foreign exchange currency. Credit Risk Financial instruments that potentially subject the Company to credit risk principally consist of cash and short term investments and trade accounts receivables. The Company invests in high credit quality financial instruments and limits the amount of credit exposure to any one financial institution. Outside of the Company’s current provider the Company only invests in NZ registered commercial banks with a Standard & Poor’s Ratings of at least AA. Accordingly, the Company does not require any collateral. Maximum exposures to credit risk are the amounts disclosed under the financial instruments category and are net of any recognised provision for losses on these financial instruments. Concentrations of Credit Risk There is a limited base of customers for the services provided by the Company. As at 30 June 2014, 81% of total receivables are from 11 customers. (81% of total receivables were from 11 customers as at 30 June 2013) All of the 81% is considered to be fully recoverable. The Company has $482,862 on deposit with Bank of New Zealand (2013: $329,911). The Company is not exposed to any other concentrations of credit risk. Credit Facilities The Company has no credit facilities other than the normal 30-day trading terms. Fair Values The method and assumption used is that the carrying amount in the financial statements reflects the estimated fair value of the financial instruments including receivables, bank and investments, accounts payable and term loans. Liquidity Risk Liquidity risk is the risk that the Company encounters difficulty raising liquid funds to meet commitments as they fall due. Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and ability to close out market positions. The Company aims to maintain flexibility in funding by keeping committed credit lines available. The Company has an overdraft facility of $100,000. There are no restrictions on the use of this facility.
27. CAPITAL MANAGEMENT The Company’s capital is its equity, which comprises paid in share capital and retained earnings. Equity is represented by net assets. The Company’s constitution requires shareholder approvals to carry on any business other than the operation of Palmerston North Airport. The subsidiary company, FreightGate Limited was formed with the approval of shareholders. The PNCC has by resolution exempted Freightgate Limited pursuant to s7(3) of the Local Government Act subject to certain conditions. The Company’s approach to the management of capital is outlined in the Statement of Intent, including performance targets to achieve returns on assets, whilst remaining a going concern and meeting the requirements of the Companies Act.
28. EVENTS AFTER BALANCE DATE There are no significant events after the balance sheet date.
Palmerston North Airport Limited Annual Report 2014 47 Independent Auditor’s Report TO THE READERS OF PALMERSTON NORTH AIRPORT LIMITED AND GROUP’S FINANCIAL STATEMENTS AND STATEMENT OF SERVICE PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2014 The Auditor General is the auditor of Palmerston • the statement of service performance of the North Airport Limited (the company) and group. The company and group on pages 16 to 18: Auditor General has appointed me, Debbie Perera, • complies with generally accepted using the staff and resources of Audit New Zealand, accounting practice in New Zealand; and to carry out the audit of the financial statements and statement of service performance of the company • gives a true and fair view of the and group on her behalf. achievements measured against the performance targets adopted for the year We have audited: ended on 30 June 2014. • the financial statements of the company and group on pages 21 to 47, that comprise the OTHER LEGAL REQUIREMENTS statement of financial position as at 30 June 2014, the statement of comprehensive income, In accordance with the Financial Reporting statement of changes in equity and statement of Act 1993 we report that, in our opinion, proper accounting records have been kept by the cash flows for the year ended on that date and company and group as far as appears from an the notes to the financial statements that include examination of those records. accounting policies and other explanatory information; and Our audit was completed on 20 August 2014. This is the date at which our opinion is expressed. • the statement of service performance of the company and group on pages 16 to 18. The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board of Directors and our responsibilities, and we explain OPINION our independence. Financial statements and statement of service performance BASIS OF OPINION In our opinion: We carried out our audit in accordance with the • the financial statements of the company and Auditor General’s Auditing Standards, which group on pages 21 to 47: incorporate the International Standards on Auditing (New Zealand). Those standards require that we • comply with generally accepted comply with ethical requirements and plan and accounting practice in New Zealand; carry out our audit to obtain reasonable assurance • give a true and fair view of the company about whether the financial statements and and group’s: statement of service performance are free from material misstatement. • financial position as at 30 June Material misstatements are differences or 2014; and omissions of amounts and disclosures that, in our • financial performance judgement, are likely to influence readers’ overall and cash flows for the year ended understanding of the financial statements and on that date; statement of service performance. If we had found
