EROAD Annual Report FY18
EROAD
ANNUAL REPORT 2018
About us
EROAD modernises road charging and compliance for
road transport by replacing paper-based systems with
easy-to-use electronic systems. The EROAD solution also
improves fleet management, bringing benefits to our
customers who operate transport fleets, as well as benefits
to communities and the wider public through improved road
safety and valuable data about road use to improve the
planning, management and maintenance of our roads.
This annual Report is dated 18 May 2018 and is signed on behalf
of the Board of EROAD by Michael Bushby, Chairman and Steven
Newman, Chief Executive Officer.
Michael Bushby
Chairman
Steven Newman
Chief Executive Officer
Key Dates
02
AUGUST 2018
Annual Shareholders Meeting
31
MARCH 2019
Financial Year End
19
NOVEMBER 2018
Half Year Results announcement*
30
SEPTEMBER 2018
Financial Half Year End
*Proposed date
Contents
OVERVIEW
2018 Business Highlights02
2018 Results in Brief03
Market Outlook05
Chairman Report08
CEO Report09
GOVERNANCE
Board of Directors12
Executive Management Team13
Corporate Governance15
FINANCIAL PERFORMANCE
Financial Review26
Consolidated Financial Statements29
Notes to the Consolidated Financial Statements35
Independent Auditor’s Report66
REGULATORY DISCLOSURES
Director Disclosures75
Shareholder Information77
Other Information79
GLOSSARY
81
COMPANY TIMELINE
83
DIRECTORY
84
01
1.0
OVERVIEW
02
1.0 OVERVIEW
• Contracted units up 61.5% to 77,600 (FY17: 48,041)
• Revenue up 57% to $51.5 million1 ($32.7 million)
• EBITDA up 113% to $15.0 million ($7.1 million)
• Net Profit after Tax of $0.2 million vs a net loss after of $5.3 million in FY17. A positive change of $5.5 million
• In the second half of the year the business graduated from start-up mode to established business mode, generating
self-sustaining cash flows for the first time
• Record sales growth of 191% in North America now means EROAD has a credible beachhead in this market
• Major growth among enterprise customers including Downer Group, Waste Management, Fulton Hogan and food
distributor Bidfood
• Raised $21.5 million of new capital; $6 million through a Share Purchase Plan for existing shareholders (that was 90.78%
over-subscribed), and $15.5 million through a strongly supported equity placement to existing and new institutional
shareholders
• Secured new credit facility from the BNZ to support future growth, with the limit increased within six months by BNZ to
fund higher growth.
• Engaged First NZ Capital to undertake a strategic review of EROAD’s North American business focused on evaluating
options to further capture the compelling growth opportunity in North America
• The ANZ business achieved four consecutive quarters of record sales growth, resulting in 42% year on year growth, and
indicative of the potential for continuing growth in this market
• In Q3, sales in North America exceeded sales in Australia and New Zealand for the first time
• Achieved a sales and customer support scale up of many multiples – a number of quarters this year saw more sales and
customer onboarding than entire previous years. This proved extremely challenging and the business learned a great deal
from this rapid upscale. EROAD is continuing to implement improvements arising from these lessons to ensure sustainable
ongoing growth at scale
• Graham Stuart, previously chief executive officer of Sealord Group and a former CFO and director of strategy & growth at
Fonterra, joined the EROAD board of directors and assumed the chair of the Finance, Risk and Audit Committee
• The Federal Motor Carrier Safety Administration, through the Department of Transportation’s National Training Center,
selected EROAD as one of four ELD devices for use in training commercial motor vehicle inspectors and investigators
• The Project Management Institute of New Zealand awarded EROAD’s ELD development its Project of the Year award at
the institute’s annual awards
• EROAD selected to participate as the sole heavy transport services provider in the first multi-state truck pilot on the I-95
to explore the feasibility of a Mileage-Based User Fee along the United States’ eastern seaboard
• US federal government, in its annual Economic Report of the President, proposed a move from fuel tax to road user fees
• Australia’s Minister for Urban Infrastructure, the Honourable Paul Fletcher, announced a heavy vehicle charging pilot and
a business case pathway for local heavy vehicle trials, in response to more rapid adoption of electric vehicles in the freight
sector
• Launched new driver and vehicle safety tools to extend EROAD’s market leading suite of health and safety products and
services including Posted Speed on box, and EROAD Inspect vehicle checklist product on Android and iOS mobile devices
• Launched EROAD Inspect on Ehubo2 in North America.
