VicTrack ANNUAL REPORT 2005-06 Contents Letter to the
Who is VicTrack?...... 1 Minister
Report from the Chairperson...... 3
Report from the Chief Executive...... 5 4 October 2006 VicTrack Commercial Services...... 6
VicTrack Property Services ...... 9 The Hon Peter Batchelor MP Minister for Transport VicTrack and the Rail Business...... 11 Level 26, Nauru House 80 Collins Street VicTrack and Asset Management...... 13 Melbourne Victoria 3000
VicTrack and Victoria’s Rail Heritage...... 15 Dear Minister I have much pleasure in submitting the Annual Report VicTrack and the Environment...... 17 for VicTrack for the period of 1 July 2005 to 30 June 2006 for your presentation to Parliament. VicTrack and its People...... 18 Yours sincerely Members of the Board...... 20
Executive Team...... 21
Corporate Governance...... 22 Elana Rubin Chairperson VicTrack’s Organisational Structure...... 24
VicTrack’s Financial Performance...... 25
Finance Report...... 26
Statutory Information...... 60
Disclosure Index and Glossary...... 61 Who is VicTrack?
VicTrack is a commercially driven and socially responsible 2005-06 Highlights organisation that, in its custodian role, protects and adds • Installed a network for the provision of closed circuit value to Government assets, primarily state rail land and television (CCTV) at principal metropolitan railway stations, infrastructure. It successfully manages around $50 million worth to provide enhanced security for the 2006 Commonwealth of projects each year, on behalf of the Victorian community. Games; VicTrack (Victorian Rail Track) was created on 1 April 1997 • Completed construction of Sherwood Park Station under section 8 of the Rail Corporations Act 1996. It is a (Warrnambool), allowing better student access to Government Business Enterprise, reporting to the Minister for Deakin University; Transport. • Undertook a new development process at Stubbs Street, Kensington that will result in a positive commercial return VicTrack is the custodian of strategic rail assets including: while also providing an ongoing revenue stream and flexibility • Land and interests in the land; for future options; • Track; • Successfully completed heritage restoration works at Ballarat • Signals; and St Arnaud stations; • Buildings and structures; • Oversaw the completion of draft vegetation management • Overhead wiring; guidelines for the rail industry; and • Power substations; • Commenced preparations for the relocation of the head office • Rolling stock; to 1010 La Trobe Street, a new high-tech precinct • Communications networks; and in Docklands. • Communications base stations.
The majority of these assets are leased to the Director of Public Transport (DPT). DPT then sub-leases the assets to various rail transport operators and track access providers.
Under the leases to DPT, VicTrack has the right to undertake commercial activities in the areas of telecommunications, property leasing and licensing, outdoor advertising and commercial property development. In undertaking its commercial activities, VicTrack must not, however, adversely interfere with transport operations.
In addition to these commercial activities, VicTrack performs a range of important social and environmental activities including proactive environmental management, maintenance of rail heritage assets and provision of leases to not-for-profit community organisations at nominal rates.
...commercially driven and socially responsible
VicTrack Annual Report 2005-06 VicTrack provides a unique rail perspective to various committees at a time where predictions indicate significant growth in rail transport into the Port of Melbourne.
...a significant year in terms of planning for the future
VicTrack Annual Report 2005-06 Report from the Chairperson
In its role as custodian of strategic rail assets, VicTrack operates Proactive environmental management plans, rail heritage across a diverse range of industry sectors. In this financial restoration and preservation, infrastructure maintenance, year, VicTrack consolidated its position within these sectors property information systems and a commitment to leasing and delivered a strong financial performance, allowing it to VicTrack land and buildings at nominal rates to not-for-profit contribute to the delivery of State Government policy objectives community organisations are just some of the activities that and provide social and environmental benefits for the enabled VicTrack to deliver a social benefit to Victoria. One of Victorian community. the key factors in VicTrack’s ongoing success will be to continue to strike a balance between these non-commercial activities and In collaboration with Government departments, particularly commercial initiatives. the Department of Infrastructure (DOI), VicTrack continued to assist Government in the delivery of key policy objectives including Growing Victoria Together, Linking Melbourne: Looking forward to 2010 and beyond Metropolitan Transport Plan and Melbourne 2030. During the year, the Government outlined its blueprint for VicTrack contributes significantly to the Victorian economy Victoria’s transport system into the future in its transport and and the community with operations in four key business areas: liveability statement Meeting our Transport Challenges. • Telecommunications sector, providing services primarily to VicTrack will work with DOI to assist in the delivery of the rail transport operators and related contractors; transport objectives outlined in this document. • Rail and transport industries, both passenger and freight; • Property management and development, providing access to In the year ahead, our head office will relocate to and developing VicTrack’s property portfolio; and 1010 La Trobe Street in the new high-tech Docklands precinct. • Rail transport infrastructure development, maintenance This relocation, which will integrate our head office people for and preservation. the first time, will provide an excellent opportunity for further enhancement of a strong and cohesive culture within VicTrack.
A positive commercial outcome This year has been one of consolidation and success for VicTrack but also a significant year in terms of planning for the It is pleasing to report that continued growth in demand for future. A clear vision for our organisational objectives to 2010 VicTrack services and expertise across all four business areas and beyond, involvement of our people in planning the move delivered a positive commercial outcome in the 2005-06 to 1010 La Trobe Street and ongoing positive cultural change financial year. provides us with great optimism when looking to the future of VicTrack. We have again achieved our bottom line revenue and operating expenditure budgets. Revenue from VicTrack’s business activities increased by eight per cent to more than $59 million. Thank you Our capital expenditure program of $50 million represents a significant investment in the state’s rail infrastructure assets for I would like to thank my fellow Directors for their the benefit of the Victorian community. contributions during the year, and on behalf of the Board, to thank John Sutton and the VicTrack people for their enthusiasm and ongoing hard work. Social and environmental sustainability
While performing these commercial activities, VicTrack also conducted a range of activities that generated social Elana Rubin and environmental benefits for the broader community. These activities were valued at around $27 million in this financial year.
VicTrack Annual Report 2005-06 VicTrack employee Chris Hogan, conducting a risk assessment at a level crossing with passive protection.
…strategically positioned to maximise commercial outcomes and fulfil our obligations to the community
VicTrack Annual Report 2005-06 Report from the Chief Executive
One of the most pleasing results of the past year has been the continued to contribute its knowledge and unique perspective significant and continued demand for VicTrack services and rail of the industry, land, operations and terminal management by industry expertise. advising private rail operators, franchisees and Federal and State Government planning, policy and project committees. A continuing Government focus on areas such as security and safety in the rail network, increasing use of public transport Delivering safer level crossings is a key Government and resultant infrastructure demands, a greater focus on the commitment. The VicTrack Asset Management Group rail network for moving freight and a burgeoning community is supporting the delivery of this objective through the interest in broadband access represent some of the changes in management of the Victorian Railway Crossing Safety Steering our operating environment influencing the growth of VicTrack. Committee’s level and pedestrian crossing upgrade programs. Asset Management also continued essential research and Over the past year, considerable attention has been given to development work into enhancing crossing safety. understanding our changing environment and its stakeholders and forward planning to ensure we are strategically positioned to maximise commercial outcomes and continue to fulfil our Fulfilling our social and obligations to the Victorian community. environmental obligations
Throughout the year, VicTrack successfully completed $3.8 million Our financial performance worth of rail heritage improvements, working with the guidance of VicTrack’s Heritage Advisory Panel. Pleasingly, we can also report Our financial performance was again very strong with cash that there has been a resurgence in prospective tenants wanting to surpluses being generated from our operating activities and net lease VicTrack’s beautiful historic railway stations and goods sheds assets increasing year-on-year. This result enabled us to pay a that have undergone extensive restoration and renovation. direct dividend to the Government of $5 million, in addition to funding a number of major state rail infrastructure initiatives. It Through its role as chair of the Victorian Rail Environment is important to note that VicTrack’s bottom line financial result Forum, VicTrack again contributed to significant progress includes a number of non-cash expenses that relate directly to in driving environmental change and best practice in the rail our role as owner and custodian of the majority of the state’s industry. VicTrack strives to take a leading position in minimising rail infrastructure and rolling stock assets. our environmental affects as well as undertaking proactive environmental work.
Reviewing performance in our four key business areas Working together, looking ahead
As well as being a key contributor to our financial performance, Many of our activities over the year have been driven by the need our Commercial Group continued to use VicTrack’s extensive asset to position our organisation for the future and I believe this hard base to develop innovative services and business solutions. An work will result in the continued growth and success of VicTrack. example of this was the valuable support provided by the Group I would particularly like to thank our people for their commitment for the 2006 Commonwealth Games through the installation of a to helping us achieve our organisational goals. I would also like to network for cctV at principal metropolitan railway stations. thank the Board, our customers, the Minister for Transport and the We recognise our management of property has a profound affect Secretary and staff of DOI for their ongoing support. on communities in many ways. To help us ensure we put VicTrack In the year ahead, I look forward to working with our people land to better use, the Property Group initiated a major project to continue our progress and deliver even greater benefits to the to develop strategic plans for all of our land by municipality. This Victorian community. change will allow us to deliver on both commercial and social obligations, an important outcome for our organisation.
VicTrack has a history of managing rail operations and maintenance, for itself and others. Our Rail Business Group John Sutton continued to successfully manage rail sites and facilities not leased to DPT, such as the Dynon Rail Precinct. Rail Business also
VicTrack Annual Report 2005-06 VicTrack Commercial Services
VicTrack continues to pursue significant growth in its commercial operations through the provision of telecommunications services primarily to the public transport sector. The VicTrack Commercial Group also manages an extensive portfolio of outdoor advertising panels in metropolitan and regional Victoria.
Highlights
• Telecommunications revenue of $18.9 million, a $1.4 million increase over the previous year; • Outdoor advertising portfolio revenue exceeded $1.8 million; • Signed long-term agreement with the Victorian Education and Research Network (VERN), to facilitate the development of a research and education network linking educational institutions throughout Victoria; Telecommunications Revenue Telecommunications Division RailMap Users VicTrack Employees ($ million) Best Practice Scorecard • Installed a carriage network for the provision of CCTV applications at principal 20 metropolitan railway stations, to provide enhanced security for the 2006 1.0 1.0 = Best Practice Benchmark
Commonwealth Games; 15 0.8 • Successfully identified and began upgrading a suitable location for VicTrack’s
disaster recovery centre and secondary data centre for the metropolitan train 10 0.6
control system; Performance 0.4 • Undertook a customer satisfaction survey to identify areas for improvement and 5 growth; and 0.2
• Continued strategic review of outdoor advertising placement, resulting in the 0 0.0 Best Practice Category construction of four new advertising panels and the decommissioning of seven older 2005-06 18.9 30 June 2006 Quality advertising panels. 2004-05 17.5 30 June 2005 Performance Management 2003-04 14.6 Communication Delivery of Service Telecommunications revenue increased RailMap allows customers and VicTrack employee numbers continue Customers stakeholders to access maps, aerial to grow to meet an increasing demand Telecommunications by $1.4 million during 2005-06. People photographs, building locations and for services and expertise. Promotion and Image other data via the internet. Using its extensive network of fixed fibre optic and copper cabling, as well as a Overall Result substantial wireless radio network, VicTrack supplies Victoria’s rail and tram operators Telecommunications’ customers continue with a diverse range of telecommunications services for rail operational purposes under to receive a high level of customer service Telecommunications Revenue Telecommunications Division RailMap Users VicTrack Employees commercial contracts. as shown through regular customer ($ million) Best Practice Scorecard satisfaction surveys. 20 Providing a range of telecommunications services 1.0 1.0 = Best Practice Benchmark
15 VicTrack’s specific telecommunications services include: 0.8 • Voice services; 10 0.6 • Call centre services; Performance • Transmission network; 0.4 5
• Wholesale network capacity; 0.2 • Radio services; and 0 0.0 • Other telephony services. Best Practice Category 2005-06 18.9 30 June 2006 Quality 2004-05 17.5 30 June 2005 Performance Management 2003-04 14.6 Communication Delivery of Service RailMap allows customers and VicTrack employee numbers continue Telecommunications revenue increased Customers by $1.4 million during 2005-06. stakeholders to access maps, aerial to grow to meet an increasing demand People photographs, building locations and for services and expertise. Promotion and Image other data via the internet. Overall Result
VicTrack employees Johann Ginger, Caroline Dowell, Kheng Goh and Ian Telecommunications’ customers continue to receive a high level of customer service Davidson discuss their customer’s requirements at a joint workshop session. as shown through regular customer satisfaction surveys.
VicTrack Annual Report 2005-06 Lisa Funnell and Erin Douglas in the VicTrack 24-hour call centre. Telecommunications services are provided primarily to the public transport sector under commercial contracts.
VicTrack Commercial Services...
Meeting the needs of our customers This partnership represents the most significant non-transport related utilisation of VicTrack’s regional fibre optic network to VicTrack is a fully integrated telecommunications carrier date. This will undoubtedly enrich educational and research dedicated to the delivery of the full suite of services identified resources and provide capability for a strong virtual presence previously. VicTrack’s team comprises a mix of industry among the VERN educational institutions in regional Victoria. professionals, technical specialists and experienced service delivery personnel who meet the needs and expectations As part of the agreement, VicTrack will enhance a section of its of customers. metropolitan broadband fibre network, improving the quality of the public transport communications system. VicTrack people provide a range of core competencies that are tailored to meet business functions and services. These competencies include: Outdoor advertising • Pre-sales solutions design; VicTrack owns and operates a substantial portfolio of • Post-sales project delivery; outdoor advertising panels that provides a significant income • Network operations; and stream for VicTrack. • Customer services. An ongoing review of outdoor advertising placement will To provide these services, VicTrack’s key telecommunications ensure that advertising is strategically positioned to maximise assets include: commercial returns while ensuring that the amenity issues of • An 800km fibre optic network that includes connections local councils and communities are met. to the regional centres of Geelong, Ballarat, Bendigo and Traralgon; • An extensive copper cable network along the entire rail Looking forward network (train and tram) including cable to customers’ premises; • Commence work on the new smartcard transport ticketing • 35 radio tower sites in metropolitan Melbourne and 120 system across Victoria, requiring a managed Wide Area base stations in regional Victoria; and Network consisting of fixed and wireless network • PABX, voice and data switches and radio systems. connectivity; • Improve the quality, range and cost effectiveness of services Improving security at metropolitan railway stations by implementing the new internet protocol network platform; A significant achievement during 2005-06 was the deployment • Continue to work with DOI on the recently announced of a carriage network for the provision of CCTV applications Metropolitan Train Radio Safety Communication System; at principal metropolitan railway stations. The project was • Conduct an extensive review of business support systems, delivered against acute time constraints in time for the new in particular customer reporting; network to provide enhanced security coverage for the 2006 • Further develop the niche services product offering to Commonwealth Games. whole-of-Government to provide access to efficient and up-to-date communications services; and Working with Government agencies • Ongoing rationalisation of outdoor advertising placement. During the year, VicTrack entered into a long-term agreement with VERN, facilitating the development of a research and education network linking educational institutions throughout Victoria.
...a fully integrated telecommunications carrier dedicated to the delivery of a full suite of services
VicTrack Annual Report 2005-06 VicTrack provides leases to councils for the beautification of open spaces.
