Go to top of page

Directors' Report

The Board of Directors of the Australian Rail Track Corporation Ltd (ARTC) has pleasure in submitting the Directors' Report together with the Financial Report of the Group (the Group comprises Australian Rail Track Corporation Ltd and the Standard Gauge Company Pty Ltd) for the financial year ended 30 June 2020. This Directors’ Report has been prepared in accordance with the requirements of Division 1 of Part 2M.3 of the Corporations Act 2001.

Directors

The following persons were Directors of Australian Rail Track Corporation Ltd during the whole of the financial year and up to the date of this report unless otherwise stated:

W Truss
C Barlow
G Brown
M Campbell (appointed on 30 April 2020)
J Fullerton (end of term on 30 April 2020)
R Garnon
V Graham
D Saxelby
J Seabrook

Qualifications, experience and special responsibilities

The Hon Warren Truss AC (Non-Executive Director)

The Hon Warren Truss was appointed to the ARTC Board as Chairman on 21 April 2018. Previously, Warren served as a Member of the Federal Parliament for 26 years including 8 years as the Federal Leader of the National Party. As the 16th Deputy Prime Minister and Minister for Infrastructure and Regional Development, Warren was responsible for the delivery of several significant Australian Government investments including the early funding for Inland Rail. Prior to entering federal politics, Warren served in local government for 14 years, holding various roles including Chairman and Councillor of the Kingaroy Shire Council.

Previously, Warren was Chair of the Sugar Coast Burnett Regional Tourism Board, Deputy Chair of Bulk Grains Queensland and President of the Australian Council of Rural Youth.

Chris Barlow BSc (Hons), CE (Non-Executive Director)

Mr Chris Barlow was appointed to the ARTC Board as a Non-Executive Director on 2 May 2016. Chris is a Chartered Civil Engineer. Chris has held a variety of senior leadership roles in the transport and infrastructure industries, serving as Managing Director for a number of UK Airports. Chris was previously CEO & Managing Director of the Australian Pacific Airports Corporation, running Melbourne and Launceston airports. Additionally, Chris has had the experience of a number of Board positions. He was on the Board of Asciano (Patrick Stevedoring and Pacific National Rail) and Melbourne Convention Bureau. He is presently Chair of Airport Development Group, (Darwin and Alice Springs Airports).

Gillian Brown LLB (Hons), Grad Dip App Fin & Invest, MAICD (Non-Executive Director)

Ms Gillian Brown joined the Board as a Non-Executive Director in June 2010. Gillian is an independent non-executive director with over 15 years board experience in infrastructure, debt capital markets and funds management. Until 2017, Gillian was a leading corporate and project finance lawyer and Partner at Minter Ellison Lawyers. Gillian has experience in complex corporate transactions, including public private partnerships, mergers and acquisitions, strategy and risk allocation, workplace health and safety and environmental, social and governance initiatives. Gillian is also a Non-Executive Director of QIC Limited, QIC Private Capital Pty Ltd and BRIC Housing. Gillian’s previous board roles include Chairman of Minter Ellison Lawyers and director of Queensland Treasury Corporation and DBCT Holdings Pty Ltd.

Rosheen Garnon BEc/LLB, FCA, CTA, GAICD (Non-Executive Director)

Ms Rosheen Garnon was appointed to the ARTC Board as Non-Executive Director on 21 November 2018. Rosheen is a seasoned professional services expert with over 29 years’ experience in the accounting industry. Rosheen's qualifications include a Bachelor of Economics (Accounting Major) and Bachelor of Laws from the Australian National University. She is a Fellow of Chartered Accountants in Australia and New Zealand, a Chartered Tax Advisor and a Graduate of the Australian Institute of Company Directors. Rosheen is Chair and a Non-Executive Director of Alexium International Group Limited and a Non-Executive Director of Resolution Life Australia. She is also Chair of the Board of Taxation. Her volunteer and not-for-profit roles include a Non-Executive Director of The Smith Family; Member of the University of Sydney Finance and Audit Committee; Trustee of the Sydney Cricket and Sports Ground Trust; a Non-Executive Director of Creative Partnerships Australia; and a Non-Executive Director of Women Corporate Directors.

Vince Graham AM, KCSG, BEng (Civil), Grad Dip Mgmt, FAICD, (Non-Executive Director)

Mr Vince Graham was appointed to the Board as a Non-Executive Director on 8 March 2016. Vince has had extensive experience in executive roles at both a federal and state level. Prior to his appointment, Vince was the Chief Executive Officer of Ausgrid, Endeavour Energy and Essential Energy in NSW. In his role as Managing Director of the National Rail Corporation over a decade, Vince was involved in the development of the national rail freight network. He was the Chief Executive Officer of RailCorp NSW, the Chief Operating Officer of State Rail Authority, and the Managing Director of NSW Grain Handling Authority. Presently, Vince is a Non-Executive Director of the Western Sydney Airport Corporation, the Western City Aerotropolis Authority and Catholic Schools NSW Ltd.

