UNISON Annual Report 2015

Transcription

THE
YEAR
OF
Y U
UNISON Annual Report 2015
Cover page: Unison proudly supports
junior rugby in Hawke’s Bay. Pictured
Elijah Booth from Havelock North Pumas.
This page: Landscape view of part of
Unison’s rural Hawke’s Bay network.
Contents
1. Our Vision 4
2. Chairman’s Annual Review
6
3. Group Chief Executive’s Annual Review
16
4. Corporate Governance Statement
26
5. Board of Directors 30
6. Statutory Information 36
7. Trustees’ Statement 42
8. Financial Statements 46
9. Directory
98
3
ANNUAL REPORT 2015 Our Vision
1
OUR VISION
‘To deliver world-class network and
energy solutions to our customers.’
4
Our Vision ANNUAL REPORT 2015
L-R: Line Mechanic, Leslie Setu, enjoying Unison’s end of year Christmas BBQ.
Unison employees getting out for a lunchtime walk as part of the company’s in-house ‘Stepping Challenge’.
Newly built network as part of the major dairy farm conversion project for Wairakei Pastoral.
Members of Unison’s Smart Network strategy team come together to discuss the year’s achievements.
In 2014, over 8,000 kit bags were distributed across Hawke’s Bay junior rugby, netball and hockey as part of Unison’s Greatest Supporter Programme.
The Hawke’s Bay Sports Park
in Hastings is a large customer powered
by Unison.
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ANNUAL REPORT 2015 Chairman’s Annual Review
2
CHAIRMAN’S
ANNUAL
REVIEW
2014/15 has been
a solid year for the
Unison Group.
Unison Group’s on-going commitment
to developing world-class network and
energy solutions continues to drive
the business toward being an industry
leader in New Zealand.
Unison Group Chairman, Kevin Atkinson,
with residents, Richard and Heather Morrish, at the sustainable
housing development in Hastings where Unison is trialling solar
generation and battery storage solutions.
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Chairman’s Annual Review ANNUAL REPORT 2015
7
Chairman’s
Annual Review
We have reached a major milestone in completing the initial
stage of establishing a Smart Network across our three
regions – an innovative solution that anticipates our future
environment and puts our customers’ requirements first.
Through the five-year implementation
phase, we have seen a progressive
roll-out and deployment of advanced
technologies and it has been pleasing,
as a Board, to see the continually
evolving benefits to customers through
improvements in network reliability.
Now we look forward to the next stage
of the project, which involves extracting
the full benefits from these technologies
together with completing the integration
8
of our Advanced Distribution Management
System (ADMS) – a world leading automated
network control system and key enabler
of the overall Smart Network initiative.
Once fully integrated, Unison will have the
ability to capture and analyse detailed realtime data from its smart assets which will
ultimately provide benefits to customers
through sustained reductions in expenditure
on our assets over the longer term.
“
Through the five-year implementation
phase, we have seen a progressive
roll-out and deployment of advanced
technologies.”
Kevin Atkinson
Unison Group Chairman
As part of the Smart Network strategy,
Unison was the first company in the world to install and commission a Silver
Spring Networks (SSN) Generation Four (Gen4) Distribution Automation
(DA) mesh radio network, to provide communications to its smart devices.
9
Lines Supervisor, Rodney Booth,
challenges himself in Unison’s ‘fitness for work’ programme, ‘CrewFit’.
10
“
The Board remains fiercely
committed to the safety of both
employees and our community.”
Kevin Atkinson
Unison Group Chairman
For us, customer service goes beyond
our responsibility as an electricity
distribution business. We have an
important leadership role to play in
helping educate our customers about
the choices for electricity they will have
in the future. We have been trialling
solar and battery storage solutions
within a small housing development in
Hastings which, over time, will provide
Unison with first-hand experience
of the operation, performance and
potential impact this technology
may have for customers and on the
Network. Solar generation is very
topical at present and it is trending
towards becoming economically viable
in the next decade or so. We want to be
able to help customers understand the
technology so they can make informed
decisions when it comes to energy
services. Legacy pricing models will
have to change in light of technologies
such as solar to ensure customers see
the true value of their connection to
the grid and to ensure equity between
customers with and without solar
generation, for example.
A highlight of the year was the results
of the Company’s staff engagement
survey which gives the Board great
confidence that the Company has a
team of passionate and committed
people to drive the business forward
and who believe Unison is a great place
to work.
Customer focus remains at the heart of
everything we do. We remain on our
journey towards transforming from good
to great, supported by our values-driven
culture. Looking ahead, we have an
exciting strategy in place to further build
on our culture of ‘Safety and Wellbeing’,
‘Excellence’, ‘Customer Service’, ‘Integrity’
and ‘Team work’.
The Board remains fiercely committed
to the safety of both employees and our
community, so despite some notable
achievements in this area throughout the
year it was disappointing to report three
Serious Harm Incidents.
With the Government’s Health and Safety
Reform Bill expected to come into force
in 2015, the Board has been undertaking
a thorough review of the proposed
legislation, and dedicating significant
time to look at how we can make further
enhancements to our safety culture and
performance at Unison. Unison continues
to put in place measures to mitigate risks
going forward and we will work diligently in
the coming year towards our goal of Zero
Harm.
As we look forward we have a lot to
build on, new opportunities to seize and
challenges to face. As a Board, we remain
focussed and committed to a strategic
direction which continually strives towards
a future of enhanced performance for our
customers.
11
Financial Performance
The 2014/15 financial year has been a solid trading
period for the Unison Group.
In particular it has been a very successful
year for Unison’s subsidiary ETEL which,
combined with the colder temperatures
across our network regions and growth
in energy demand from commercial
customers, meant we were ahead of
budgeted revenue throughout the year.
The Group’s Net Profit After Tax (NPAT)
for the 2014/15 financial year was $27.5
million, which is up (13.6%) on the previous
year’s result of $24.2 million.
Line revenue (net of transmission charges)
increased $10.0 million (10.9%) on the
previous year. Line revenue growth
reflects increased electricity demand and
the impact of price increases approved
under the Commerce Commission’s
Default Price-Quality Path determination.
In the year ahead the price increase
of 1.4% permitted by the Commerce
Commission is representative of Unison’s
ongoing investment requirements. For
the remainder of the current regulatory
period until the end of 2020, Unison
12
will be permitted to make annual price
adjustments of up to the rate of CPI
inflation on the distribution component
of our tariffs and pass-through charges in
transmission costs.
Depreciation grew by $1.8 million (7%), due
to the continued levels of re-investment
Unison has made in its network, IT systems
and related plant and equipment.
Operating cash flows were again strong
at $64.1 million (2014: $52.5 million),
reflecting the excellent operational
performance across the Group. Capital
expenditure at $49.5 million is up
$2.4 million on last year as a result of
increased customer driven projects
and the continued investment of smart
technologies in our electricity network.
Group borrowings, excluding fair value
movements, increased by $1 million to
$240.5 million. Shareholder funds as
a percentage of total assets remained
unchanged at 49% (2014: 49%).
Total Group Revenue
$210.5 m
Net Profit After Tax
$27.5 m
Equity / Total Assets
49 %
Capital Expenditure
$49.5 m
Dividend
$9.550 m
13
Flaxmere Primary School students
enjoy learning about what it’s like working for
Unison during a Careers Expo.
14
Dividend
A Dividend of $9.446 million, declared on
27 June 2014 in respect of the financial
year ended 31 March 2014, was paid to
the Hawke’s Bay Power Consumers’ Trust
on 4 August 2014. Unison’s Board has
declared a Dividend of $9.550 million
for the year ended 31 March 2015. The
Dividend will be paid to the Trust in early
August 2015.
Dividend declared for the
year ended 31 March 2015
$9.550m
Acknowledgements
I would like to acknowledge the
commitment and on-going support of my
fellow Board members this year. Their
contribution has enabled the Unison
Group to perform strongly in the 2014/15
financial year. I would like to make
particular mention of retiring Director,
Tim Lusk, for his three years of service to
the Board. Tim joined the Board in 2012.
During his tenure he made a significant
contribution to developing Unison’s Health
and Safety culture, which will continue to
evolve in the years ahead. On behalf of the
Board, I wish Tim well in his next challenge
serving on the Board of Transpower. This
is a notable achievement, and is testament
to his position as a valued member of the
industry.
It is through Ken’s leadership, supported
by a strong management team and staff,
that Unison remains at the forefront of the
electricity distribution industry.
Thank you to the Hawke’s Bay Power
Consumers’ Trust, representing the
beneficial owners of Unison. The Trustees
and the Board continue to maintain an
effective working relationship. We are
grateful for the high level of confidence that
the Trust places in the Board, in all the work
that we do, and the strong customer focus
that we share.
Kevin Atkinson MNZM
Chairman
We are very fortunate to have Unison
Group Chief Executive, Ken Sutherland,
continuing to drive the business forward
with great commitment and leadership.
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ANNUAL REPORT 2015 Group Chief Executive’s Annual Review
3
GROUP CHIEF
EXECUTIVE’S
ANNUAL
REVIEW
2014/15 has been
a year of strong
performance and
positive results.
The 2014/15 year has demonstrated that
Unison continues to be at the forefront of
the electricity distribution industry in New
Zealand.
Wairakei Pastoral Limited Chief Executive Officer, Chris Parkinson
and Unison Group Chief Executive, Ken Sutherland,
on site during the stringing of conductor wires across the Waikato River,
as part of the major dairy farm conversion project Unison is involved in.
16
Group Chief Executive’s Annual Review ANNUAL REPORT 2015
17
Group Chief
Executive’s
Annual Review
It is clear that globally there is a shift in how consumers
think about and use energy.
As solar panels become cheaper and more
efficient and battery storage becomes
viable for consumers, traditional business
models associated with building additional
conventional electricity generation
and transport infrastructure to meet
consumers’ demands will come under
threat.
The Smart Network strategy that Unison
embarked upon five years ago has
positioned Unison well to meet these
future challenges. As we embark on the
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next phase of the strategy, which is to
use the much greater level of information
on the performance and condition of the
network, Unison will improve its capability
to manage its assets through improved
utilisation and deferring, if not avoiding,
significant upgrades which will provide
long-term benefits for our customers. Far
from fearing the future, Unison is seeking
to embrace the challenge of transitioning
to a world where our customers have much
greater options to meet their energy needs.
Control Room Operator, Ian Newton,
utilising the new Advanced Distribution Management
System (ADMS) during a power outage event.
19
Unison completed a major project, with the Hawke’s
Bay Power Consumers’ Trust to replace the overhead
network with underground cables.
SAIDI Performance
115
mins
SAIDI
System Average Interruption
Duration Index.
SAIFI Performance
2.0
SAIFI
System Average Interruption
Frequency Index.
20
“
We recognise that we impact on our
customers’ lives and we understand
their landscape is changing every day.”
Ken Sutherland
Group Chief Executive
Network Performance
Despite the impact of Cyclone Ita in
April and high winds in October (which
contributed to about 20% of year-end
reliability performance), and increased
planned outages due to implementation of
smart grid technologies on the network, the
average duration and frequency of outages
experienced by our customers was well
below regulatory limits and our Statement of
Corporate Intent targets.
Customer Projects
For us, customer experience is part of our
everyday language; where understanding
and meeting our customers’ needs has
always been the catalyst for delivering
excellence. In 2014/15 we connected 871
customers to our network, and carried out
major cable-conversion projects in Bluff
Hill, Napier and in the Hastings CBD. We
undertook a major project in Kennedy Road,
Napier to replace part of the overhead
network with underground cables to
improve the aesthetic appeal of the area
and provide reliability and safety benefits
over the longer term.
We continued our long-term partnership
with Wairakei Pastoral Limited and
Landcorp Farming for their major dairy farm
conversion project in Taupo, and in 2014/15
we commissioned our new substation at Te
Toke as part of this long-term development.
We recognise that we impact on our
customers’ lives and we understand their
landscape is changing every day. We see
our role as more than just keeping the lights
on - that is why we have been trialling solar
technologies, testing electric vehicles and
partnering in research with a number of
universities across the country, so we can
understand the positive and adverse impacts
of new technologies and help our customers
as they explore new energy options.
Number of new customers
connected to our network
871
in 2014/2015
21
Subsidiary Performance
22
Customers are also central to the strategic
drive behind our subsidiary companies,
where commitment to excellence in service
has delivered strong results in 2014/15.
own ‘CrewFit’ programme, helping our
team improve their physical fitness so
they can be better prepared for the often
challenging responsibilities they hold.
Unison Contracting Services Limited
has delivered a record year in terms of
completing the capital and customer work
programme, whilst helping maintain the
performance of our network. Working
24/7 in all terrains, and in all conditions,
we know part of the challenge is keeping
our people safe, and disappointingly,
we reported seven lost time injuries
throughout the year. We have since
carried out significant root-cause analysis
to ensure we mitigate risks going forward,
and will continue to work hard towards
our aspiration of every employee going
home safe and well every day. We take
a holistic approach to health and safety
and it is firmly etched into the fabric of
our culture, where we also recognise how
the mental and physical agility of our
people contributes to safety outcomes.
That is why we have implemented our
For Unison Fibre Limited, the number of
customers connected to our network has
doubled since 2013/14. We have also seen
the rate of customer uptake double in
March, a positive sign as we look towards
the future, whilst partnerships with our
Retail Service Providers continue to grow so
we can offer our customers choice through
provision of an open-access platform.
ETEL Limited, our distribution transformer
manufacturing company, has delivered a
strong positive result for the year, which
has been typified by the range of customer
work undertaken. We worked closely with
the Fiji Electricity Authority to provide backup diesel generation in response to the
country’s low hydro storage situation, as
well as successfully completing the supply
of transformers for a second wind farm
development in Australia, at Boco Rock.
Unison Line Mechanics
carrying out maintenance on the network.
23
“
…the stimulation
we enable, and
the passion we
embed is what
differentiates us…”
Ken Sutherland
Technician, Brendon Devine, and his son William,
enjoy a fun-filled Unison Family Day.
24
Our People
Realisation of our Smart Network strategy,
service excellence for our customers
and continued positive results for our
subsidiary businesses requires a team of
people who are passionate, innovative,
experienced and who all strive to deliver
the same goal. That is why, at Unison,
our values are the fabric of who we are,
our vision is our single aspiration and our
team of people are the backbone of our
business.
We are a learning organisation that is
driven by innovation, where we push
the mind-set to challenge traditional
approaches and seek smarter ways of
doing business.
That is why people want to work here,
and choose to stay here – with employee
turnover tracking downwards year on year,
and being at an all-time low of 3.3% during
the 2014/15 year.
The environment we provide, the
stimulation we enable, and the passion we
embed is what differentiates us and is what
dictates our success.
It is therefore appropriate that I record my
sincere thanks to the people that make
Unison the success it is.
Ken Sutherland
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ANNUAL REPORT 2015 Corporate Governance Statement
4
CORPORATE
GOVERNANCE
STATEMENT
This statement provides an overview of the Company’s
main corporate governance policies, practices and
processes adopted or followed by the Board.
26
Corporate Governance Statement ANNUAL REPORT 2015
The Unison sponsored Rotorua Night Market
runs right through the year and attracts a large
crowd each week.
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ANNUAL REPORT 2015 Corporate Governance Statement
Role of the Board of Directors
The Board of Directors (the “Board”) is appointed by the shareholders’ representatives, the
trustees of Hawke’s Bay Power Consumers’ Trust.
The Board is responsible for setting and monitoring the strategic direction, policies and
control of the Company’s activities, with day-to-day management delegated to the Group
Chief Executive.
The Board has a formal charter that outlines the responsibilities of the Board and the Group
Chief Executive and that provides a code of ethics to guide Directors and the Group Chief
Executive in carrying out their duties and responsibilities. This is available on the Company’s
website.
The Board meets on a monthly basis during the financial year, with additional full meetings
and sub-committee meetings being convened when required.
Board Committees
Audit and Risk Committee
Unison has a formally constituted Audit and Risk Committee, responsible for reviewing the
Company’s accounting policies, financial management, financial statements, management of
information systems and systems of internal control, external and internal risk management
functions and the treasury policy. The committee also considers internal risk assessments
and external audit reports as well as appointment of the external auditor, audit relationship
matters and fees.
The committee meets an average of five times a year, with additional meetings being
convened when required.
Remuneration Committee
The Board promotes remuneration of directors and executives that is transparent, fair and
reasonable in a competitive market for the skills, knowledge and experience required by the
Company.
The committee makes recommendations to the Board regarding the appointment of
the Group Chief Executive and annually reviews the remuneration packages of executive
managers, including the Group Chief Executive, as well as reviewing the performance of the
Group Chief Executive. External advice may be sought as part of its review.
The committee also periodically reviews and makes recommendations to the Board regarding
general remuneration policy.
Other Committees
In addition, the Board establishes other committees on an “as required” basis to consider
matters such as due diligence reviews of acquisitions and other major transactions.
28
Corporate Governance Statement ANNUAL REPORT 2015
Risk Management
The Board oversees a formal risk management policy and framework that are consistent with
the international standard for risk management AS/NZS ISO 31000:2009 Risk management –
Principles and guidelines.
The Board is responsible for reviewing and ratifying the system of risk management practices
and the Company’s system of internal controls.
The Board monitors the operational and financial aspects of the Company’s activities, principally
through the Audit and Risk Committee, and the Board considers the recommendations and
advice of external and internal auditors and other external advisors on the operational and
financial risks that face the Company.
The Board ensures that recommendations made by the external and internal auditors and other
external advisers are investigated and appropriate action is taken to ensure that the Company
has an appropriate internal control environment in place to manage the key risks identified.
Treasury Policy
Exposure to treasury-related financial risks is managed in accordance with the Company’s
treasury policy. This policy sets out financial and treasury management objectives, specific
responsibilities, limits on management authority, permissible financial instruments,
counterparty credit limits and reporting, and monitoring requirements.