...managing around 2,000 leases of which more than 400 are with not-for-profit community groups
VicTrack Annual Report 2005-06 VicTrack Property Services
The VicTrack Property Group manages the leasing, licencing, An important initiative completed during the year was the land assessment, sales and acquisitions, service access, land $1.5 million sale of the former storage depot in Bow Crescent, records and commercial development of VicTrack’s significant Camberwell for residential development. property portfolio. A preferred developer was appointed for the development of a valuable industrial site in Stubbs Street, Kensington. A large Highlights portion of the site will be sold to the developer with VicTrack • Revenue of $28.2 million, an eight per cent increase over retaining a number of warehouse units, providing an ongoing the previous year; revenue stream. • Facilitated the sale of land at Footscray to provide for the VicTrack continued to project manage the relocation of a freight expansion of the police station; facility at Dandenong Station to a nearby site, to facilitate • Populated RailMap with around 320 aerial images; a Transit Cities development at this location. These works • Successfully secured tenants for two heritage railway have enabled Hanson Concrete to construct a new $6 million stations; concrete batching facility adjacent to the freight facility. Other • Completed a feasibility study for the redevelopment of the commercial leasing opportunities for the precinct are being Glenferrie Road shops, one of VicTrack’s key retail sites; investigated. and • Undertook a new development process at Stubbs Street, Kensington that will result in a positive commercial return Protecting the integrity of the rail system while also providing an ongoing revenue stream and flexibility for future options. VicTrack manages requests from utility companies and other third parties seeking access to its land for service installation. In processing these requests, due consideration needs to be given to Property Group both maintaining the integrity of the rail system and the safety of rail operations. The Services team within the Property Group, VicTrack is one of the largest landowners in Victoria. The facilitated 230 third party works access applications during the majority of VicTrack’s land that is used for rail operations year. is leased to DPT for nominal rental. A major proportion of VicTrack land not needed for rail purposes is leased or licensed A key focus was the review of pipeline licence agreements. to organisations and individuals for a commercial return, or to Many oil, gas and petroleum product pipelines run for kilometres not-for-profit community groups for a nominal return. on VicTrack land and original agreements can date back to the 1950s and 1960s. VicTrack has worked with a number of During the year, the Commercial Development team was organisations to review existing licence agreements. integrated into the Property Group to allow for improved strategic property planning, increased efficiency and improved service to external parties interested in commercial opportunities for VicTrack properties.
Delivering commercial development opportunities
VicTrack identifies, evaluates and delivers commercial development opportunities for surplus land, airspace and buildings. Potential projects are assessed on the basis of their ability to provide upgrades to transport infrastructure and facilities and deliver commercial returns. The Stubbs Street, Kensington development will deliver a positive commercial return while providing an ongoing revenue stream.
VicTrack Annual Report 2005-06 VicTrack employees Don Welsh and Michael Blackburn, discuss the concept of whole-of-municipality land management plans with representatives from City of Moreland.
VicTrack Property Services...
Providing broad benefits to the community A shift to direct property management
VicTrack also assesses the suitability of land for use by To ensure a greater focus on its strategic and environmental others including councils and community organisations. obligations, VicTrack will change to a system of direct Over the year, VicTrack reviewed 200 applications for management of community group leases. This will give each purchase, lease, lease renewal or short-term occupancy of community group greater accountability for their management of VicTrack land, of which 20 related to community applications. VicTrack sites, as well as provide VicTrack with more capacity to tailor its management depending on the tenant and the purpose VicTrack granted leases to four councils for beautification of the property. of open space, covering more than 11 hectares of land. It also granted four community building leases for a range of community activities. New technology and information In excess of 100 land sales and acquisitions are in various stages management of completion. An example is the disposal of one hectare of VicTrack continued to improve information systems and data rail land in East Melbourne for the purpose of a residential during the 2005-06 financial year. RailMap, VicTrack’s development. VicTrack is working with a number of interested web-based geo-spatial information system, allows customers stakeholders to finalise this complex sale, expected early in and stakeholders to access maps and aerial photographs of rail the 2006-07 financial year. tracks, building locations, details of property boundaries, land tenure, leases and other data via the internet. It is now used regularly by more than 30 organisations, including councils and rail transport operators. Telecommunications Revenue Telecommunications Division RailMap Users VicTrack Employees ($ million) Best Practice Scorecard 20 Looking forward 1.0 1.0 = Best Practice Benchmark • As the custodian of strategic rail assets, VicTrack will 15 0.8 continue work on a major project to develop whole-of- municipality land management plans; 10 0.6 • Continue to assess development opportunities including a Performance 0.4 large site adjacent to the Somerville Railway Station and a 5
0.2 significant parcel of industrial land at Langford Street, North Melbourne; 0 0.0 Best Practice Category • Finalise a land exchange with the City of Whittlesea that 2005-06 18.9 30 June 2006 Quality will allow the city to gain land for a new arterial road and 2004-05 17.5 30 June 2005 Performance Management VicTrack to acquire land suitable for a future railway 2003-04 14.6 Communication station; and Delivery of Service RailMap allows customers and VicTrack employee numbers continue Telecommunications revenue increased Customers Further restructuring of the property management function to by $1.4 million during 2005-06. stakeholders to access maps, aerial to grow• to meet an increasing demand People photographs, building locations and for services and expertise. Promotion and Image enhance service provision. other data via the internet. Overall Result
Telecommunications’ customers continue to receive a high level of customer service as shown through regular customer satisfaction surveys.
...enhancing service provision for our stakeholders
10 VicTrack Annual Report 2005-06 VicTrack and the Rail Business
VicTrack has a long history in managing rail operations and Rail Business activities maintenance, for itself and others. Within VicTrack there is a VicTrack again boosted the usage of its two main Melbourne wealth of detailed knowledge about the industry, land, rail terminals, which saw the passage of more than 23,000 operations and management of terminals. VicTrack uses this wagons and around 11,000 containers. The use of tracks at unique perspective to provide independent advice on many Dynon, Spotswood and Newport was also promoted during the issues to private rail operators, franchisees and Federal and year and continued to serve industry requirements for storage State Government planning, policy and project committees. and holding of rolling stock. VicTrack also negotiated an arrangement with V/Line Passenger to stable part of its Highlights passenger fleet at South Dynon terminal, enabling rapid access • Completed the first year of operation of the EM100 track to Southern Cross Station. recording car under VicTrack management; The EM100 track recording car operated over the • Established transparent access arrangements for rail metropolitan and country rail networks evaluating the operators to gain entry to VicTrack’s network of rail condition of those tracks. The EM100 runs to an annual sidings; and schedule monitoring track quality, enabling VicTrack’s clients, • Continued growth and development of VicTrack Connex and Pacific National, to report on a regular basis to freight terminals. DPT. The car is also used to verify track quality after major project works such as the Regional Fast Rail project. Providing strategic advice to the rail industry Over the past year, the VicTrack Rail Business Group advised Rail safety accreditation the Australian Competition and Consumer Commission on VicTrack provides rail track access over sidings within the industry changes, and participated in the establishment of an Dynon area and at other locations within the state. To do open access regime for Victoria’s intrastate rail network. this, VicTrack is required to be accredited annually as a rail VicTrack is assisting various Victorian Freight and Logistics infrastructure provider and meet the standards of Public Council committees to identify freight efficiency improvements Transport Safety Victoria (PTSV). in Victoria by supporting work to analyse the movement of containers across the whole logistics supply chain. In doing so, VicTrack brings a new and independent rail perspective Looking forward at a time where predictions indicate significant growth in rail • Expand VicTrack’s open access arrangements on the rail transport into the Port of Melbourne. network to include Somerton and Dynon intermodal VicTrack is a member of a number of major state planning terminals, enabling improved access to facilities that support committees including: the Port of Melbourne; and • Melbourne Port@l Committee, which is charged with • Develop an intermodal freight terminal in the Dandenong area. developing the basis for an integrated port, road and rail terminal; and • The State Rail Network Master Planning Committee, which is working to achieve industry outcomes on state projects, regional rail services and operational improvements in the metropolitan freight terminals.
…assisting committees to identify freight efficiency improvements in Victoria
VicTrack Annual Report 2005-06 11 The upgraded crossing at Centre Road, Bentleigh features Victorian first safety improvements including visual active warning protection and emergency escape gate latches.
…improving safety at level and pedestrian rail crossings
12 VicTrack Annual Report 2005-06 VicTrack and Asset Management
VicTrack is responsible for maintaining and managing rail Research and development for the future infrastructure not leased to DPT. This includes 130 railway During the year, VicTrack completed construction works to stations, 90 road over rail bridges and 15 disused lines in install a prototype of an improved pedestrian crossing at Centre addition to common access tracks and numerous parcels Road, Bentleigh. In the 2006-07 financial year, state-of-the-art of vacant land. technology including ‘another train coming’ and ‘red man’ electronic signs and emergency latches will be trialled at the Highlights site. Paths and other aspects, such as emergency exit gates and • Commissioned 20 level and pedestrian crossing upgrades, latches, fully comply with the Disability Discrimination Act a 54 per cent increase on the previous year; 1992 (DDA). • Completed construction of Sherwood Park Station (Warrnambool), allowing better student access to Deakin University; Delivering on projects • Assumed management of the Drawing Management System The Asset Management Group works on a wide range of other to manage more than 300,000 technical drawings on behalf projects, such as the construction, maintenance, upgrade and of the state; and restoration of stations, heritage rail assets and the development • Reviewed and enhanced internal management systems of public transport facilities. and processes. During 2005-06, VicTrack successfully managed more than $25 million of general projects, including the completion of Level and pedestrian crossing safety Marshall Station, the design and construction of Sherwood Park Station (Warrnambool) and the design and construction of VicTrack provides benefits to the broader community through underpasses at Lynbrook and Morwell. its ongoing involvement in Government initiatives to improve safety at level and pedestrian rail crossings. The VicTrack Asset Management Group, on behalf of the state, project manages the Managing technical rail infrastructure level and pedestrian crossing upgrade program. systems During the year, VicTrack completed 20 railway crossing VicTrack manages the state-wide infrastructure database, the upgrades, representing a 54 per cent increase on the previous Drawing Management System, on behalf of the Government. year. The Regional Fast Rail project delivered 76 crossing The Drawing Management System is designed to assist with upgrades in the same year, bringing the total number of managing Victoria’s technical rail infrastructure drawings. It Victorian upgrades to 96, with the majority in regional Victoria. contains some 300,000 electronic versions of signalling, track, VicTrack had anticipated an increased delivery rate during the civil and electrical plans, which are available to designers and year, however an Australia-wide resource shortage, combined maintenance specialists. with other high priority state projects competing for this limited resource, impeded the delivery of an accelerated program. In collaboration with the industry, VicTrack has developed a Looking forward number of initiatives to address these issues. These initiatives • Deliver an accelerated level and pedestrian crossing upgrade will be implemented in 2006-07 and will enable a significant program, with a year-on-year incremental increase, increase in the commissioning rate in forthcoming years. commencing with a 2006-07 upgrade target of 30 crossings; Upgrade works at level and pedestrian crossings throughout • Complete the roll out of the ALCAM model; the state are prioritised according to a risk based model. This • Implement a new computer based asset management model is being upgraded to a nationally accepted risk based database to further refine asset management systems model called the Australian Level Crossing Assessment Method and processes; (ALCAM), due for completion by the end of 2007. This model • Manage in excess of $1 million worth of civil works to will include details of approximately 3,100 public pedestrian upgrade regional pedestrian crossings to DDA compliance; and level crossings throughout Victoria and will enable and strategies to be put in place to improve safety. • Work towards becoming a preferred project deliverer across the rail industry.
VicTrack Annual Report 2005-06 13 VicTrack completed $2.6 million of heritage works to restore the Ballarat Station train hall to its former glory.
14 VicTrack Annual Report 2005-06 VicTrack and Victoria’s Rail Heritage
Heritage restoration Managing heritage sites
VicTrack manages the upgrade and restoration of Victoria’s rail VicTrack manages many of Victoria’s significant rail heritage sites. During the year, VicTrack successfully completed heritage sites, including the Hawthorn Tram Depot and $3.8 million worth of heritage improvements, including Newport Workshops. successful restorations at Ballarat and St Arnaud stations. The heritage listed Hawthorn Tram Depot houses The Ballarat Station train hall has undergone one of the approximately 20 heritage trams including many of the iconic most significant sustainability improvements in decades. The W Class trams. During the year, VicTrack established the $2.6 million VicTrack project has revitalised the heritage station ‘Friends of Hawthorn Tram Depot’ with the assistance of the train hall for future generations to enjoy. Heritage works Council of Tramways Museums of Australasia. This group included the restoration of the train hall roof exterior, east and manages the day-to-day running of the Hawthorn Tram Depot west arches and platform canopies and waterproofing of the and organises monthly open days for the public. train hall. The refurbishments not only restore the train hall to Newport Workshops provide a facility for community interest its former glory, but ensure the station remains comfortable for groups to undertake restoration and maintenance works on the modern train passenger. heritage carriages and locomotives. During the year, VicTrack also completed a $140,000 restoration at St Arnaud Station and water towers. Built at the height of the gold rush in 1878, St Arnaud Station required Looking forward vital preservation work to its corrugated roofing, guttering and • Deliver in excess of $1 million of heritage improvements spouting along with paintwork and skylight detailing. VicTrack during 2006-07; worked closely with Heritage Victoria to ensure this important • Review all heritage listed sites with Heritage Victoria to project met all heritage guidelines. While St Arnaud Station is rationalise and confirm heritage status. The new asset no longer required for rail operations, it is currently being used management system will allow proactive maintenance of as a childcare facility. these sites; and In recognition of the importance of Victoria’s rail heritage, • Continue to seek prospective tenants for historic stations VicTrack takes guidance from its Heritage Advisory Panel. and goods sheds. Members of the Panel include DOI, Heritage Victoria, an independent academic and VicTrack representatives.
There has been a resurgence in prospective tenants wanting to lease VicTrack’s historic railway stations and goods sheds, which have received extensive restoration and renovation works. Lal Lal and Creswick are two of our heritage stations to have occupants breathing new life into them.
...a resurgence in prospective tenants wanting to lease VicTrack’s historic railway stations and goods sheds
Rosedale Station on the Bairnsdale railway line.
VicTrack Annual Report 2005-06 15 VicTrack Manager Environment, Stephen Hamilton oversees a proactive environmental program across all VicTrack assets.
…a significant investment toward environmental risk management
16 VicTrack Annual Report 2005-06 VicTrack and the Environment
As one of the largest landowners in Victoria and with the Promoting environmental best practice effects of over a century of rail operations, VicTrack faces many In its role as chair of the Victorian Rail Environment Forum, environmental challenges and opportunities. VicTrack takes a VicTrack contributed to significant progress in driving proactive approach to its environmental management activities environmental change in the rail industry and promoting and has made a significant investment towards environmental environmental best practice in activities along rail corridors. risk management during the year. Environmental work includes Key issues are weed management, fire management and the remediation of contaminated land, managing asbestos and protection of native vegetation. restoring, protecting and managing native grasslands. The Forum completed the development of draft vegetation management guidelines for the rail industry which, in the Land remediation program 2006-07 financial year, will be adopted as industry best practice.
During the year, VicTrack continued the program of The Forum has also identified the geographical information environmental investigation that underpins its land system that will be the best tool for mapping weeds across contamination and remediation strategies. Victoria’s rail system and that will enable weed management to be prioritised in future. In order to confirm the suitability of land subject to lease and/or sale proposals, VicTrack conducted 38 audits as well as proactive reviews at a further 25 key strategic transport sites. ‘Green’ sponsorships The 50 highest risk sites have now been assessed and ranked to assist in prioritising remediation work across all VicTrack Landcare assets. The first full year of the ‘Grassroots’ partnership with Following land assessment, VicTrack works closely with Landcare has passed. The partnership was the first of its type in environmental agencies and stakeholders to undertake Australia. The ‘Grassroots’ program is focussed on the proactive remediation of contaminated land. In the past year, restoration of native grasslands across Victoria. During the year, remediation work commenced at a VicTrack property in 16 funded projects were commenced including native grasslands Montague Street, South Melbourne. Remediation works at the grazing management, ecological burning, weed control, surveys, Spotswood Depot will commence in the 2006-07 financial year. education and research.
Managing asbestos across our assets Greenfleet VicTrack’s sponsorship of Greenfleet Australia continued. VicTrack has finalised an asbestos management plan outlining Greenfleet Australia is a not-for-profit organisation dedicated to a framework for the management of asbestos across VicTrack planting native trees to offset the environmental affects from the assets. emissions of VicTrack’s vehicle fleet. As part of this management plan, VicTrack has conducted 64 asbestos related environmental audits and implemented an asbestos management and identification database. Looking forward
The majority of asbestos sites on the database have been ranked • Foster environmental awareness and support the for potential asbestos exposure risk. A five-year program of development of the rail industry as an environmental leader; proactive audits is now being undertaken with a focus on the and health and safety of employees across the entire rail industry • Seek continuing beneficial outcomes for native grasslands and local communities. in Victoria.