David Saxelby BEng (Civil), MAICD (Non-Executive Director)

Mr David Saxelby was appointed to the Board as Non-Executive Director on 1 December 2016. David has had a highly successful 30-year career in construction, infrastructure contracting and major projects. He was previously the Managing Director of Thiess and most recently the Chief Executive Officer of Lendlease’s Construction and Infrastructure Business. David has been responsible for delivering many of Australia’s iconic major projects, including the ANZAC Bridge, Darling Harbour Convention Centre, Lane Cove Tunnel, Epping to Chatswood Underground Rail
Link and NorthConnex. David has held a number of senior industry positions as President and Board member of Australian Constructors Association, Board member of Roads Australia, Board member of Infrastructure Partnership Association and Board member of the Minerals Council of Australia. David was listed in the Top 100 Engineers in Australia for four consecutive years and is a Non-Executive Director of the Office of Projects Victoria Advisory Board.

Jennifer Seabrook BCom, FCA, FAICD (Non-Executive Director)

Ms Jennifer Seabrook was appointed to the ARTC Board as Non-Executive Director on 1 December 2016. Jennifer is a chartered accountant and has had an executive career in mergers and acquisitions, equity and debt capital markets, and financial advisory. She is a Special Advisor to Gresham Partners Limited and is employed by Iluka Ltd as Chair of their Deterra Royalties Limited. She holds directorships at BGC Australia and Esther Investments. Previous Non-Executive Director roles include West Australian Newspapers, Bank of Western Australia, Western Power Corporation, MMG Limited, IRESS Limited, Iluka Resources Limited, Alinta Gas and Western Australian Treasury Corporation. Jennifer’s former advisory panel memberships include ASIC’s External Advisory Group, the Takeovers Panel, Corporations Law Simplification Task Force and WA Pearling Industry Advisory Panel.

Mark Campbell BEng (Civil), GAICD (CEO and Executive Director)

Mr Mark Campbell is the Managing Director and Chief Executive Officer at ARTC, overseeing a team of more than 1,600 people in five states across Australia who manage the transit of around 450 trains per day. With more than 30 years of international experience in light and heavy industrial fields, Mark joined ARTC in April 2020 from leading construction materials firm Holcim, where he led the company’s Australia and New Zealand divisions for eight years. A civil engineer by trade, Mark also has significant board experience as a former director of Holcim Australia and New Zealand, Cement Australia, Cement Concrete & Aggregates Australia, Penrith Lakes Development Corporation, Skills DMC and Metromix.

John Fullerton BTech (EEng), FIE Aust, FAICD, CMILT

Mr John Fullerton was Managing Director and Chief Executive Officer of Australian Rail Track Corporation Ltd from February 2011 to 30 April 2020. Mr Fullerton has over 35 years’ experience in the rail industry across Australia and currently holds the position as Non-Executive Director of the Australasian Railway Association and is the Alternate Non-Executive Director of Hunter Valley Coal Chain Coordinator Ltd. Mr Fullerton is also a member of the Freight on Rail Group having served as its inaugural Chairman from 2015 to 2018. Mr Fullerton was previously Chief Executive
Officer of Freight Link Pty Ltd and Asia Pacific Transport Pty Ltd, Chairman of Rail CRC Ltd, Non-Executive Director of Tasmanian Railway Pty Ltd, Non-Executive Director Rail Industry Safety and Standards Board Ltd and inaugural Board Member for South Australian Young Entrepreneur Scheme. Mr Fullerton has held other senior executive roles in the rail industry including Chief Operating Officer at National Rail Corporation and Divisional General Manager (Operations) at Pacific National. Mr Fullerton has been listed in the Top 100 Influential Engineers in Australia for four consecutive years from 2011 to 2014.

Company Secretary

Mr Gavin Carney BA, LLB, LLM, GradDip ACG, MAICD, FGIA was appointed Company Secretary in 2009. Mr Carney joined ARTC in 2007 and is also the General Counsel. Mr Carney is a Fellow of the Governance Institute of Australia and a Member of the Australian Institute of Company Directors. As Company Secretary of ARTC, Mr Carney is responsible for monitoring the Company’s corporate governance framework and for managing all matters relating to the Company’s Board of Directors, Board Committees and Executive Team.

Meetings of Directors

The number of meetings of the Group's Board of Directors and of each Board Committee held during the year ended 30 June 2020, and the numbers of meetings attended by each Director were:

Meeting of Directors

Full meeting of Directors

Audit & Compliance Committee

Environment

Health & Safety

Committee

People & Performance Committee (1)

Risk

Committee

Inland Rail

Committee

W Truss (2)

A

8

B

8

A

5

B

5

A

3

B

3

A

5

B

5

A

2

B

2

A

8

B

8

C Barlow (3)

8

8

1

5

-

3

5

5

2

2

8

8

G Brown (4)

8

8

5

5

3

3

5

5

2

2

6

8

R Garnon (5)

8

8

5

5

-

3

5

5

2

2

6

8

V Graham (6)

8

8

5

5

3

3

1

5

2

2

4

8

D Saxelby (7)

8

8

1

5

1

3

2

5

2

2

8

8

J Seabrook (8)

7

8

4

5

1

3

5

5

2

2

7

8

M Campbell (9)

2

2

1

1

1

1

1

1

-

-

2

2

J Fullerton (10)

8

8

5

5

2

3

4

5

2

2

8

8

A = Number of meetings attended

B = Number of meetings held during the time the Director held office or was a member of the committee during the year

(1) = Whole Board for Succession Planning Committee is incorporated into the People & Performance Committee.