Under the treasury policy the Board is responsible for approving all treasury and interest rate
strategies and any changes to those strategies.
Statement of Corporate Intent
In accordance with Section 39 of the Energy Companies Act 1992, the Directors annually
submit a Statement of Corporate Intent for the coming financial year to the Hawke’s Bay Power
Consumers’ Trust for endorsement. This document outlines the Company’s overall objectives,
intentions and financial performance targets and is available on the Company’s website.
Directors’ Interests Register
The Company maintains and reviews on a monthly basis an Interests Register to record
particulars of transactions or matters involving Directors.
29
ANNUAL REPORT 2015 Board of Directors
5
BOARD OF
DIRECTORS
Kevin Atkinson MNZM CFInstD FNZIM
30
Board of Directors ANNUAL REPORT 2015
Andrew Bayly
Paul Callow
Paul Connell CA CFInstD
Brenden Hall
Philip Hocquard
Tim Lusk
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Kevin Atkinson MNZM CFInstD FNZIM
CHAIRMAN, REMUNERATION COMMITTEE CHAIRMAN
AND AUDIT AND RISK COMMITTEE MEMBER
Kevin Atkinson is a Hawke´s
Bay-born Director who has spent
the majority of his working life in
the technology sector. He is the
Principal and Managing Director
of the software company
Information Management
Services Limited. He is also the
Chairman of the Hawke’s Bay
District Health Board, and a
Director of Hawke’s Bay Rugby.
Kevin is a Chartered Fellow of the
Institute of Directors (CFInstD)
32
and a Fellow of the Institute of
Management (FNZIM). He was
made a member of the New
Zealand Order of Merit (MNZM)
for services to Business and the
Community in the 2010 Queen’s
Birthday Honours List.
Kevin was appointed to the
Unison Networks Limited Board in
June 1998, the Unison Contracting
Services Limited Board in March
2007 and the Unison Fibre Limited
Board in February 2010.
Andrew Bayly
Paul Callow
AUDIT AND RISK COMMITTEE
MEMBER
MEMBER
Appointed to the Board in May
2013, Andrew Bayly is a local
director based in Havelock North.
Andrew has successfully developed
a governance and business advisory
practice, AB360 Limited, over the
past three years by combining his
knowledge and experience with his
passion for helping businesses and
individuals to grow and succeed.
Paul Callow is an independent
Director with over 30 years
of finance, commercial and
engineering experience, including
extensive experience working in the
regulated electricity sector in New
Zealand.
Previously Andrew was a partner
at PricewaterhouseCoopers’ Napier
office, working with some of the
region’s largest businesses. He has
a range of specialist knowledge
including strategic planning,
governance, business risk and
performance improvement.
Andrew is a director of Tremain
Capital Limited, Ask Holdings
Limited and Ask Your Team NZ
Limited. He is currently also a
member of the Advisory Boards for
Emmerson Transport Limited and
Hatuma Lime Company Limited and
is a Chartered Member of the New
Zealand Institute of Directors.
He holds a mechanical engineering
degree from the University of
Birmingham, and was a partner
of the international firm, Deloitte,
for 13 years, where he advised
public and private sector clients
on some of New Zealand’s largest
transactions and investments.
Paul is a director of privately owned
Hawke’s Bay company, Hau Ora
Clay Target Shooting, and is a
chartered member of the Institute
of Directors in New Zealand.
Paul was appointed to the Unison
Networks Limited Board in July
2014. He and his wife recently
relocated to Hawke’s Bay from
Wellington.
33
Paul Connell CA CFInstD
Brenden Hall
CHAIRMAN
MEMBER
Paul Connell is an independent
director with broad commercial,
management and governance
experience spanning industries and
countries. He has been a director
of a number of public and private
companies for over 14 years.
Brenden Hall is an independent
director and business advisor with
over twenty five years of experience
across a multiple of industries
including electricity, information
technology and agricultural export.
He is chairman of the Testing
Laboratory Registration Council
(IANZ) and the independent
chairman of the Hamilton City
Council Audit and Risk Committee.
Paul is a director of Hall’s
Refrigerated Transport Limited,
and Telarc SAI Limited, a Crown
subsidiary.
Paul is a member of the Chartered
Accountants Australia and New
Zealand and a Chartered Fellow
of the Institute of Directors in
New Zealand. He was born and
educated in Hawke’s Bay and
resides in Auckland.
Paul was appointed to the Unison
Networks Limited Board in July
2010 and joined the Unison Fibre
Limited Board in October 2010.
34
Brenden holds a commerce
degree from Victoria University
of Wellington, and is a Chartered
Member of the Institute of
Directors. He currently provides
advisory services in strategy
development, mergers and
acquisitions and export market
development.
Brenden joined the ETEL Limited
Board in May 2009, the Unison
Networks Limited Board in July 2011
and the Unison Fibre Limited Board
in December 2011. He was born
and educated in Wellington and
now resides in Auckland.
Philip Hocquard
Tim Lusk
MEMBER AND REMUNERATION
COMMITTEE MEMBER
MEMBER AND REMUNERATION
COMMITTEE MEMBER
Philip Hocquard is a business
adviser, company executive
and director with broad
experience of many different
types of business, corporate and
commercial structures, financing
options, business strategies and
governance. He holds a law degree
from Victoria University and was a
partner of the Hastings legal firm,
Bannister & von Dadelszen, for over
20 years before retiring in 1999 to
set up an independent mentoring
business providing strategic, legal
and general advice to selected
private businesses.
Tim Lusk holds a degree in
Power System Engineering and
has over 45 years’ experience
in the New Zealand energy and
telecommunications industries.
He has worked in the public and
private sectors including executive
positions in McConnell Dowell
International, Transpower NZ
Limited, Telecom NZ Limited and
Meridian Energy Limited. He has
a deep interest in the creation
of high performing companies
through cultural and technological
transformation.
Philip was appointed to the
Unison Networks Limited Board
in July 2009. He joined the Unison
Contracting Services Limited
Board in June 2010. He is a senior
management executive or director
of a number of privately owned
Hawke’s Bay companies and
Chairman of some of those. Philip
is also a Trustee of the Hawke’s Bay
Rescue Helicopter Trust.
Tim is Chair of Enable Networks
Limited, a Director of the
Environmental Protection Authority,
a member of the Transpower
NZ Limited Board Committee on
Network Risk, and Chair of Cook
Brothers Construction Advisory
Board.
Tim was appointed to the Unison
Networks Limited Board in March
2012 and resigned in May 2015.
35
ANNUAL REPORT 2015 Statutory Information
6
STATUTORY
INFORMATION
The Directors are pleased to present the Annual Report
and accompanying Financial Statements in respect of
Unison Networks Limited’s operations for the twelve
months to 31 March 2015.
36
Statutory Information ANNUAL REPORT 2015
Rural shot overlooking Wairakei Pastoral.
37
Financial Results
The Group’s earnings before interest and tax for the twelve months under review was $54.0
million, compared with $50.8 million for the previous twelve months. The net surplus for 2015
was $27.5 million (2014: $24.2 million).
Principal Activities
Unison Networks Limited and its subsidiaries (together the Group) provide electricity
distribution and line function services to consumers and businesses, as well as fibre optic
network interconnections and related services throughout the Hawke’s Bay, Rotorua and
Taupo regions. The Group also provides electrical, fibre, civil and vegetation contracting
services; manufactures electrical products for the Australian, Pacific and New Zealand
markets; and operates a captive insurance company.
Company’s Affairs
The Directors consider the state of the Company’s affairs to be satisfactory. Details of the year
under review are included in the Annual Report and the Financial Statements accompanying
this report.
Dividend
A fully imputed dividend of $9.446 million ($13.120 million inclusive of imputation credits),
which equates to 14.76 cents per share, was declared during the year and paid to the Hawke’s
Bay Power Consumers’ Trust.
On 19 June 2015, the Directors declared a fully imputed dividend of $9.550 million ($13.264
inclusive of imputation credits), which equates to 14.92 cents per share, in respect of the
2014/15 financial year. This dividend will be paid to the Trust on or about 3 August 2015.
38
Directors
At the Annual General Meeting held on 25 July 2014, Mr Hall was re-elected to the Unison
Networks Limited Board. Mr Callow’s appointment as a Director of Unison Networks Limited,
filling the position left vacant by Mr John Palairet’s retirement, was also confirmed.
Directors’ Remuneration
and Other Benefits
Directors’ remuneration from the Company in the year to 31 March 2015 was:
Parent
Subsidiaries
$
$
111,000
27,170
J R Palairet
24,975
29,627
P W Hocquard
55,500
13,585
P A Connell
68,450
13,585
B J Hall
55,500
34,168
T A Lusk
55,500
A C Bayly
55,500
P Callow
32,375
K H Atkinson
K R Valentine
40,000
D J Frow
30,000
B J Martin
7,718
S E Blanch
19,022
J Kiteley
18,375
39
Directors’ Interests
Some Directors have an interest in transactions with the Company involving the supply of
services on standard terms and conditions to premises in which they have interests. The
interest which these Directors may have in such transactions is no different in kind, quality,
benefit or obligation from transactions which the Company has with other consumers.
The following Directors declared interests in the entity listed. The declaration serves as notice
that the Director may benefit from any transactions between the Company and the identified
entity.
Director
Entity
Mr K H Atkinson
· Chairman, Hawke’s Bay District Health Board
· Director, Hawke’s Bay Rugby Union
· Managing Director, IMS Payroll Limited
Mr P A Connell
· Director, Telarc SAI Limited
· Chairman, Testing Laboratory Registration Council
Mr T A Lusk
· Director, Enable Networks Limited
· Director, Environmental Protection Authority
· Member, Transpower Board Subcommittee on Network Risk
Mr P W Hocquard
· Trustee, Hawke’s Bay Helicopter Rescue Trust
Directors’ Indemnity and
Insurance
The Company provides cover to its Directors and certain executives for personal loss caused
by wrongful acts in the course of their duties where indemnity is not available from the
Company.
40
Information Used by Directors
There were no notices from Directors requesting the use of company information received in
their capacity as Directors, which would not otherwise have been available to them.
Donations
Donations of $21,541 were made by the Company in the financial year to 31 March 2015.
Auditors
In accordance with Section 45 of the Energy Companies Act 1992, and Section 15 of the Public
Audit Act 2001, the Auditor-General continues as Auditor.
The amount payable by the Company to Audit New Zealand is $315,287.
This is made up of:
Unison Networks Limited
$110,000
$12,837
Unison Energy Limited
$1,686
Unison Fibre Limited
$6,360
Unison Insurance Limited
$12,000
ETEL Limited
$91,000
For other services
$81,404
41
ANNUAL REPORT 2015 Trustees’ Statement
7
TRUSTEES’ STATEMENT
on the compliance by Unison Networks Limited with
the Statement of Corporate Intent for the year ended 31
March 2015.
The Hawke’s Bay Power Consumers’ Trust (HBPCT) and
Unison’s Overhead to Underground conversion project
along Kennedy Road, Napier, has significantly improved the
aesthetic appeal of the area.
42
Trustees’ Statement ANNUAL REPORT 2015
43
ANNUAL REPORT 2015 Trustees’ Statement
All of the shares in Unison Networks Limited are held by the Hawke’s Bay Power Consumers’
Trust on behalf of consumers who are connected to Unison’s network in Hawke’s Bay.
As the Trust is the majority shareholder, the Trustees are required to prepare a statement,
for inclusion in Unison’s annual report, commenting on the Company’s compliance with the
Statement of Corporate Intent.
The 2015 Statement of
Corporate Intent
Key Objective
To operate as a successful and sustainable business, through enhanced shareholder value
and meeting the needs of its consumers in terms of quality and efficiency.
Compliance
In the 2014-2015 year trading results were up on the previous year. Total group revenue for the
year was $210.5 million, an increase of $18.5 million on the previous year. The net profit before
tax increased to $38.2 million from $34.5 million in the previous year.
Shareholder value showed a solid increase of $16.3 million or 5% increasing to $343 million. The
investment in the Smart Grid strategy has resulted in a very good network performance result,
surpassing the targets for the year.
Ratio of Consolidated Shareholders’ Funds to Total Assets
• The minimum target ratio of consolidated shareholders’ funds to total assets is set at not
less than 40%.
• Target goal for 2015 – 49%.
Compliance
Both the minimum target ratio and the target goal were achieved. The actual ratio met was 49%.
Performance Targets
Unison’s 2015 Statement of Corporate Intent sets targets for both financial and network
performance.
Compliance
The Company met all but one of its performance targets. The Trustees are satisfied with the
trading results and the network performance.
44
Trustees’ Statement ANNUAL REPORT 2015
Statement of Corporate Intent
FINANCIAL
Profit before interest, tax and depreciation, amortisation and
financial instruments as a percentage of average assets employed Targets Actual Results
2015
2015
11.4% 13.0%
Profit before interest, taxation and financial instruments
as a percentage of average assets employed
7.3%
8.4%
Total line operating costs per consumer
$328
$318
123
115
SAIFI - System Average Interruption Frequency Index
2.3
2.0
FAULTS - Per 100km of line
• Underground faults
• Overhead faults
6.2
7.6
4.4
7.7
Total System Faults
7.4
7.2
NETWORK PERFORMANCE
SAIDI - System Average Interruption Duration Index (Minutes)
Compliance with Other Matters
The Statement of Corporate Intent also details matters relating to the Company’s scope
of activities, dividend distributions, accounting policies, information to be provided to
shareholders and administrative matters relating to procedures and communications with
the Trust, as the sole shareholder. We are satisfied that in all these matters the Company has
complied with the Statement of Corporate Intent.
Summary
The Trustees are very pleased to report a solid financial result and a very good network
performance result. It is very pleasing that the deployment of strategies and technologies
over the past few years is delivering such a high level of security of supply to our consumers.
John Newland Chairman
For and on behalf of Trustees of the Hawke’s Bay Power Consumers’ Trust
Trustees: Arch Buntain, Helen Francis, Diana Kirton, Ken Gilligan, John Newland
45
ANNUAL REPORT 2015 Financial Statements
8
FINANCIAL
STATEMENTS
Unison cable drums.
46
Financial Statements ANNUAL REPORT 2015
Statement of Performance48
Statement of Financial Performance
49
Statement of Comprehensive Income
49
Statement of Financial Position50
Statement of Changes in Equity
51
Statement of Cash Flow52
Notes to the Financial Statements 53
Independent Auditor’s Report96
47
ANNUAL REPORT 2015 Financial Statements > Statement of Performance
Statement of Performance
Statement of
Corporate Intent
2014/15 Targets
31 March
2015
31 March
2014
11.4%
13.0%
11.4%
Profit before interest, taxation and financial instruments as a
percentage of
average assets employed
7.3%
8.4%
7.1%
Profit as a percentage of average shareholder funds
7.2%
8.2%
7.6%
Ratio of shareholders’ funds to total assets
49%
49%
49%
110,344
110,573
110,296
System Length (km’s)
8,115
8,114
8,077
Total line business operating costs per consumer
$328
$318
$317
$4,460
$4,334
$4,322
<123.0
115.0
112.8
<2.3
2.0
1.8
Underground faults
6.2
4.4
6.0
Overhead faults
7.6
7.7
6.4
Total System faults
7.4
7.2
6.2
Medical Treatment Injuries
30
35
28
Number of Public Accidents (either harm to the public or
significant damage to property) from Unison’s operation of the
electricity infrastructure
Nil
1.0
1.0
2,500
2,818
2,628
15.22
14.92
14.76
For the Year Ended 31 March 2015
GROUP FINANCIAL MEASURES
Profit before interest, taxation, depreciation, amortisation and
financial instruments as a percentage of average assets employed
ELECTRICAL LINES BUSINESS PERFORMANCE MEASURES
1. Operating Cost Comparison
Consumer Numbers
Total line business costs per km
2. Electricity Network Performance
SAIDI - System Average Interruption Duration Index
This represents the average number of minutes that a consumer
was without power during
the reporting period
SAIFI - System Average Interruption Frequency Index
This represents the average number of interruptions that a
consumer experiences during
the reporting period
Faults per 100km of Line
3. Health & Safety Performance
Public Safety Management Systems (PSMS) target: Number of
school visits for electricity safety education (measure number of
children presented)
4. Dividend target
Dividend target (cents per share) 1
1The dividend target is the dividend expected to be paid in relation to that financial year and
hence paid out during the following financial year. This includes forecasted assumptions of CPI.
48
Statement of Financial Performance < Financial Statements ANNUAL REPORT 2015
Statement of Financial Performance
Group
Notes
Operating revenue
3
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
210,492
191,922
153,986
138,142
Total revenue
210,492
191,922
153,986
138,142
Electricity transmission charges
39,923
35,389
39,923
35,389
Distribution system maintenance
7,740
7,776
9,914
9,864
Raw materials and consumables used
26,045
26,106
-
-
Employee related expenses
29,422
27,038
14,835
13,405
18,205
19,834
13,391
14,174
Operating expenditure
Other expenses
121,335
116,143
78,063
72,832
Earnings before interest, income tax, depreciation,
amortisation and financial instruments (EBITDAF)
89,157
75,779
75,923
65,310
Change in fair value of financial instruments
(3,793)
3,576
(3,793)
3,518
Earnings before interest, income tax, depreciation
and amortisation (EBITDA)
85,364
79,355
72,130
68,828
Depreciation and amortisation expense
4
27,834
25,997
23,708
22,437
Loss on disposal of property, plant and equipment
4
3,512
2,587
3,403
2,538
Earnings before interest and income tax (EBIT)
54,018
50,771
45,019
43,853
Finance expenses
5
15,773
16,202
16,119
16,269
Finance income
5
-
-
(1,712)
(1,870)
38,245
34,569
30,612
29,454
10,725
10,396
8,607
9,050
27,520
24,173
22,005
20,404
Profit before income tax
Income tax
6
Profit for the year
Statement of Comprehensive Income
Group
Notes
Profit for the year
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
27,520
24,173
22,005
20,404
-
-
-
-
4,998
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Gains on revaluation of land and buildings
Items that may be subsequently reclassified to profit
or loss:
(1,798)
5,063
(2,383)
Other comprehensive income for the year, net of tax
Gain/(loss) on financial instruments taken to equity
23
(1,798)
5,063
(2,383)
4,998
Total comprehensive income for the year
25,722
29,236
19,622
25,402
The above statements of financial performance and
comprehensive income should be read in conjunction
with the accompanying notes.