VicTrack Annual Report 2005-06 17 VicTrack and its People
Listening and responding to employee Occupational Health and Safety (OH&S) feedback Commitment to OH&S During the year, VicTrack conducted its first employee survey to gain a better understanding of how people feel about the VicTrack is committed to the health and safety of its employees, organisation and to identify areas for improvement. contractors and clients and fosters a proactive approach toward safety. This commitment is demonstrated by consulting across A 70 per cent feedback rate was received which was a very all levels of the organisation and by ensuring safety strategies positive response. A number of initiatives were identified and encompass all relevant legislation and standards. VicTrack’s rail are being implemented in response to feedback received from safety systems are subject to annual audit by PTSV. the survey. OH&S Committee Meeting an increasing demand for services A senior committee, reporting to the Chief Executive and with a representative from each part of the business, oversees At the conclusion of the 2005-06 financial year, VicTrack VicTrack’s OH&S activities. Designated workgroups employed 123 people, an increase of 15 people on the previous communicate up-to-date information to this committee on year and a reflection of the growing demand for VicTrack potential hazards, risks and other OH&S issues to ensure timely services and expertise. These new positions ranged from the responses. appointment of a new IT Manager and Director Property Services, to the recruitment of telecommunications engineering Work environment support people. VicTrack provides and maintains a safe work environment VicTrack successfully achieved its target of less than five per by identifying, assessing and controlling risks and promoting cent unscheduled absenteeism during the year and has set a incident investigation, in conjunction with injury prevention, target of four per cent for 2006-07. rehabilitation and return to work programs. Safety risks are minimised by ensuring responsibilities are clearly defined, people are accountable for their actions and appropriate levels of training and open systems of communication support the Telecommunications Revenue VicTrack Employees Telecommunications Division RailMap Users decision-making process. These principles are being managed ($ million) Best Practice Scorecard 20 proactively to reduce potential losses in both human and 1.0 1.0 = Best Practice Benchmark financial terms.
15 0.8 Workplace injuries
10 0.6 VicTrack did not meet its target of zero workplace injuries Performance 0.4 during the year. There were two workplace injuries and as 5 a result of these, VicTrack has placed an increased emphasis 0.2 on safety awareness, through regular employee meetings and 0 0.0 providing safety information in the internal VicTrack newsletter. Best Practice Category 2005-06 18.9 30 June 2006 Quality 2004-05 17.5 30 June 2005 Performance Management OH&S training 2003-04 14.6 Communication Delivery of Service Telecommunications revenue increased RailMap allows customers and VicTrack employee numbers continue New employees are provided with an overview of health and Customers stakeholders to access maps, aerial to grow to meet an increasing demand by $1.4 million during 2005-06. People safety in the workplace as part of their induction. VicTrack’s photographs, building locations and for services and expertise. Promotion and Image other data via the internet. OH&S Committee identified the need for refresher training for Overall Result all its OH&S representatives and implemented this during Telecommunications’ customers continue the year. to receive a high level of customer service as shown through regular customer satisfaction surveys.
18 VicTrack Annual Report 2005-06 VicTrack and its People...
...giving people greater opportunity to work together Assisting with the relocation of VicTrack to 1010 La Trobe Street are business ambassadors: Greg Champion, Maria Spataro, Brett McGillivray, Santina Straube and Project Manager, Alistair Williams.
Key initiatives in OH&S 1010 La Trobe Street, ‘Looking Forward Together’ • VicTrack is committed to improving the health and well-being of its people. As part of this commitment, VicTrack commenced preparations for the relocation of its it provided free flu vaccinations, medicals and eye head office to 1010 La Trobe Street, a new high-tech precinct in examinations throughout the year; and Docklands. • As an ongoing rail safety requirement, VicTrack provided All people from the VicTrack head office will be located over rail safety training to 41 of its people. two contiguous floors for the first time, giving people greater opportunity to work together and enabling VicTrack to progress Staff development, succession planning as a more united and cohesive organisation. and equal opportunity A key objective of the move is the involvement and engagement of VicTrack people in planning for this significant change to VicTrack recognises the importance of developing and training their workplace. Business ambassadors from each of the four its people, to ensure we are able to meet the needs of our business areas were selected to represent their area in regular changing operating environment and stakeholders. Targeted meetings and consultation about the move. A comprehensive programs for our people continue to be developed and refined. communication program supports this consultative process. Work has continued on succession planning initiatives, involving recruitment and mentoring of key people, to ensure the retirement or departure of people with specialist knowledge Looking forward and skills will not disrupt the organisation. • VicTrack will conduct a second employee opinion survey, to Equal opportunity policies and procedures have continued in monitor and continually improve our staff satisfaction; accordance with VicTrack’s commitment to being an equal • Develop a corporate-wide Recognition Program to ensure opportunity employer. VicTrack’s Merit and Equity Policy appropriate and consistent recognition of our people; and governs equal opportunity issues. • As part of the new Enterprise Agreement, negotiate and agree productivity improvements with our people.
VicTrack Annual Report 2005-06 19 Members of the Board
From left to right: Bruce Cohen, John Anderson, Elana Rubin, Philippa Marshall (Board Secretary), John Sutton (Chief Executive) and Chris Lovell
Elana Rubin - MA, GAICD, FFin Bruce Cohen - PhD (PP), MCom, LLB Chairperson Director Elana Rubin was appointed a Director of VicTrack in July 2000 Bruce Cohen was appointed a Director of VicTrack in and Chairperson on 1 January 2005. She is also Chairperson January 2005 and is Chairperson of the VicTrack Remuneration of the Victorian Workcover Authority and a Director of the Committee. Bruce is a barrister and a principal in private recently merged AustralianSuper. Elana is also a Director of practice in the area of public policy. His previous roles have the Industry Superannuation Property Trust, Hotel Leisure included Treasury Director for the Office of Premier and & Tourism Trust of Australia and the Transport Accident Treasurer of Victoria, Senior Analyst/Executive Advisor on Commission (TAC). regulatory affairs with the Australian Bankers Association and Director of Snowy Hydro Limited. John Anderson - Cert EDP, MACS Deputy Chairperson Chris Lovell - BA, LLM (London) John Anderson was appointed a Director of VicTrack in Director April 2000 and Deputy Chairperson in January 2005. He was Chris Lovell was appointed a Director of VicTrack in January appointed Chairperson of the Heritage Advisory Panel in 2005 and is Chairperson of the VicTrack Audit and Risk July 2002. John holds a senior field position for Sun Management Committee. Chris is the National Managing Microsystems in their Asia Pacific Division and is a Director Partner of law firm, Holding Redlich, and practices in of the West Gippsland Healthcare Group. funds management and on large-scale property projects. He is a trustee of the MCG, and a Director of Clemenger Communications Limited and the Melbourne Community Foundation.
Sam Andersen - LLB, CPA Sam Andersen was appointed to the Audit and Risk Management Committee in October 2005. Sam is Chairperson of the Audit and Risk Management Committee at Superpartners Pty Ltd, where she also holds a position as Director. She has held senior positions with the ANZ Bank, Commonwealth Bank of Australia and National Australia Bank. Sam was the Chief Financial Officer at Lumacom Ltd and Chief Operating and Financial Officer of Multi-Emedia.com Ltd. Her previous directorships include Victorian Funds Management Corporation, Multi-Emedia.com Ltd and Youth at Risk Inc.
20 VicTrack Annual Report 2005-06 Executive Team
John Sutton - CPEng, MIEA prior to that was employed by BP for over 18 years. In BP, Chief Executive Greg worked in various management roles in North and South Appointed Chief Executive of VicTrack in April 1997. America and Australia. John commenced his career with Westrail in Western Australia working in various roles and attaining the position of Geoff Walker - BE(Hons), PostGradDipBusAdmin Assistant Commissioner in 1992. Since moving to Victoria General Manager Asset Management in 1993, John worked for the Public Transport Corporation, Employed at VicTrack since June 2005. Geoff’s career firstly as Director of Planning and Marketing and then as started in the Maritime Services Board of NSW working in Director of Infrastructure. structural design and contracts management. Geoff has 25 years experience in infrastructure management, including Philippa Marshall - LLB, FFin the maritime, Local Government, water, gas and transport Corporate Counsel and Board Secretary industries. Previously Geoff was with MainCo, where he held Employed at VicTrack since January 2004. Prior to joining the position of Infrastructure Manager. VicTrack, Philippa was a partner in the Corporate Advisory Group of Blake Dawson Waldron, one of Australia’s major Kingsley Stanley - AssDipHR law firms, with a broad commercial practice including Manager Human Resources corporate management and governance matters, non-regulated Employed at VicTrack since 1997. Having previously worked mergers and acquisitions, joint ventures and other commercial in Corporate Human Resources within the Public Transport transactions, trust and investment vehicles. Corporation, Kingsley has extensive experience in employee relations and negotiation of Enterprise Agreements. Mark Scully - BBus, FCPA General Manager Finance Stephen Hamilton- B.App.Sci. (Applied Geology), Employed at VicTrack since July 2001. Mark has more than M.Env.Eng 20 years experience in financial management, having Manager Environmental previously worked for National Express, Bayside Trains, Employed at VicTrack since June 2005. Stephen’s career the Public Transport Corporation and Melbourne and started as an Exploration Geologist in Western Australia. Metropolitan Board of Works. He then moved into Environmental Consulting, where he held senior level consulting and workgroup management Don Welsh - MBA, Dip.CE, GradDipME, Dip.CD roles. Stephen’s areas of expertise include environmental Director Property Services risk management, land contamination and remediation, Employed at VicTrack since March 2006. Don has over 25 years hydrogeology and environmental engineering. experience in executive positions in Local Government, including 15 years at Chief Executive level. His experience Stephen Fitch includes organisational restructure, corporate governance, Manager Risk joint venture developments, corporate planning, financial Employed as Risk Manager since April 2006. Stephen has planning and asset management. 30 years experience in the private and public sector both in property development and land management where his focus Peter Stagg - Ass.Dip CE, MIEA has been on strategic management and organisational change. Manager Rail Business Employed at VicTrack since 1997. Peter has worked in the Nicky Webster - BBus(Com) Victorian rail industry for over 30 years in railway design, Manager Public Affairs planning, maintenance and construction. Peter previously Employed at VicTrack since January 2006. Nicky has worked worked with the Victorian Railways and the Public Transport in public relations for almost 20 years, with experience in both Corporation. the private and public sector. Her experience includes crisis management, media management and internal and external Greg McGann - B.Com communication strategy development. General Manager Commercial Employed at VicTrack since May 2005. Greg previously worked for Melbourne Water in Stakeholder Relations and
VicTrack Annual Report 2005-06 21 Corporate Governance
Role of the Board Chairperson
VicTrack is a statutory corporation governed by the Rail VicTrack’s Chairperson is an independent, non-executive Corporations Act 1996 and has a Board of Directors who Board member. are responsible for the management of VicTrack’s affairs, VicTrack’s current Chairperson is Elana Rubin, who was including corporate governance practices and overall business appointed to the role from 1 January 2005 after joining the performance. The Directors are appointed by the Governor-in- Board as a Director in 2000. John Anderson holds the position Council and report to the Minister for Transport. of Deputy Chairperson. The functions of the Board include:
• Ensuring appropriate controls, systems and procedures are Chief Executive in place to manage business risks and ensure compliance with legislative and Government requirements, including The Chief Executive (CE) is responsible for the day-to-day occupational health and safety, environmental, rail safety and operations of VicTrack and is appointed by the Board of telecommunications regulatory requirements; Directors, with approval from the Minister for Transport. • Reviewing and adopting annual financial budgets and The CE makes recommendations on strategies and policies assessing and monitoring results on a regular basis; for Board approval. • Approving annual financial statements; John Sutton is CE and he has held the position since VicTrack • Preparing a three-year Corporate Plan for the approval of the was established in 1997. John is not a Director of VicTrack, Minister for Transport; however, he is a Director of each company within the Rolling • Reviewing and evaluating performance of the Chief Executive Stock Holdings group. and senior management; and • Considering management’s recommendations on major investments and strategies to achieve VicTrack’s objective of Meetings of the Board and Board Committees creating and adding value to assets under its custodianship. VicTrack holds Board meetings, generally, on a monthly basis. Each subsidiary company forming the Rolling Stock Holdings Two committees, the Remuneration Committee and the Audit group of companies also has its own Board of Directors. and Risk Management Committee, have also been established to Each Board is responsible for the management of the relevant assist the Board in relation to specific functions. company and comprises each of the VicTrack Directors, plus John Sutton, VicTrack’s Chief Executive. The Remuneration Committee comprises all the VicTrack Directors and is responsible for reviewing and making Board composition recommendations to the Board in relation to remuneration and incentive arrangements for the CE and other executive officers, and The VicTrack Board must comprise between three and five for reviewing and monitoring VicTrack’s remuneration policies and Directors, each generally appointed for a three-year term. procedures. This includes ensuring compliance with Government Currently the Board comprises four independent, non-executive policies and guidelines. Bruce Cohen is Chairperson of the Directors, including the Chairperson. Remuneration Committee. The Committee meets on a quarterly Current Directors of VicTrack are Elana Rubin (Chairperson), basis, with additional meetings held as required. John Anderson (Deputy Chairperson), Chris Lovell and Bruce Cohen. Each Director has a wide range of experience with other The Audit and Risk Management Committee is chaired boards and organisations and together they bring a diverse range by Chris Lovell and comprises all of VicTrack’s Directors. An of knowledge and business expertise to VicTrack. Directors are additional independent member, Sam Andersen, was appointed appointed on the basis of their ability to contribute to meeting to the Committee in October 2005. The Committee is responsible VicTrack’s objectives. for assisting the Board in relation to VicTrack’s accounting and reporting responsibilities and identification and management of risk, including reporting of financial information, internal control systems and the application and amendment of accounting policies.
22 VicTrack Annual Report 2005-06 Corporate Governance...
The Audit and Risk Management Committee meets on a quarterly basis, with additional meetings being held as required. The Committee has access to both internal and external auditors as required and the CE, General Manager, Finance and Corporate Counsel attend meetings at the discretion of the Committee.
The Board is also advised by the Heritage Advisory Panel on the strategic management of assets owned by VicTrack and listed on the Victorian Heritage Register. The Panel is chaired by John Anderson, VicTrack’s Deputy Chairperson and includes representatives of DOI, Heritage Victoria, a heritage architect and another VicTrack Director, Bruce Cohen. The Panel meets quarterly, or as otherwise required.
The following table summarises members’ attendance at Board and Committee meetings.
Audit & Risk VicTrack Board Remuneration Management Committee Meetings Committee Meetings Meetings Total meetings in 2005-06 financial year 13 6 7 Elana Rubin 13 6 7 John Anderson 9 6 5 Chris Lovell 13 6 7 Bruce Cohen 13 6 7 Sam Andersen n/a n/a 4*
* Sam Andersen was eligible to attend four meetings of the Audit and Risk Management Committee.
Independent professional advice Ministerial Directions
Directors are entitled to obtain independent professional advice There have been no directions from the Minister for Finance or at VicTrack’s expense in relation to matters pertaining to their the Minister for Transport. role as Director, provided prior notification is given to the Chairperson. Enterprise risk management Corporate Plan During the year, VicTrack further enhanced its enterprise risk management framework and strategies. These strategies are VicTrack is required, under the Rail Corporations Act 1996, designed to strengthen risk management processes throughout all to prepare a Corporate Plan for Ministerial approval. The areas of the business. Plan establishes the framework for business strategies and VicTrack intends to further embed risk management processes performance monitoring and must be agreed between the Board through all levels of the organisation to ensure risks associated and the Minister for Transport. The Corporate Plan is prepared with its business activities can be systematically identified annually and covers a three-year period starting from the current and managed in a comprehensive and integrated manner. financial year. Risk management activities are undertaken with the aim of complementing VicTrack’s business plans and strategic objectives.
Declaration of pecuniary interests To this end, each business has undertaken an objective process of risk assessment and has evaluated its current risk management All Directors and nominated officers have completed a approach and systems against an industry standard. Where declaration of pecuniary interests. gaps in the system of risk management are identified, a risk management plan has been prepared and is being implemented.