(2) Mr Truss attended five Audit & Compliance Committee meetings as an invitee, three Environment Health Safety Committee meetings as an ex officio member, and five People & Performance Committee meetings as an invitee.

(3) Mr Barlow attended one Audit & Compliance Committee meeting as an invitee.

(4) Ms Brown attended six Inland Rail Committee meetings as an ex officio member.

(5) Ms Garnon attended six Inland Rail Committee meetings as an invitee.

(6) Mr Graham attended one People & Performance Committee meeting as an invitee and four Inland Rail Committee meetings as an ex officio member.

(7) Mr Saxelby attended one Audit & Compliance Committee meeting and two People & Performance Committee meetings as an invitee.

(8) Ms Seabrook attended one Environment, Health & Safety Committee meeting as an ex officio member

(9) Mr Campbell attended the Audit & Compliance Committee and the People & Performance Committee meeting by invitation.

(10) Mr Fullerton attended the Audit & Compliance Committee and the People & Performance Committee meetings by invitation. Mr Fullerton attended one additional Audit & Compliance Committee, People & Performance Committee, Inland Rail Committee and Environment, Health & Safety Committee and two additional Board meetings as an adviser, following the end of the term of his appointment as Managing Director.

Members of the Board Committees during the year

Audit & Compliance

Member

Memebrship period (if other than full year)

G Brown

Chair

R Garnon

V Graham

J Seabrook

Environment Health & Safety

Memebr

Membership period (if other than full year)

V Graham

Chair

G Brown

J Fullerton

D Saxelby

People & Performance

Memeber

Membership period (if other than full year)

J Seabrook

Chair

C Barlow

G Brown

R Garnon

Risk Committee

Member

Membership period (if other than full year)

C Barlow

Chair

G Brown

M Campbell

Appointed on 30 April 2020

J Fullerton

End of term on 30 April 2020

R Garnon

V Graham

D Saxelby

J Seabrook

W Truss

Inland Rail Committee

Member

Membership period (if other than full year)

D Saxelby

Chair

C Barlow

M Campbell

Appointed on 30 April 2020

J Fullerton

End of term on 30 April 2020

J Seabrook

W Truss

Principal Activities

The principal activities of the Group during the year were the provision of rail access and infrastructure management of rail networks, either owned or leased by ARTC and the delivery of the Inland Rail Project.

Significant changes in the state of affairs

Significant changes in the state of affairs of the Group during the financial year were as follows:

1. Inland Rail activities:-

ARTC continues to make progress on the Inland Rail program since construction commenced in December 2018 on the first of section of Inland Rail between Parkes to Narromine in New South Wales, finalisation of detailed design and pre-procurement for Narrabri to North Start and near completion of reference design across the remainder of the program.

The significant national benefit of Inland Rail was reconfirmed by it being listed as an Infrastructure Australia ‘Priority Project’ and in June being listed as an Australian Government priority project to benefit from streamlined approval processes.

These benefits will only be delivered by a combined commitment by all levels of the Government and community to work with Inland Rail to maintain social licence and support for delivery, when ultimately a program of this size has significant local impacts.

A key part of this is that Intergovernmental agreements have been in place for some time with Victoria and New South Wales and with the Queensland Intergovernmental Agreement being executed between the State and Federal Governments in November 2019 the enabling environment to deliver now exists, however a number of enabling agreements with Queensland State Agencies still remain outstanding.

Of further note this financial year:

  • Construction activities on the Parkes to Narromine Project stage reached 75% and are expected to be completed in mid FY21;
  • The Narrabri to North Star Project in New South Wales saw further progress with Expression of Interest (EOI) and Request for Proposal (RfP) received. Contract award is expected to occur early in FY21. Manufacturing and delivery of rail and sleepers commenced and is nearing completion;
  • ARTC received a positive response from the market for the EOI to design, build, finance and maintain the Gowrie to Kagaru segment in Queensland through a Public Private Partnership (PPP);
  • The Inland Rail team has been actively engaging and listening to landowners and other stakeholders. A total of eight Community Consultation Committees (CCCs) and a number of sub-committees continue to actively facilitate community involvement along the route as part of our commitment to addressing local community and environmental concerns;
  • The Environmental Impact Statements (EIS) for Gowrie to Helidon and Calvert to Kagaru, were submitted to the Office of the Coordinator General for Adequacy Review. Helidon to Calvert EIS has been submitted in early FY21;
  • The majority of Project stages completed Reference Design, with the two remaining projects achieving 70% of Reference Design completion;
  • The Inland Rail Skills Academy was launched in August 2019 with the aim to; increase the number of skilled people eligible for employment on Inland Rail and associated regional industries, increase school student awareness and capability by connecting students with industry best practice, create opportunities for local businesses to participate in new supply chains and equip Inland Rail employees with world -class skills;
  • The Community Sponsorships and Donations Program also launched in 2019 with the aim to assist community-initiated projects, events or activities with grants between $1,000 to $4,000 awarded through four rounds within FY20;
  • As at 30 June, a total of 1,805 people had worked on the P2N project, with 692 of these workers being local residents, and 298 being Indigenous workers;
  • In September 2019, the Senate moved that an inquiry into the management of the Inland Rail Project by ARTC would be undertaken. Public hearings have been held in January and April 2020, with a report from the inquiry currently due on 11 November 2020; and,
  • A reset exercise was undertaken which considered Inland Rail Program cost, scope and schedule. The Directors are satisfied that adequate funding is available to deliver the Inland Rail Project against the revised cost and schedule updates.