49
ANNUAL REPORT 2015 Financial Statements > Statement of Financial Position
Statement of Financial Position
As at 31 March 2015
Group
2015
$ 000
Notes
2014
$ 000
Parent
2015
$ 000
2014
$ 000
ASSETS
Current assets
Cash and cash equivalents
8
9,456
3,623
2,189
137
Receivables
9
23,094
19,823
15,784
12,199
Derivative financial instruments
21
912
687
27
342
Inventories
10
20,993
20,323
3,486
3,346
Other financial assets
11
1,452
-
-
-
Related party advances
-
-
2,400
2,400
Total current assets
55,907
44,456
23,886
18,424
Non current assets
Property, plant and equipment
12
593,633
575,327
575,900
553,485
Intangible assets
13
49,109
49,745
20,449
20,934
14
685
1,261
-
-
21
21,392
1,935
21,392
1,935
23,282
Related party advances
-
-
19,114
Investment in subsidiaries
-
-
52,770
49,770
Total non current assets
664,819
628,268
689,625
649,406
Total assets
720,726
672,724
713,511
667,830
LIABILITIES
Current liabilities
Trade and other payables
15
17,955
16,002
12,359
9,505
Current tax liabilities
6
2,936
1,577
700
1,019
Employee provisions
16
5,888
5,113
2,692
2,355
Interest bearing liabilities
17
-
35,000
-
35,000
21
125
288
391
288
Deferred income
1,035
1,224
798
266
Total current liabilities
28,102
59,307
16,837
48,270
202,064
Non current liabilities
Interest bearing liabilities
19
262,609
202,064
262,609
Employee provisions
18
1,313
1,495
600
794
21
11,872
10,363
11,872
10,355
Deferred tax liabilities
20
76,114
73,916
72,857
78,461
Related party payables
-
-
13,028
10,305
Total non current liabilities
349,710
286,779
366,570
299,632
Total liabilities
377,812
346,086
383,407
347,902
Net assets
342,914
326,638
330,104
319,928
66,661
EQUITY
Contributed equity
22
66,661
66,661
66,661
Reserves
23
(2,184)
(386)
(2,820)
(437)
Retained earnings
23
278,437
260,363
266,263
253,704
342,914
326,638
330,104
319,928
Total equity
For and on behalf of the Board
50
Director
Director
Date: 19 June 2015
Statement of Changes in Equity < Financial Statements ANNUAL REPORT 2015
Statement of Changes in Equity
Share
Capital
$ 000
Reserves
$ 000
Retained
Earnings
$ 000
Total
Equity
$ 000
Balance as at 1 April 2014
66,661
(386)
260,363
326,638
Profit for the year
-
-
27,520
27,520
-
(1,798)
-
(1,798)
-
(1,798)
27,520
25,722
Notes
GROUP: CURRENT YEAR
Cash flow hedge reserve movement
23
Total comprehensive income/(loss)
Dividend paid
23
-
-
(9,446)
(9,446)
66,661
(2,184)
278,437
342,914
66,661
(5,449)
245,405
306,617
Profit for the year
-
-
24,173
24,173
-
5,063
-
5,063
-
5,063
24,173
29,236
Balance as at 31 March 2015
GROUP: COMPARATIVE YEAR
23
Dividend paid
23
-
-
(9,215)
(9,215)
66,661
(386)
260,363
326,638
66,661
(437)
253,704
319,928
Profit for the year
-
-
22,005
22,005
-
(2,383)
-
(2,383)
-
(2,383)
22,005
19,622
PARENT: CURRENT YEAR
23
Dividend paid
23
-
-
(9,446)
(9,446)
66,661
(2,820)
266,263
330,104
66,661
(5,435)
242,515
303,741
Profit for the year
-
-
20,404
20,404
-
4,998
-
4,998
-
4,998
20,404
25,402
PARENT: COMPARATIVE YEAR
23
Dividend paid
23
-
-
(9,215)
(9,215)
66,661
(437)
253,704
319,928
51
ANNUAL REPORT 2015 Financial Statements > Statement of Cash Flow
Statement of Cash Flow
Group
Notes
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Cash flows from operating activities
Receipts from customers
202,270
186,228
147,462
132,867
Contributions for capital works
5,340
4,919
5,331
4,842
Interest received
78
23
1,712
1,893
207,688
191,170
154,505
139,602
Payments to suppliers and employees
(118,128)
(113,344)
(77,112)
(70,459)
Interest paid on loans
(16,237)
(16,202)
(16,172)
(16,269)
Income taxes paid
(7,592)
(8,590)
(5,653)
(6,270)
GST refunds/(payments)
(1,618)
(506)
(75)
(103)
64,113
52,528
55,493
46,501
Purchase and construction of property, plant &
equipment
(49,529)
(47,102)
(48,880)
(42,133)
Amounts repaid by related party
-
-
6,896
5,150
Amounts advanced to related party
-
-
(11)
(2,016)
(1,700)
Net cash inflow / (outflow) from operating activities
32
Cash flows from investing activities
Investment in subsidiary
-
-
(3,000)
Investments
(305)
293
-
-
Net cash inflow / (outflow) from investing activities
(49,834)
(46,809)
(44,995)
(40,699)
1,000
5,000
1,000
5,000
Cash flows from financing activities
Proceeds from borrowings
Repayment of loans
-
(1,600)
-
(1,600)
(9,446)
(9,215)
(9,446)
(9,215)
Net cash inflow / (outflow) from financing activities
(8,446)
(5,815)
(8,446)
(5,815)
Net increase (decrease) in cash and cash equivalents
5,833
(96)
2,052
(13)
Cash and cash equivalents at the beginning of the
financial year
3,623
3,719
137
150
9,456
3,623
2,189
137
Payment of dividends
Cash and cash equivalents at end of the financial
year
24
8
52
Notes to Financial Statements < Financial Statements ANNUAL REPORT 2015
Notes to the Financial Statements
1 General Information
Unison Networks Limited and its subsidiaries (together
the Group) provide electricity distribution and line
function services to consumers and businesses, as
well as fibre optic network interconnections and
related services throughout the Hawke’s Bay, Rotorua
and Taupo regions. The Group also provides civil,
vegetation, electrical and fibre contracting services;
manufactures electrical products for the Australia,
Pacific and New Zealand markets; and operates a
captive insurance company.
The Company is a limited liability company
incorporated and domiciled in New Zealand. The
address of its registered office is 1101 Omahu Road,
Hastings, New Zealand. It is registered under the
Companies Act 1993 and is an energy company in
terms of the Energy Companies Act 1992.
These consolidated financial statements have been
approved for issue by the Board of Directors on 19
June 2015.
2 Summary of Significant
Accounting Policies
The principal accounting policies adopted in the
preparation of the financial statements are set out
below. These policies have been consistently applied
to all the years presented, unless otherwise stated.
The financial statements include separate financial
statements for Unison Networks Limited as an
individual entity and the consolidated entity consisting
of Unison Networks Limited and its subsidiaries.
(2.1) Basis of preparation
The consolidated financial statements of the Group
have been prepared in accordance with Generally
Accepted Accounting Practice in New Zealand (‘NZ
GAAP’). They comply with New Zealand equivalents to
International Financial Reporting Standards (‘NZ IFRS’)
and other applicable Financial Reporting Standards,
as applicable for profit oriented entities. The
consolidated financial statements also comply with
International Financial Reporting Standards (‘IFRS’) and
IFRIC interpretations.
Compliance with IFRS
The separate and consolidated financial statements
of the Group also comply with International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Entities Reporting
The consolidated financial statements presented
are of Unison Networks Limited (the Parent) and
subsidiaries comprising of: Unison Energy Limited
(UEL); Unison Contracting Services Limited (UCSL);
Unison Insurance Limited (UIL); Unison Fibre Limited
(UFL); ETEL Limited (ETEL); and ETEL Transformers Pty
Limited.
The Company and Group are designated as profit
oriented entities for financial reporting purposes.
Statutory Base
The consolidated financial statements have been
prepared in accordance with the requirements of the
Financial Reporting Act 2013, Companies Act 1993 and
Energy Companies Act 1992.
The consolidated financial statements are presented
in New Zealand dollars and all values are rounded to
the nearest thousand dollars ($000).
Historical cost convention
These consolidated financial statements have been
prepared under the historical cost convention, as
modified by the revaluation of available for sale
financial assets, financial assets and liabilities
(including derivative instruments) at fair value through
profit or loss, certain classes of property, plant and
equipment and investment property.
Changes in accounting policy and disclosures
(i) New standards and interpretations not yet adopted
A number of new standards and amendments to
standards and interpretations are effective for
annual periods beginning after 1 April 2014, and have
not been applied in preparing these consolidated
financial statements. None of these is expected to
have a significant effect on the consolidated financial
statements of the Group, except the following set out
below:
• NZ IFRS 9, ‘Financial instruments’, addresses the
classification, measurement and recognition of
financial assets and financial liabilities. NZ IFRS
9 was issued in November 2009 and October
2010. It replaces the parts of NZ IAS 39 that
relate to the classification and measurement of
financial instruments. NZ IFRS 9 requires financial
assets to be classified into two measurement
categories: those measured as at fair value
and those measured at amortised cost. The
determination is made at initial recognition. The
classification depends on the entity’s business
model for managing its financial instruments and
the contractual cash flow characteristics of the
instrument. For financial liabilities, the standard
retains most of the NZ IAS 39 requirements.
Unison Networks Limited (the Parent) is 100% owned
by the Hawke’s Bay Power Consumers’ Trust.
53
ANNUAL REPORT 2015 Financial Statements > Notes to Financial Statements
The main change is that, in cases where the fair
value option is taken for financial liabilities, the part
of a fair value change due to an entity’s own credit
risk is recorded in other comprehensive income
rather than the statement of financial performance,
unless this creates an accounting mismatch. The
Company and Group is yet to assess NZ IFRS 9’s
full impact and intends to adopt NZ IFRS 9 no later
than the accounting period beginning on or after
1 January 2015. The Company and Group will also
consider the impact of the remaining phases of NZ
IFRS 9 when completed by the IASB.
• NZ IFRS 15, ‘Revenue from Contracts with
Customers’, NZ IFRS 15 establishes a new five
step model that will apply to revenue arising
from contracts with customers. Under NZ IFRS 15
revenue is recognised at an amount that reflects
the consideration to which an entity expects to
be entitled in exchange for transferring goods
or services to a customer. The principles in NZ
IFRS 15 provide a more structured approach to
measuring and recognising revenue. The new
revenue standard is applicable to all entities and
will supersede all current revenue recognition
requirements under NZ IFRS. Either a full or
modified retrospective application is required for
annual periods beginning on or after 1 January
2017 with early adoption permitted. The Group is
currently assessing the impact of NZ IFRS 15 and
plans to adopt the new standard on the required
effective date.
There are no other NZ IFRSs or NZ IFRIC
interpretations that are not yet effective that would be
expected to have a material impact on the Company
and Group.
(2.2) Principles of Consolidation
Subsidiaries
The consolidated financial statements incorporate
the assets and liabilities of all subsidiaries of Unison
Networks Limited as at 31 March 2015 and the results
of all subsidiaries for the period then ended. Unison
Networks Limited and its subsidiaries together are
referred to in these financial statements as the Group
or the consolidated entity.
Control is achieved when the Group is exposed to, or
has rights to, variable returns from its involvement
with the entity. Specifically, the Group controls an
entity if and only if the Group has:
- power over the entity (i.e. existing rights that give it
the current ability to direct relevant activities of the
entity); and
- exposure to, or rights to variable returns from its
involvement with the entity; and
- the ability to use its power over the entity to affect its
returns.
54
Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are
de consolidated from the date that control ceases.
Intercompany transactions, balances, income and
expenses on transactions between group companies
are eliminated. Profits and losses resulting from inter
company transactions that are recognised in assets
are also eliminated. Accounting policies of subsidiaries
have been changed where necessary to ensure
consistency with the policies adopted by the Group.
(2.3) Critical Judgements and Estimations in
Applying Accounting Policies
The preparation of financial statements in conformity
with NZ IFRS requires judgements, estimates and
assumptions that affect the application of policies and
reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions
are based on historical experience and various other
factors that are believed to be reasonable under the
circumstances. Actual results may differ from these
estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the
estimate is revised if the revision affects only that
period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
The Directors believe that, as at the date of these
financial statements, there are no significant sources
of estimation uncertainty that have not been disclosed
in these notes.
Accounting judgements are made in respect of the
hedge designation of certain financial instruments,
assessment of hedge effectiveness, determination of
useful lives of Property, Plant and Equipment and the
impact of tax rate changes on deferred tax balances.
Fair Value Estimation
The fair value of financial assets and financial
liabilities, including derivative instruments, must be
estimated for recognition and measurement, or for
disclosure purposes. The fair value of instruments
traded in active markets (such as equities and bonds)
is based on closing market prices at balance date.
The fair value of instruments that are not traded
on an active market (Interest Rate Swaps (IRS’s),
Cross Currency Interest Rate Swaps (CCIRS’s),
Foreign Exchange Contracts (FEC’s)) is determined
using various valuation techniques which include
assumptions on observable data when such data is
available. The fair value of IRS’s, CCIRS’s, and FEC’s is
based on the discounted value of future cash flows.
Assumptions on the determination of future cash
flows are based on publicly available forecast prices.
The fair value of FEC’s is determined using forward
exchange market rates at balance date discounted to
present value. The fair value of financial liabilities in
a fair value hedge relationship and for the purpose
of disclosure is estimated by discounting the future
designated cash flows at current market interest rates
applicable to the risks being hedged.
(2.5) Revenue recognition
Revenue is measured at the fair value for the
consideration received or receivable, and represents
amounts receivable for goods and services supplied,
(net of Goods and Services Tax), rebates and discounts
and after eliminating sales within the Group.
Revenue is recognised as follows:
The valuations determined for instruments not traded
on an active market can vary significantly based on
assumptions in relation to the interest rates and
foreign exchange rates. The sensitivity to changes in
assumptions for foreign exchange and interest rates is
quantified in Note 28 – Financial Risk Management.
(i)
Property, Plant and Equipment
- The amount of revenue can be measured reliably; and
The Group used judgement to determine the
estimated remaining useful lives of assets. They are
detailed in section 2.7 below. The residual value
and the useful lives of assets are reviewed, and if
appropriate adjusted, at each balance date.
Intangible Assets
The Group used judgement to determine the
estimated remaining useful lives of intangible assets.
They are detailed in section 2.8 below. The residual
value and the useful lives of assets are reviewed, and if
appropriate adjusted, at each balance date.
The recoverable amount of goodwill is calculated
using value in use (the net present value of expected
future cash flows) of the cash generating units. Key
assumptions used in the value in use model that
require the Group’s estimation and judgement include
revenue forecasts (including volumes and pricing),
costs and discount rates. See Note 13 for further
detail.
(2.4) Foreign currency translation
(i)
Functional and presentation currency
Items included in the financial statements of each of
the Group’s entities are measured using the currency
of the primary economic environment in which each
of the entities operate (‘the functional currency’). The
consolidated financial statements are presented in
New Zealand dollars ($), which is the Company and
Group’s presentation currency.
(ii)
Transactions and balances
Transactions in foreign currencies are translated at
the New Zealand dollar rate of exchange at the date
of the transaction. At balance date foreign monetary
assets and liabilities not hedged by foreign currency
derivative instruments are translated at the closing
rate, and exchange variances arising are included in
the statement of financial performance.
Sales of goods
Revenue from the sale of goods is recognised when all
of the following conditions are satisfied:
- The Group has transferred to the buyer the significant
risk and rewards of ownership of the goods; and
- It is probable the economic benefits with the
transaction will flow to the entity.
(ii)
Capital contributions
Where the Group constructs assets at its own cost and
receives a cash payment from a third party as part,
or full payment for the development of such assets,
the Group recognises the asset at the cost incurred to
construct the asset and recognises the cash received as
revenue.
(iii)
Contract revenue
Contract revenue and contract costs are recognised as
revenue and expenses respectively by reference to the
stage of completion of the contract at balance date.
The stage of completion is measured by reference to
the contract costs incurred up to balance date as a
percentage of total estimated costs for each contract.
Contract costs include all costs directly related to
specific contracts, costs that are specifically chargeable
under the terms of the contract, and an allocation of
overhead expenses incurred in connection with the
Group’s construction activities in general.
(iv)
Sale of services
Sales of services are recognised in the accounting
period in which the services are rendered, based upon
usage or volume through put during that period.
(v)
Interest income
Interest income is recognised on a time proportion
basis using the effective interest method.
(vi)
Rental income
Rental income is recognised on an accruals basis
in accordance with the substance of the relevant
agreements.
Monetary assets and liabilities in foreign currencies
at balance date hedged by foreign currency derivative
instruments are translated at the contract rates.
55
(2.6) Cash and cash equivalents
Cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other
short term, highly liquid investments with original
maturities of three months or less that are readily
convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and
bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the statement of
financial position.
(2.7) Property, plant and equipment
Electrical Distribution Network
An election was made to use the electrical distribution
network revaluation as at 31 March 2006 as deemed
cost on the date of transition (i.e. 1 April 2006) to New
Zealand’s equivalent to IFRS.