VicTrack Annual Report 2005-06 23 VicTrack’s Organisational Structure
John Sutton Chief Executive
Katy McCallum Philippa Marshall Executive Assistant/ Corporate Counsel HR Co-ordinator
Nicky Webster Stephen Fitch Manager Manager Risk Public Affairs
Mark Scully Geoff Walker Don Welsh Greg McGann General Manager General Manager Director General Manager Finance Asset Management Property Services Commercial
Peter Stagg Stephen Hamilton Kingsley Stanley Manager Manager Manager Rail Business Environmental Human Resources
24 VicTrack Annual Report 2005-06 VicTrack’s Financial Performance
VicTrack’s strong financial performance continued during The improved operating result for the 2005-06 financial year the 2005-06 financial year. Financial highlights include an was due to increased receipts from lessees of rolling stock and increase in consolidated net assets of $275.8 million and cash Government contributions towards capital and related works. inflows from operating activities of $49.9 million. Although These items have also led to the year-on-year change in cash a small loss from operating activities before tax was recorded, inflows from operating activities. the bottom line operating result substantially improved from The majority of VicTrack’s assets are leased to DPT, who the previous year. sub-leases them to various transport operators and track As noted in the table below, VicTrack’s financial results have access providers, for a nominal consideration. However, as varied significantly over recent years. These year-on-year the owner of the assets, VicTrack is required to depreciate/ variations have largely resulted from significant asset transfers, amortise the assets with the depreciation/amortisation charge representing primarily the state’s rolling stock assets, which far exceeding the lease revenue, resulting in an accounting loss have occurred in recent years. being reported.
Five year financial summary
Note 2006(*)(#) 2005(*)(#) 2004(*) 2003(*) 2002 ($M) ($M) ($M) ($M) ($M) Total Revenue 1 321.0 257.6 669.2 150.8 157.5 Total Expenditure 2 (323.4) (294.7) (194.4) (102.2) (102.2) Net Profit/(Loss) before Income Tax (2.4) (37.1) 474.8 48.6 55.3 Net Cash Inflow from Operating Activities 49.9 5.6 24.1 29.8 31.8 Total Assets 3 6,831.0 6,583.4 5,855.5 4,496.4 3,948.1 Total Liabilities 4 (1,439.5) (1,467.7) (922.3) (360.5) (13.6) Net Assets 5,391.5 5,115.7 4,933.2 4,135.9 3,934.5 Total Staff 123 108 103 105 99
(*) Consolidated results, including Rolling Stock Holdings (Victoria) Pty Limited (RSH). (#) Represents financial results reported in accordance with International Financial Reporting Standards.
Notes 1. Revenue in 2006 and 2005 includes contributions from Government towards VicTrack’s operating and finance lease commitments enabling the organisation to meet its loan obligations. Revenue in 2004 includes the fair value of existing rolling stock transferred to RSH. Revenue excludes the Victorian Government’s capital assets charge. 2. Expenditure in 2006 and 2005 includes depreciation/amortisation of rolling stock acquired by the consolidated entity. Expenditure excludes the capital assets charge. 3. Increase in Total Assets represents the transfer of rolling stock and value of leasehold improvements undertaken on assets owned by VicTrack. 4. Increase since 2003 represents liabilities relating to rolling stock, both borrowings for the purchase of new trains and finance lease liabilities.
VicTrack Annual Report 2005-06 25 Victorian Rail Track FINANCE REPORT
26 VicTrack Annual Report 2005-06 Victorian Rail Track
VicTrack Annual Report 2005-06 27 Victorian Rail Track
28 VicTrack Annual Report 2005-06 Victorian Rail Track
Operating Statement
For the financial year ended 30 June 2006
Consolidated Parent
2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
Revenue from ordinary activities: Customers Telecommunications services 18,935 17,510 18,935 17,509 Property related income 28,192 26,054 28,192 26,054 Leasehold improvements/renewals received 69,812 57,688 69,812 57,688 Rolling stock received free of charge - 16,847 - - Other revenue 2 204,107 139,545 54,223 18,129
321,046 257,644 171,162 119,380
Capital assets charge 777,363 599,030 777,363 599,030
777,363 599,030 777,363 599,030
Total revenue 1,098,409 856,674 948,525 718,410
Expenses from ordinary activities: Employee benefits 3 10,584 9,803 10,584 9,803 Depreciation and amortisation 4 178,885 155,027 100,721 85,520 Interest expense 102,510 94,392 - - Capital assets charge 777,363 599,030 777,363 599,030 Supplies and services 5 25,503 28,377 25,503 28,377 Other operating expenses 6 5,935 7,139 5,884 6,805
Total expenses 1,100,780 893,768 920,055 729,535
Profit/(loss) from ordinary activities before income tax expense (2,371) (37,094) 28,470 (11,125)
Tax equivalent (expense)/benefit 15 (3,089) 8,053 (11,027) 1,099
Net profit/(loss) for the reporting period (5,460) (29,041) 17,443 (10,026)
Net increase/(decrease) in asset revaluation reserve (116) 70,213 - 70,097
Total changes in equity other than those resulting from transactions with the Victorian State Government in its capacity as owner (5,576) 41,172 17,443 60,071
The Operating Statement should be read in conjunction with the accompanying notes.
VicTrack Annual Report 2005-06 29 Victorian Rail Track
Balance Sheet
As at 30 June 2006
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
Current assets
Cash assets 6,810 8,468 3,303 1,794 Other financial assets 7 54,516 138,286 41,604 39,004 Receivables 8(a) 13,351 11,585 10,777 10,913 Inventory 9 25 25 25 25 Prepayments 439 313 439 313
Total current assets 75,141 158,677 56,148 52,049
Non-current assets
Other financial assets 7 100 12,716 - - Receivables 8(a) 57 90 129,170 129,204 Property, infrastructure, plant and equipment 10 6,692,259 6,348,512 5,156,651 4,872,691 Intangible assets 63,417 63,417 - -
Total non-current assets 6,755,833 6,424,735 5,285,821 5,001,895
Total assets 6,830,974 6,583,412 5,341,969 5,053,944
Current liabilities
Payables 8(b) 18,379 15,576 8,727 11,682 Employee benefits 11 1,479 1,361 1,479 1,361 Interest bearing liabilities 12 70,552 52,187 385 144
Total current liabilities 90,410 69,124 10,591 13,187
Non-current liabilities
Employee benefits 11 4,987 5,300 4,987 5,300 Interest bearing liabilities 12 1,166,013 1,218,307 314 374 Deferred tax liability 15 178,072 174,983 201,859 190,832
Total non-current liabilities 1,349,072 1,398,590 207,160 196,506
Total liabilities 1,439,482 1,467,714 217,751 209,693
Net assets 5,391,492 5,115,698 5,124,218 4,844,251
Equity
Contributed capital 13(a) 4,327,133 4,040,763 4,301,944 4,034,420 Asset revaluation reserve 13(b) 628,967 629,083 628,967 628,967 Accumulated surplus 13(c) 435,392 445,852 193,307 180,864
Total equity 5,391,492 5,115,698 5,124,218 4,844,251
The Balance Sheet should be read in conjunction with the accompanying notes.
30 VicTrack Annual Report 2005-06 Victorian Rail Track
STATEMENT OF CHANGES IN EQUITY
For the financial year ended 30 June 2006
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
Fair value revaluation of assets (116) 70,213 - 70,097
Net income recognised directly in equity (116) 70,213 - 70,097
Net profit/(loss) for the reporting period (5,460) (29,041) 17,443 (10,026)
Total recognised income and expense for the period (5,576) 41,172 17,443 60,071
Effects of changes in accounting policy - - - -
Effects of correction of errors - - - -
Attributable to:
Equity holders of the parent (5,576) 41,172 17,443 60,071
The Statement of Changes in Equity should be read in conjunction with the accompanying notes.
VicTrack Annual Report 2005-06 31 Victorian Rail Track
Cash flow staTement
For the financial year ended 30 June 2006
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
Cash flows from operating activities
Receipts from customers (inclusive of GST) 219,892 180,747 61,652 53,593 Interest received 3,650 3,426 3,343 3,214
Receipts from Victorian Government for: - Capital assets charge (*) 777,363 599,030 777,363 599,030 - Capital and related works (inclusive of GST) and termination payments 41,800 63,175 41,800 63,175
1,042,705 846,378 884,158 719,012 Payments to:
Suppliers (inclusive of GST) and employees (199,487) (229,652) (50,449) (102,600) Borrowing costs paid (15,975) (12,079) - - Capital assets charge (*) (777,363) (599,030) (777,363) (599,030)
(992,825) (840,761) (827,812) (701,630)
Net cash inflow from operating activities 14 49,880 5,617 56,346 17,382
Cash flows from investing activities
Proceeds from/(payments) for: Investments 90,252 67,597 (2,600) 21,422 Acquisition of property, infrastructure, plant and equipment (160,936) (81,776) (51,500) (36,028)
Proceeds from: Sale of property, infrastructure, plant and equipment 4,726 1,580 4,263 1,580
Net cash outflow from investing activities (65,958) (12,599) (49,837) (13,026)
Cash flows from financing activities
Payments for: Dividend (5,000) (5,000) (5,000) (5,000)
Proceeds from: Borrowings 19,420 15,536 - -
Net cash inflow/(outflow) from financing activities 14,420 10,536 (5,000) (5,000)
Net increase/(decrease) in cash held (1,658) 3,554 1,509 (644)
Cash at the beginning of the financial year 8,468 4,914 1,794 2,438
Cash at the end of the financial year 6,810 8,468 3,303 1,794
(*) The receipt and payment of the capital assets charge does not represent physical movements of cash between Victorian Rail Track and the Victorian Government. In accordance with the provisions of the Financial Management Act 1994, the capital assets charge is considered a cash equivalent item and is therefore included in the Cash Flow Statement.
The Cash Flow Statement should be read in conjunction with the accompanying notes.
32 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This general-purpose financial report has been prepared on an Entity) as at 30 June 2006 and the results of all controlled entities accruals basis in accordance with the Financial Management Act for the year then ended. Victorian Rail Track and its controlled 1994, Australian Accounting Standards, Statements of Accounting entities together are referred to in this financial report as the Concepts and other authoritative pronouncements of the Australian Consolidated Entity. The effects of all transactions between Accounting Standards Board and Urgent Issues Group Consensus entities within the Consolidated Entity are eliminated in full. Views. Australian Accounting Standards include Australian equivalents to International Financial Reporting Where control of an entity is obtained during a financial year, its Standards (A-IFRS). results are included in the consolidated Operating Statement from the date on which control commences. Where control of an entity The financial report is prepared in accordance with the historical ceases during a financial year, its results are included for that part of cost convention, except for certain assets allocated to Victorian the year during which control existed. Rail Track which were valued by the previous owner at valuations other than historical cost and land which is recorded at independent The following entities are controlled by the Parent Entity as valuation. The accounting policies adopted and the classification at 30 June 2006: and presentation of items are consistent with those of the previous Rolling Stock Holdings (Victoria) Pty Limited year except where a change is required to comply with an Australian Rolling Stock (Victoria–VL) Pty Limited Accounting Standard or Urgent Issues Group Consensus View, or Rolling Stock (VL-1) Pty Limited an alternative accounting policy or an alternative presentation or Rolling Stock (VL-2) Pty Limited classification of an item, as permitted by an Australian Accounting Rolling Stock (VL-3) Pty Limited. Standard, is adopted to improve the relevance and reliability of the financial report. Where practicable, comparative amounts are The above-mentioned companies have been established to own presented and classified on a basis consistent with the current year. various items of rolling stock (passenger trains and trams) that are Victorian Rail Track and its subsidiary companies provide certain leased to public transport operators. services free of charge or at prices significantly below their cost of production for the collective consumption by the community, (b) Statement of Compliance which is incompatible with generating profit as a principal objective. The financial report complies with Australian Accounting Consequently, where appropriate, those paragraphs in Australian Standards, which include A-IFRS. Compliance with A-IFRS ensures Accounting Standards relating to not-for-profit entities are applied. that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Victorian Rail Track changed its accounting policies on 1 July 2005 Standards (IFRS). to comply with A-IFRS. The transition to A-IFRS is accounted for in accordance with Australian Accounting Standard AASB 1 “First- This is the first financial report prepared based on A-IFRS and time Adoption of Australian Equivalents to International Financial comparatives for the year ended 30 June 2005 have been restated Reporting Standards”, with 1 July 2004 as the date of transition. accordingly, except for the adoption of AASB 132 “Financial Details of how the transition from superseded policies to A-IFRS Instruments: Disclosure and Presentation” and AASB 139 has affected Victorian Rail Track’s financial position and financial “Financial Instruments: Recognition and Measurement”. In performance is provided in Note 24. accordance with the Victorian Government’s Department of Treasury and Finance’s Financial Reporting Direction 101, the The accounting policies set out below have been applied in preparing Consolidated Entity has taken up the exemption available under the financial statements for the year ended 30 June 2006, the AASB 1 “First-time Adoption of Australian Equivalents to comparative information presented in the financial statements for International Financial Reporting Standards” from applying AASB the year ended 30 June 2005 and in the preparation of the opening 132 and AASB 139 to the comparative period. Reconciliations of A-IFRS Balance Sheet at 1 July 2004, Victorian Rail Track’s date of A-IFRS equity and profit for 30 June 2005 to the balances reported transition, except for the accounting policies in respect of financial in the 30 June 2005 financial report and at transition to A-IFRS are instruments. Victorian Rail Track has not restated comparative detailed in Note 24. information for financial instruments, including derivatives, as permitted under the first-time adoption transitional provisions. (c) Contributed Capital The accounting policies for financial instruments applicable to the comparative information and the impact of the changes in these The Consolidated Entity’s contributed capital comprises the value accounting policies are discussed further in (at the date of transfer) of the majority of the state’s rail and tram Note 1 (y). fixed infrastructure as well as leasehold improvements undertaken by lessees/sub-lessees. (a) Principles of Consolidation The major movements of contributed capital (comprising property, The consolidated financial statements incorporate the assets and rights and liabilities) from the inception of the Consolidated Entity liabilities of all entities controlled by Victorian Rail Track (Parent have been as follows:
VicTrack Annual Report 2005-06 33 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...
(c) Contributed Capital... Enterprises Act 1992, the Consolidated Entity is subject to the NTER in 2005-06, but limited to the income tax component of the Financial Year $’000 NTER. Current tax assets and liabilities for the current and prior 1997-1998 Non-electrified rail infrastructure 772,981 periods are measured at the amount expected to be recovered from, 1999-2000 Electrified rail infrastructure 2,560,180 or paid to, the taxation authorities. The tax rates and tax laws used 2000-2001 Southern Cross Station to compute the amount are those that are enacted or substantively (formerly Spencer Street Station) enacted by the Balance Sheet date. infrastructure to Southern Cross Station Authority (formerly Deferred income tax is provided on all temporary differences at the Spencer Street Station Authority) (80,528) Balance Sheet date between the tax bases of assets and liabilities and 2001-2002 Leasehold improvements 62,068 their carrying amounts for financial reporting purposes. 2001-2002 Surrender of land (Birrarung Marr) to the state (64,800) Deferred income tax liabilities are recognised for all taxable 2002-2003 Leasehold improvements 150,347 temporary differences except: 2003-2004 Leasehold improvements 327,492 2004-2005 Leasehold improvements 320,414 • When the liability arises from the initial recognition of goodwill 2005-2006 Leasehold improvements 286,370 or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects (d) Acquisition of Assets neither the accounting profit nor taxable profit or loss; or All assets acquired, including property, infrastructure, plant and equipment (but excluding goodwill), are initially recorded at their • When the taxable temporary difference is associated with cost of acquisition at the date of acquisition, being the fair value of investments in subsidiaries, associates or interests in joint the consideration provided plus incidental costs directly attributable ventures, and the timing of the reversal of the temporary to the acquisition. difference can be controlled, and it is probable that the temporary difference will not reverse in the foreseeable future. (e) Revenue Recognition The carrying amount of deferred tax assets are reassessed at each Amounts disclosed as revenue are, where applicable, net of returns, Balance Sheet date and reduced to the extent that it is no longer allowances, duties and taxes. Revenue for telecommunications probable that sufficient taxable profit will be available to allow all services, property related income, advertising and lease of the or part of the deferred income tax asset to be utilised. interstate rail corridors is recognised when services are provided by the Consolidated Entity. Government contributions towards capital Unrecognised deferred tax assets are reassessed at each Balance and related costs are recognised when the Consolidated Entity Sheet date and are recognised to the extent that it has become gains control of the underlying assets. Leasehold improvements/ probable that future taxable profit will allow the deferred tax asset renewals undertaken by lessees/sub-lessees and assets provided to be recovered. by other parties are recognised when works are performed on the assets/improvements based on confirmations received from the other (h) Cash Assets parties. Proceeds from asset sales are recognised at the time the asset is sold, while interest revenue is brought to account when earned. For the purposes of the Cash Flow Statement, cash includes short- Rolling stock received free of charge is recognised at its fair value at term deposits that are readily convertible to cash on hand and the time of acquisition. which are subject to an insignificant risk of changes in value, net of outstanding cheques yet to be presented. (f) Borrowing Costs (i) Other Financial Assets Borrowing costs represent interest incurred on loans taken out primarily for the purpose of acquiring new passenger rolling stock. Other financial assets represent fixed term deposits held by the Borrowing costs also includes the amortisation of discounts or Consolidated Entity and investments with Treasury Corporation of premiums relating to these borrowings and interest charges on Victoria and are valued at their fair value. finance leases. Fixed term deposits are subject to draw down restrictions and a In accordance with the Victorian Government’s Department of fixed rate of return. Treasury and Finance’s Financial Reporting Direction 105, all borrowing costs are expensed as incurred. Investments with Treasury Corporation of Victoria are held on deposits ranging from 30 days to 90 days – these investments are (g) National Tax Equivalent Regime (NTER) ear-marked for use on future infrastructure improvement projects.