Consistent with prior years and all ARTC assets the Inland Rail project is assessed for impairment as required by Accounting Standards (note 7(c)). Notwithstanding all of the above it is noted that the Inland Rail project is primarily funded by the Commonwealth Government in accordance with pre-existing project agreements.

2. ACCC Hunter Valley Compliance Assessment: -

Since June 2019, calendar year 2015 and 2016 compliance assessments have been concluded with the ACCC, with subsequent Compliance Assessments being subject to progressive review. The Group continues to carry an estimated financial liability or asset on the balance sheet for the remaining compliance assessment outcomes relating to Calendar Years 2017-2019 and to 30 June 2020 for the 2020 half calendar year assessment.

3. Non-Coal Market Conditions and Impairment:-

2019/20 has seen increased challenges within the economic environment with the additional unique circumstances posed by the COVID-19 pandemic. Within the non-coal market segment, COVID-19 resulted in increased demand for a range of consumer staples leading to increased interstate freight volumes and revenue which is likely to be short-term in nature.

Experience from previous economic downturns has shown that the volume of freight will be reduced in the short to medium term and we have lowered our previous forecast growth expectations in respect of future mining developments and inter-capital growth rates as a result.

To support the Interstate customer base through the challenges posed by COVID-19, ARTC has deferred scheduled price increases from 1 July 2020 to 1 January 2021. In addition, Interstate rail customers’ payment terms were extended to 90 days for a period of approximately 6 months.

As a result there has been a reduction in the Interstate Business Unit’s long term cash flow forecasts which has been the key reason for a downward revaluation of the Interstate Business Unit’s assets of $366.0 million, of which $366.0 million (2019: $287.9 million) was recorded in the Income Statement and nil (2019: $216.6 million) in the Asset Revaluation Reserve.

There was a partial offset to the fair valuation outcome noted above due to a 0.6% reduction in ARTC’s Weighted Average Cost of Capital (refer to Note 11(d) of the financial statements for further detail) reflecting ARTC’s view, based on the work of an external expert, that there has been a reduction in the long term risk free rate since the previous assessment was undertaken in June 2019.

There were no other significant changes in the state of affairs of the Group during the year.

Significant events after the balance date

It is the opinion of the Directors of the Group that no event has arisen that would significantly affect the operation of the Group, the result of those operations, or the state of affairs of the Group in future financial years.

As part of our COVID-19 response throughout the year, we worked closely with government and health authorities to determine and adhere to preventative measures, while navigating ever-changing travel restrictions and border closure arrangements in order to keep the nation’s supply chain intact. This remains an ongoing focus for ARTC particularly noting the recent spike in COVID-19 cases in Victoria.

Likely developments and expected results of operations

Likely developments and the expected results of operations of ARTC are contained in the Chairman and Chief Executive Officer's Reports.

There has been ongoing engagement with shareholders and financiers in terms of the management of ARTC’s liquidity requirements, noting some of the challenges and risks in the operating and financial environment. ARTC has plans in place to manage its funding requirements for the coming financial year which include a deferral of dividends.

Dividends

On 31 October 2019 the Group made a payment of $23,325,000 to the shareholder as the final dividend for the 2018/19 financial year.

Payment of an interim dividend in respect of the 2019/20 financial year has been deferred as at balance date.

Review of operations

The review of operations of the Group is contained in the Chairman’s and the Chief Executive Officer's Reports

Environmental regulation

ARTC is committed to managing its operational activities and services in an environmentally responsible manner to meet its legal, social and ethical obligations. ARTC holds operational licences from both the Environment Protection Authority of South Australia and the Environment Protection Authority of New South Wales. In South Australia, the licence is held under Part 6 of the Environment Protection Act 1993 to undertake the activity of "Railway Operations". The licence is due to expire on 31 January 2024. In New South Wales, the licence is held under Section 55 of the Protection of the Environment Operations Act 1997 to undertake "Railway Systems Activities". The licence has an anniversary date of September 5 and subject to payment of the fee and provision of annual returns, continues until the parties agree to change or withdraw it. Other than in South Australia and New South Wales, ARTC is not required to be licensed.

Indemnification of officers

During the reporting period, ARTC had in place insurance cover in respect of liabilities arising from the performance of the Directors and Officers of the Group.

The disclosure of the premium paid under Section 300(8) (b) of the Corporations Act 2001 is not shown as the insurance contract between ARTC and the insurer prohibits ARTC from disclosing such information.

No known liability has arisen under the insurance contract as at the date of this report.

ARTC has indemnified each of the Directors of the Company against any legal proceedings, loss or liability that arises in their capacity as a Director of ARTC. As at 30 June 2020, no material claims have been made.

Non-audit services from External Auditors

The External Auditors did not provide any non-audit services during 2019/20 (2018/19: $144,981).

