2020-Annual-Report.Pdf
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19|20 ANNUAL REPORT Contents Purpose Growing regional Australia by delivering bulk FY2020 in Review .................................................. 1 commodities to the world. Chairman’s Report ................................................ 2 Managing Director & CEO’s Report .............. 3 Vision The first choice for bulk commodity transport Directors’ Report ...................................................4 solutions. – Operating and Financial Review .................11 – Remuneration Report ....................................25 Values Auditors’ Independence Declaration ........ 39 Safety: We have a relentless focus towards ZEROHarm. Corporate Governance Statement .............40 People: We seek diverse perspectives. Financial Report .................................................. 46 Integrity: We have the courage to do Shareholder Information ................................110 the right thing. Glossary .................................................................. 112 Customer: We strive to be the first choice Corporate Information ....................................114 for customers. Excellence: We set and achieve ambitious goals. FY2020 in Review Result Highlights (Underlying and statutory continuing operations) ($M) FY2020 FY2019 VARIANCE Total revenue 3,064.6 2,907.6 5% EBITDA 1,467.6 1,371.6 7% EBIT 909.0 829.0 10% EBIT Statutory 1,014.4 829.0 22% NPAT 531.4 473.3 12% NPAT Statutory 605.1 473.3 28% Free cash flow (FCF) 714.7 734.4 (3%) Final dividend (cps) 13.7 12.4 10% Total dividend (cps) 27.4 23.8 15% Earnings per share (cps) 27.2 23.8 14% Return on invested capital (ROIC) 10.9% 9.7% 1.2ppt EBITDA margin (%) 47.9% 47.2% 0.7ppt Operating ratio (OR) (%) 70.3% 71.5% 1.2ppt Above Rail Tonnes (m) 262.0 258.9 1% Above Rail opex/NTK (excluding access) ($/’000 NTK) 20.9 20.3 (3%) Gearing (net debt/net debt + equity) (%) 45.1% 41.7% (3.4ppt) Performance Overview Major items Outlook › EBIT up 10% to $909.0m with: › Bulk – strong financial performance delivered › Underlying EBIT guidance for FY2021 for • Bulk up $52.6m (141%) with higher through new contracts and ongoing Group $830m to $880m. Key assumptions: revenue through new contracts and operational efficiency improvements. • Coal – flat volumes 210-220mt based benefits from ongoing efficiency Acquisition of Townsville Bulk Storage and on current view of COVID-19 impact improvements Handling (renamed Aurizon Port Services) on coal • Network up $68.5m (17%) with higher in March 2020 expands capability and • Network – revenue from the implemented offering to customers – Tariffs based on QCA approved UT5 Undertaking and non-recurrence of › Network – UT5 Undertaking approved during volume forecast of 239mt – 5% higher the FY2018 true-up that impacted FY2019 the year providing greater certainty and than FY2020 actual volumes • Coal down $4.5m (1%) with higher improved returns – CQCN volumes expected to be lower depreciation and operating costs › Coal – secured contract extensions with major than 239mt due to COVID-19's impact associated with installing additional customers during the year and now operates on coal demand, resulting in a revenue capacity to deliver contracted in all coal systems across the east coast under-recovery volume growth of Australia – Flat volumes implies a revenue under- • Other down $36.6m impacted by the sale › Completed the refinancing of Network’s recovery of approximately $50m1 of the Rail Grinding business in October bank debt facilities in June 2020, increasing – any shortfall will form part of the 2019 and the recovery of a $20.3m capacity to $1.3bn with maturities from June revenue cap in FY2023 partly offset doubtful debt in FY2019 2023 – June 2025, of which $525.0m is to by other adjustments including WACC › FCF declined 3% to $714.7m due to the cover the upcoming bond maturity • Operational efficiency improvements impact of the Cliffs termination payment remain a key driver in the business in FY2019 and FY2018 true-up adjustment • Redundancy costs included in guidance paid in FY2020 more than offsetting an (reported in 'Other' segment) improvement in cash flows from investing • No material disruptions to commodity activities (sale of Rail Grinding business) supply chains (such as adverse weather and higher Group earnings and/or COVID-19) › Final dividend 13.7cps, 70% franked, representing a payout ratio of 100% of underlying NPAT for the continuing operations, an increase of 10% › Commitment to returning surplus funds to shareholders with completion of $400.0m on market buy-back and further $300.0m targeted for FY2021 1 Based on 227mt applied to $941 MAR (excluding GAPE). FY2020 IN REVIEW 1 Chairman’s Report A message from the Chairman Aurizon has decided to pay out 