By direction of the Treasurer of Victoria under the State Owned
34 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...
(j) Receivables Plant and equipment, which includes rolling stock, is stated at cost. Where assets are revalued, revaluations are undertaken with All debtors are recognised at the amounts receivable as they are due sufficient regularity to ensure that the carrying amount of each for settlement at no more than 30 days from the date of recognition. asset does not differ materially from its fair value at the reporting The collectability of debtors is reviewed on an ongoing basis. Debts date. Revaluations are conducted in accordance with the Victorian that are known to be uncollectible are written off. A provision for Government’s policy – Revaluation of Non-Current Physical Assets. doubtful debts is raised when some doubt as to collection exists.
Revaluation increments are credited directly to the asset revaluation (k) Inventory reserve, except to the extent that an increment reverses a revaluation Items held in stores at the reporting date include spare parts decrement in respect of that class of asset previously recognised as and componentry generally used for the maintenance of rail an expense in net result. Where this situation arises, the increment infrastructure assets. Inventory is stated at the lower of cost and net is recognised immediately as revenue in the net result. realisable value. Revaluation decrements are recognised immediately as expenses The provision for stock obsolescence relates to inventory that has in the net result, except to the extent that a credit balance exists in not moved for three years or more, excluding inventory specifically the asset revaluation reserve in respect of the same class of assets. held for emergency situations. Where this situation arises, the revaluation decrement is debited to the asset revaluation reserve. (l) Property, Infrastructure, Plant and Equipment Revaluation increments and decrements are offset against one All rail infrastructure assets owned by the Consolidated Entity another within classes of non-current assets. when it commenced operations were transferred from the previous owners, the Public Transport Corporation and the V/Line Freight Land Corporation, by way of statutory allocation under the Rail Corporations Act 1996, effective from 1 July 1997. The Consolidated Entity recognises two major classes of land – rail corridor land and non-rail corridor land. Non-rail corridor land is The Allocation Statement (as amended) included the carrying value used for commercial purposes while rail corridor land is used as a for the rail infrastructure assets to be adopted by the Consolidated rail reserve. Entity. The Consolidated Entity’s land was revalued with effect from There have been a number of subsequent Allocation Statements 30 June 2005. The result of this revaluation is disclosed in this since the commencement of operations, having the effect of financial report. transferring ownership both to and from the Consolidated Entity. These Allocation Statements also included the carrying value of the The basis of the valuation of non-rail corridor land is market value, rail infrastructure assets adopted by the Consolidated Entity at the with adjustments being made, where appropriate, for variations in time of transfer. the size and quality of each land parcel.
The initial Allocation Statement (and amendment) and subsequent Rail corridor land is based on the assessed market value of the land Allocation Statements were ratified by the relevant Minister under (effectively the value of the land were it to be sold to adjoining land section 40 of the Rail Corporations Act 1996 and, as such, the owners) with discounts being applied to reflect costs that would be values ascribed to the rail infrastructure assets, apart from land, incurred in selling the land ie subdivisional, legal, etc. have been adopted by the Directors of the Consolidated Entity as the appropriate cost for reporting purposes. Lease of infrastructure assets
The Consolidated Entity leases the majority of its rail infrastructure At 30 June 2006, in accordance with the Victorian Government’s assets to DPT for the purposes of conducting passenger and Department of Treasury and Finance’s Financial Reporting freight train and tram operations. DPT then sub-leases the assets Direction 103, apart from land, rail infrastructure assets are to various transport operators and track access providers. Under stated at either Allocation Statement valuation (if allocated to the the leases, responsibility for conducting transport operations and Consolidated Entity) or at cost if the assets were constructed by maintaining the infrastructure assets is effectively transferred the Consolidated Entity or lessees/sub-lessees. In the absence of a to the lessees/sub-lessees. The Consolidated Entity reserves the formal revaluation being undertaken of the Consolidated Entity’s exclusive right to engage in non-transport activities on its assets and infrastructure assets, the Allocation Statement valuations are specifically excludes trunk telecommunications infrastructure from deemed to be cost. the leases.
VicTrack Annual Report 2005-06 35 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...
(l) Property, Infrastructure, Plant and Equipment...
The following table sets out details of the infrastructure leases with DPT:
Description of Leased Assets Lessee Asset Value Start Date Term Rental Suburban train and DPT $3,071 M 18 April 2004 4.5 years Nil tram infrastructure (*) Country non-electrified intrastate 15 years, plus two infrastructure (excluding certain stations) DPT $1,703 M 1 May 1999 15 year options Nil Country stations (**) DPT Included above 1 Oct 2003 16 years Nil Non-electrified interstate DPT $188 M 1 July 1999 15 years < 1 year $2.4 M infrastructure (***) 1 to 7 years $16.8 M
(*) In accordance with refranchising arrangements that came into effect in April 2004, the initial lease of the suburban train and tram infrastructure, which commenced in August 1999 for a period of 15 years, was terminated. (**) The original country station lease, that commenced in August 1999 for a period of 20 years, has been terminated. (***) Under the interstate lease, rental is payable to the Consolidated Entity by DPT’s sub-lessee of the interstate track, the Australian Rail Track Corporation Ltd (ARTC).
Leasehold improvements projects are recorded at cost. The recorded value of rolling stock works in progress includes payments made to the manufacturer. Infrastructure improvements undertaken by lessees/sub-lessees Borrowing costs incurred to finance the construction of new have been recorded as assets of the Consolidated Entity in rolling stock are expensed as they are incurred. accordance with a direction from the Victorian Government’s Department of Treasury and Finance. Infrastructure (n) Intangible Assets (Goodwill) improvements undertaken by the ARTC have also been recognised as assets of the Consolidated Entity. These leasehold Where an entity or operation is acquired, the identifiable net assets improvements have been recognised at cost. Significant leasehold acquired are measured at fair value. The excess of the fair value improvements recognised as assets during the year include of the cost of acquisition over the fair value of the identifiable net costs incurred on the regional fast rail and Craigieburn train assets acquired is brought to account as goodwill. Goodwill is extension projects as well as various other track upgrading works required to be tested for impairment on an annual basis and its undertaken on the metropolitan train and tram networks. value written down to the extent that impairment exists. As at 30 June 2006, there was no impairment of the reported goodwill. Rolling stock (o) Depreciation The Consolidated Entity has entered into contracts for the supply and manufacture of new passenger trains. As at 30 June 2006, All non-current assets, including leasehold improvements and $27.4 million is recorded as works in progress for these assets. renewals but excluding land, have been depreciated using the straight-line method of depreciation over their estimated useful The Consolidated Entity owns the majority of the existing lives to the Consolidated Entity. The range of depreciation rates suburban rolling stock fleet (trains and trams) that were used for each class of asset is as follows: transferred as assets received free of charge in April 2004 at a fair % value of $448.2 million. This value was adopted as the deemed cost of the assets. The fair value was determined on the basis of Buildings and structures 1.7 - 5.0 depreciated replacement cost. Track 2.0 - 5.0
The Consolidated Entity also recognises other suburban rolling Signals and communications 2.0 - 7.7 stock that is the subject of a number of finance leases, which have Plant and equipment 2.0 - 33.0 a carrying value of $841.5 million as at 30 June 2006. Rolling stock 3.0 - 50.0 (m) Capital Works in Progress The above rates are the same as those applied in the 2004-05 The Consolidated Entity’s works in progress includes rail financial year. infrastructure and rolling stock projects underway, but not yet complete or ready for service. The incomplete rail infrastructure
36 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...
(p) Leased Assets reporting date is recognised in the provision for employee benefits and is measured as the present value of expected future payments Operating leases to be made in respect of services provided by employees up to the The Consolidated Entity operates a fleet of motor vehicles under reporting date. Consideration is given to expected future wage an operating lease from the Commonwealth Bank of Australia. and salary levels, experience of employee departures and periods The Consolidated Entity also leases certain office equipment. of service. Expected future payments are discounted using interest rates on Commonwealth Government guaranteed securities with Operating lease payments are expensed in the period incurred. terms to maturity that match, as closely as possible, the estimated future cash outflows. Finance leases Superannuation Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement, The amount charged to the Operating Statement in respect of so as to reflect the risks and benefits incidental to ownership. superannuation represents the employer’s contributions made by the Consolidated Entity to superannuation funds of which Leases of fixed assets where substantially all of the risks and employees are members. Further details are provided in Note 16. benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to the Consolidated Entity are classified Employee benefit on-costs as finance leases. Finance leases are capitalised, recording an asset Employee benefit on-costs, including payroll tax, are recognised and a liability equal to the present value of the minimum lease and included in employee benefit liabilities and costs when the payments, including any guaranteed residual values. Leased assets employee benefits to which they relate are recognised as liabilities. are depreciated on a straight-line basis over their estimated useful lives, where it is likely that the Consolidated Entity will obtain (s) Interest Bearing Liabilities ownership of the asset, or over the term of the lease. Secured loans are carried on the Balance Sheet at their fair value Lease payments are allocated between the reduction of the lease at the time the loan was taken out or acquired, net of fair value liability and the lease interest expense for the period. unwinds. Interest is accrued over the period it becomes due and is recorded as part of payables at year-end. While the Consolidated Entity has recognised finance leases relating to the introduction of new rolling stock within its All borrowing costs are expensed as incurred. financial statements, the risks associated with these leases remains with DOI. The finance lease liability is determined in accordance with the requirements of AASB 117 “Leases”. (q) Payables The premium that arose on the secured loans as a result of being These amounts represent liabilities for goods and services provided recorded at their fair value is being amortised over the repayment to the Consolidated Entity prior to the end of the financial year period of the secured loans. and which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition. (t) Goods and Services Tax (GST)
(r) Employee Benefits Revenues, expenses and assets are recognised net of GST except where the amount of GST incurred is not recoverable, in which Wages, salaries and annual leave case it is recognised as part of the cost of acquisition of an asset or Liabilities for wages, salaries and annual leave expected to be part of an item of expense. The net amount of GST recoverable settled within 12 months of the reporting date are recognised in from, or payable to, the Australian Taxation Office is included respect of employees’ services up to the reporting date and are as part of receivables or payables in the Balance Sheet. The measured as the amounts expected to be paid when the GST component of a receipt or payment is recognised on a gross liabilities are settled. basis in the Cash Flow Statement in accordance with Australian Accounting Standard AASB 107 “Cash Flow Statements”. Long service leave (u) Dividends The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for Section 36 of the Rail Corporations Act 1996, provides for a employee benefits and is measured in accordance with ‘Wages, rail corporation to pay to the state amounts as directed by the salaries and annual leave’ above. The liability for long service Treasurer of Victoria after consultation with the Board of the rail leave expected to be settled more than 12 months from the
VicTrack Annual Report 2005-06 37 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...
(u) Dividends... The accounting policies applied to accounting for financial instruments in the current financial year are detailed in Notes 1 (i), corporation and the Minister. In June 2006, a determination was 1 (j), 1 (q) and 1 (s). received from the Treasurer requiring the Consolidated Entity to make a dividend payment of $5 million to the Consolidated Fund Other financial assets in respect to the 2005-06 financial year ($5 million for 2004-05) - this payment was made on 30 June 2006. Other financial assets represent fixed term deposits held by the Consolidated Entity and investments with Treasury Corporation (v) Capital Assets Charge of Victoria and are valued at their fair value.
The capital assets charge is the estimate of the cost of capital Fixed term deposits are subject to draw down restrictions and a investment in Government assets ie the return that could be fixed rate of return. achieved were the Government to direct its capital towards the next best investment of comparable risk. It is imposed on the Investments with Treasury Corporation of Victoria are held on Consolidated Entity by the Victorian Government’s Department of deposits ranging from 30 days to 90 days – these investments are Treasury and Finance. ear-marked for use on future infrastructure improvement projects.
The purpose of this notional charge is to increase the awareness Receivables of the costs of assets for management to make improved resource allocation and investment decisions. All debtors are recognised at the amounts receivable as they are due for settlement at no more than 30 days from the date of The capital assets charge is shown as both a receipt and an recognition. expense from ordinary activities in the Operating Statement, meaning that there is no impact on the operating result for the The collectability of debtors is reviewed on an ongoing basis. year, nor on the Balance Sheet as at 30 June 2006. Debts that are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to Although the receipt and payment of the capital assets charge does collection exists. not represent physical movements of cash, the capital assets charge has been disclosed in the Cash Flow Statement as it is considered Payables a cash equivalent item under the provisions of the Financial These amounts represent liabilities for goods and services provided Management Act 1994. to the Consolidated Entity prior to the end of the financial year and which are unpaid. The amounts are unsecured and are The charge equates to approximately 15% on the Parent Entity’s usually paid within 45 days of recognition. average net assets for the 2005-06 financial year.
Interest bearing liabilities (w) Comparatives Secured loans are carried on the Balance Sheet at their fair value Where practicable, comparative amounts are presented and at the time the loan was taken out or acquired, net of fair value classified on a basis consistent with the current year. unwinds. Interest is accrued over the period it becomes due and is recorded as part of payables at year-end. (x) Rounding
All amounts shown in the financial statements are expressed All borrowing costs are expensed as incurred. by reference to the nearest thousand dollars unless otherwise specified. The finance lease liability is determined in accordance with the requirements of AASB 117 “Leases”. (y) Financial Instruments The premium that arose on the secured loans as a result of being In accordance with the Victorian Government’s Department of recorded at their fair value is being amortised over the repayment Treasury and Finance’s Financial Reporting Direction 101, the period of the secured loans. Consolidated Entity has not restated comparative information for financial instruments within the scope of AASB 132 Financial“ Instruments: Disclosure and Presentation” and AASB 139 “Financial Instruments: Recognition and Measurement” as permitted on the first-time adoption of A-IFRS.
38 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...