Subsequent additions are recognised at cost and are
included in the asset’s carrying amount or recognised
as a separate asset, as appropriate, only when it is
probable that future economic benefits associated
with the item will flow to the Group and the cost of the
item can be measured reliably. All other repairs and
maintenance are charged to the statement of financial
performance during the financial period in which they
are incurred.
Fibre Network
Additions are recognised at cost and are included
in the asset’s carrying amount or recognised as
a separate asset, as appropriate, only when it is
probable that future economic benefits associated
with the item will flow to the Group and the cost of the
item can be measured reliably. All other repairs and
maintenance are charged to the statement of financial
performance during the financial period in which they
are incurred.
Land and buildings
Land and buildings are stated at fair value based on
periodic, but at least five yearly, valuations determined
by an independent registered valuation company, and
are adjusted for additions at cost and depreciation at
appropriate rates.
Any accumulated depreciation as at the revaluation
date is eliminated against the gross carrying amount
of the asset and the net amount is restated to the
revalued amount of the asset.
Increases in the carrying amounts arising on
revaluation of land and buildings are credited to other
reserves in shareholders’ equity. To the extent that the
increase reverses a decrease previously recognised in
the statement of comprehensive income, the increase
is first recognised in the statement of financial
performance. Decreases that reverse previous
56
increases of the same asset are first charged against
revaluation reserves directly in equity to the extent
of the remaining reserve attributable to the asset;
all other decreases are charged to the statement of
financial performance.
Self constructed assets
The cost of self constructed assets includes the
cost of all materials used on construction, direct
labour on the project, costs of obtaining Resource
Management Act consents, financing costs that are
directly attributable to the project and an appropriate
proportion of variable and fixed overhead. Costs cease
to be capitalised as soon as the assets are ready for
productive use and do not include any inefficiency
costs.
Other Property, Plant and Equipment
All other property, plant and equipment are stated
at historical cost less accumulated depreciation and
impairment loss. Historical cost includes expenditure
that is directly attributable to the acquisition of the
items.
Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as
appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the Group and the cost of the item can be
measured reliably. All other repairs and maintenance
are charged to the statement of financial performance
during the financial period in which they are incurred.
Asset under construction
The cost of assets under construction includes direct
materials, labour and an allocation of overheads that
directly relate to the work performed.
Disposal of Property, Plant and Equipment
When an item of property, plant or equipment is
disposed of, any gain or loss is recognised in the
statement of financial performance and is calculated
as the difference between the sale price and the
carrying value of the asset.
On disposal of an item of property, plant or
equipment, any revaluation surplus in respect of that
class of asset is transferred to retained earnings.
Depreciation
Depreciation is provided on a straight line basis on all
tangible items of property, plant and equipment other
than freehold land, at rates calculated to allocate the
assets’ cost or valuation less any residual value, over
their estimated useful life.
(2.8) Intangible assets
Manufacturing
Depreciation is provided on a diminishing value or
useful life basis for all tangible items of property, plant
and equipment. Management use the relevant tax
depreciation rates as a guide.
Fibre Network
The estimated useful lives of property, plant and
equipment are as follows:
33kV sub transmission
Zone substations, structures and
equipment
Distribution transformers
Distribution switchgear
Overhead lines
Underground cables
Other distribution equipment
Freehold buildings
Land
Motor vehicles
Plant and equipment
Office furniture and equipment
Information technology
Manufacturing
Plant and equipment
Motor vehicles
Office furniture and equipment
Information technology Fibre Network
Core network
Central office
Feeder network Connections
45 ‑ 80 years
10 ‑ 60 years
50 ‑ 60 years
35 ‑ 45 years
45 ‑ 80 years
30 ‑ 70 years
10 ‑ 70 years
50 ‑ 100 years
Indefinite
5 ‑ 10 years
5 ‑ 10 years
4 ‑ 10 years
3 ‑ 10 years
5 ‑ 25 years
7 years
5 ‑ 16 years
3 ‑ 10 years
15 ‑ 75 years
15 ‑ 30 years
15 ‑ 30 years
15 years
The assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at the end of
each reporting period.
Gains and losses on disposals are determined by
comparing the proceeds with the carrying amount
and are recognised within ‘Loss on sale of property,
plant and equipment’ in the statement of financial
performance.
(i) Goodwill
Goodwill represents the excess of the cost of an
acquisition over the fair value of the Group’s share of
the net identifiable assets of the acquired entity at the
date of acquisition. Separately recognised goodwill is
tested annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses
on goodwill are not reversed. Gains and losses on
the disposal of an entity include the carrying amount
of goodwill relating to the entity sold. Goodwill is
allocated to cash generating units for the purpose of
impairment testing. The allocation is made to those
cash generating units or groups of cash generating
units that are expected to benefit from the business
combination in which the goodwill arose.
(ii) Software
Acquired software licences are capitalised on the basis
of the costs incurred to acquire and bring to use the
specific software. These costs are amortised over their
estimated useful lives (three to ten years)
Costs associated with developing or maintaining
software programmes are recognised as an expense
as incurred. Costs that are directly associated with
the production of identifiable and unique software
products controlled by the Group, and that will
probably generate economic benefits exceeding
costs beyond one year, are recognised as intangible
assets. Direct costs include the software development,
employee costs and an appropriate portion of relevant
overheads.
Software development costs recognised as assets are
amortised using the straight line method over their
estimated useful lives (not exceeding ten years).
(iii) Indefeasible right of use (IRU)
IRU’s are not cash generating in nature as the Group
provides third parties the right to connect to and use
fibre optic cable. The rights to connect and use fibre
distribution networks are initially recorded at cost plus
any other directly attributable costs of preparing the
IRU for its intended use. IRU’s are amortised using the
straight line method over their useful lives (6 to 21
years).
(iv) Easements
Easements are not cash generating in nature as they
give the Group the right to access private property
where network assets are located. Easements are
initially recorded at cost plus the cost of registering
the easement and any other directly attributable
costs of preparing the easement for its intended use.
Easements with a finite life are amortised over that
period.
57
(2.9) Impairment of non-financial assets
(ii)
The carrying amount of the Group’s assets, other than
inventories and derivative financial instruments, are
reviewed at each reporting date to determine whether
there is any indication of impairment. If any such
indication exists, the recoverable amount of assets is
estimated to determine the extent of any impairment
loss. An impairment loss is recognised whenever the
carrying amount of an asset exceeds its recoverable
amount. Impairment losses are recognised in the
statement of financial performance except impairment
losses on revalued assets which are first taken to the
revaluation reserve if there is a surplus in respect of
that asset.
Loans and receivables are non derivative financial
assets with fixed or determinable payments that are
not quoted in an active market. They are included in
current assets, except for maturities greater than 12
months after the end of the reporting period. These
are classified as non current assets. The Group’s loans
and receivables comprise ‘trade and other receivables’
and ‘cash and cash equivalents’ in the statement of
financial position (notes 8 and 9).
Irrespective of any indications of impairment, goodwill
acquired in a business combination and intangible
assets that have an indefinite useful life are tested
annually for impairment.
For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are
separately identifiable cash flows (cash generating
units). The recoverable amount is the higher of an
asset’s net selling price and value in use. In assessing
value in use, the estimated future cash flows are
discounted to their present value using a discount rate
that reflects current market assessments of the time
value of money and the risks specific to the asset.
Non financial assets other than goodwill which
have suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.
(2.10) Investments and other financial assets
Classification
The Group classifies its financial assets in the
following categories: at fair value through profit or
loss, loans and receivables, and available for sale.
The classification depends on the purpose for which
the financial assets were acquired. Management
determines the classification of its financial assets at
initial recognition.
(i)
Financial assets at fair value through profit or loss
are financial assets held for trading. A financial asset
is classified in this category if acquired principally for
the purpose of selling in the short term. Derivatives
are also categorised as held for trading unless they
are designated as hedges. Assets in this category are
classified as current assets if expected to be settled
within 12 months, otherwise they are classified as non
current.
58
(iii)
Loans and receivables
Held to maturity investments
Held to maturity investments are non derivative
financial assets with fixed or determinable payments
and fixed maturities that the Company has positive
intention and ability to hold to maturity. They are
included in current assets, except for maturities
greater than 12 months after the balance date, which
are included in non current assets.
(iv) Available for sale financial assets
Available for sale financial assets are non derivatives
that are either designated in this category or not
classified in any of the other categories. They are
included in non current assets unless the investment
matures or management intends to dispose of it
within 12 months of the end of the reporting period.
Recognition and measurement
Regular purchases and sales of financial assets are
recognised on the trade date – the date on which
the Group commits to purchase or sell the asset.
Investments are initially recognised at fair value plus
transaction costs for all financial assets not carried
at fair value through profit or loss. Financial assets
carried at fair value through profit or loss are initially
recognised at fair value, and transaction costs are
expensed in the statement of financial performance.
Financial assets are derecognised when the rights
to receive cash flows from the investments have
expired or have been transferred and the Group
has transferred substantially all risks and rewards
of ownership. Available for sale financial assets and
financial assets at fair value through profit or loss
are subsequently carried at fair value. Loans and
receivables are subsequently carried at amortised cost
using the effective interest method.
Gains or losses arising from changes in the fair value
of the ‘financial assets at fair value through profit
or loss’ category are presented in the statement of
financial performance within ‘other (losses)/gains –
net’ in the period in which they arise. Dividend income
from financial assets at fair value through profit
or loss is recognised in the statement of financial
performance as part of other income when the
Group’s right to receive payments is established.
Impairment of financial assets
(i)
Assets carried at amortised cost
The Group assesses at the end of each reporting
period whether there is objective evidence that a
financial asset or group of financial assets is impaired.
A financial asset or a group of financial assets is
impaired and impairment losses are incurred only if
there is objective evidence of impairment as a result
of one or more events that occurred after the initial
recognition of the asset (a ‘loss event’) and that loss
event (or events) has an impact on the estimated
future cash flows of the financial asset or group of
financial assets that can be reliably estimated.
Evidence of impairment may include indications that
the debtors or a group of debtors is experiencing
significant financial difficulty, default or delinquency
in interest or principal payments, the probability
that they will enter bankruptcy or other financial
reorganisation, and where observable data indicate
that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or
economic conditions that correlate with defaults.
For the loans and receivables category, the amount
of the loss is measured as the difference between
the asset’s carrying amount and the present value of
estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at
the financial asset’s original effective interest rate.
The carrying amount of the asset is reduced and the
amount of the loss is recognised in the consolidated
statement of financial performance. If a loan or held
to maturity investment has a variable interest rate,
the discount rate for measuring any impairment loss
is the current effective interest rate determined under
the contract. As a practical expedient, the Group may
measure impairment on the basis of an instrument’s
fair value using an observable market price.
If, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be
related objectively to an event occurring after the
impairment was recognised (such as an improvement
in the debtor’s credit rating), the reversal of the
previously recognised impairment loss is recognised in
the consolidated statement of financial performance.
(ii)
Assets classified as available for sale
The Group assesses at the end of each reporting
period whether there is objective evidence that
a financial asset or a group of financial assets
is impaired. For debt securities, the Group uses
the criteria referred to in (i) above. In the case of
equity investments classified as available for sale, a
significant or prolonged decline in the fair value of
the security below its cost is also evidence that the
assets are impaired. If any such evidence exists for
available for sale financial assets, the cumulative loss
– measured as the difference between the acquisition
cost and the current fair value, less any impairment
loss on that financial asset previously recognised in
profit or loss – is removed from equity and recognised
in profit or loss. Impairment losses recognised in the
consolidated statement of financial performance
on equity instruments are not reversed through the
consolidated statement of financial performance.
If, in a subsequent period, the fair value of a debt
instrument classified as available for sale increases
and the increase can be objectively related to an event
occurring after the impairment loss was recognised in
profit or loss, the impairment loss is reversed through
the consolidated statement of financial performance.
(2.11)Fair value estimation
The fair value of financial assets and financial
liabilities must be estimated for recognition and
measurement or for disclosure purposes.
The fair value of financial instruments traded in
active markets (such as publicly traded derivatives,
and trading and available for sale securities) is based
on quoted market prices at the balance date. The
quoted market price used for financial assets held by
the Group is the current bid price; the appropriate
quoted market price for financial liabilities is the
current ask price.
The fair value of financial instruments that are
not traded in an active market (for example, over
the counter derivatives) is determined using
valuation techniques. The Group uses a variety of
methods and makes assumptions that are based
on market conditions existing at each balance date.
Quoted market prices or dealer quotes for similar
instruments are used for long term debt instruments
held. Other techniques, such as estimated
discounted cash flows, are used to determine fair
value for the remaining financial instruments. The
fair value of interest rate swaps is calculated as the
present value of the estimated future cash flows.
The fair value of forward exchange contracts is
determined using forward exchange market rates at
the balance date.
The nominal value less estimated credit adjustments
of trade receivables and payables are assumed
to approximate their fair values. The fair value
of financial liabilities for disclosure purposes is
estimated by discounting the future contractual
cash flows at the current market interest rate
that is available to the Group for similar financial
instruments.
59
(2.12) Investments in subsidiaries
(2.15) Inventories
Investments in subsidiaries in the Parent financial
statements are stated at cost less impairment.
Inventories held for sale or use in the production of
goods and services on a commercial basis are valued
at the lower of cost and net realisable value. The cost
of purchased electrical and fibre related inventory
is determined using the average cost method. The
cost of other inventory is determined using the
standard cost method. The write down from cost to
net realisable value is recognised in the statement of
financial performance in the period when the write
down occurs. The cost of work in progress includes
direct materials and labour and an allocation of
overheads that directly relate to the work performed.
(2.13) Trade and other receivables
Trade receivables are amounts due from customers
for goods sold or services performed in the ordinary
course of business. If collection is expected in one
year or less (or in the normal operating cycle of the
business if longer), they are classified as current
assets. If not, they are presented as non current
assets.
Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using
the effective interest method, less provision for
impairment.
A provision for impairment of trade receivables is
established when there is objective evidence that
the Group will not be able to collect all amounts due
according to the original terms of the receivables.
Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or
financial reorganisation, and default or delinquency
in payments (more than 30 days overdue) are
considered indicators that the trade receivable
is impaired. The amount of the provision is the
difference between the asset’s carrying amount and
the present value of estimated future cash flows,
discounted at the original effective interest rate. The
carrying amount of the asset is reduced through
the use of an allowance account, and the amount of
the loss is recognised in the statement of financial
performance within ‘other expenses’. When a trade
receivable is uncollectible, it is written off against the
allowance account for trade receivables. Subsequent
recoveries of amounts previously written off are
credited against ‘other expenses’ in the statement of
financial performance.
(2.14) Trade and other payables
These amounts represent liabilities for goods
and services provided to the Group prior to the
end of the financial period which are unpaid,
and are initially measured at fair value, net of
any transaction costs. These are subsequently
measured at amortised cost using the effective
interest rate method. The amounts are unsecured
and are usually paid within 30 to 60 days of
recognition.
Trade payables are recognised initially at fair value
and subsequently measured at amortised cost
using the effective interest method.
60
(2.16) Employee benefits
(i)
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non
monetary benefits, annual leave and accumulating
sick leave expected to be settled within 12 months
of the reporting date are recognised in employee
provisions in respect of employees’ services up to
the reporting date and are measured at the amounts
expected to be paid when the liabilities are settled.
Liabilities for non accumulating sick leave are
recognised when the leave is taken and measured at
the rates paid or payable.
(ii)
Long service leave
The liability for long service leave is recognised in the
provision for employee benefits and measured as
the present value of expected future payments to be
made in respect of services provided by employees
up to the reporting date based on net present value.
Consideration is given to expected future wage and
salary levels, experience of employee departures
and periods of service. Expected future payments
are discounted using market yields at the reporting
date on national government bonds with terms
to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
(iii)
Retirement benefit obligations
Participating employees of the Group are entitled
to benefits on retirement, disability or death from
the Defined Benefit Plan Contributors Schemes as
part of the National Provident Fund and entitled
to retirement benefits from AMP. The schemes are
multi employer defined benefit plans which provides
a defined lump sum benefit based on years of
service and final average salary. However, sufficient
information is not available to use defined benefit
accounting. Therefore the Group accounts for the
scheme as if it were a defined contribution plan.
Accounting for defined contribution plans
requires that an expense is recognised for the
contributions paid/payable during the period and
any outstanding contributions are recognised as a
liability.
(iv)
Bonus plans
The Group recognises a provision where
contractually obliged or where there is a past
practice that has created a constructive obligation.
(2.17) Provisions
Provisions are recognised when the Group has a
present obligation (legal or constructive) as a result
of a past event, it is probable that an outflow of
resources embodying economic benefits will be
required to settle the obligation and a realisable
estimate can be made of the amount of the
obligation. The expense relating to any provision
is presented in the statement of comprehensive
income.
Provisions are measured at the present value of
the expenditures expected to be required to settle
the obligation using a discount rate that reflects
current market assessments of the time value
of money and the risks specific to the obligation.
The increase in the provision due to the passage
of time is recognised in the statement of financial
performance.
(2.18) Leases
Financial leases
Leases in which the Group has substantially all the
risks and rewards of ownership are classified as
finance leases. Finance leases are capitalised at
the lease’s inception at the lower of the fair value
of the leased asset and the present value of the
minimum lease payments. Each lease payment is
allocated between the liability and finance charges
so as to achieve a constant rate on the finance
balance outstanding. The corresponding rental
obligations, net of finance charges are included
in other long term payables. The interest element
of the finance cost is charged to the statement of
financial performance over the lease period so as to
produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
The property, plant and equipment acquired under
a finance lease are depreciated over the shorter of
the asset’s useful life and the lease term.
Operating leases
Leases in which a significant portion of the risks and
rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under
operating leases (net of any incentives received from
the lessor) are charged to the statement of financial
performance on a straight line basis over the period
of the lease.
(2.19) Borrowings
Borrowings are initially recognised at fair value,
net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost using the
effective interest method.
