Corporate Report for the year ended 30 June 2022
Introduction and overview
Business performance
Governance and risk
Directors’ report
Remuneration report
Financial statements
Sustainability supplement
Security holder information
Executive KMP remuneration outcomes
STI outcomes STI awards are determined with reference to an assessment of performance against individual KPIs and Group performance measures. When the Board and the Remuneration, People and Culture Committee consider the performance against each element, several factors are considered that may result in the exercise of Board discretion for the benefit or detriment of the executives. For example: • prevailing external business and economic factors beyond the control of the business and which may impact performance • unforeseen factors that may not have been known at the beginning of the performance period, but which are relevant to performance over the performance period • whether budgetary assumptions that were made when setting performance targets remain appropriate and whether conditions are potentially better or worse when compared with those assumptions • the degree of difficulty and complexity associated with achieving the targets, as related to both the internal and external environment. In assessing whether to exercise discretion for any of these factors, the Board will have regard for the interests of all stakeholders including security holders.
Transurban’s strategic priorities are cascaded via the CEO’s KPIs to other executives, along with other functional measures. The Board assessed the Group’s and CEO’s performance as follows (KPIs that are commercially sensitive have been excluded). FY22 Group measures outcomes Proportional EBITDA contributed $1,869 million for the period versus a target $1,951 million. At the time the EBITDA measures were set, government mandated COVID-19 restrictions were in place and the nature and length of these restrictions were unknown. It was acknowledged that the associated impact on EBITDA was outside of Management’s control. In response to the uncertainty, a set of principles were developed to estimate the expected weekly revenue impacts of these restrictions, which were provided to the ASX as part of the FY21 investor materials. The target EBITDA has incorporated these principles. The additional impacts to EBITDA were ongoing COVID-19 related government directives, the Omicron wave and extended traffic recovery profiles over the year, resulting in an outcome of 58%. Proportional Net Costs were $546 million for the period versus target of $605 million. This was driven by a combination of active management initiatives and benefits from prevailing market conditions. Active cost management initiatives include:
• direct negotiation with vendors to reduce costs across technology and insurance; • deferral or cancellation of consulting and marketing spend; • renegotiation of electricity contracts at historically low energy prices; and • management of ventilation systems electricity consumption. Benefits to Net Costs partially due to prevailing market conditions include lower than expected employee expenses, lower debt collection costs and COVID-19 related cost reductions of travel, entertainment and facilities. This resulted in an outcome of 150% on which the Board exercised its discretion and reduced the outcome to 90%. This was to reflect the benefit of some cost savings not being directly attributable to management efforts. Group HSE performance was strong for the period reflecting the Group’s ongoing focus and investment in our safety culture. This includes targeted activities in relation to the safety of our people, our contractors and our roads. The FY22 outcome for HSE was 130.5%. The overall FY22 STI outcome is 85.3%, including Board discretion to reduce the Proportional Net Cost STI outcome. This aligns STI outcomes with the experience of security holders, given FCF (excluding Capital Releases) was 8.5% and EBITDA was 5.8% below pre-COVID levels (FY19).
FY22 Group measures outcomes
Measure
Target Performance Outcome % STI Outcome % Commentary
Excluding significant items, specific major development and legal project spend, transaction and integration costs and the incremental impact of unbudgeted new assets.
Proportional EBITDA (40%)
$1,951M
$1,869M
58%
23.2%
Proportional Net Costs (40%)
$605M
$546M
90%
36.0%
HSE (20%)
130.5%
26.1%
Overall performance/Group outcome
85.3%
105
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