(y) Financial Instruments... be estimated to be close to its fair value. In such cases, the asset is tested for impairment as part of the cash-generating unit to which Effect of changing the accounting policies for financial it belongs. instruments
There are no indicators of impairment of assets at the current There are no changes to the Consolidated Entity’s Balance Sheet reporting date. arising from the adoption of the accounting policies for financial instruments. (aa) Going Concern
(z) Impairment of Assets The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal trading The Consolidated Entity assesses at each reporting date whether operations and the realisation of assets and settlement of liabilities there is an indication that an asset may be impaired. If any such in the ordinary course of business. The ability of the Consolidated indication exists, or when annual impairment testing for an asset Entity to continue paying its debts as and when they fall due is is required, the Consolidated Entity makes an estimate of the dependent upon existing contractual arrangements continuing to asset’s recoverable amount. An asset’s recoverable amount is the operate as originally intended. Such agreements ensure sufficient higher of its fair value less costs to sell and its value in use, and contributions are made by the Victorian Government to cover the is determined for an individual asset, unless the asset does not Consolidated Entity’s contractual commitments. generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot
(ab) Correction of Prior Period Errors
Finance leases
Updated information has been provided by DOI regarding the value of finance lease assets and liabilities recognised by the Consolidated Entity. The correction of information previously reported has necessitated the following adjustments to prior year’s financial information:
1 July 2004 Balance Sheet Decrease Property, infrastructure, plant and equipment $ 6.222 million Increase Current liabilities – Interest bearing liabilities $ 2.602 million Decrease Non-current liabilities – Interest bearing liabilities $10.022 million Increase Retained profits $ 1.198 million
Operating Statement – Financial Year ended 30 June 2005 Decrease Other revenue $ 6.116 million Increase Depreciation and amortisation $ 0.006 million Decrease Interest expense $ 5.007 million
1 July 2005 Balance Sheet Decrease Property, infrastructure, plant and equipment $ 0.204 million Increase Current liabilities – Interest bearing liabilities $ 0.047 million Decrease Non-current liabilities – Interest bearing liabilities $ 0.334 million Increase Retained profits $ 0.083 million
Provision for deferred tax liability
The Consolidated Entity had not brought to account a provision for deferred tax liability in prior years to reflect temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. To correct this error for reporting periods to 1 July 2004, the following adjustment has been made to the 1 July 2004 opening balances:
Decrease Retained profits $152.994 million Increase Provision for deferred tax liability $152.994 million
A further adjustment has been made to the Balance Sheet as at 30 June 2005, being:
Decrease Revaluation reserve $30.042 million Increase Retained profits $ 8.053 million Increase Provision for deferred tax liability $21.989 million
VicTrack Annual Report 2005-06 39 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
NOTE 2 OTHER REVENUE
Interest received 3,347 3,217 3,347 3,217 Proceeds from sale of assets 4,726 929 4,263 903 Lease of the interstate rail corridors 2,919 3,259 2,919 3,259 Government contributions towards capital and related works 163,029 123,521 38,000 6,503 Rolling stock lease revenue 24,138 3,940 - - Other 5,948 4,679 5,694 4,247
Total Other Revenue 204,107 139,545 54,223 18,129
NOTE 3 EMPLOYEE BENEFITS
Salaries and wages 8,429 7,376 8,429 7,376 Associated labour costs: On-costs 968 890 968 890 Superannuation contributions 859 759 859 759
Sub-total associated labour costs 1,827 1,649 1,827 1,649
Increase/(decrease) in provision for employee entitlements (240) 535 (240) 535 Termination payments 568 243 568 243
Total Employee Benefits 10,584 9,803 10,584 9,803
NOTE 4 DEPRECIATION AND AMORTISATION
Buildings and structures 24,086 23,265 24,086 23,265 Track 44,482 37,686 44,482 37,686 Signals and communications 26,671 19,334 26,671 19,334 Plant and equipment 83,646 74,742 5,482 5,235
Total Depreciation and Amortisation 178,885 155,027 100,721 85,520
NOTE 5 SUPPLIES AND SERVICES
Property services (including land tax) 9,021 12,898 9,021 12,898 Telecommunications expenses 7,286 7,303 7,286 7,303 Contract payments 4,358 3,830 4,358 3,830 Other 4,838 4,346 4,838 4,346
Total Supplies and Services 25,503 28,377 25,503 28,377
40 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
NOTE 6 OTHER OPERATING EXPENSES
Increase/(decrease) in provision for doubtful debts (459) 149 (459) 149 Increase in provision for stock obsolescence - 216 - 216 Bad debts 312 1 312 1 Insurance premiums 619 680 619 680 Legal fees 478 470 478 470 Occupancy costs 987 962 987 962 Written down value of assets sold and costs incurred in selling assets 3,262 548 3,188 358 Other rolling stock expenses - 3,220 - 3,220 Other expenses 736 893 759 749
Total Other Operating Expenses 5,935 7,139 5,884 6,805
NOTE 7 OTHER FINANCIAL ASSETS
Funds on deposit - at fair value 13,012 94,506 - - Funds advanced - 17,492 - - Investments - Treasury Corporation of Victoria 41,604 39,004 41,604 39,004
Other Financial Assets 54,616 151,002 41,604 39,004
Reported as: Current Funds on deposit - at fair value 12,912 81,790 - - Funds advanced - 17,492 - - Investments - Treasury Corporation of Victoria 41,604 39,004 41,604 39,004 54,516 138,286 41,604 39,004 Non-current Funds on deposit - at fair value 100 12,716 - - 100 12,716 - -
Total Other Financial Assets 54,616 151,002 41,604 39,004
Use of funds on deposit is restricted to payments of interest on borrowings and payments to suppliers in relation to the construction of new rolling stock (trains). The amount on deposit is subject to a fixed interest rate of 5.15% with quarterly payments of interest.
Funds currently held with Treasury Corporation of Victoria are ear-marked for use on future infrastructure improvement projects.
VicTrack Annual Report 2005-06 41 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
NOTE 8(a) RECEIVABLES
Receivables 13,724 12,450 140,263 140,892 Less provision for doubtful debts (316) (775) (316) (775)
Receivables 13,408 11,675 139,947 140,117
Reported as: Current Receivables 13,667 12,360 11,093 11,688 Less provision for doubtful debts (316) (775) (316) (775) 13,351 11,585 10,777 10,913
Non-current Receivables 57 90 129,170 129,204 57 90 129,170 129,204
Total Receivables 13,408 11,675 139,947 140,117
NOTE 8(b) PAYABLES
Payables 18,379 15,576 8,727 11,682
Total Payables 18,379 15,576 8,727 11,682
NOTE 9 INVENTORY
Stores and materials 856 856 856 856 Less provision for stock obsolescence (831) (831) (831) (831)
Total Inventory 25 25 25 25
All inventory has been classified as current as it is likely to move in the next 12 months.
A provision for stock obsolescence is raised when stock has not moved for a period of three years or more, excluding stock held for emergency situations.
42 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
NOTE 10 PROPERTY, INFRASTRUCTURE, PLANT AND EQUIPMENT
Land Rail corridor land - at independent valuation - 30 June 2005 913,992 913,992 913,992 913,992 Non-rail corridor land - at cost 63 - 63 - Non-rail corridor land - at independent valuation - 30 June 2005 805,999 808,964 805,999 808,964
Land 1,720,054 1,722,956 1,720,054 1,722,956
Buildings and structures Allocation statement valuation 799,448 799,448 799,448 799,448 Accumulated depreciation (141,757) (122,797) (141,757) (122,797) 657,691 676,651 657,691 676,651
Leasehold improvements/renewals 126,038 111,854 126,038 111,854 Accumulated depreciation (11,528) (7,491) (11,528) (7,491) 114,510 104,363 114,510 104,363
Cost 51,970 30,556 51,970 30,556 Accumulated depreciation (4,264) (3,174) (4,264) (3,174) 47,706 27,382 47,706 27,382
Buildings and structures after depreciation 819,907 808,396 819,907 808,396
Track Allocation statement valuation 895,468 895,468 895,468 895,468 Accumulated depreciation (169,633) (147,510) (169,633) (147,510) 725,835 747,958 725,835 747,958
Leasehold improvements/renewals 734,455 526,359 734,455 526,359 Accumulated depreciation (47,199) (27,688) (47,199) (27,688) 687,256 498,671 687,256 498,671
Cost 72,177 70,977 72,177 70,977 Accumulated depreciation (18,312) (15,464) (18,312) (15,464) 53,865 55,513 53,865 55,513
Track after depreciation 1,466,956 1,302,142 1,466,956 1,302,142
Signals and communications Allocation statement valuation 313,028 313,028 313,028 313,028 Accumulated depreciation (86,184) (75,089) (86,184) (75,089) 226,844 237,939 226,844 237,939
Leasehold improvements/renewals 380,671 146,349 380,671 146,349 Accumulated depreciation (23,896) (12,731) (23,896) (12,731) 356,775 133,618 356,775 133,618
Cost 92,192 65,316 92,192 65,316 Accumulated depreciation (11,342) (6,931) (11,342) (6,931) 80,850 58,385 80,850 58,385
Signals and communications after depreciation 664,469 429,942 664,469 429,942
VicTrack Annual Report 2005-06 43 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTs...
NOTE 10 PROPERTY, INFRASTRUCTURE, PLANT AND EQUIPMENT...
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
Plant and equipment Allocation statement valuation 763,179 539,993 - - Accumulated depreciation (96,493) (49,129) - - 666,686 490,864 - -
Leasehold improvements/renewals 2,041 2,034 2,041 2,034 Accumulated depreciation (494) (290) (494) (290) 1,547 1,744 1,547 1,744
Finance leases at cost 904,658 900,158 - - Accumulated amortisation (63,113) (32,312) - - 841,545 867,846 - -
Cost 98,900 96,583 98,900 96,583 Accumulated depreciation (23,258) (18,037) (23,258) (18,037) 75,642 78,546 75,642 78,546
Plant and equipment after depreciation 1,585,420 1,439,000 77,189 80,290
Capital works in progress Leasehold improvements/renewals 391,287 510,559 391,287 510,559 Rolling stock under construction 27,377 117,111 - - Other 16,789 18,406 16,789 18,406
Capital works in progress 435,453 646,076 408,076 528,965
Total Property, Infrastructure, Plant and Equipment 6,692,259 6,348,512 5,156,651 4,872,691
2006 Land Buildings & Track Signals & Plant & W.I.P. Total Consolidated Structures Comms. Equipment $’000 $’000 $’000 $’000 $’000 $’000 $’000
Carrying amount at start of year 1,722,956 808,396 1,302,142 429,942 1,439,000 646,076 6,348,512
Additions (*) 63 35,597 209,296 261,198 230,292 (210,623) 525,823
Disposals (2,965) - - - (226) - (3,191)
Depreciation expense - (24,086) (44,482) (26,671) (83,646) - (178,885)
Carrying Amount at the end of the Financial Year 1,720,054 819,907 1,466,956 664,469 1,585,420 435,453 6,692,259
(*) Includes infrastructure improvements/renewals undertaken by lessees/sub-lessees.
44 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 10 PROPERTY, INFRASTRUCTURE, PLANT AND EQUIPMENT...
2006 Land Buildings & Track Signals & Plant & W.I.P. Total Parent Structures Comms. Equipment $’000 $’000 $’000 $’000 $’000 $’000 $’000
Carrying amount at start of year 1,722,956 808,396 1,302,142 429,942 80,290 528,965 4,872,691
Additions (*) 63 35,597 209,296 261,198 2,533 (120,889) 387,798
Disposals (2,965) - - - (152) - (3,117)
Depreciation expense - (24,086) (44,482) (26,671) (5,482) - (100,721)
Carrying Amount at the end of the Financial Year 1,720,054 819,907 1,466,956 664,469 77,189 408,076 5,156,651
(*) Includes infrastructure improvements/renewals undertaken by lessees/sub-lessees.
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
NOTE 11 EMPLOYEE BENEFITS
Long service leave 3,848 4,214 3,848 4,214 Annual leave 2,317 2,236 2,317 2,236 Other 301 211 301 211
Employee Benefits 6,466 6,661 6,466 6,661
Reported as: Current Long service leave 309 338 309 338 Annual leave 933 866 933 866 Other 237 157 237 157 1,479 1,361 1,479 1,361
Non-current Long service leave 3,539 3,876 3,539 3,876 Annual leave 1,384 1,370 1,384 1,370 Other 64 54 64 54 4,987 5,300 4,987 5,300
Total Employee Benefits 6,466 6,661 6,466 6,661
VicTrack Annual Report 2005-06 45 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
NOTE 12 INTEREST BEARING LIABILITIES
Secured loan 416,768 409,260 - - Lease liability 819,797 861,234 699 518
Interest Bearing Liabilities 1,236,565 1,270,494 699 518
Reported as: Current Secured loan 25,471 10,425 - - Lease liability 45,081 41,762 385 144 70,552 52,187 385 144
Non-current Secured loan 391,297 398,835 - - Lease liability 774,716 819,472 314 374 1,166,013 1,218,307 314 374
Total Interest Bearing Liabilities 1,236,565 1,270,494 699 518
NOTE 13 EQUITY AND MOVEMENTS IN EQUITY
(a) Contributed Capital - Consolidated Entity Capital Capital Additional Capital 1 July 2005 Returned Capital 30 June 2006 $’000 $’000 $’000 $’000 Assets Inventory 205 - - 205 Receivables 2,715 - - 2,715 Land 1,074,458 - - 1,074,458 Buildings and structures 844,764 - 8,354 853,118 Track 1,167,150 - 158,115 1,325,265 Signals and communications 351,019 - 231,712 582,731 Plant and equipment 106,575 - 9,883 116,458 Works in progress/other assets 500,836 - (121,694) 379,142
Total assets 4,047,722 - 286,370 4,334,092
Liabilities Provision for employee benefits (6,959) - - (6,959)
Total liabilities (6,959) - - (6,959)
Contributed Capital at the end of the Financial Year 4,040,763 - 286,370 4,327,133
46 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 13 EQUITY AND MOVEMENTS IN EQUITY...
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
(b) Asset Revaluation Reserve
Asset revaluation reserve at the beginning of the financial year 629,083 558,870 628,967 558,870 Increase/(decrease) in the value of funds on deposit (116) 116 - - Land revaluation - 100,139 - 100,139 Tax effect of land revaluation - (30,042) - (30,042)
Asset Revaluation Reserve at the end of the Financial Year 628,967 629,083 628,967 628,967
(c) Accumulated Surplus
Accumulated surplus at the beginning of the financial year 445,852 479,893 180,864 195,890 Net profit/(loss) for the reporting period (5,460) (29,041) 17,443 (10,026) Dividend (5,000) (5,000) (5,000) (5,000)
Accumulated Surplus at the end of the Financial Year 435,392 445,852 193,307 180,864
NOTE 14 RECONCILIATION OF NET PROFIT/(LOSS) FOR THE REPORTING PERIOD TO NET CASH INFLOW FROM OPERATING ACTIVITIES
(a) Reconciliation of Cash Assets
For the purpose of the Cash Flow Statement, cash includes short-term deposits that are readily convertible to cash on hand and which are subject to an insignificant risk of changes in value, net of outstanding cheques yet to be presented.
(b) Non-Cash Financing and Investing Facilities
The Consolidated Entity has no non-cash financing and investment facilities in place.
(c) Credit Facilities
The Parent Entity does not have any credit facilities in place.
(d) Reconciliation of Net Profit/(Loss) for the Reporting Period to Net Cash Inflow from Operating Activities:
Net profit/(loss) for the reporting period (5,460) (29,041) 17,443 (10,026) Depreciation/amortisation 178,885 155,027 100,721 85,520 Increase/(decrease) in provisions 2,702 (7,158) 10,640 (204) Decrease/(increase) in receivables 7,454 47,365 629 47,983 Decrease/(increase) in prepayments (126) (192) (126) (192) Decrease/(increase) in inventory - 16 - 16 Contributed capital expensed - 3,220 - 3,220 Assets received under lease agreements (69,812) (57,688) (69,812) (57,688) Rolling stock received free of charge - (17,437) - - Fair value adjustments (3,479) (3,392) - - Increase/(decrease) in payables (58,770) (84,573) (2,024) (50,553) Loss/(profit) on sale of assets (1,514) (530) (1,125) (694)
Net Cash Inflow From Operating Activities 49,880 5,617 56,346 17,382
VicTrack Annual Report 2005-06 47 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
NOTE 15 NATIONAL TAX EQUIVALENT REGIME
(a) Current Income Tax Operating Statement Current income tax (expense)/benefit 22,930 38,363 9,353 27,953 Deferred income tax (26,019) (30,310) (20,380) (26,854)
Income Tax (Expense)/Benefit Reported in Operating Statement (3,089) 8,053 (11,027) 1,099
Income Tax Reconciliation Accounting profit/(loss) before tax (2,371) (37,094) 28,470 (11,125)
At company tax rate of 30% 711 11,128 (8,542) 3,338 Non-allowable items (2,450) (2,169) (2,485) (2,239) Finance lease addition (1,350) - - - Adjustments in respect of prior years tax - (906) - -
Income Tax (Expense)/Benefit (3,089) 8,053 (11,027) 1,099
Balance Sheet Operating Statement 2006 2005 2006 2005 $’000 $’000 $’000 $’000
(b) Deferred Income Tax
Consolidated Deferred Tax Liabilities Accelerated depreciation (241,789) (221,478) (20,312) (27,386) Finance lease asset (252,672) (260,494) 7,822 (34,416) Fair value on loan (74) (78) 4 4 Interest receivable (5) (4) (1) (1)
(494,540) (482,054) (12,487) (61,799) Deferred Tax Assets Fair value on loan 6,608 7,656 (1,048) (1,111) Finance lease liability 245,939 258,370 (12,431) 32,082 Losses available for offset 61,293 38,364 - - Prepaid revenue 1,129 935 194 281 Long service leave 1,155 1,264 (109) 127 Doubtful debts 95 233 (138) 45 Stock obsolescence 249 249 - 65
316,468 307,071 (13,532) 31,489
Net Deferred Tax Asset/(Liability) (178,072) (174,983) Deferred Tax Expense (26,019) (30,310)
48 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 15 NATIONAL TAX EQUIVALENT REGIME...