1All references to $ refer to New Zealand Dollars (NZD)
2018 Business Highlights
03
1.0 OVERVIEW
-
10.0
20.0
30.0
40.0
50.0
60.0
6.2
10.0
17.6
26.2
2014201320152016
32.8
51.5
20172018
-
10,000
20,000
30,000
50,000
60,000
70,000
80,000
40,000
20132017
48,041
14,332
2014
6,612
2016
36,953
11,091
11,088
2018
77,600
29,559
7,720
2015
11,530
25,862
2018 Results in Brief
TOTAL CONTRACTED UNITS
REVENUE ($Millions)
Total Contracted Units is a measure that represents Units on Depot and Units that have been
dispatched pending installation. Total Contracted Units is a non-GAAP measure that EROAD
management uses to track sales growth.
04
1.0 OVERVIEW
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
201420132015201620172018
11.5
19.5
32.6
45.3
2.7
8.2
51.7
8.7
84.1
Rental units continue to dominate our total contracted units.
TOTAL CONTRACTED UNITS
MARCH 2018
TOTAL CONTRACTED UNITS
MARCH 2018
Australia & New Zealand
North America
Rented - Operating Lease
Rented - Finance Lease
Sold
FUTURE CONTRACTED INCOME ($Millions)
North America
Australia & New Zealand
Revenue
57%
Total Contracted Units
62%
Future Contracted Income
55%
Retention Rate
98%
Staff Number
15%
Invested in R&D
$9.8m
59,843
1 7,757
11%
80%
9%
Future Contracted Income is a non-GAAP measure which represents future hardware and
SaaS cash inflows relating to income under non-cancellable long-term rental agreements.
Note that this definition has changed from the previous period in order to include the future
cash flows from finance leases, where the revenue has been recognised in advance of cash
flows. Refer to Note 6 of the Financial Statements.
05
1.0 OVERVIEW
Globally electronic RUC (road user charges) is at a relative
early stage of development. EROAD is at the forefront of
developing this technology to improve business outcomes
from transport operators as well as improving road safety
and the sustainability of funding for road building and
maintenance.
A move towards electric vehicles, as well as more fuel-
efficient vehicles, means that revenue from fuel taxes – the
main method of funding roads in many jurisdictions – is
becoming less sustainable, leading to a move to road user
charges. In addition, an increased emphasis on health and
safety in the workplace – including vehicles – means that
operators need to be able to better manage and audit driver
and vehicle safety. Mandatory ELDs in the US is an example
of this trend.
AUSTRALIA AND NEW ZEALAND
Penetration of telematics and other transport technology
services in Australia’s transportation fleet remains relatively
stable with forecasts that penetration will grow considerably
in the coming years. Australia has around 700,000 heavy
vehicles and 2.9 million light commercial vehicles. During
the year, the Australian government announced a National
Heavy Vehicle Charging Pilot to investigate replacing
Australia’s existing heavy vehicle charging system (PAYGO)
– a combination of fuel-based road user charges and heavy
vehicle registration fees – with a direct user charging system.
EROAD is well positioned to support and participate in this
trial, drawing on its experience with pilot programmes in
Oregon and California.
In New Zealand, penetration of regulatory telematics is
more advanced due to the country’s national RUC system
based on vehicle weight and distance travelled. New Zealand
has around 140,000 heavy vehicles and 500,000 light
commercial vehicles. More than 50% of heavy transport RUC
is now collected electronically, led by EROAD’s world-first
national eRUC service. EROAD has collected more than
$1.9 billion of RUC on behalf of the New Zealand Transport
Agency.