Auditor's independence declaration

A copy of the auditor's independence declaration as received by the Directors as required under Section 307C of the Corporations Act 2001 is set out on page 10.

Signed in accordance with a resolution of the Directors:

Auditor's independence declaration

Remuneration report - unaudited

This report outlines the approach to setting remuneration and the outcomes for ARTC’s Key Management Personnel (KMP) for the year ended 30 June 2020. The personnel covered in this report include Non-Executive Directors of ARTC, its Chief Executive Officer and Managing Director (CEO & MD) and all senior executives appointed to roles that report directly to the CEO & MD.

Name

Title

2020 Status

Non - Executive - Directors

Warren Truss AC

Chairman

Full Year

Chris Barlow

Non - Executive Director

Full Year

Gillian Brown

Non - Executive Director

Full Year

Vince Graham AM

Non - Executive Director

Full Year

David Saxelby

Non - Executive Director

Reappointed 28/11/2019

Jenny Seabrook

Non - Executive Director

Reappointed 28/11/2019

Rosheen Garnon

Non - Executive Director

Full Year

Name

Title

2020 Status

Executive Directors

John Fullerton

Chief Executive Officer and Managing DIrector

Resigned 30/04/2020

Mark Campbell

Chief Executive Officer and Managing Director

Appointed 30/04/2020

Other Key Management Personnel

Andrew Bishop

Chief Financial Officer

Retired 31/12/2019

Shane Flowers

Chief Financial Officer (Acting)

Appointed 31/12/2019

Gavin Carney

General Counsel and Company Secretary

Full Year

Kylie Gallasch

Group Executive Corporate Services and Safety

Full Year

Jane Lavender - Baker

Group Executive Corporate Affairs and People

Full Year

Simon Ormsby

Group Executive Strategy & Corporate

Development

Full Year

Jonathan Vandervoort

Group Executive Hunter Valley

Retired 31/01/2020

Wayne Johnson

Group Executive Hunter Valley

Appointed 31/01/2020

Peter Winder

Group Executive Interstate

Full year

Richard Wankmuller

Chief Executive Officer Inland Rail

Full Year

Damien White

Executive General Manager integration Inland Rail

Appointed 14/10/2019

KMP Remuneration Policies and Practices

Non-Executive Directors

All Non-Executive Directors of ARTC are appointed by the Commonwealth of Australia through the Shareholding Ministers. Fees for Non-Executive Directors are set by the Commonwealth Remuneration Tribunal (the Tribunal). The Tribunal reviewed the Non-Executive Directors’ remuneration in 2019 and consented to increases from 1 July 2019. No increase has been applied for FY20.

Chief Executive Officer and Managing Director (CEO & MD)

As a result of planned retirement from the role, Mr John Fullerton handed over responsibilities to incoming ARTC CEO & MD, Mr Mark Campbell on 30 April 2020 following Mr Campbell’s appointment by the Commonwealth Government through the Shareholder Ministers.

In March 2020, the Remuneration Tribunal confirmed the role as a Principal Executive Officer (PEO) Band E under the Principal Executive Office - Classification Structure and Terms and Conditions. The Tribunal confirmed an ‘at risk’ incentive opportunity of up to 60% of the total remuneration would apply as determined by the Board.

Senior Executives (Executive KMP)

The achievement of the Company strategy relies on ARTC’s ability to attract and retain senior executives who can lead the business to deliver the safety, people and commercial objectives and do so in a way that strengthens the business and builds the culture defined by the Company Values.

All ARTC Executive KMP are employed under individual contracts of service specifying the terms, conditions and performance requirements specific to each role.

Executives received a 2% increase in October 2019. No increase has been applied for FY20.

KMP Remuneration Governance Arrangements

ARTC’s Board monitors performance and reward practice against its corporate governance objectives. The Board is accountable for remuneration related activities and manages these matters through the People and Performance Committee (the Committee).

The Committee assists the Board to fulfil its governance responsibilities in relation to people management and remuneration policies and practice.

The Committee responsibilities include and are not limited to, assisting the Company:

  • in building a high performance organisation through policies designed to recruit, develop, reward and retain the best people, and
  • the orderly succession of KMP staff and the Chief Executive Officer (CEO)

The Committee makes specific recommendations to the Board regarding remuneration of the Chief Executive Officer (CEO) and Executive KMP and provides oversight at Board level of the related Company policies, procedures and practices.

Remuneration Policies and Related Practices

Remuneration Structure

For FY20 the CEO & MD and senior executive remuneration arrangements are comprised as follows:

Changes to Fixed Remuneration in 2019/20

In July 2019, the ARTC Board approved a 2% increase in FAR for each of the KMP reporting to the CEO & MD which took effect in October 2019. This decision was informed by the Remuneration Tribunal determination regarding the CEO & MD’s remuneration and a review of the relevant market data comparators. This included, the Consumer Price Index, remuneration guidance for the general market and the engineering market, provided by our remuneration consulting partners and the average Federal Government enterprise bargaining wage increase.

As a result of the Australian Government’s decision in April 2020 to place a six-month pause on wage and salary increases, ARTC has similarly suspended Executive KMP remuneration review in 2020. Ordinarily a review would be undertaken in July and increases payable from October. This pause also applies to ARTC CEO and Directors.