48 Palmerston North Airport Limited Annual Report 2014 material misstatements that were not corrected, we financial statements and statement of service would have referred to them in our opinion. performance that: An audit involves carrying out procedures to obtain • comply with generally accepted accounting audit evidence about the amounts and disclosures practice in New Zealand; in the financial statements and statement of service • give a true and fair view of the company and performance. The procedures selected depend on group’s financial position, financial performance our judgement, including our assessment of risks and cash flows; and of material misstatement of the financial statements and statement of service performance whether due • give a true and fair view of the company and to fraud or error. In making those risk assessments, group’s service performance achievements. we consider internal control relevant to the The Board of Directors is also responsible for such preparation of the company and group’s financial internal control as it determines is necessary to statements and statement of service performance enable the preparation of financial statements and that give a true and fair view of the matters to which statement of service performance that are free they relate. We consider internal control in order to from material misstatement, whether due to fraud design audit procedures that are appropriate in the or error. The Board of Directors is also responsible circumstances but not for the purpose of expressing for the publication of the financial statements and an opinion on the effectiveness of the company and statement of service performance, whether in group’s internal control. printed or electronic form. An audit also involves evaluating: The Board of Directors’ responsibilities arise from • the appropriateness of accounting policies the Local Government Act 2002 and the Financial used and whether they have been consistently Reporting Act 1993. applied; • the reasonableness of the significant RESPONSIBILITIES OF THE AUDITOR accounting estimates and judgements made by We are responsible for expressing an independent the Board of Directors; opinion on the financial statements and statement • the adequacy of all disclosures in the of service performance and reporting that opinion financial statements and statement of service to you based on our audit. Our responsibility arises performance; and from section 15 of the Public Audit Act 2001 and section 69 of the Local Government Act 2002. • the overall presentation of the financial statements and statement of service performance. INDEPENDENCE We did not examine every transaction, nor do When carrying out the audit we followed the we guarantee complete accuracy of the financial independence requirements of the Auditor General, statements and statement of service performance. which incorporate the independence requirements Also we did not evaluate the security and controls of the External Reporting Board. over the electronic publication of the financial Other than the audit, we have no relationship with or statements and statement of service performance. interests in the company or any of its subsidiaries. In accordance with the Financial Reporting Act 1993, we report that we have obtained all the information and explanations we have required. We believe we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion. Debbie Perera Audit New Zealand RESPONSIBILITIES OF THE BOARD OF On behalf of the Auditor General DIRECTORS Palmerston North, New Zealand The Board of Directors is responsible for preparing
Palmerston North Airport Limited Annual Report 2014 49 Historical Financial Highlights
Year ending 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004* Statement of Financial (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) Performance:
Total Revenue 4,818 4,590 4,480 4,225 3,981 4,090 5,181 5,598 5,642 5,586 5,957 Net Surplus Before Interest, 1,847 1,765 1,739 1,821 1,674 1,888 2,864 3,259 3,167 2,566 2,853 Depn, Taxation
Net Surplus Before Taxation & 756 709 684 748 501 658 1,611 2,020 1,902 1,402 1,388 Misc items Net Surplus After Taxation 544 492 496 535 327 423 1,090 1,448 1,395 837 1,201 excluding deferred tax adj.
Earnings Per $ of Paid Up Share Capital (excl. any premium 5.92c 5.35c 5.39c 5.82c 3.56c 4.61c 11.86c 20.21c 19.47c 16.30c 29.78c on issue and deferred tax adjustments)
Dividend Proposed or Paid Per $ of Paid Up Share Capital (excl. of 2.37c 2.14c 2.10c 2.30c 1.56c 1.80c 4.30c 7.00c 6.40c 6.50c 9.60c any premium on issue)
Statement of Financial Position (000) (000) (000) (000) (000) (000) (000) (000) (000) (000) (000)
Total Assets 44,904 43,727 43,878 44,645 44,664 40,828 41,057 38,708 32,614 30,220 17,697
Shareholders Funds 35,823 35,475 35,177 35,516 35,124 31,526 31,498 28,879 22,517 19,426 8,465 Share Capital paid up (excl. of 9,195 9,195 9,195 9,195 9,195 9,195 9,195 7,165 7,165 5,135 4,033 any premium on issue)
Net Asset Backing Per Share $3.90 $3.86 $3.83 $3.86 $3.82 $3.43 $3.43 $3.14 $2.45 $2.11 $0.92
Return On Shareholder Funds 1.52% 1.39% 1.41% 1.51% 0.93% 1.34% 3.46% 5.01% 6.20% 4.31% 11.30% (excl deferred tax adjustments
* 15-month transitional year to 30 June 2004. All other results are for a 12 month period. Note: Financial highlights to June 2006 were prepared under the previous NZ GAAP and not under NZ IFRS.
50 Palmerston North Airport Limited Annual Report 2014 Company Directory
DIRECTORS: Derek Walker (Chairman) Jon Nichols Ormond Stock Josie Adlam Gerard Gillespie
MANAGEMENT: David Lanham - Chief Executive Glen Pleasants - Manager Aeronautical & Infrastructure Roy Bodell - Manager Transition & Projects Zoe Palmer - Acting Manager Business Services & Secretary to the Board Angela Scott - Visitor Development Manager
TRADING BANKERS Bank Of New Zealand
LEGAL ADVISORS Cooper Rapley
AUDITORS Audit New Zealand (On behalf of the Auditor-General)
REGISTERED OFFICE: Palmerston North Airport Terminal Building Airport Drive Palmerston North
Phone: +64 6 351 4415 Fax: +64 6 355 2262 e-mail: [email protected] pnairport.co.nz
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