100% of In February, we acknowledged the sad passing Underlying Net Profit After Tax as dividends, of our highly-respected former colleague, Dear fellow shareholders consistent with our practice for the past five John Cooper. John served on Aurizon’s Board I am pleased to report that Aurizon has years. The Board has declared a final dividend from April 2012 until May 2019 when he retired performed well during a challenging year of 13.7 cents per share, 70% franked. This will due to health reasons. John was a force for to 30 June 2020. It was a year of two very take total dividends in respect of FY2020 positive change during his time as a Director different operating periods for your Company, to 27.4 cents per share, 70% franked. During and played a key role in the Board’s focus on with the coronavirus pandemic (COVID-19) the year, we also completed a $400 million safety, people and culture as part of broader dominating the second half of FY2020. As an on-market share buy-back which is value- transformation efforts. essential service provider to the Australian accretive for shareholders. In December 2019, Dr Sarah Ryan and economy, Aurizon has continued to operate Strong progress was made on several key Mr Lyell Strambi joined the Aurizon Board throughout COVID-19, delivering safely and priorities during FY2020: as Non-Executive Directors. Sarah and Lyell reliably for our customers. The health and have brought further operational, major project, well-being of our employees has remained our › Approval from the Queensland Competition technology and transport skills and experience highest priority. A range of proactive measures, Authority for the 10-year Access Undertaking to your Board. Sarah has approximately aligned with expert health and government (UT5) for the Central Queensland Coal 30 years of international experience in the advice, has been maintained in Aurizon Network. This agreement is a major oil and gas industry. Lyell is the Chief Executive workplaces. Further detail on these measures achievement for Aurizon and the coal Officer of Melbourne Airport and has extensive is provided in Andrew Harding’s MD & CEO industry, providing long-term investment experience over more than 40 years in the report on the following page. Andrew chairs certainty for one of Australia’s most aviation and transport infrastructure sectors, the COVID-19 Crisis Management Team for the important export infrastructure assets both in Australia and overseas. We are delighted Company, with the support of our leadership and a platform for continued performance that Sarah and Lyell have joined our Board. team and Chief Medical Officer. improvement across the supply chain › Implementation of a new legal and capital As we enter FY2021, we are cognisant of the Aurizon is strongly committed to safety – structure for the Aurizon Group which continuing economic uncertainty in the markets for our employees, the customers we serve has organised the above and below-rail we serve and the inevitable headwinds that will and the communities in which we operate. businesses under the holding company. flow through to our business. We have built We were saddened by the death in December We established independent gearing strong foundations for the Company in recent 2019 of one of our employees, Hans Ah Chee, levels for each business, consistent with years by simplifying the business model and in a work motor vehicle accident. Hans was their different risk profiles, which has focussing on core services for our customers. a highly respected train driver working in our made available additional funding capacity Aurizon is well-positioned from a funding Coal business in Central Queensland and is of approximately $1.2 billion. By progressively perspective, with a strong balance sheet. missed by his colleagues. Andrew addresses adding debt over time, we can optimise the in his report the broader program of safety On behalf of the Board, I thank all employees balance sheet and unlock additional value work underway in Aurizon. across the business for their outstanding for shareholders contribution to our results this year and In terms of earnings, Aurizon delivered › Successful completion of the refinancing particularly for their efforts in the challenging Earnings Before Interest and Tax (EBIT) in of Aurizon Network’s bank facilities, environment of COVID-19. I also acknowledge FY2020 of $909 million. This was a solid result extending the maturity to 2023-2025 and the continued support of you, our shareholders. given the uncertain business environment that increasing the facility size to $1.3 billion, unfolded during the second half of FY2020. an increase of $420 million. With the While there were no significant impacts to completion of this refinancing, the Aurizon demand during this period, changes