Future Reward Considerations

Overall, as the impact of the Covid-19 pandemic continues to evolve, we expect to see continuing impacts on our business, with the economic downturn, leading to declining freight volumes and revenue, which will require appropriate efficiency adjustments.

In contrast, ARTC’s project delivery task is growing. The delivery of the Inland Rail project and potential fast tracking or further investment in an already busy infrastructure sector, presents challenges around our ability to attract and retain critical talent and the need to adopt a tailored approach to retention and reward strategies will be crucial.

The ability to effectively balance competing priorities and secure the capability required to execute complex, high profile projects that deliver value over the longer term, will remain a key focus in the management of business cost and risk.

ARTC’s Board and People and Performance Committee will continue to review the critical strategic objectives and exercise discretion to ensure prudent management of ARTC resources, including the basis upon which remuneration and short term incentives is determined.

Short Term Incentive (STI) Performance Program

The Corporate Measures used to assess Company performance for FY20 are set by the Board and aligned to the measures in the Corporate Plan, approved by the Shareholders.

The three critical objectives for FY20 are:

  • Building Inland Rail on time, to budget and scope;
  • Exceeding our Customers needs and promoting better rail industry outcomes; and
  • An uncompromising commitment to safety.

To achieve its strategic objectives, ARTC seeks to ensure it has the right people capabilities and business systems to demonstrate and deliver:

  • Safe working environments free from harm;
  • Company-wide commitment to its core values;
  • Respect and value creation for its stakeholders and communities;
  • Strong leadership and corporate governance;
  • Effective safety, procurement, people and risk management including security, reliability and performance of systems and confidentiality of ARTC and customers’ data.

Linking Company and Individual Performance to STI Payments

The STI Program is linked to individual balanced scorecards of Key Performance Indicators (KPIs), and an assessment against overall results and alignment to the Company’s values and Leadership behaviours.

Key Performance Indicators (KPIs) are a mix of Company financial and non-financial measures (including safety, customer and employee targets), and specific individual performance objectives, directly related to the Executive’s accountability.

The STI is based on a percentage of the FAR as follows:

ROLE

Potential STI as % FAR

ARTC CEO & MD

60 (*)

INLAND RAIL CEO

50 (**)

OTHER ELIGIBLE KMP

20-30 (**)

(*) ARTC CEO & MD Short Term Incentive is capped at 60%

(**) with stretch the potential STI for the Inland Rail CEO is 62% of FAR and for other eligible KMP 23 to 35% of their FAR

The CEO & MD ’s Performance Plan (the Plan) is determined by the Board and sets out the five critical Performance Measures and stretch targets.

A Performance Plan is created with each Executive KMP based on the accountabilities specific to their role, and the part that they play in leading the delivery of the Corporate Plan objectives. Each plan contains stretch targets aligned to each of the objectives which are designed to incentivise high performance to deliver the Corporate Plan outcomes and greater value to the Shareholder.

Performance is assessed against targets that align with Shareholder interests as detailed in the ARTC Corporate Plan. To achieve the maximum award, the relevant targets must be significantly exceeded.

The Board determines the payment of short term incentives as an outcome of the assessment of each Executive KMP’s performance against the objectives set out in ARTC’s Corporate Plan.

Payment under the STI Program is at the discretion of the Board and is dependent on the overall performance of the business.

Executive KMP Performance and Payment of STI for 2019 - 2020

The FY20 performance year proved extremely challenging due initially to the protracted Australian Bushfires commencing in October 2019 on the Telarah to Acacia Ridge Corridor and extending through New South Wales, Victoria, South Australia and Western Australia. The fires continued until late February 2020. In February severe flooding occurred in South Australia and in March, there was the tragic train derailment in Wallan, Victoria.

The significant track losses were rebuilt ahead of schedule as the organisation mobilised and maintained focus on keeping the national network running for its customers and other key stakeholders.

The rapid onset of the Covid-19 pandemic resulted in a substantial amount of work to be reprioritised and operationalised for the movement of freight across Australia. Continuous adjustments to maintain critical maintenance and project work in a safe manner and effectively support customers in the delivery of freight has been and will continue to be an overarching priority. A number of key stakeholders have acknowledged ARTC’s speed and adjustment to new safe working requirements. As an essential service ARTC has successfully mobilised and continues to deliver high volumes of freight across the country. There have been no significant outages or shutdowns due to Covid-19.

Corporate Performance Outcomes

  • ARTC assesses financial performance on the basis of operating profit performance against budget. Operating Profit is defined as earnings before interest, tax, depreciation, amortisation and impairment (EBITDAI) excluding impacts on earnings from expenditure related to ARTC’s major infrastructure works program and grant revenue. ARTC had a solid year with operating profit exceeding the budgeted target, with some increases in interstate freight activity and revenue coupled with general operating expenditure savings helping to offset higher incident expense and corridor maintenance costs.
  • The corporate performance measure for safety exceeded the target, however, the Board in taking account of the holistic safety performance exercised discretion and reduced the rating score.
  • Customer satisfaction was slightly below target; the employee engagement measures achieved target remaining above the industry average benchmarks.