Borrowings are classified as current liabilities unless
the Group has an unconditional right to defer
settlement of the liability for at least 12 months after
the financial position date.
Fees paid on the establishment of loan facilities are
capitalised as a pre payment for liquidity services
and amortised over the period of the facility to which
it relates.
(2.20) Borrowing costs
Borrowing costs incurred for the construction of any
qualifying asset are capitalised during the period
of time that is required to complete and prepare
the asset for its intended use or sale. An asset
qualifies when the cost of construction is greater
than $500,000 and the construction period is longer
than six months. Interest on borrowing costs are
calculated based on the effective yearly interest rate
of 6.73% (31 March 2014: 6.83%). Other borrowing
costs are expensed.
All other borrowing costs are recognised in profit or
loss in the period in which they are incurred.
(2.21) Accounting for financial instruments and
hedging activities
Derivative financial instruments are used to manage
interest and foreign exchange rate risk, including
interest rate swaps, cross currency swaps and
foreign exchange contracts. Derivatives are initially
recognised at fair value on the date a derivative
contract is entered into and are subsequently
re measured to their fair value. The method of
recognising the resulting gain or loss depends on
whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being
hedged. The Group designates certain derivatives
as hedges of a particular risk associated with a
recognised asset or liability or a highly probable
forecast transaction cash flow.
61
The Group documents at the inception of the
transaction the relationship between hedging
instruments and hedged items, as well as its
risk management objective and strategy for
undertaking various hedge transactions. The Group
also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions
have been and will continue to be highly effective
in offsetting changes in fair values or cash flows of
hedged items.
Changes in the fair value of derivatives that are
designated and qualify as fair value hedges are
recorded in the statement of financial performance
with a net change in fair value of financial
instruments within other expenses in respect of
CCIRS’s, together with any changes in the fair value
of the hedged asset or liability that are attributable
to the hedged risk. Interest expense on the loans
designated as hedged items in fair value hedges
are recognised in other expenses. If the hedge no
longer meets the criteria for hedge accounting, the
adjustment to the carrying amount of a hedged
item is amortised to the statement of financial
performance over the period to maturity.
The fair values of various derivative financial
instruments used for hedging purposes are
disclosed in note 21. Movements in the cash flow
hedging reserve in shareholders’ equity are shown
in note 23.
(i)
Fair value hedge
The full fair value of hedging derivatives is classified
as a non current asset or liability if the remaining
maturity of the hedged item is more than 12
months, and as a current asset or liability if the
remaining maturity of the hedged item is less than
12 months.
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash
flow hedges is recognised in equity in the hedging
reserve. The gain or loss relating to the ineffective
portion is recognised immediately in the statement
of financial performance. For derivatives that are
not hedged, the gain or loss on changes in fair
value is recognised in the statement of financial
performance.
62
Amounts accumulated in equity are recycled in the
statement of financial performance in the periods
when the hedged item will affect profit or loss (for
instance when the forecast sale that is hedged
takes place). However, when the forecast interest
payments that are hedged results in the recognition
of a non financial asset (for example, property,
plant and equipment) or a non financial liability,
the gains and losses previously deferred in equity
are transferred from equity and included in the
measurement of the initial cost or carrying amount
of the asset or liability.
When a hedging instrument expires or is sold or
terminated, or when a hedge no longer meets the
criteria for hedge accounting, any cumulative gain or
loss existing in equity at that time remains in equity
and is recognised when the forecast transaction is
ultimately recognised in the statement of financial
performance. When a forecast transaction is no
longer expected to occur, the cumulative gain or
loss that was reported in equity is immediately
transferred to the statement of financial
performance.
(ii)
Cash flow hedge
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash
flow hedges is recognised in other comprehensive
income. The gain or loss relating to the ineffective
portion is recognised immediately in the statement
of financial performance within ‘other gains/(losses)
– net’.
Certain derivative financial instruments do not
qualify for hedge accounting. These derivatives
are initially recognised at fair value on the date
a derivative contract is entered into and are
subsequently re measured to their fair value
at each balance date with the resulting gain or
loss recognised in the statement of financial
performance. The full fair value of the derivative
is classified as current if the contract is due for
settlement within 12 months of balance date,
otherwise the derivatives are classified as non
current.
When a hedging instrument expires or is sold,
or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity
and is recognised when the forecast transaction
is ultimately recognised in the income statement.
When a forecast transaction is no longer expected
to occur, the cumulative gain or loss that was
reported in equity is immediately transferred to the
statement of financial performance within ‘other
gains/(losses) – net’.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for
hedge accounting. Changes in the fair value of
any derivative instrument that does not qualify for
hedge accounting are recognised immediately in
the statement of financial performance.
(2.22) Income tax
(2.23) Contributed Equity
Ordinary shares are classified as equity.
(2.24) Dividend distribution
The Company recognises a liability to make a
distribution to equity holders of the Parent when
the distribution is authorised and the distribution
is no longer at the discretion of the Company. As
per company law in New Zealand, a distribution is
authorised when it is approved by the directors. A
corresponding amount is recognised in equity.
(2.25) Goods and Services Tax (GST)
The statement of financial performance has been
prepared so that all components are stated exclusive
of GST. All items in the statement of financial
position are stated net of GST, with the exception
of receivables and payables, which include GST
invoiced.
Income tax expense includes current tax and
deferred tax.
Current tax is the amount of income tax payable
based on the taxable profit for the current year,
plus any adjustments to income tax payable in
respect of prior years. Current tax is calculated
using rates that have been enacted or substantively
enacted by balance date.
Deferred tax liabilities are generally recognised
for all taxable temporary differences. Deferred
tax assets are recognised to the extent that it
is probable that taxable profits will be available
against which the deductible temporary differences
or tax losses can be utilised. Deferred tax is not
recognised if the temporary difference arises from
the initial recognition of goodwill or from the initial
recognition of an asset and liability in a transaction
that is not a business combination, and at the
time of the transaction, affects neither accounting
profit nor taxable profit. Deferred tax is calculated
at the tax rates that are expected to apply in the
period when the liability is settled or the asset is
realised, using tax rates that have been enacted or
substantively enacted by balance date.
Current tax and deferred tax is charged or credited
to the statement of financial performance, except
when it relates to items charged or credited directly
to equity, in which case the tax is dealt with in
equity.
63
3 Revenue
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Sales revenue
Line revenue
141,720
127,154
141,720
127,154
Capital contributions
4,809
4,653
4,800
4,576
Other regulated revenue
1,039
673
1,039
673
Non regulated revenue
62,647
59,290
6,323
5,700
210,215
191,770
153,882
138,103
Other revenue
Recovery of debt previously written off
27
17
26
16
Interest received
250
135
78
23
277
152
104
39
210,492
191,922
153,986
138,142
4 Expenses
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Audit NZ - audit of the annual financial statement
234
205
110
90
Audit NZ - other services
81
46
65
46
Directors fees
690
653
459
434
593
Other expenses
Operating lease payments
1,839
2,016
667
Increase/(decrease) for impairment of receivables
(125)
25
(124)
94
Bad debt expense
214
299
201
291
Inventory write downs
42
809
42
809
Bank charges
94
94
39
31
Realised foreign exchange (gain)/loss
(555)
(137)
-
-
Other expenses
15,691
15,824
11,932
11,786
18,205
19,834
13,391
14,174
Depreciation
Buildings
316
306
317
307
Plant and equipment
2,391
2,045
436
333
Fixtures and fittings
192
173
142
126
Motor vehicles
1,668
1,352
149
173
Computer hardware
796
1,014
743
958
Fibre distribution network
650
578
-
-
Electrical distribution network
20,140
19,317
20,503
19,528
Total depreciation
26,153
24,785
22,290
21,425
Computer software
1,649
1,179
1,418
1,012
Indefeasible right of use (IRU)
32
33
-
-
Total amortisation
1,681
1,212
1,418
1,012
Total depreciation and amortisation
27,834
25,997
23,708
22,437
Amortisation
64
5 Finance Income and Expenses
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Interest and finance charges paid/payable
16,368
16,503
16,368
16,503
Intercompany funding cost
-
-
346
67
Capitalised interest
(595)
(301)
(595)
(301)
Total finance costs
15,773
16,202
16,119
16,269
Intercompany funding charge
-
-
(1,712)
(1,870)
Total finance income
-
-
(1,712)
(1,870)
Net finance costs
15,773
16,202
14,407
14,399
Finance costs
Finance income
6 Income Tax
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
(a) Income tax expense
Current tax
9,101
8,043
5,338
6,023
Prior period current tax adjustment
(150)
665
(4)
780
Prior period deferred tax adjustment
136
38
3
17
Deferred tax associated with timing differences
1,638
1,650
3,270
2,230
Income tax expense
10,725
10,396
8,607
9,050
Profit from continuing operations before income tax expense
38,245
34,569
30,612
29,454
Tax at the New Zealand tax rate of 28% (2014: 28%)
10,709
9,679
8,571
8,247
Non assessable income
(3)
-
(1,533)
(1,147)
Non deductible expenses
33
14
7
10
Non taxable intra group margin
-
-
1,563
1,143
(b) Reconciliation of income tax expense to prima facie
tax payable
Prior period deferred tax adjustment
136
38
3
17
(150)
665
(4)
780
Income tax expense
10,725
10,396
8,607
9,050
Opening balance
1,577
1,475
1,019
486
Current year taxation expense
9,101
8,043
5,338
6,023
(c) Taxation payable/(refund)
(150)
665
(4)
780
Taxation paid
(7,592)
(8,606)
(5,653)
(6,270)
2,936
1,577
700
1,019
65
7 Imputation Credits
Parent
Imputation credits available for use in subsequent
periods
2015
$ 000
2014
$ 000
20,060
14,833
The Parent is part of the Unison Networks
Consolidated Group for tax purposes, and therefore
does not maintain its own imputation credit account.
8 Current Assets - Cash and Cash Equivalents
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Cash at bank and in hand
5,570
2,548
1,855
82
AUD accounts
1,382
623
-
-
USD account
954
452
334
55
Term deposits
1,550
-
-
-
9,456
3,623
2,189
137
For the purposes of the statement of cash flows,
cash and cash equivalents includes cash on hand and
bank and investments in money market instruments,
inclusive of outstanding bank overdrafts. Cash and
cash equivalents at balance date as shown in the
statement of cash flows can be reconciled to the
related items in the statement of financial position.
The Group has a $3 million overdraft facility available
on the Group’s operational bank accounts (31 March
2014: $3 million). The maximum exposure to credit
risk at the end of the reporting period is the carrying
amount of each class of cash and cash equivalents
mentioned above.
The Group provides guarantees to certain customers
for security over supply contracts. At balance date the
Group had provided guarantees to the value of $2.6
million (2014: $2.6 million). The guarantee limit is $4
million (2014: $4 million).
The carrying amount for cash and cash equivalents
equals the fair value.
66
9 Current Assets - Trade and Other Receivables
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
11,125
Trade receivables
21,340
18,439
14,473
Other receivables
142
32
-
-
Provision for impairment of receivables
(194)
(319)
(191)
(315)
Total trade receivables
21,288
18,152
14,282
10,810
Related party receivables
237
321
158
165
Subsidiary receivables
-
-
241
164
Prepayments
1,569
1,350
1,103
1,060
23,094
19,823
15,784
12,199
The ageing of these trade receivables is as follows:
0 - 30 days
20,727
17,464
13,736
10,449
Past due 31 - 60 days
72
336
70
118
Past due more than 60 days
489
352
476
243
21,288
18,152
14,282
10,810
There are no trade receivables classified as held for
sale (31 March 2014: nil). The Group does not hold
any collateral in respect of the balances above.
The average credit period on sales of goods and
services in New Zealand is 30 days (Australia: 60
days). No interest is charged on trade receivables
in New Zealand for the first 30 days (Australia:
60 days) from the date of the invoice. Thereafter,
interest can be charged at 2% per month on the
outstanding balance. The Group has provided fully
for all receivables over 120 days because historical
experience is such that receivables that are past
due beyond 120 days are generally not recoverable.
Trade receivables between 60 days and 120 days
are provided for based on estimated irrecoverable
amounts, determined by reference to past default
experience.
Included in the Group’s trade receivable balance are
debtors with a carrying amount of $0.7m (31 March
2014: $0.7m) which are past due at the reporting
date for which the Group has not provided as there
has not been a significant change in credit quality
and the amounts are still considered recoverable.
The Group does not hold any collateral over these
balances.
Included in the Parent’s trade receivable balance
are debtors with a carrying amount of $0.4m (31
March 2014: $0.3 million) which are past due at
the reporting date for which the Parent has not
provided as there has not been a significant change
in credit quality and the amounts are still considered
recoverable. The Parent does not hold any collateral
over these balances.
Before accepting any significant customers, the
Group uses an external credit scoring system to
assess the potential customer’s credit quality. Credit
limits are defined by key Group trade receivable
categories.
67
(a) Impaired receivables
(i) The ageing of impaired trade receivables is as follows:
Group
2015
$ 000
2014
$ 000
Up to 3 months
(4)
3 to 6 months
(50)
Greater than 6 months
2015
$ 000
2014
$ 000
(147)
(1)
(145)
(87)
(50)
(86)
(140)
(85)
(140)
(84)
(194)
(319)
(191)
(315)
(ii) Movements in the provision for impairment of
receivables are as follows:
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Opening balance
(319)
(294)
(315)
(221)
Impairment losses recognised on receivables
(63)
(370)
(51)
(369)
Amounts written off as uncollectable
214
299
201
291
Amounts recovered during the year
(26)
46
(26)
(16)
Closing balance
(194)
(319)
(191)
(315)
(b) Foreign exchange and interest rate risk
The carrying amounts of the Group’s trade and
other receivables are denominated in the following
currencies:
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
NZ dollars
18,700
14,634
14,282
10,810
Australian dollars
2,588
3,518
-
-
21,288
18,152
14,282
10,810
For an analysis of sensitivity of trade receivables to
foreign currency risk refer to note 28(g).
(c) Fair value and credit risk
Due to the short-term nature of these receivables,
their carrying value is assumed to approximate their
fair value.
The maximum exposure to credit risk at the reporting
date is the fair value of each class of receivables
mentioned above.
68
Parent
10 Current Assets - Inventories
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Raw materials
12,599
12,548
3,599
3,519
Provision for obsolescence
(113)
(173)
(113)
(173)
12,486
12,375
3,486
3,346
Work in progress at cost
1,630
1,927
-
-
Finished goods at cost
6,877
6,021
-
-
20,993
20,323
3,486
3,346
No inventories are pledged as security for liabilities
(2014: nil).
11 Current Assets - Other Financial Assets
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Government bonds
501
-
-
-
Corporate bonds
201
-
-
-
Term deposits
750
-
-
-
1,452
-
-
-
The government bond was previously held as a
requirement of the Insurance Deposit Act 1953.
Unison Insurance Limited received a full licence on 22
July 2013 under the Insurance (Prudential Supervision)
Act 2010. Prior to Unison Insurance Limited obtaining
its full licence restrictions existed on the Group’s
ability to deal in this stock. The principal amount is
$500,000 with a coupon interest rate of 6% and the
maturity date is 15 April 2015. The Government bond
is classified as fair value through the profit or loss.
Corporate bonds classified as other financial assets
at fair value through the profit or loss with a carrying
value of $201,169 (2014: $202,000) have an interest
rate of 3.97% (2014: 4.06%) and mature on 24 August
2015.
The term deposit is bearing a fixed interest rate
of 4.95% (2014: Nil). This deposit matures on 25
September 2015.
69
12 Non-current Assets - Property, Plant and Equipment
Electricity
Distribution
Network
$000
Network
Land &
Buildings
$000
Fibre
Network
$000
Land &
Buildings
$000
Opening net book amount
486,437
10,767
17,908
12,055
Depreciation charge
(19,107)
(210)
(578)
(306)
Additions
37,491
1,186
1,244
1,155
Disposals
(2,566)
-
-
-
Closing net book amount
502,255
11,743
18,574
12,904
At 31 March 2014
Cost
642,385
12,911
20,154
1,688
Valuation
-
-
-
12,011
Accumulated depreciation
(140,130)
(1,168)
(1,580)
(795)
Net book amount
502,255
11,743
18,574
12,904
502,255
11,743
18,574
12,904
Depreciation charge
(19,909)
(231)
(650)
(316)
Additions
39,135
1,545
1,485
83
GROUP: CURRENT YEAR
Disposals
(3,656)
-
-
-
517,825
13,057
19,409
12,671
Cost
675,791
14,465
21,612
1,768
Valuation
-
-
-
12,011
(157,966)
(1,408)
(2,203)
(1,108)
Net book amount
517,825
13,057
19,409
12,671
At 31 March 2015
70
Motor
Vehicles
$000
Plant &
Equipment
$000
Furniture &
Fittings
$000
Information
Technology
$000
Assets Under
Construction
$000
Total
$000
4,768
9,473
833
1,313
18,658
562,212
(1,349)
(2,048)
(173)
(1,014)
-
(24,785)
4,921
3,269
78
682
(8,513)
41,513
(598)
(416)
(28)
(5)
-
(3,613)
7,742
10,278
710
976
10,145
575,327
12,864
18,751
1,806
7,613
10,145
728,317
-
-
-
-
-
12,011
(5,122)
(8,473)
(1,096)
(6,637)
-
(165,001)
7,742
10,278
710
976
10,145
575,327
7,742
10,278
710
976
10,145
575,327
(1,668)
(2,391)
(192)
(796)
-
(26,153)
2,459
2,725
395
874
(79)
48,622
(326)
(181)
-
-
-
(4,163)
8,207
10,431
913
1,054
10,066
593,633
13,868
21,154
2,202
8,484
10,066
769,410
-
-
-
-
-
12,011
(5,661)
(10,723)
(1,289)
(7,430)
-
(187,788)
8,207
10,431
913
1,054
10,066
593,633
71
12 Non-current Assets - Property, Plant and Equipment (Continued)
Electricity
Distribution
Network
$000
Network
Land &
Buildings
$000
Land &
Buildings
$000
494,338
10,767
12,152
Depreciation charge
(19,318)
(210)
(307)
Additions
42,492
1,186
1,221
Disposals
(2,566)
-
-
514,946
11,743
13,066
At 31 March 2014
Cost
655,579
12,911
1,859
Valuation
-
-
12,011
(140,633)
(1,168)
(804)
Net book amount
514,946
11,743
13,066
514,946
11,743
13,066
Depreciation charge
(20,272)
(231)
(317)
Additions
44,463
1,556
135
Disposals
(3,664)
-
-
535,473
13,068
12,884
At 31 March 2015
72
Cost
694,268
14,465
1,993
Valuation
-
-
12,011
(158,795)
(1,397)
(1,120)
Net book amount
535,473
13,068
12,884
Motor
Vehicles
$000
Plant &
Equipment
$000
Furniture &
Fittings
$000
Information
Technology
$000
Assets Under
Construction
$000
Total
$000
470
1,773
483
1,225
19,804
541,012
(173)
(333)
(126)
(958)
-
(21,425)
356
238
51
614
(9,606)
36,552
(88)
-
-
-
-
(2,654)
565
1,678
408
881
10,198
553,485
1,055
2,585
1,379
7,303
10,198
692,869
-
-
-
-
-
12,011
(490)
(907)
(971)
(6,422)
-
(151,395)
565
1,678
408
881
10,198
553,485
565
1,678
408
881
10,198
553,485
(149)
(436)
(142)
(743)
-
(22,290)
113
898
321
784
180
48,450
(81)
-
-
-
-
(3,745)
448
2,140
587
922
10,378
575,900
810
3,483
1,700
8,083
10,378
735,180
-
-
-
-
-
12,011
(362)
(1,343)
(1,113)
(7,161)
-
(171,291)
448
2,140
587
922
10,378
575,900
73
12 Non-current Assets - Property, Plant and Equipment (Continued)
(a)
Valuations of land and buildings
- Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is,
derived from prices) (Level 2).