Balance Sheet Operating Statement 2006 2005 2006 2005 $’000 $’000 $’000 $’000
Parent
Deferred Tax Liabilities Accelerated depreciation (241,789) (221,478) (20,312) (27,386) Finance lease asset (209) (140) (68) (92) Interest receivable (5) (4) (1) (1)
(242,003) (221,622) (20,381) (27,479) Deferred Tax Assets Finance lease liability 209 156 54 107 Losses available for offset 37,307 27,953 - - Prepaid revenue 1,129 935 194 281 Long service leave 1,155 1,264 (109) 127 Doubtful debts 95 233 (138) 45 Stock obsolescence 249 249 - 65
40,144 30,790 1 625
Net Deferred Tax Asset/(Liability) (201,859) (190,832) Deferred Tax Expense (20,380) (26,854)
NOTE 16 EMPLOYEE SUPERANNUATION FUNDS
No liability is recognised in the Balance Sheet for the Consolidated Entity’s share of the state’s unfunded superannuation liability. The state’s unfunded superannuation liability has been reflected in the financial statements of the Victorian Government’s Department of Treasury and Finance.
However, the Consolidated Entity’s (ie employer) superannuation contributions for the reporting period are included as part of employee benefits in the Operating Statement. The number of employees as at 30 June 2006 was 123 (30 June 2005 - 108).
Details of employee superannuation funds to which the Consolidated Entity contributes are as follows:
2005-06 Contributions 2004-05 Contributions Contributions Outstanding as at Contributions Outstanding as at Superannuation Fund (*) 30/6/06 30/6/05 $’000 $’000 $’000 $’000 Transport Superannuation Scheme 281 - 255 - State Superannuation Scheme 347 - 378 - VicSuper Scheme 169 - 110 - Other (#) 63 9 16 -
Total 860 9 759 -
(*) These superannuation contributions relate to Victorian Rail Track as the Parent Entity – Rolling Stock Holdings (Victoria) Pty Limited and its subsidiary companies, which forms the Consolidated Entity with the Parent Entity, do not employ any staff. (#) The superannuation funds summarised under “Other” comprise no more than one employee in each fund.
Employer contributions to the Transport Superannuation Scheme and the State Superannuation Scheme are based on actuarial assessments as advised by the Government Superannuation Office. Employer contributions to the other funds are made in accordance with the Commonwealth Superannuation Guarantee Legislation.
VicTrack Annual Report 2005-06 49 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
Consolidated Parent 2006 2005 2006 2005 Note $’000 $’000 $’000 $’000
NOTE 17 CAPITAL COMMITMENTS
Within one year 30,970 138,364 8,998 20,536 One year or later and not later than five years 957 21,973 957 -
Total Capital Commitments 31,927 160,337 9,955 20,536
NOTE 18 LEASE COMMITMENTS
Operating Leases
Within one year 59 93 59 93 One year or later and not later than five years 66 78 66 78 Beyond five years - - - -
Total Operating Lease Commitments 125 171 125 171
Operating lease commitments are for motor vehicles and office equipment – these leases provide for a right of renewal at which time all terms are negotiated.
Finance Leases
Within one year 137,324 137,676 385 144 One year or later and not later than five years 524,160 535,237 314 374 Beyond five years 903,134 1,029,056 - -
Total Finance Lease Commitments 1,564,618 1,701,969 699 518
Less:
Recoverable GST (142,174) (154,677) - - Future finance lease charges (602,647) (686,058) - -
Total Finance Lease Liability 819,797 861,234 699 518
Finance leases relating to the introduction of new rolling stock have an average lease term of 15 years and an average implicit discount rate of 9.89%. There is an option under the Rolling Stock Lease Direct Agreements for DPT (or his nominee) to purchase the rolling stock at the expiry of the leases. The payment of the finance lease liabilities will be funded by the state.
50 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 19 CONTINGENT LIABILITIES NOTE 20 MINISTER, THE BOARD OF DIRECTORS AND ACCOUNTABLE OFFICER
(a) Environmental Contingent Liabilities The names of persons who were Responsible Persons of the Consolidated Entity at any time during the financial year were: Upon the Consolidated Entity’s establishment, and in subsequent asset allocations, the Public Transport Corporation did not grant Responsible Minister: indemnities in relation to any consequences of environmental The Hon Peter Batchelor MP, Minister for Transport contamination of land and property that may have been transferred along with the ownership of the land and property. Directors of the Board: Elana Rubin An action plan has been prepared for the rectification of John Anderson environmental contamination at a number of high priority sites. Chris Lovell The Consolidated Entity has estimated future expenditure levels Bruce Cohen that are expected to be required to address environmental issues, including remediation activities. However, due to uncertainties Accountable Officer: regarding the actual quantum of this expenditure, no provision for John Sutton these costs has been included in the financial statements.
Remuneration of Responsible Persons: (b) Indemnities Remuneration paid to Responsible Persons during the year was: The Consolidated Entity has entered into a number of leases with DPT under which its assets are made available to various Consolidated Parent transport operators and track access providers. Under these leases Income Band 2006 2005 2006 2005 the Consolidated Entity provides various indemnities to DPT, for No. No. No. No. example in relation to the exercise of certain powers under the $10,000 to $19,999 - 3 - 3 leases and pre-existing environmental contamination. In turn, $30,000 to $39,999 3 2 3 2 DPT provides an indemnity to the Consolidated Entity against any $50,000 to $59,999 - 1 - 1 1 - 1 - losses that may result from the use of the land and infrastructure $60,000 to $69,999 $260,000 to $269,999 - 1 - 1 by its sub-lessees (transport operators and track access providers). $350,000 to $359,999 1 - 1 -
Subject to the note below relating to litigation, the Directors of the Total Remuneration of Responsible Persons: $522,278 ($438,301 Consolidated Entity are unaware of any circumstances that would in 2004-05). lead them to believe that these contingent liabilities will result in any material actual liability, and consequently no provisions are Responsible Persons’ remuneration shown in aggregate above included in the financial statements in respect of these matters. includes Directors’ fees and superannuation contributions paid on behalf of Directors by the Consolidated Entity. The amount (c) Litigation excludes insurance premiums paid by the Consolidated Entity in The Consolidated Entity is involved in legal proceedings relating respect of Directors’ and Officers’ insurance contracts. to works undertaken at the Kororoit Creek Bridge. The parties in this matter are Toll Properties Pty Ltd (plaintiff), with Melbourne The Accountable Officer’s remuneration for the 2005-06 year Water, City West Water, VicTrack and National Rail Corporation includes the total salary package received during the year as well (now owned by Pacific National) as defendants. as performance bonuses relating to the 2005-06 and 2004-05 years. The Accountable Officer’s remuneration for the 2004-05 The Consolidated Entity is also involved in legal proceedings year included the total salary package received during the year as with Adelaide Brighton Cement Limited (ABC) relating to land at well as a performance bonus relating to the 2003-04 year. Fyansford, near Geelong. This issue relates to the ownership of land between North Geelong and Fyansford. The Supreme Court The remuneration of the Minister for Transport is reported in the heard this matter in November 2005 and ruled in VicTrack’s financial statements of the Department of Premier and Cabinet. favour. A Notice of Appeal was lodged by ABC against this ruling - the date of the appeal is yet to be determined.
At this stage it is too early to predict the outcome of these actions and whether any significant liabilities will be incurred by the Consolidated Entity as a result.
VicTrack Annual Report 2005-06 51 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 21 EXECUTIVE OFFICERS’ REMUNERATION
The number of executive officers of the Consolidated Entity, other than the Accountable Officer, and their total remuneration during the reporting period are shown in the second and third columns in the table below in their relevant income bands. The base remuneration of executive officers is shown in the fourth and fifth columns. Base remuneration is exclusive of performance bonus payments, long service leave payments, redundancy payments and retirement benefits.
Income Band Total Remuneration Base Remuneration 2006 2005 2006 2005 No. No. No. No. $120,000 - $129,999 - - - 1 $130,000 - $139,999 - 2 1 1 $140,000 - $149,999 - 1 - 1 $150,000 - $159,999 - 1 2 - $160,000 - $169,999 1 - 1 - $170,000 - $179,999 1 - 1 - $190,000 - $199,999 2 - - - $200,000 - $209,999 1 - - -
Total Numbers 5 4 5 3 Total Amount $932,761 $571,157 $771,759 $402,320
Executive officers’ remuneration for the 2005-06 year includes the total salary package received during the year as well as performance bonuses relating to the 2005-06 and 2004-05 years. Executive officers’ remuneration for the 2004-05 year included the total salary package received during the year as well as performance bonuses relating to the 2003-04 year.
NOTE 22 FINANCIAL INSTRUMENTS
(a) Terms, Conditions and Accounting Policies
The Consolidated Entity’s terms, conditions and accounting policies in respect of financial instruments, both recognised and unrecognised, are as follows: Financial Instrument Accounting Policy Terms and Conditions
Financial assets
Cash assets Cash deposits are recognised at the account Cash is held at deposit, earning interest at a balance at reporting date, including accrued variable rate. interest. Interest is recorded as revenue as it accrues.
Other financial assets Fixed term deposits are recognised at fair value. The interest earned from fixed term deposits Investments are recognised at the nominal face is set at 5.15%, whilst investments earn value of the investment. Interest is recorded as interest at a variable rate. revenue as it accrues.
Receivables Receivables are carried at amounts due, less any Receivables are on 30-day terms from provision for doubtful debts. date of invoicing. Where debts become long overdue, eg in excess of 90 days, an assessment is made of collectability, and provision is made for any doubtful accounts.
Financial liabilities
Payables Liabilities are recognised for amounts to be Trade liabilities are normally settled within paid in the future for goods or services received, 45 days from the date of recognition. whether or not billed to the Consolidated Entity.
Interest bearing liabilities Secured loans are recognised at their fair value at Secured loans are fixed interest and are the time the loan was taken out or acquired. repayable on an agreed plan to September 2021.
Finance leases are recognised at the present Finance leases commenced on 18 April 2004 value of the minimum lease payments, including for a term of 15 years. any guaranteed residual values, less principal amounts repaid.
52 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 22 FINANCIAL INSTRUMENTS...
(b) Interest Rate Risk Exposure
The Consolidated Entity is not exposed to any interest rate risk in respect of any financial liabilities as the interest rates are fixed for the term of the borrowings.
Interest earned on cash assets is equivalent to the 11.00am cash rate less a fixed premium agreed by the Consolidated Entity and the bank. The weighted average interest rate for 2005-06 was 4.53% (4.33% in 2004-05). Earnings from interest vary according to movements in the 11.00am cash rate.
Interest income from funds on deposit is fixed at the rate of 5.15%. Interest income earned on investments is variable. For the year ended 30 June 2006, the Consolidated Entity had interest bearing investments with a weighted average interest rate of 5.59% (5.25% in 2004-05). The Consolidated Entity’s exposure to interest rate risk is set out below:
2006 Consolidated
Note Floating Fixed Fixed Fixed Non- Total Interest Interest Rate Interest Rate Interest Rate Interest Rate Maturing in Maturing Maturing in Bearing 1 year or over 1 to 5 more than 5 Less years years $’000 $’000 $’000 $’000 $’000 $’000
Financial assets Cash assets 3,303 3,506 - - 1 6,810 Other financial assets 7 41,604 12,912 - 100 - 54,616 Receivables 8(a) - - - - 13,408 13,408 Total Financial Assets 44,907 16,418 - 100 13,409 74,834 Weighted Average Interest Rate 5.54% 5.21% 5.15% Financial liabilities Payables 8(b) - - - - (18,379) (18,379) Interest bearing liabilities 12 - (70,552) (309,507) (856,506) - (1,236,565) Total Financial Liabilities - (70,552) (309,507) (856,506) (18,379) (1,254,944) Weighted Average Interest Rate 8.58% 8.62% 8.71% Net Financial Assets 44,907 (54,134) (309,507) (856,406) (4,970) (1,180,110)
VicTrack Annual Report 2005-06 53 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 22 FINANCIAL INSTRUMENTS...
2005 Consolidated
Note Floating Fixed Fixed Fixed Non- Total Interest Interest Rate Interest Rate Interest Rate Interest Rate Maturing in Maturing Maturing in Bearing 1 year or over 1 to 5 more than 5 Less years years $’000 $’000 $’000 $’000 $’000 $’000
Financial assets Cash assets 1,794 6,663 - - 11 8,468 Other financial assets 7 39,004 81,790 12,616 100 17,492 151,002 Receivables 8(a) - - - - 11,675 11,675 Total Financial Assets 40,798 88,453 12,616 100 29,178 171,145 Weighted Average Interest Rate 5.49% 5.16% 5.15% 5.15% Financial liabilities Payables 8(b) - - - - (15,576) (15,576) Interest bearing liabilities 12 - (52,187) (265,299) (953,008) - (1,270,494) Total Financial Liabilities - (52,187) (265,299) (953,008) (15,576) (1,286,070) Weighted Average Interest Rate 9.80% 9.80% 9.80% Net Financial Assets 40,798 36,266 (252,683) (952,908) 13,602 (1,114,925)
Reconciliation of net financial assets and net assets for the Consolidated Entity: 2006 2005 $’000 $’000
Net financial assets (1,180,110) (1,114,925)
Inventory 25 25 Prepayments 439 313 Property, infrastructure, plant and equipment 6,692,259 6,348,512 Intangible assets 63,417 63,417 Less: Employee benefits (6,466) (6,661) Deferred tax liability (178,072) (174,983)
Net Assets 5,391,492 5,115,698
(c) Credit Risk Exposure
The Consolidated Entity’s maximum exposure to credit risk at the reporting date is the carrying amount of receivables as indicated in the Balance Sheet. The receivables mainly relate to payment for the provision of telecommunications services by the Consolidated Entity and property rentals outstanding.
The Consolidated Entity provided a range of telecommunications services under contract to a number of Government controlled and private companies during 2005-06. The nature of the entities, in the opinion of the Directors of the Consolidated Entity, has created a low level of credit risk. The Consolidated Entity’s credit exposure in the real estate industry is characterised by a large and diverse range of lessees and licensees. To this extent, the credit risk exposure is regarded as low.
54 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 22 FINANCIAL INSTRUMENTS...
(d) Net Fair Value of Financial Assets and Liabilities
The net fair value of cash, other financial assets, non-interest bearing receivables and payables and interest bearing liabilities of the Consolidated Entity compared to their carrying amount is as follows:
2006 2005 Carrying Net Fair Carrying Net Fair Amount Value Amount Value $’000 $’000 $’000 $’000 Financial assets Cash assets 6,810 6,810 8,468 8,468 Other financial assets 54,616 54,616 151,002 151,002 Receivables 13,408 13,408 11,675 11,675
Total Financial Assets 74,834 74,834 171,145 171,145
Financial liabilities
Payables (18,379) (18,379) (15,576) (15,576) Interest bearing liabilities (1,236,565) (1,220,677) (1,270,494) (1,272,016)
Total Financial Liabilities (1,254,944) (1,239,056) (1,286,070) (1,287,592)
Net Financial Assets (1,180,110) (1,164,222) (1,114,925) (1,116,447)
The Consolidated Entity determines net fair values in the following manner:
Cash assets The carrying amount represents fair value as it equates to the account balance withdrawable by the Consolidated Entity at any time without notice.