Executive KMP Performance Outcomes

Delivering Critical Outcomes

  • The Automatic Train Management System (ATMS) implementation and change management deployment plan was approved with development commenced for broader network deployment underway with Freight on Rail Group (FORG) and Department of Infrastructure, Transport, Regional Development and Communications (DITRDC).
  • ARTC Network Control Optimisation (ANCO) commissioned in the Hunter Valley and ATMS IS1 passed its final acceptance testing prior to achieving practical completion.
  • Inland Rail capability was further enhanced with the establishment of the Program Management Office (PMO) to support the program and strengthen the capability of the program team.
  • Inland Rail maintained its commitment and focus on engaging transparently, respectfully and consistently with key stakeholders, landowners and communities.
  • Delivery of Victorian Projects and full integration with Inland Rail across the Project was successful.
  • Hunter Valley Business Unit achieved 2 years Lost Time Injury free during FY20.

Building Capability

  • Good progress was made to continue the strengthening of organisational capability across the business, specifically safety, procurement, systems & technology, finance and legal, and this capability further supported the delivery of Inland Rail.
  • The Risk Management System was fully commissioned,
  • The Digital Strategy to build ARTC’s capability to manage its large asset base, operating trains across the network and providing corporate support and control systems, was approved and implementation commenced.
  • ARTC’s leadership succession for the role of Chief Executive Officer and Managing Director, has been effectively transitioned with a strong focus on the early engagement of all key customers and other stakeholders.
  • A key focus was the deployment of the ARTC People Strategy - Stage 1, securing critical talent, building leadership capability and renewed focus on performance contribution and related systems and processes.

In assessing ARTC performance in FY20, the Board considered the respective Executive KMP’s performance contribution in the achievement of priority objectives together with the strategic decisions and initiatives put in place during the year to respond to the extraordinary circumstances facing the business and the wider community. The outcome of the Executive KMP performance assessments resulted in the Board awarding the outcomes specified in the table below and in the Executive Remuneration table on page 21.

Executive KMP Performance Outcomes

Role

Potential STI as % FAR

Actual STI as % FAR (*)

ARTC CEO & MD

60

54

INLAND RAIL CEO

50

43

OTHER ELIGIBLE KMP

20-30

15-26

(*) Annualised

Remuneration Governance Arrangements

The Board

ARTC’s Board monitors performance and reward practice against its corporate governance objectives. The Board responsibilities include and are not limited to:

  • Determining the business strategy;
  • Appointment and monitoring of the CEO & MD’s performance;
  • Monitoring and oversight of the senior executive performance of objectives;
  • Oversight of ARTC including Inland Rail corporate governance, control and accountability;
  • Approval of senior executive appointments reporting to the CEO & MD and the related remuneration policies and practices;
  • Approving remuneration adjustments for KMP; and
  • Determining the STI outcome for KMP who participate in the program.

The People and Performance Committee (The Committee)

The Committee Charter was revised with a number of improvements made to strengthen its oversight and governance of the people, performance and remuneration policies and practices in response to the increasing complexity of the business and the critical role people, performance and culture plays in delivering the company’s Corporate Plan.

The Charter outlines the Committee’s duties and responsibilities to assist the Board to fulfil its corporate governance responsibilities in relation to any significant matters requiring policy change or decision.

The relevant excerpts from the Charter include:

Culture and Capability

  • Encourage the Board to lead by example, setting the cultural tone from the top.
  • Assist management to develop a high performing, purpose led and values-based work culture.
  • Review the People Strategy and its implementation to ensure the Company attracts, develops, retains and motivates people to deliver its objectives.

Diversity

  • Review the effectiveness of the company’s framework to develop a diverse and inclusive workforce which is rich in skills, experience and thinking styles.

Policies

  • Evaluate any relevant potential exposure to the Company pursuant to its accountabilities and responsibilities under the Governance Arrangements for Commonwealth Government Business Enterprises.
  • Monitor and provide guidance on the Company’s workplace agreements, enterprise bargaining agreements and industrial agreements and instruments.
  • Oversee compliance with all relevant people and workplace policy legislation and regulations in all of the legal jurisdictions in which the Company operates.

Remuneration & Performance

Chief Executive Officer and Managing Director

  • Formulate and administer the contract of employment for the CEO & MD.
  • Monitor and review CEO & MD performance on an annual basis.

Senior Executive Staff

  • Assist the CEO & MD in annual review of the contracts of employment for senior executive staff, including recommendations for fixed and variable remuneration components.
  • Review with the CEO & MD the succession of key executive and specialist staff to provide for the orderly development and succession of key management personnel.

Remuneration Report

  • Review and recommend to the Board for approval the Remuneration Report to be adopted within the Annual Report.

As at 30 June 2020 the Committee comprised Jenny Seabrook (Chair), Chris Barlow, Gillian Brown and Rosheen Garnon.

The effectiveness of the Committee is assessed as part of the comprehensive annual Board Evaluation process, to ensure the Committee structure and capabilities are aligned to the overall business strategy.​

Non-Executive Director Remuneration

The following table details the fees paid to Non-Executive Directors.