Land and buildings in Omahu Road, Hastings
and Fleet Street, Taupo were independently
valued by registered valuer Telfer Young Ltd, as
at 31 January 2011.
- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs)
(Level 3).
Assets under construction include $0.1 million
(2014: $0.1 million) of intangible work in
progress.
The following table analyses the non financial
assets carried at fair value, by valuation
method. The different levels have been defined
as follows:
Fair value measurements at 31 March 2015 using:
Quoted prices
in active
markets for
identical
assets (level 1)
$ 000
- Quoted prices (unadjusted) in active markets
for identical assets or liabilities (Level 1).
Significant
other observable inputs
(level 2)
$ 000
Significant
unobservable inputs
(level 3)
$ 000
Recurring fair value measurements
Land and buildings
- Office and warehouse buildings
-
12,011
-
-
12,011
-
There were no transfers between levels 1 and 2 during
the year.
(b) Valuation techniques used to derive level 2
fair values
Level 2 fair values of land, office buildings, workshops
and warehouse facilities have been derived using the
rental capitalisation approach. Market rental and
sales data of comparable land and buildings in close
proximity are adjusted for differences in key attributes
such as building quality, tenant strength (if sold under
a sale and leaseback arrangement), and other market
factors. The most significant inputs into this valuation
approach are price per square metre, and yield.
(c)
Carrying amounts that would have been recognised if land and buildings were stated at
cost
If freehold land and buildings were stated on the
historical cost basis, the amounts would be as follows:
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Freehold land
Cost
2,573
2,573
2,573
2,573
-
-
-
-
Net book amount
2,573
2,573
2,573
2,573
Buildings
74
Cost
9,535
9,401
9,535
9,401
(1,458)
(1,152)
(1,458)
(1,152)
Net book amount
8,077
8,249
8,077
8,249
13 Non-current Assets - Intangible Assets
Indefeasible Rights
of Use
(IRU)
$ 000
Total
$ 000
Goodwill
$ 000
Computer
Software
$ 000
Other
Intangible
Assets
$ 000
41,655
2,568
209
597
45,029
Additions
-
5,903
19
6
5,928
Amortisation charge
-
(1,179)
-
(33)
(1,212)
41,655
7,292
228
570
49,745
Cost
117,543
14,667
228
699
133,137
Year ended 31 March 2014
At 31 March 2014
Valuation
(60,559)
-
-
-
(60,559)
Accumulated amortisation and
impairment
(15,329)
(7,375)
-
(129)
(22,833)
Net book amount
41,655
7,292
228
570
49,745
41,655
7,292
228
570
49,745
Additions
-
961
84
-
1,045
GROUP: CURRENT YEAR
Transferred asset
-
7
-
(7)
-
Amortisation charge
-
(1,646)
-
(35)
(1,681)
41,655
6,614
312
528
49,109
At 31 March 2015
Cost
117,543
15,619
312
689
134,163
Valuation
(60,559)
-
-
-
(60,559)
impairment
(15,329)
(9,005)
-
(161)
(24,495)
Net book amount
41,655
6,614
312
528
49,109
75
13 Non-current Assets - Intangible Assets (Continued)
Indefeasible Rights
of Use
(IRU)
$ 000
Total
$ 000
16,138
Goodwill
$ 000
Computer
Software
$ 000
Other
Intangible
Assets
$ 000
14,000
1,929
209
-
Additions
-
5,789
19
-
5,808
Amortisation charge
-
(1,012)
-
-
(1,012)
14,000
6,706
228
-
20,934
Cost
89,888
13,699
228
-
103,815
At 31 March 2014
Valuation
(60,559)
-
-
-
(60,559)
impairment
(15,329)
(6,993)
-
-
(22,322)
Net book amount
14,000
6,706
228
-
20,934
14,000
6,706
228
-
20,934
Additions
-
868
65
-
933
Amortisation charge
-
(1,418)
-
-
(1,418)
14,000
6,156
293
-
20,449
Cost
89,888
14,567
293
-
104,748
At 31 March 2015
Valuation
(60,559)
-
-
-
(60,559)
impairment
(15,329)
(8,411)
-
-
(23,740)
Net book amount
14,000
6,156
293
-
20,449
(a)
Impairment tests for goodwill
In accordance with NZ IAS 36, ‘Impairment of Assets’,
the Group regularly monitors the carrying value of its
goodwill and reviews it annually or more regularly if
there are indications that goodwill may be impaired.
For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are
separately identifiable cash flows (cash generating
units) and goodwill is allocated to these cash
generating units. The allocation is made to those
76
cash generating units or groups of cash generating
units that are expected to benefit from the business
combination in which the goodwill arose.
The Directors believe that any reasonably possible
change in the key assumptions on which the
recoverable amount is based would not cause the
aggregate carrying amount to exceed the aggregate
recoverable amount of the cash generating unit.
13 Non-current Assets - Intangible Assets (Continued)
Group
The Directors believe that the planned growth in
the export market is reasonable and achievable.
2015
$ 000
2014
$ 000
ETEL
27,655
27,655
Taupo/Rotorua Network
14,000
14,000
recoverable amount is based would not cause a
material impairment of the cash generating unit.
41,655
41,655
Taupo/Rotorua Network
ETEL Limited
The recoverable amount of this cash generating unit
was assessed by reference to a value in use calculation
which uses cash flow projections based on financial
plans covering a five year period, and a post tax
discount rate of 8.5% per annum (2014: 9.5% per
annum). The calculation assumed that the Group’s
share of the local market will remain constant over the
next five years and its share of the export market is
assumed to grow over this period.
The recoverable amount of the Taupo/Rotorua
Network cash generating unit was assessed by
reference to a value in use calculation which uses
cash flow projections based on financial forecasts
covering a ten year plan and using a post tax
discount rate of 6.2% per annum (2014: 7.0% per
annum). The calculation assumed that there would
be no significant changes to this business unit and
that the growth rates used were in line with long
term average market growth rates.
recoverable amount is based would not cause a
material impairment of the cash generating unit.
14 Non-current Assets - Other Financial Assets
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Corporate bonds
-
202
-
-
Government bonds
-
518
-
-
Equities
685
541
-
-
685
1,261
-
-
Equities classified as other financial assets at fair
value through the profit or loss with a carrying value
of $684,603 (2014: $541,000) have share values of
between $2.05 and $93.83 per share (2014: between
$1.625 and 58.191 per share). Management do
not intend to dispose of these within 12 months of
balance date.
(a)
Impairment and risk exposure
The maximum exposure to credit risk at the reporting
date is the carrying amount of the investments.
77
15 Current Liabilities - Trade and Other Payables
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
6,360
Trade payables
12,529
11,512
7,435
Subsidiary payables
-
-
133
85
Accrued expenses
693
1,386
139
122
Interest payable
2,370
2,423
2,370
2,423
Other payables
2,363
681
2,282
515
17,955
16,002
12,359
9,505
The average credit period on purchases is 30 days. The
Group has financial risk management policies in place
to ensure that all payables are paid within the credit
timeframes.
(a) Foreign currency risk
The carrying amounts of the Group’s and parent
entity’s trade and other payables are denominated
in the following currencies:
Group
2015
$ 000
2014
$ 000
Parent
2015
$ 000
2014
$ 000
US Dollars
1,715
1,027
48
1
Australian Dollars
473
1,743
115
1,523
New Zealand Dollars
15,767
13,232
12,196
7,981
17,955
16,002
12,359
9,505
For an analysis of the sensitivity of trade and other
payables to foreign currency risk refer to note 28(g).
16 Current Liabilities - Employee Provisions
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
1,470
Accrued pay
2,815
2,371
1,680
Long service leave
25
29
-
-
Sick leave
79
56
40
35
Annual leave
2,969
2,657
972
850
5,888
5,113
2,692
2,355
17 Current liabilities - Interest Bearing Liabilities
Group
Notes
Term borrowings maturing within one year
78
19
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
-
35,000
-
35,000
-
35,000
-
35,000
18 Non-current Liabilities - Employee Provisions
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Retirement gratuities
1,146
1,295
505
673
Long service leave
167
200
95
121
1,313
1,495
600
794
19 Non-current Liabilities - Interest Bearing Liabilities
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Maturing between 2 and 3 years
50,000
30,000
50,000
30,000
72,500
56,500
72,500
56,500
117,994
117,994
117,994
117,994
240,494
204,494
240,494
204,494
6,455
(1,065)
6,455
(1,065)
15,660
(1,365)
15,660
(1,365)
22,115
(2,430)
22,115
(2,430)
262,609
202,064
262,609
202,064
Term Borrowings - Bank Loans
Term Borrowings - Senior Notes US Fixed Rate
Fair Value Movement - Senior Notes US Fixed Rate
Foreign Currency Movement - Senior Notes US
Fixed Rate
Total non current interest bearing liabilities
Term borrowings are a combination of bank loans
and unsecured senior notes.
The Group utilises multi tranche revolving debt bank
facilities totalling $153 million (2014: $150 million).
Interest rates for all bank loans are floating based on
the bank bill rate plus a margin.
In October 2011, USD 100 million of unsecured
senior notes were issued in a private placement to
US institutional investors, using a derivative contract
to fix an exchange rate of USD 0.8475 for every NZD.
Interest is paid semi annually.
All borrowings are unsecured and are subject to a
negative pledge and cross guarantee. The following
Group companies are parties to a negative pledge and
cross guarantee; Unison Networks Limited; Unison
Energy Limited; Unison Contracting Services Limited;
Unison Fibre Limited; and ETEL Limited.
Borrowings are subject to various lending covenants
such as limitation on long term indebtedness, leverage
and other ratios. The Group complied with all
covenants for the 2015 and 2014 financial years.
All borrowings are measured at amortised cost
adjusted for fair value movements in respect of the
hedged risk on borrowings designated in fair value
hedge relationships and are classified between
current and non current dependent on contractual
obligations.
79
Interest rate risk exposures
The Group manages interest rate exposure in accordance
with its treasury policy by hedging no less than 60% (31
March 2014: 60%) of all borrowings with interest rate
hedge instruments.
The weighted average rates on interest rate swaps and
options are as follows:
Group
Parent
2015
%
2015
$ 000
2014
%
2014
$ 000
Maturing in less than 1 year
4.91
37,000
4.20
20,000
4.65
33,000
5.08
40,000
4.88
68,000
5.15
123,000
Maturing after 5 years
4.98
82,000
5.29
Interest Rate Swaps
220,000
37,000
220,000
USD Senior Notes Interest Rate Cross Currency
Maturing between 5 and 10 years (USD)
3.88
100,000
3.88
100,000
100,000
100,000
20 Non-current Liabilities - Deferred Tax Liabilities
Group
2015
$ 000
2014
$ 000
Parent
2015
$ 000
2014
$ 000
The balance comprises temporary differences
attributable to:
77,955
75,929
81,728
78,419
(2,034)
(1,318)
(2,282)
(1,355)
Employee provisions
(1,663)
(1,514)
(863)
(780)
(54)
(94)
(53)
(88)
Other provisions
(288)
(146)
(69)
(82)
73,916
72,857
78,461
76,114
Opening balance
72,857
69,206
76,114
71,924
2,026
1,584
3,309
2,361
(716)
2,007
(927)
1,943
Employee provisions
(149)
(150)
(83)
(88)
40
(12)
35
(26)
Other provisions
(142)
222
13
-
Closing balance
73,916
72,857
78,461
76,114
Movements:
80
21 Derivative Financial Instruments
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Interest rate swaps - hedged ((a)(ii))
27
144
27
144
Forward foreign exchange contracts - hedged ((a)(i))
885
345
-
-
Interest rate swaps - unhedged ((a)(ii))
-
198
-
198
Total current derivative financial instrument assets
912
687
27
342
Cross currency interest rate swaps - fair value hedged ((a)
(iii))
21,364
1,932
21,364
1,932
Foreign currency forward contracts - hedged ((a)(i))
28
-
28
-
-
3
-
3
Total derivative financial instrument assets
21,392
1,935
21,392
1,935
Total derivative financial instrument assets
22,304
2,622
21,419
2,277
Forward foreign exchange contracts - cash flow hedged
((a)(i))
102
-
102
-
Foreign currency forward contracts - hedged ((a)(i))
-
266
-
-
-
-
-
-
Interest rate collars - unhedged ((a)(ii))
186
125
186
125
Total current derivative financial instrument liabilities
288
391
288
125
-
5,487
-
5,487
Current assets
Non current assets
Current liabilities
Non current liabilities
Cross currency interest rate swaps - cash flow hedged ((a)
(iii))
Forward foreign current contracts - hedged ((a)(i))
-
8
-
-
Interest rate swaps - unhedged ((a)(ii))
9,063
1,364
9,063
1,364
2,809
3,504
2,809
3,504
Total non current derivative financial instrument liabilities
11,872
10,363
11,872
10,355
Total derivative financial instrument liabilities
12,160
10,754
12,160
10,480
Net derivative financial instrument asset/(liability)
10,144
(8,132)
9,259
(8,203)
Fair value of financial instruments
IFRS 7 provides for a three level fair value hierarchy of
valuation data inputs that requires financial instruments
inputs to be categorised as follows:
• Level 1 Inputs - Quoted prices (unadjusted) in active
markets for identical assets or liabilities;
• Level 2 Inputs - Either direct (i.e. as prices) or indirect
(i.e. derived from prices) observable inputs other than
quoted prices included in Level 1;
• Level 3 Inputs - Inputs for the asset or liability that are
not based on observable market data (unobservable
inputs).
Where the fair value of a financial instrument is
calculated as the present value of the estimated future
cash flows of the instrument, two key types of variables
are used by the valuation technique, these are:
• forward price curve; and
• discount rates.
All of the Group and Parent derivatives are level 2 inputs.
(a)
Instruments used by the Group
The full fair value of a hedging derivative is classified as
a non current asset or liability if the remaining maturity
of the hedged item is more than 12 months and, as a
current asset or liability, if the maturity of the hedged
item is less than 12 months.
(i)
Forward foreign exchange contracts
The notional principal amounts of the outstanding
forward foreign exchange contracts at 31 March 2015
were $912,960 (2014: $92,370).
81
(ii)
Interest rate swaps
The notional principal amounts of the outstanding
interest rate swap contracts at 31 March 2015 were
$220 million (2014: $220 million).
At 31 March 2015, the fixed interest rates vary from
3.19% to 6.33% (2014: 3.59% to 6.59%), and the main
floating rate is BKBM. Gains and losses recognised in
the hedging reserve in equity on interest rate swap
contracts as of 31 March 2015 will be continuously
released to the income statement within finance cost
until the repayment of the bank borrowings.
(iii)
Cross currency interest rate swap
Cross currency interest rate swaps, which are used to
manage the combined interest and foreign currency
risk on borrowings issued in foreign currency, have
been split into two components for the purpose of
hedge designation: the hedge of the benchmark
interest rate is designated as a fair value hedge; and
the hedge of the issuance margin is designated as a
cash flow hedge.
(b) Credit risk exposures
Credit risk arises from the potential failure of
counterparties to meet their obligations under the
respective contracts at maturity. This arises on
derivative financial instruments with unrealised
gains. The maximum exposure to credit risk at the
reporting date is the fair value of the derivative
assets in the balance sheet.