Other financial assets For investments, the carrying amount represents fair value as it comprises a contractual obligation on the financial institution to repay principal to this value upon maturity. For funds on deposit, the fair value represents the present value of interest and the amount on deposit.
Receivables The carrying amount represents fair value, as it is a contractual obligation on the debtor, usually payable within 30 days of the date of recognition.
Payables The carrying amount represents fair value, as it comprises a contractual obligation on the Consolidated Entity, usually payable within 45 days of the date of recognition.
Interest bearing liabilities The fair value represents the present value of interest and principal repayments.
NOTE 23 REMUNERATION OF AUDITORS
Consolidated Parent 2006 2005 2006 2005 Note ($) ($) ($) ($) Audit fees paid or payable to the Victorian Auditor-General’s Office for the audit of the financial statements: Paid as at 30 June 79,325 80,260 33,850 20,620 Payable as at 30 June 79,250 112,980 30,550 63,080
VicTrack Annual Report 2005-06 55 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 24 THE IMPACTS OF ADOPTING AUSTRALIAN ACCOUNTING STANDARDS BOARD (AASB) EQUIVALENTS TO INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) STANDARDS
The Consolidated Entity changed its accounting policies, other than its accounting policy for financial instruments, on 1 July 2004 to comply with the Australian equivalents to International Financial Reporting Standards (A-IFRS). The transition to A-IFRS is accounted for in accordance with Australian Accounting Standard AASB 1 “First-time Adoption of Australian Equivalents to International Financial Reporting Standards”, with 1 July 2004 as the date of transition. The Consolidated Entity changed its accounting policies for financial instruments effective from 1 July 2005 (refer Note 1 (y)).
An explanation of how the transition from superseded policies to A-IFRS has affected the Consolidated Entity’s financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables.
The transition to A-IFRS has had no impact on the financial results for the Parent Entity.
Table 1: Effect of A-IFRS on the Balance Sheet as at 1 July 2004
Note Superseded Effect of A-IFRS Policies Transition to A-IFRS $’000 $’000 $’000 Current assets Cash assets 4,914 - 4,914 Other financial assets 174,363 - 174,363 Receivables 59,702 - 59,702 Inventory 258 - 258 Prepayments 121 - 121
Total current assets 239,358 - 239,358
Non-current assets Other financial assets 71,955 - 71,955 Receivables 143 - 143 Property, infrastructure, plant and equipment a, b 5,474,372 286,087 5,760,459 Intangible assets 63,417 - 63,417
Total non-current assets 5,609,887 286,087 5,895,974
Total assets 5,849,245 286,087 6,135,332
Current liabilities Payables 69,468 - 69,468 Employee benefits 1,498 - 1,498 Interest bearing liabilities b 21,148 20,605 41,753
Total current liabilities 92,114 20,605 112,719
Non-current liabilities Employee benefits 4,633 - 4,633 Interest bearing liabilities b 818,136 287,738 1,105,874 Deferred tax liability 152,994 - 152,994
Total non-current liabilities 975,763 287,738 1,263,501
Total liabilities 1,067,877 308,343 1,376,220
Net assets 4,781,368 (22,256) 4,759,112
Equity Contributed capital 3,720,349 - 3,720,349 Reserves 558,870 - 558,870 Accumulated surplus a, b 502,149 (22,256) 479,893
Total equity 4,781,368 (22,256) 4,759,112
56 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 24 THE IMPACTS OF ADOPTING AUSTRALIAN ACCOUNTING STANDARDS BOARD (AASB) EQUIVALENTS TO INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) STANDARDS...
Table 2: Effect of A-IFRS on the Operating Statement for the financial year ended 30 June 2005
Note Superseded Effect of A-IFRS Policies Transition to A-IFRS $’000 $’000 $’000 Revenue from ordinary activities
Customers Telecommunications services 17,510 - 17,510 Property related income 26,054 - 26,054 Leasehold improvements/renewals received 57,688 - 57,688 Rolling stock received free of charge 16,847 - 16,847 Other revenue b 138,253 1,292 139,545
256,352 1,292 257,644
Capital assets charge 599,030 - 599,030
Total revenue 855,382 1,292 856,674
Expenses from ordinary activities Employee benefits 9,803 - 9,803 Depreciation and amortisation a, b, c 149,132 5,895 155,027 Interest expense a, b 67,928 26,464 94,392 Capital assets charge 599,030 - 599,030 Supplies and services 28,377 - 28,377 Other operating expenses b 41,425 (34,286) 7,139
Total expenses 895,695 (1,927) 893,768
Profit/(loss) from ordinary activities before income tax expense (40,313) 3,219 (37,094)
Tax equivalent expense/(benefit) 8,053 - 8,053
Net profit/(loss) for the reporting period (32,260) 3,219 (29,041)
Net increase in asset revaluation reserve 70,213 - 70,213 Total changes in equity other than those resulting from transactions with the Victorian State Government in its capacity as owner 37,953 3,219 41,172
VicTrack Annual Report 2005-06 57 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 24 THE IMPACTS OF ADOPTING AUSTRALIAN ACCOUNTING STANDARDS BOARD (AASB) EQUIVALENTS TO INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) STANDARDS...
Table 3: Effect of A-IFRS on the Balance Sheet as at 1 July 2005
Note Superseded Effect of A-IFRS Policies Transition to A-IFRS $’000 $’000 $’000
Current assets Cash assets 8,468 - 8.468 Other financial assets 138,286 - 138,286 Receivables 11,585 - 11,585 Inventory 25 - 25 Prepayments 313 - 313
Total current assets 158,677 - 158,677
Non-current assets Other financial assets 12,716 - 12,716 Receivables 90 - 90 Property, infrastructure, plant and equipment a, b 6,083,148 265,364 6,348,512 Intangible assets c 60,080 3,337 63,417
Total non-current assets 6,156,034 268,701 6,424,735
Total assets 6,314,711 268,701 6,583,412
Current liabilities Payables 15,576 - 15,576 Employee benefits 1,361 - 1,361 Interest bearing liabilities b 29,447 22,740 52,187
Total current liabilities 46,384 22,740 69,124
Non-current liabilities Employee benefits 5,300 - 5,300 Interest bearing liabilities b 953,309 264,998 1,218,307 Deferred tax liability 174,983 - 174,983
Total non-current liabilities 1,133,592 264,998 1,398,590
Total liabilities 1,179,976 287,738 1,467,714
Net assets 5,134,735 (19,037) 5,115,698
Equity Contributed capital 4,040,763 - 4,040,763 Reserves 629,083 - 629,083 Accumulated surplus a, b, c 464,889 (19,037) 445,852
Total equity 5,134,735 (19,037) 5,115,698
58 VicTrack Annual Report 2005-06 Victorian Rail Track
NOTES TO AND FORMING PART OF THE JUNE 2006 FINANCIAL STATEMENTS...
NOTE 24 THE IMPACTS OF ADOPTING AUSTRALIAN ACCOUNTING STANDARDS BOARD (AASB) EQUIVALENTS TO INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) STANDARDS...
Explanatory notes:
(a) Capitalised borrowing costs
The Consolidated Entity previously capitalised borrowing a lease is a finance or operating lease is less prescriptive under costs related to qualifying assets. On adoption of A-IFRS, A-IFRS, and there is a greater emphasis on the substance of the the Consolidated Entity, in accordance with the Victorian transaction when making such a judgement. As a consequence, Government’s Department of Treasury and Finance’s Financial there may be instances where leases that have previously been Reporting Direction 105, now expenses all borrowing costs as classified as operating leases under Australian Generally Accepted they are incurred, even where they relate to qualifying assets. Accounting Principles may be reclassified as finance leases under A-IFRS. The Connex X’trapolis operating lease, previously The impact of this change in accounting policy has resulted in a recognised by the Consolidated Entity as an operating lease, has reduction in the carrying values of qualifying assets as at been reclassified as a finance lease following the adoption 30 June 2005 of $33.150 million and an increase in borrowing of A-IFRS. costs expenses for the financial year ended 30 June 2005 of approximately $11.491 million. Depreciation expense has also The impact of this change in accounting policy has resulted in decreased by $0.597 million as a consequence. an increase in the Consolidated Entity’s lease assets and lease liabilities of $298.514 million and $287.738 million respectively (b) Finance leases as at 30 June 2005. On the Operating Statement, expenditure on operating leases has decreased by $34.286 million, offset by an Previously, Australian Accounting Standards required the lessee of increase in depreciation expense of $9.829 million and an increase a finance lease to recognise a lease asset and a lease liability equal in interest costs of $14.973 million for the financial year ended to the present value of minimum lease payments at the beginning 30 June 2005. of the lease term. On adoption of A-IFRS, the lease asset and lease liability recognised is to be equal to the lower of the present value (c) Goodwill amortisation of minimum lease payments and fair value of the leased asset which, in those cases where the present value of minimum lease In accordance with AASB 3 “Business Combinations”, payments exceeds the fair value of the leased asset, required an amortisation of goodwill ceased on 1 July 2004. This led to adjustment to the Consolidated Entity’s lease assets and liabilities $3.337 million in amortisation being reversed in the 2004-05 at the date of transition. In addition, the guidance on whether financial year. Goodwill will be tested for impairment annually.
VicTrack Annual Report 2005-06 59 Statutory Information
Statutory framework National Competition Policy Victorian Rail Track, operating under the name of VicTrack, is a The infrastructure leases with DPT provide for open access to Victorian statutory corporation established under and governed Victoria’s rail infrastructure. DPT’s sub-leases to Pacific National, by the Rail Corporations Act 1996. ARTC and suburban train and tram franchisees facilitate the state’s open access regime, fostering competition among Engagement of consultants intrastate and interstate transport companies. During the 2005-06 financial year, VicTrack commissioned eight VicTrack also manages various rail terminals. Critical rail consultancies, individually valued at less than $100,000, at a facilities fall within the Victorian Rail Access Regime and total cost of $264,581, compared with seven consultancies in others compete on a commercial basis. 2004-05 individually valued at less than $100,000 at a total cost of $305,249. VicTrack did not commission any consultancies with VicTrack has approached its other non-transport opportunities a value in excess of $100,000 during this period. within the framework of maintaining an open access regime. That is, no one party is given exclusive rights to the rail corridor Compliance with the Building Act 1993 to the detriment of competition. VicTrack is working towards full compliance with the building and maintenance provisions of the Building Act 1993 in relation Implementation of the Victorian Industry to the buildings owned by it and a compliance program has been Participation Policy put in place in order to meet these requirements and In October 2003, the Victorian Parliament passed the Victorian relevant guidelines. Industry Participation Policy Act 2003, which requires public bodies and departments to report on the implementation of the The majority of buildings owned by VicTrack were leased out Victorian Industry Participation Policy (VIPP). Departments and during the 2005-06 financial year. The contractual responsibility public bodies are required to apply VIPP in all tenders which are for compliance is transferred to the lessees and sub-lessees. more than $3 million in suburban Melbourne and $1 million in regional Victoria. Freedom of Information VicTrack’s standard tendering procedures include compliance VicTrack received two Freedom of Information requests during with the VIPP. the 2005-06 financial year, compared with three in 2004-05.
Under the Freedom of Information Act 1982, only requests Whistleblowers Protection Act 2001 made in writing, clearly defining the required documents and The main purposes of the Whistleblowers Protection Act 2001 accompanied by a $21.50 lodgement fee, are considered valid. are: (a) To encourage and facilitate disclosures of improper conduct Requests should be submitted to: by public officers and public bodies; The Freedom of Information Officer (b) To provide protection for: VicTrack i. Persons who make those disclosures; and GPO Box 1681 ii. Persons who may suffer reprisals in relation to those Melbourne Victoria 3001 disclosures; and (c) To provide for the matters disclosed to be properly Availability of information investigated and dealt with. In accordance with the requirements of the Ministerial Directions
of the Minister for Finance, details in respect to the additional VicTrack has procedures for managing any such disclosure about items listed in Financial Reporting Direction 22 have been the organisation or any of its officers. These procedures provide prepared and are fully available to the relevant Minister, Members for appropriate receipt, assessment and investigation of disclosures of Parliament and the public on request. and action taken after investigation. They also provide for managing the welfare of the whistleblower and the person The available information includes: against whom a disclosure has been made. • Declarations of pecuniary interests duly completed by the
relevant officers; Since the Act commenced on 1 January 2002, there have been no • Details of overseas visits undertaken, including a summary of disclosures relating to VicTrack. the objectives and outcomes of each visit; • Details of assessments and measures undertaken to improve the occupational health and safety of employees; and • A general statement on industrial relations within the organisation and details of time lost through industrial accidents or disputes.
60 VicTrack Annual Report 2005-06 Disclosure Index and Glossary
The Annual Report of VicTrack is prepared in accordance with all relevant Victorian legislation. This index has been prepared to facilitate identification of the compliance with statutory disclosure requirements.
Ministerial Directions Legislation Requirement Page Financial Statements Financial statements required under part 7 of the Report of Operations Financial Management Act 1994 Charter and purpose Legislation Requirement Page Manner of establishment and the FRD 22 1, 51 relevant Ministers Compliance with Australian Accounting 26 Objectives, functions, powers and SD 4.2 (c) Standards and other authoritative FRD 22 1 duties pronouncements Nature and range of services SD 4.2 (c) Compliance with Ministerial Directions 26 FRD 22 1 provided SD 4.2 (d) Rounding of amounts 38 Management and structure SD 4.2 (c) Accountable officer’s declaration 26 FRD 22 Organisational structure 24 SD 4.2 (f) Model financial report 26 Financial and other information SD 4.2 (b) Operating Statement 29 Statement of workforce data and FRD 22 18, 19 merit and equity SD 4.2 (b) Balance Sheet 30 Summary of the financial results for FRD 22 25 SD 4.2 (a) Statement of Changes in Equity 31 the year 32 Significant changes in financial SD 4.2 (b) Cash Flow Statement FRD 22 25 position during the year Operational and budgetary 25 Other disclosures in notes to the financial statements FRD 22 objectives and performance against Departmental disclosure of administered n/a objectives FRD 9 assets and liabilities Major changes or factors affecting FRD 22 25 performance FRD 11 Disclosure of ex-gratia payments n/a FRD 22 Subsequent events n/a Disclosure of parliamentary n/a FRD 13 Application and operation of appropriations FRD 22 60 Freedom of Information Act 1982 Responsible person and executive 51, 52 FRD 21 Compliance with building and 60 officer disclosures FRD 22 maintenance provisions of Building Act 1993 Statement on National Competition Legislation FRD 22 60 Policy Act Page Application and operation of the FRD 22 60 Freedom of Information Act 1982 60 Whistleblowers Protection Act 2001 Details of consultancies over Building Act 1993 60 FRD 22 n/a $100,000 Whistleblowers Protection Act 2001 60 Details of consultancies under FRD 22 60 $100,000 Victorian Industry Participation Policy Act 2003 60 FRD 12 Disclosure of major contracts n/a Financial Management Act 1994 33 Statement of availability of other 27 FRD 22 60 Audit Act 1994 information FRD 22 Occupational health and safety 18, 19 FRD15 Executive officer disclosures 52 FRD 10 Disclosure index 61 Reporting of office-based FRD 24 n/a environmental impacts Victorian Industry Participation FRD 25 60 Policy disclosures FRD 8 Budget portfolio outcomes n/a
Glossary
AAS...... Australian Accounting Standards DPT...... Director of Public Transport A-IFRS...... Australian Equivalents to International FOI...... Freedom of Information Financial Reporting Standards IFRS...... International Financial Reporting Standards ALCAM...... Australian Level Crossing Assessment Method NTER...... National Tax Equivalent Regime ARTC...... Australian Rail Track Corporation Ltd PTSV...... Public Transport Safety Victoria CCTV...... Closed Circuit Television VERN...... Victorian Education & Research Network DDA...... Disability Discrimination Act VicTrack...... Victorian Rail Track DOI...... Department of Infrastructure VIPP...... Victorian Industry Participation Policy
VicTrack Annual Report 2005-06 61 VicTrack Head Office: Level 17, 595 Collins Street Melbourne Victoria 3000
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Web: www.victrack.com.au
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