Name

Year

Based fixed annual

salary

Post-employment

Superannuation

Total

$

$

$

W Truss

2019

2020

162,665

167,569

15,453

15,919

178,118

183,488

C Barlow

2019

2020

81,332

83,790

7,727

7,960

89,059

91,750

G Brown

2019

2020

97,209

100,235

7,727

7,960

104,936

108,195

V Graham

2019

2020

89,271

92,013

7,727

7,960

96,998

99,973

D Saxelby

(reappointed 28 November 2019)

2019

2020

81,332

83,790

7,727

7,960

89,059

91,750

J seabrook

(reappointed 28 November 2019)

2019

2020

89,271

92,013

7,727

7,960

96,998

99,973

R Garnon

2019

2020

49,533

92,013

4,706

7,960

54,239

99,973

Total non-executive

Director remuneration

2019

2020

650,613

711,423

58,794

63,679

709,407

775,102

Executive Remuneration

The following table represents the remuneration receivable by KMP executives applicable to the relevant year. E.g. The short-term incentives for financial year 2020 represent the amounts awarded to KMP for performance outcomes associated with FY2020 and are to be paid in October 2020.

Name

Year

Short-term benefits

Post-employment

Other long-term benefits

Termination benefits

Total remuneration

Base Salary and fees

STI/Bonuses

Non-cash

benefits

Superannuation contributions

STI deferral

Long service leave

$

$

$

$

$

$

$

Executive Director

M Campbell (1)

2019

2020

-

129,254

-

-

-

-

-

4,201

-

-

-

2,864

-

136,319

J Fullerton (2)

2019

2020

703,670

627,089

313,283

437,771

-

-

20,531

17,691

-

-

61,131

19,569

-

1,098,615

1,102,120

Other key management personnel(group)

A Bishop (3)

2019

2020

376,815

191,622

94,307

54,292

-

-

20,531

11,309

-

-

19,606

6,057

-

-

511,259

263,280

S Flowers (4)

2019

2020

-

158,684

-

35,160

-

-

-

10,501

-

-

-

3,427

-

-

-

207,772

G Carney

2019

2020

323,956

353,335

72,603

88,128

-

-

20,531

21,164

-

-

14,692

10,416

-

-

431,782

473,043

D White (5)

2019

2020

-

238,619

-

37,477

-

-

-

15,510

-

-

-

5,694

-

-

-

297,300

K Gallasch

2019

2020

331,294

373,506

80,491

97,681

-

-

20,531

21,164

-

-

16,228

11,281

-

-

448,544

503,632

J Lavender - Baker

2019

2020

368,964

379,215

80,014

105,700

-

-

20,531

21,164

-

-

14,029

10,582

-

-

483,538

516,661

S Ormsby (6)

2019

2020

349,731

340,945

69,426

92,804

-

-

20,531

21,164

-

-

13,912

9,419

-

-

453,600

464,332

J Vandervoort (7)

2019

2020

454,458

292,133

104,205

71,494

-

-

20,531

12,925

-

-

10,283

(33,937)

-

-

589,477

342,615

W Johnson (8)

2019

2020

-

176,157

-

40,590

-

-

-

8,643

-

-

-

8,562

-

-

-

233,952

P Winder (9)

2019

2020

477,112

468,780

86,531

110,925

-

-

20,531

21,164

-

-

11,331

8,963

-

-

595,505

609,832

R Wankmuller

2019

2020

994,821

1,017,738

390,500

450,548

-

-

20,531

21,164

-

-

16,214

19,646

-

-

1,422,066

1,509,096

Total Executive

KMP

2019

2020

4,380,821

4,747,077

1,291,360

1,622,570

-

-

184,779

207,764

-

-

177,426

82,543

-

-

6,034,386

6,659,954

Total NED

remuneration

2019

2020

650,613

711,423

-

-

-

-

58,794

63,679

-

-

-

-

-

-

709,407

775,102

Total KMP remuneration expense (10)

2019

2020

5,031,434

5,458,500

1,291,360

1,622,570

-

-

243,573

271,443

-

-

177,426

82,543

-

-

6,743,793

7,435,056

  1. Mr Campbell was appointed by the Shareholding Ministers to the position of Chief Executive Officer and Managing Director on 30/04/2020.
  2. Mr Fullerton ceased the position of Chief Executive Officer and Managing Director on 30/04/2020 and assumed the role of Advisor to the CEO & MD until 31/07/2020.
  3. Mr Bishop retired from the position of Chief Financial Officer on 31/12/2019.
  4. Mr Flowers was appointed to the position of Acting Chief Financial Officer on 31/12/2019.
  5. Mr White was appointed to the position of Executive General Manager Integration Inland Rail on 14/10/2019.
  6. Mr Ormsby earned higher remuneration in FY19 due to a period where he acted as CEO (08/09/2019 - 05/10/2019).
  7. Mr Vandervoort retired from the position of Group Executive Hunter Valley on 31/01/2020
  8. Mr Johnson was appointed to the position of Group Executive Hunter Valley on 31/01/2020.
  9. Mr Winder earned higher remuneration in FY19 due to a period where he acted as CEO (26/8/2018 - 6/10/2018).
  10. Total KMP STI remuneration expense for 2019 has been increased by $47,253 above the total KMP STI remuneration expense of $1,244,107 disclosed in the 2018/19 year to reflect final bonuses paid in respect of that financial year. This is reflected in increases in the individual STI amounts for all KMP who were in their positions at 30 June 2019.