22 Contributed Equity
Parent
Issue and paid up
2015
$ 000
2014
$ 000
66,661
66,661
23 Reserves and Retained Earnings
Group
2015
$ 000
2014
$ 000
Parent
2015
$ 000
2014
$ 000
(a) Reserves
Property, plant and equipment revaluation reserve
3,046
3,046
3,046
3,046
Hedging reserve - cash flow hedges
(5,230)
(3,432)
(5,866)
(3,483)
(2,184)
(386)
(2,820)
(437)
Opening balance
3,046
3,046
3,046
3,046
Closing balance
3,046
3,046
3,046
3,046
Movements: Property, plant and equipment
revaluation reserve
Hedging reserve - cash flow hedges
Opening balance
(3,432)
(8,495)
(3,483)
(8,481)
Fair value gains recognised to cash flow hedge reserve
1,368
8,205
179
7,849
Fair value losses recognised to cash flow hedge reserve
(3,845)
(1,179)
(3,488)
(908)
Deferred tax
679
(1,963)
926
(1,943)
Net fair value gain/(loss) recognised to cash flow hedge
reserve
(1,798)
5,063
(2,383)
4,998
Closing balance
(5,230)
(3,432)
(5,866)
(3,483)
(b) Nature and purpose of reserves
(i) Property, plant and equipment revaluation reserve
The property, plant and equipment revaluation
reserve is used to record increments and decrements
on the revaluation of non current assets.
82
(ii) Hedging reserve - cash flow hedges
The hedging reserve is used to record gains or losses on
a hedging instrument in a cash flow hedge. The amounts
are recognised in the profit and loss component of the
statement of comprehensive income when the associated
hedged transactions affect profit or loss (note 2.21).
Movements in Retained Earnings were as follows:
(C) Retained Earnings
Opening Balance
260,363
245,405
253,704
Net profit for the year
27,520
24,173
22,005
242,515
20,404
Dividends
(9,446)
(9,215)
(9,446)
(9,215)
Closing balance
278,437
260,363
266,263
253,704
24 Dividends
During the financial period a fully imputed dividend of $9,446,400 ($13,120,000
inclusive of imputation credits), which equated to 14.76 cents per share, was paid
in respect of the 2013/14 financial year (31 March 2014: $9,215,000 (14.4 cents per
share) fully imputed dividend inclusive of imputation credits $12,798,611).
25 Commitments
Operating Leases
Lease payments under operating leases, where the lessor effectively retains
substantially all the risks and benefits of ownership of the leased property, plant
or equipment are expensed to the statement of financial performance in equal
instalments over the lease term.
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Within one year
2,837
2,728
653
755
Later than one year but not later than five years
1,902
2,002
67
102
Later than five years
2,269
1,613
9
83
Total
7,008
6,343
729
940
The value of contractual capital commitments is
estimated at:
6,194
5,146
6,150
4,942
The value of contractual operating commitments
is estimated at:
177
3,997
177
293
6,371
9,143
6,327
5,235
26 Contingencies
As at 31 March 2015 the Group had no contingent
liabilities or assets (2014: $nil).
27 Capital Management
The Groups general policy is to maintain capital at
a prudent level to assets. This is achieved through
a mix of equity capital and subordinated debt.
Restrictions on the level and mix of capital are set by
the Statement of Corporate Intent approved by the
Shareholder, and the debt facility agreements.
The Group manages its equity as a by product of
prudently managing revenues, expenses, assets and
liabilities to ensure the Group effectively achieves
its objectives and purpose, whilst remaining a going
concern.
The Group’s capital is its equity which comprises
accumulated funds and other reserves. Equity is
represented by net assets.
83
28 Financial Risk Management
The Group’s activities expose it to a variety of
financial risks: market risk (including currency risk,
fair value interest rate risk, cash flow interest rate
risk and price risk), credit risk and liquidity risk.
The Group’s overall risk management programme
focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on
the Group’s financial performance.
expenditure will fluctuate due to changes in foreign
exchange rates.
The Group operates internationally and is exposed
to foreign currency risk arising from various
currency exposures, primarily with respect to the US
dollar and the Australian dollar. Foreign currency
risk arises from future commercial transactions,
recognised assets and liabilities and net investments
in foreign operations.
Financial risk management is carried out by a central
treasury department (group treasury) under policies
approved by the board of directors. Group treasury
identifies, evaluates and hedges financial risks in
close co operation with the group’s operating units.
The board provides written principles for overall
financial risk management, as well as written policies
covering specific areas, such as foreign exchange
risk, interest rate risk, credit risk, use of derivative
financial instruments and non derivative financial
instruments, and investment of excess liquidity.
(a)
Management has set up a policy to require group
companies to manage their foreign currency
risk against their functional currency. The group
companies are required to hedge their foreign
currency risk exposure. To manage their foreign
currency risk arising from future commercial
transactions and recognised assets and liabilities,
entities in the group use forward contracts. Foreign
currency risk arises when future commercial
transactions or recognised assets or liabilities are
denominated in a currency that is not the entity’s
functional currency.
Foreign currency risk
Foreign currency risk is the risk that the value of
the Group’s assets and liabilities or revenues and
As at balance date the
Group held the following
forward exchange contracts:
Average Exchange Rate
Foreign Currency
Contact Value
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Less than 1 year
0.8057
0.8090
3,125
4,525
3,879
5,593
Greater than 1 year
-
0.8051
-
200
-
248
Less than 1 year
0.8881
0.8427
3,100
1,542
3,490
1,830
Greater than 1 year
-
-
-
-
-
-
Less than 1 year
0.8424
0.9634
1,738
2,946
2,063
3,058
Greater than 1 year
-
-
-
-
-
-
Buy USD/Sell NZD
Sell AUD/Buy NZD
Sell AUD/Buy USD
(b)
Credit risk
Credit risk is the risk that a third party will default on
its obligations to the Company and Group, causing it
to incur a loss. Financial instruments which potentially
subject the Group to credit risk principally consist of
bank balances, accounts receivable and CCIRS’s. No
collateral is held on these amounts (31 March 2014:
nil).
Concentration of Credit Exposure
The Group has exposure to twelve electricity retailers
that account for 58% (2014: 57%) of accounts
receivable. To minimise this risk, the Company
performs credit evaluations on all energy retailers
84
in conjunction with the contractual requirements
contained within the use of system agreements
operating with these parties. A loan, bond or bank
undertaking may be required where deemed
necessary. At balance date a bank guarantee of up
to $5.4 million is currently held in respect of one
gentailer, and bonds of $380k in respect of two
electricity retailers.
The impairment provision has been calculated
based on expected losses from the group’s pool of
debtors. Expected losses have been determined
based on analysis of specific debtors.
Group
An analysis of the credit quality of financial assets that
are neither past due nor impaired is as follows:
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
74
56
9,493
9,623
7,685
7,685
74
54
9,492
9,620
7,685
7,685
11,523
21,146
10,785
18,470
4,662
14,282
3,440
11,125
9,456
750
10,206
3,623
3,623
2,189
2,189
137
137
550
273
157
407
1,387
720
48
76
119
299
1,262
-
-
22,304
22,304
2,622
2,622
21,419
21,419
2,277
2,277
Trade receivables
Counterparties with external credit rating (S&P or
Moody’s)
AA
A
BBB
Counterparties without external credit rating
Total unimpaired trade receivables
Cash at bank and short term bank deposits
AA
A
Available for sale and fair value through the profit
and loss securities
AAA
AA
A
BBB
Counterparties without external credit rating
Derivative financial assets
AA
(c)
Liquidity risk
Liquidity risk represents the risk that the Group
may not have the financial ability to meet its
contractual obligations. The Group evaluates its
liquidity requirements on an ongoing basis. Overall
the Group generates sufficient cash flows from its
operating activities to meet its obligations arising
from its financial liabilities and has funding in place
to cover potential shortfalls.
Financing arrangements
The Group and the parent entity had access to
the following undrawn borrowing facilities at the
reporting date:
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Expiring within one year (bank overdraft and bill
facility)
3,000
1,973
1,000
1,973
Expiring beyond one year (bank loans)
30,500
28,500
30,500
28,500
33,500
30,473
31,500
30,473
Floating rate
85
The bank overdraft facilities may be drawn at any
time and may be terminated by the bank without
notice. The unsecured bill acceptance facility may
be drawn at any time and is subject to annual
review. Subject to the continuance of compliance
with debt covenants, the bank loan facilities may be
drawn at any time and have an average maturity of
3.67 years (2013 - 2.53 years).
committed borrowing facilities (note 19) at all times
so that the Group does not breach borrowing
limits or covenants (where applicable) on any of
its borrowing facilities. Such forecasting takes into
consideration the Group’s debt financing plans,
covenant compliance, compliance with internal
balance sheet ratio targets and, if applicable
external regulatory or legal requirements-for
example, currency restrictions.
Maturities of financial liabilities
The table below analyses the Group’s contractual
maturities of financial liabilities into relevant
maturity groupings based on the remaining period
at the balance sheet date to the contractual maturity
date. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Cash flow forecasting is performed in the operating
entities of the Group and aggregated by group
finance. Group finance monitors rolling forecasts
of the Group’s liquidity requirements to ensure it
has sufficient cash to meet operational needs while
maintaining sufficient headroom on its undrawn
Carrying
Amount
$ 000
Contractual
Amount
$ 000
Less
than
1 year
$ 000
Between
1 and 2
years
$ 000
Between
2 and 3
years
$ 000
Over
3 years
$ 000
Borrowings
(262,609)
(274,086)
(80,429)
(35,299)
(31,619)
(126,739)
(17,955)
(17,955)
(17,955)
-
-
-
Interest rate swaps hedged
(2,809)
(44,871)
(8,071)
(8,071)
(8,071)
(20,658)
Interest rate swaps unhedged
(9,249)
(7,743)
(2,665)
(2,665)
(2,413)
-
Outflow
(102)
(102)
(102)
-
-
-
Inflow
-
-
-
-
-
-
Total
(292,724)
(344,757)
(109,222)
(46,035)
(42,103)
(147,397)
Carrying
Amount
$ 000
Contractual
Amount
$ 000
Less
than
1 year
$ 000
Between
1 and 2
years
$ 000
Between
2 and 3
years
$ 000
Over
3 years
$ 000
Borrowings
(237,064)
(276,372)
(40,239)
(5,239)
(35,239)
(195,655)
(16,002)
(16,002)
(16,002)
-
-
-
(3,504)
(30,441)
(6,267)
(6,267)
(6,203)
(11,704)
(1,489)
(15,670)
(5,063)
(3,411)
(2,110)
(5,086)
Outflow
(274)
(274)
(255)
(199)
-
-
Inflow
-
-
-
-
-
-
- Outflow
(3,554)
(41,875)
(4,460)
(4,460)
(4,460)
(28,495)
- Inflow
-
41,875
4,460
4,460
4,460
28,495
Total
(261,887)
(338,759)
(67,826)
(15,116)
(43,552)
(212,445)
Group - At 31 March 2015
Non-derivative financial
liabilities
Derivative financial liabilities
Forward exchange contracts
used for hedging
liabilities
used for hedging:
CCIRS used for hedging:
86
Carrying
Amount
$ 000
Contractual
Amount
$ 000
Less
than
1 year
$ 000
Between
1 and 2
years
$ 000
Between
2 and 3
years
$ 000
Over
3 years
$ 000
Borrowings
(262,609)
(274,086)
(80,429)
(35,299)
(31,619)
(126,739)
(12,359)
(12,359)
(12,359)
-
-
-
(2,809)
(44,871)
(8,071)
(8,071)
(8,071)
(20,658)
(9,249)
(7,743)
(2,665)
(2,665)
(2,413)
-
Outflow
(102)
(102)
(102)
-
-
-
Inflow
-
-
-
-
-
-
Total
(287,128)
(339,161)
(103,626)
(46,035)
(42,103)
(147,397)
Carrying
Amount
$ 000
Contractual
Amount
$ 000
Less
than
1 year
$ 000
Between
1 and 2
years
$ 000
Between
2 and 3
years
$ 000
Over
3 years
$ 000
Borrowings
(237,064)
(276,372)
(40,239)
(5,239)
(35,239)
(195,655)
(9,505)
(9,505)
(9,505)
-
-
-
(3,504)
(30,441)
(6,267)
(6,267)
(6,203)
(11,704)
(1,489)
(15,670)
(5,063)
(3,411)
(2,110)
(5,086)
- Outflow
(3,554)
(41,875)
(4,460)
(4,460)
(4,460)
(28,495)
- Inflow
-
41,875
4,460
4,460
4,460
28,495
Total
(255,116)
(331,988)
(61,074)
(14,917)
(43,552)
(212,445)
Parent - At 31 March 2015
liabilities
used for hedging
Non derivative financial
liabilities
CCIRS used for hedging:
The gross inflows/(outflows) disclosed in the above
table represent the contractual undiscounted cash
flows relating to derivative financial liabilities held for
risk management purposes and which are not usually
closed out before contractual maturity. The disclosure
shows net cash flow amounts for derivatives that are
net cash-settled and gross cash inflow and outflow
amounts for derivatives that have simultaneous gross
cash settlement.
(d)
Fair value estimation
The fair value of financial assets and financial liabilities
must be estimated for recognition and measurement
or for disclosure purposes.
The table on the following page analyses financial
instruments carried at fair value, by valuation method.
The different levels have been defined as follows:
•
Quoted prices (unadjusted) in active markets for
identical assets or liabilities (Level 1).
•
Inputs other than quoted prices included
within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (Level 2).
•
Inputs for the asset or liability that are not based
on observable market data (that is, unobservable
inputs) (Level 3).
The following table presents the Group’s financial
assets and liabilities that are measured at fair value at
31 March 2015 and 31 March 2014.
87
Level 1
$ 000
Level 2
$ 000
Level 3
$ 000
Total balance
$ 000
-
-
-
-
NZX listed equities
410
-
-
410
ASX listed equities
275
-
-
275
Assets
Financial assets at fair value through
profit or loss
Foreign exchange contracts
Equity securities
Debt investments
Corporate bonds
201
-
-
201
Government bond
501
-
-
501
Term deposits
750
-
-
750
Derivatives used for hedging
Interest rate contracts
-
27
-
27
-
913
-
913
Foreign currency on US senior notes
-
21,364
-
21,364
Total assets
2,137
22,304
-
24,441
-
9,249
-
9,249
-
102
-
102
2,809
Liabilities
Financial liabilities at fair value through
profit or loss
-
2,809
-
-
-
-
-
Total liabilities
-
12,160
-
12,160
Level 1
$ 000
Level 2
$ 000
Level 3
$ 000
Total balance
$ 000
-
198
-
198
-
-
-
-
NZX listed equities
344
-
-
344
ASX listed equities
197
-
-
197
Debt investments
-
-
-
-
Corporate bonds
202
-
-
202
Government bonds
518
-
-
518
2,079
Assets
Financial assets at fair value through
profit or loss
Equity securities
-
2,079
-
-
345
-
345
Fair value on US senior notes
-
1,065
-
1,065
-
1,365
-
1,365
Total assets
1,261
5,052
-
6,313
-
1,489
-
1,489
-
-
-
8,991
Liabilities
88
-
8,991
-
-
274
-
274
Total liabilities
-
10,754
-
10,754
Level 1
$ 000
Level 2
$ 000
Level 3
$ 000
Total balance
$ 000
27
Assets
-
27
-
-
28
-
28
-
21,364
-
21,364
Total assets
-
21,419
-
21,419
-
9,249
-
9,249
-
102
-
102
2,809
Liabilities
Financial liabilities at fair value through profit or loss
-
2,809
-
-
-
-
-
Total liabilities
-
12,160
-
12,160
Level 1
$ 000
Level 2
$ 000
Level 3
$ 000
Total balance
$ 000
-
198
-
198
Assets
-
2,079
-
2,079
-
1,065
-
1,065
-
1,365
-
1,365
Total assets
-
4,707
-
4,707
-
1,489
-
1,489
Liabilities
Financial liabilities at fair value through profit or loss
-
8,991
-
8,991
Total liabilities
-
10,480
-
10,480
There were no transfers between levels 1 and 2 during the year.
(i)
Financial instruments in level 1
The fair value of financial instruments traded in active
markets is based on quoted market prices at the
balance sheet date. A market is regarded as active
if quoted prices are readily and regularly available
from an exchange, dealer, broker, industry group,
pricing service, or regulatory agency, and those prices
represent actual and regularly occurring market
transactions on an arm’s length basis. The quoted
market price used for financial assets held by the
Group is the current bid price. These instruments are
included in Level 1. Instruments included in Level 1
comprise primarily NZX and ASX equity investments
classified as trading securities or available for sale.
89
(ii)
Financial instruments in level 2
The fair value of financial instruments that are not
traded in an active market (for example, over the
counter derivatives) is determined by using valuation
techniques. These valuation techniques maximise the
use of observable market data where it is available
and rely as little as possible on entity specific
estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is
included in Level 2.
If one or more of the significant inputs is not based on
observable market data, the instrument is included in
Level 3.
•
Quoted market prices or dealer quotes for similar
instruments;
•
The fair value of interest rate swaps is calculated
as the present value of the estimated future cash
flows based on observable yield curves;
•
The fair value of forward foreign exchange
contracts is determined using forward exchange
rates at the balance sheet date, with the resulting
value discounted back to present value;
•
Other techniques, such as discounted cash flow
analysis, are used to determine fair value for the
remaining financial instruments.
Specific valuation techniques used to value financial
instruments include:
(e)
Financial instruments by category
Loans and
receivables
$’000
Assets at
fair value
through
profit or
loss $’000
Derivatives
used for
hedging
$’000
Held to
maturity
$’000
Available
for sale
$’000
Total
$’000
-
-
22,304
-
-
22,304
Trade and other receivables
23,094
-
-
-
-
23,094
-
2,137
-
-
-
2,137
9,456
-
-
-
-
9,456
32,550
2,137
22,304
-
-
56,991
-
198
2,424
-
-
2,622
19,823
-
-
-
-
19,823
-
1,261
-
-
-
1,261
3,623
-
-
-
-
3,623
23,446
1,459
2,424
-
-
27,329
Loans and
receivables
$’000
Assets at
fair value
through
profit or
loss $’000
Derivatives
used for
hedging
$’000
Held to
maturity
$’000
Available
for sale
$’000
Total
$’000
-
-
21,419
-
-
21,419
15,784
-
-
-
-
15,784
-
-
-
-
-
-
2,189
-
-
-
-
2,189
17,973
-
21,419
-
-
39,392
-
198
2,079
-
-
2,277
12,199
-
-
-
-
12,199
-
-
-
-
-
-
137
-
-
-
-
137
12,336
198
2,079
-
-
14,613
Financial assets as per balance
sheet
Group
At 31 March 2015
At 31 March 2014
Financial assets as per balance
sheet
Parent
At 31 March 2015
At 31 March 2014
90
Financial liabilities as per balance
sheet
Liabilities
at fair value
through profit
or loss
$’000
Derivatives
used for
hedging
$’000
Measured at
amortised
cost
$’000
Total
$’000
Group
At 31 March 2015
Borrowings
-
22,115
240,494
262,609
9,249
2,911
-
12,160
-
-
17,955
17,955
9,249
25,026
258,449
292,724
At 31 March 2014
Borrowings
-
(2,430)
239,494
237,064
1,489
9,265
-
10,754
-
-
16,002
16,002
1,489
6,835
255,496
263,820
Liabilities
at fair value
through profit
or loss
$’000
Derivatives
used for
hedging
$’000
Measured at
amortised
cost
$’000
Total
$’000
Financial liabilities as per balance
sheet
Parent
At 31 March 2015
Borrowings
-
22,115
240,494
262,609
9,249
2,911
-
12,160
-
-
12,359
12,359
9,249
25,026
252,853
287,128
At 31 March 2014
(f)
Borrowings
-
(2,430)
239,494
237,064
1,489
8,991
-
10,480
-
-
9,505
9,505
1,489
6,561
248,999
257,049
Cash flow interest rate risk
Cash flow interest rate risk is the risk that the cash
flows from a financial instrument will fluctuate
because of changes in market interest rates.
Derivatives and borrowings issued at variable
interest rates expose the Group to cash flow
interest rate risk. The Group manages its cash flow
interest rate risk on borrowings by using floating to
fixed interest rate swaps and options. Such interest
rate swaps have the economic effect of converting
borrowings at floating rates and swaps them into fixed
rates that are generally lower than those available
if the Group borrowed at fixed rates directly. Under
the interest rate swaps, the Group agrees with
other parties to exchange, at specified intervals, the
difference between fixed contract rates and floating
rate interest amounts calculated by reference to the
agreed notional principal amounts.
91
(g)
Foreign currency sensitivity analysis
The Group is mainly exposed to the currency
of the United States (USD) and the currency
of Australia (AUD). The following table details
the Group’s sensitivity to a 1 cent increase and
decrease in the relevant foreign currencies
against the New Zealand dollar. Given the
volatility of the foreign markets a 1 cent
change in foreign currency exchange rates is
considered a reasonably possible change. The
sensitivity analysis only includes outstanding
foreign currency denominated monetary items
and adjusts their translation at the period
end for a 1 cent change in foreign currency
exchange rates. A positive number indicates an
increase in profits and other equity.
(h)
31 March
2015
NZ $’000
31 March
2014
NZ $’000
Profit or loss - strengthening in NZD
75
(94)
Profit or loss - weakening in NZD
(76)
98
Assets
Liabilities
Profit or loss - strengthening in NZD
(32)
11
Profit or loss - weakening in NZD
33
(11)
Sensitivity Analysis
In managing interest rate risks the Group aims
to reduce the impact of short term fluctuations
on the Group’s earnings. Over the longer term,
however, permanent changes in interest rates
will have an impact on profit.
If interest rates on borrowings at 31 March
2015 had fluctuated by plus or minus 0.5%, the
effect would have been to decrease or increase
the surplus after tax by $73,778 (31 March
2014: $70,178) as a result of a higher or lower
interest expense on floating rate borrowings.
29 Related Party Transactions
(a)
Group Structure
Unison Networks Limited owns, manages and
operates an electricity distribution network serving
the Hawke’s Bay, Taupo and Rotorua regions. On
behalf of electricity retailers it distributes electrical
energy that has been brought to points of supply
by the National Grid operator or produced by
embedded generators, to over 110,000 connected
consumers. Unison Networks Limited provides
management services to Unison Contracting Services
Limited, Unison Fibre Limited, Unison Insurance
Limited and ETEL Limited (including ETEL Pty
Limited).
Unison Contracting Services Limited along with other
third party contractors provides contract services
to maintain, develop and service Unison Networks
Limited electrical distribution network and Unison
Fibre Limited’s fibre optic network.
Unison Fibre Limited operates a fibre optic
network in the Hawke’s Bay, Taupo and Rotorua
regions. Unison Fibre Limited provides fibre optic
interconnection services to Unison Networks
92
Limited.
ETEL Limited (including ETEL PTY Limited)
manufactures electricity distribution transformers
and other electrical components for the Australia,
Pacific and New Zealand markets. ETEL Limited
sells electricity distribution transformers to Unison
Networks Limited.
Unison Insurance Limited’s principal activity is to
act as a captive insurance company, and insures
certain transmission and distribution assets of
Unison Networks Limited, and material damage and
business interruption cover for the Group. Unison
Insurance Limited obtained reinsurance for the
material damage and business interruption cover.
Unison Networks Limited is 100% owned by the
Hawke’s Bay Power Consumers’ Trust.
Related parties include:
Subsidiaries
Hawke’s Bay Power Consumers’ Trust
Centralines Limited
The Group’s key management personnel
(b) Key management and personnel compensation
Key management personnel compensation
for the periods and financial year are set out
below. The key management personnel are all
the Directors of the Group and the executives
with the greatest authority for the strategic
direction and management of the Group.
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
3,086
Short term benefits
4,511
4,113
3,376
Post employment benefits
22
20
-
-
Other long term benefits
3
82
-
75
Termination benefits
136
-
-
-
Share based payments
-
-
-
-
4,672
4,215
3,376
3,161
(c)Subsidiaries
Interests in subsidiaries are set out in note 30.
(d)
Parent
Transactions with related parties
The following transactions occurred with related parties:
2015
$ 000
2014
$ 000
Value of contracting services provided to Parent
(33,251)
(29,648)
Interest paid to Parent
-
-
Advances payable to/(receivable from) Parent
(5,916)
(3,600)
Corporate overhead and rent charge paid to Parent
1,381
1,330
Value of electrical products sold to Parent
(2,005)
(1,517)
1,116
1,345
14,817
17,217
ETEL Limited
Corporate overhead charge paid to Parent
19
15
Amounts receivable from Parent
(132)
(85)
Amounts payable to Parent
184
115
Loan repayments to Parent
(2,400)
4,400
Additional borrowing from Parent
-
(2,000)
Insurance premium charge to Parent
(1,667)
(1,811)
-
-
Interest receivable from Parent
(345)
(67)
Unison Insurance Limited (UIL)
Corporate overhead charge paid to Parent
62
62
Amounts receivable from Parent
(6,694)
(6,705)
Issue of equity shares
-
6,700
Value of substation service charges to Parent
(637)
(554)
596
525
Corporate overhead and rent charge paid to Parent
352
222
6,284
8,465
51
48
Issue of equity shares
3,000
-
Unison Fibre Limited (UFL)
93
(e)
Other Related Parties
The Hawke’s Bay Power Consumers’ Trust
holds the shares of the Group on behalf of the
consumers in their capacity as owners.
The Group operates a management contract for
Centralines Limited, an electricity lines company
based in Waipukurau. This contract provides for
executive, financial, technical and managerial
services for Centralines Limited. For commercial
reasons the value of this contract is not disclosed.
(f)
Transactions with Directors, Key Management and their immediate family
During the year the following entities, in which
Directors had an interest, provided or received
services to or from the Group under normal
commercial terms. All related party transactions
were conducted at arms length.
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Information Management Services Limited K Atkinson
(Shareholder)
(4)
(4)
(4)
(4)
Hawke's Bay Helicopter Rescue Trust P Hocquard
(Director)
(58)
(50)
(58)
(50)
Hawkes Bay District Health Board K Atkinson (Director)
72
60
72
60
Telarc Sai Limited P Connell (Director)
(5)
(4)
(5)
(4)
Mission Estate Winery Limited P Hocquard (Director)
(31)
(3)
(31)
(3)
Hawkes Bay Airport Limited J Palairet (Director)
-
15
-
15
Hawkes Bay Airport Limited J Palairet (Director)
-
(2)
-
(2)
Enable Networks Limited T Lusk (Director)
(1)
(2)
(1)
(2)
Delta Utility Services Limited D Frow (Director)
1,770
1,552
-
-
There were no other related party transactions. There were no
accounts receivable/(payable) at year end.
30 Investment in Subsidiaries
The consolidated financial statements incorporate
the assets, liabilities and results of the following
subsidiaries
94
Country of
Incorporation
Class of
Share
2015
%
2014
%
New Zealand
Ordinary
100
100
ETEL Limited
New Zealand
Ordinary
100
100
New Zealand
Ordinary
100
100
Unison Insurance Limited
New Zealand
Ordinary
100
100
Unison Energy Limited
New Zealand
Ordinary
100
100
ETEL Transformers PTY Limited
Australia
Ordinary
100
100
The number of ordinary fully paid shares on issue
for Unison Networks Limited is 64,000,000 (31 March
2014: 64,000,000).
for ETEL Transformers PTY Limited is 100 (31 March
2014: 100).
The number of ordinary fully paid shares on issue for
Unison Contracting Services Limited is 3,720,000 (31
March 2014: 3,720,000).
for Unison Insurance Limited is 8,700,000 (31 March
2014: 8,700,000).
Unison Energy Limited is 100 (31 March 2014: 100).
Unison Fibre Limited is 18,000,100 (31 March 2014:
15,000,100).
for ETEL Limited is 22,350,000 (31 March 2014:
22,350,000).
31 Significant Events Occurring After Balance Date
There were no events occurring subsequent to
balance date which require adjustment to or
disclosure in the financial statements.
32 Reconciliation of Profit After Income Tax to Net Cash Inflow from
Operating Activities
Group
Parent
2015
$ 000
2014
$ 000
2015
$ 000
2014
$ 000
Profit for the year
27,520
24,173
22,005
20,404
Depreciation
26,153
24,785
22,290
21,425
Amortisation
1,681
1,212
1,418
1,012
Net (Gain)/loss on sale of property, plant and
equipment
3,512
2,586
3,403
2,538
Fair value movement in financial instruments
recognised via the statement of financial performance
3,793
(3,576)
3,793
(3,518)
(Increase)/decrease in receivables, prepayments and
inventory
(3,940)
384
(3,725)
1,250
Increase/(decrease) in payables (excluding capital
items), accruals and employee provisions
2,269
775
3,353
608
Increase/(decrease) in income taxes payable
1,359
102
(318)
535
Deferred tax
1,766
2,087
3,274
2,247
Net cash inflow from operating activities
64,113
52,528
55,493
46,501
95
Independent Auditor’s Report
TO THE READERS OF UNISON NETWORKS LIMITED
AND GROUP’S FINANCIAL STATEMENTS AND
STATEMENT OF PERFORMANCE FOR THE YEAR
ENDED 31 MARCH 2015
The Auditor-General is the auditor of Unison
Networks Limited (“the company”) and its New
Zealand domiciled subsidiaries (collectively referred
to as “the group”). The Auditor-General has appointed
me, Julian Tan, using the staff and resources of Audit
New Zealand, to carry out the audit of the financial
statements and the statement of performance of the
company and group on her behalf.
OPINION ON THE FINANCIAL STATEMENTS AND
THE STATEMENT OF PERFORMANCE
We have audited:
• the financial statements of the company and group
on pages 49 to 95, that comprise the statement
of financial position as at 31 March 2015, the
statement of comprehensive income, statement
of changes in equity and statement of cash flows
for the year ended on that date and the notes to
the financial statements that include accounting
policies and other explanatory information; and
• the statement of performance of the company and
group on page 48.
In our opinion:
• the financial statements of the company and
group:
• present fairly, in all material respects:
- their financial position as at 31 March 2015; and
- their financial performance and cash flows for
the year then ended; and
• have been prepared in accordance with the New Zealand Equivalents to International Financial Reporting Standards.
• the statement of performance of the company and
group:
•
presents fairly, in all material respects, the company and group’s achievements measured against the performance targets adopted for the year ended 31March 2015; and
• has been prepared in accordance with generally accepted accounting practice.
Our audit was completed on 19 June 2015. This is
the date at which our opinion is expressed.
96
The basis of our opinion is explained below. In
addition, we outline the responsibilities of the
Board of Directors and our responsibilities, and
explain our independence.
BASIS OF OPINION
We carried out our audit in accordance with the
Auditor-General’s Auditing Standards, which
incorporate the International Standards on Auditing
(New Zealand). Those standards require that we
comply with ethical requirements and plan and carry
out our audit to obtain reasonable assurance about
whether the financial statements and the statement
of performance are free from material misstatement.
Material misstatements are differences or omissions
of amounts and disclosures that, in our judgement,
are likely to influence readers’ overall understanding
of the financial statements and the statement of
performance. If we had found material misstatements
that were not corrected, we would have referred to
them in our opinion.
An audit involves carrying out procedures to obtain
audit evidence about the amounts and disclosures
in the financial statements and in the statement of
performance. The procedures selected depend on
our judgement, including our assessment of risks of
material misstatement of the financial statements
and the statement of performance whether due to
fraud or error. In making those risk assessments, we
consider internal control relevant to the preparation
of the company and group’s financial statements and
statement of performance in order to design audit
procedures that are appropriate in the circumstances
but not for the purpose of expressing an opinion on
the effectiveness of the company and group’s internal
control.
An audit also involves evaluating:
• the appropriateness of accounting policies used
and whether they have been consistently applied;
• the reasonableness of the significant accounting
estimates and judgements made by the Board of
Directors;
• the adequacy of the disclosures in the financial statements and in the statement of performance; and
• the overall presentation of the financial statements
and the statement of performance.
We did not examine every transaction, nor do
we guarantee complete accuracy of the financial
statements and the statement of performance. Also
we did not evaluate the security and controls over the
electronic publication of the financial statements and
the statement of performance.
We believe we have obtained sufficient and
appropriate audit evidence to provide a basis for our
audit opinion.
RESPONSIBILITIES OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for the
preparation and fair presentation of financial
statements and a statement of performance for the
company and group, in accordance with New Zealand
Equivalents to International Financial Reporting
Standards and generally accepted accounting
practice.
The Board of Directors is also responsible for such
internal control as it determines is necessary to
enable the preparation of financial statements and
a statement of performance that are free from
material misstatement, whether due to fraud or
error. The Board of Directors is also responsible for
the publication of the financial statements and the
statement of performance, whether in printed or
electronic form.
The Board of Directors’ responsibilities arise from the
Energy Companies Act 1992.
• an agreed upon procedures review for the
company in connection with the Price 2014/2015
and Quantity 2013/14 disclosure schedule for the
assessment period ending 31 March 2016;
• an assurance engagement in connection with the
information request prepared by the company
in accordance with the Commerce Commission’s
requirements issued by notice in writing to the
company under section 53ZD of the Commerce Act
1986 on 13 August 2014;
• a limited assurance engagement for the company
on the amendments to data to be used in the reset
of the Commerce Commission’s financial model for
the Electricity Distribution Services Default PriceQuality Path Determination 2015;
• an assurance engagement for the company in
respect of the Compliance Statement in connection
with the default price-quality path prepared under
the Electricity Distribution Services Default Price
Quality Path Determination 2012 NZCC 35 for the
year ended 31 March 2015; and
• a limited assurance engagement in connection with
the issuing of a report for the year ended 31 March
2015 for a subsidiary of the company as required
by the Reserve Bank of New Zealand’s solvency
standard for captive insurers transacting non-life
insurance business.
RESPONSIBILITIES OF THE AUDITOR
Other than the audit and these engagements, we
have no relationship with or interests in the company
or any of its New Zealand domiciled subsidiaries.
We are responsible for expressing an independent
opinion on the financial statements and the
statement of performance and reporting that opinion
to you based on our audit. Our responsibility arises
from section 15 of the Public Audit Act 2001 and
section 45(1) of the Energy Companies Act 1992.
Julian Tan
AUDIT NEW ZEALAND
INDEPENDENCE
When carrying out the audit, we followed the
independence requirements of the Auditor-General,
which incorporate the independence requirements of
the External Reporting Board.
On behalf of the Auditor-General
Palmerston North, New Zealand
In addition to the audit we have carried out the
following engagements which are compatible with
those independence requirements:
• an assurance engagement with respect to the
company’s compliance in connection with to the
issuing of certificates pursuant to the Electricity
Distribution (Information Disclosure) Requirements
2012 for the regulatory period ended 31 March 2014;
97
ANNUAL REPORT 2015 Directory
Directory
Registered Office
1101 Omahu Road
PO Box 555
Hastings 4156, New Zealand
Telephone: +64 6 873 9300
Facsimile: +64 6 873 9311
Faults: +64 6 873 9333
Freephone: 0800 286 476
www.unison.co.nz
Board of Directors
Kevin Atkinson
Andrew Bayly
Paul Callow
Paul Connell
Brenden Hall
Philip Hocquard
Tim Lusk
Ken Sutherland
Landscape view of part of Unison’s
rural Hawke’s Bay network.
98
Chairman
Unison Networks Limited
Executive management
Greg Morgan
Jaun Park
Chief Financial Officer
General Manager Networks and Operations
Michael McGarvey
Nathan Strong
Chief Information Officer
General Manager Business Assurance
Len Gould
General Manager Commercial
Charles Kaka Chief Executive
Michael McGarvey
General Manager
ETEL Limited
Peter Leece
Auditors
Audit New Zealand, on behalf of the Auditor-General
Chief Executive

UNISON Annual Report 2015

Transcription

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