In addition, new health and safety and chain of responsibility
regulations are driving the uptake of regulatory telematics
services. Fleet owners and operators are looking to better
manage driver and vehicle safety while meeting contractual
obligations around fleet safety and performance put in
Market Outlook
place by customers. The chain of responsibility regulations
have expanded the market size as contracts come up for
renegotiation and businesses better understand their
obligations under the new regulations in New Zealand. The
chain of responsibility changes come into effect in July 2018
in Australia.
NORTH AMERICA
Around 3 million vehicles in the US are mandated under
new federal regulations to install an ELD. Legacy AOBRDs
(automatic on board recording devices) had been adopted
by US fleets and have been grandfathered under the
regulations but will need to be updated to meet the new
technical requirements of ELDs by December 2019. Many
of the US regulatory platforms, like the International Fuel
Tax Agreement (IFTA), are manual and paper-based.
EROAD provides both electronic IFTA and IRP (International
Registration Plan) to North American customers. Oregon
is one of four states where heavy vehicles pay taxes for
road use based on distance travelled and vehicle weight,
using a system similar to New Zealand’s road user charging
regime. EROAD provides an electronic solution in Oregon
for managing and paying weight mile tax. Federally, fuel tax
remains the main source of revenue for providing surface
transportation infrastructure.
In 2016/2017, EROAD participated as the sole heavy transport
services provider in California’s road user charge pilot. In
December 2017, EROAD was also selected to participate as
the sole heavy transport services provider in the first multi-
state truck pilot to explore the feasibility of a Mileage-Based
User Fee (MBUF) along the United States’ eastern seaboard.
The I-95 Corridor Coalition truck pilot, in partnership with
the Delaware Department of Transportation, will include
50 vehicles equipped with EROAD in-vehicle hardware
for a period of six months. The EROAD system will record
accurate mileage data and apply applicable formulas for
a truck-based MBUF as prescribed by the programme’s
Steering Committee, which includes the American Trucking
Associations. EROAD will produce dummy invoices,
demonstrating payments to appropriate agencies within the
I-95 Corridor Coalition. The pilot area, running from Maine to
Florida, is a critical freight corridor in the US economy. More
than 5 billion tons of freight, representing almost 40% of the
country’s GDP, moves annually across the area’s 1,917 miles of
roads.
06
1.0 OVERVIEW
In March 2018, the US federal government stated it was
considering a road funding model based on user fees. The
annual Economic Report of the President has proposed
replacing fuel tax with a user fee, rather than raising the fuel
tax as President Trump had earlier signalled. The report states
that “conventional funding models are now under pressure
from rising fuel efficiency and the use of electric vehicles, and
congestion costs are high and rising in many urban areas.”
Oregon’s Mileage Fee Concept and Road User Fee Pilot
Program, for cars and light commercial vehicles, is now
underway to consider whether user charges can be extended
to light vehicles. Since the introduction of the FAST (Fixing
America’s Surface Transportation) Act in December 2015, a
number of pilot initiatives have been established throughout
the United States. Multiple states and geographic regions
are testing different approaches to compare distance-based
charging with the fuel tax.
“EROAD has so far brought
down our over speed events
from approximately 25,000 a
month to about 1200.
It’s reduced our overall fuel
bill by approximately 20% and
accident incident rates by 20%.”
SIMON BATCHELOR
FLEET & PROCUREMENT MANAGER
MCCONNELL DOWELL
08
1.0 OVERVIEW
In January 2018, we were delighted to welcome Graham
Stuart to the Board as an independent director, and are
pleased he has agreed to chair our Finance, Risk and Audit
Committee. Graham has led some of New Zealand’s most
successful export businesses. His wealth of international
experience and strategic capability, including scaling
organisations for growth, will be an asset as we build on our
position in New Zealand’s transport services ecosystem, and
continue to expand across North America and Australia.
During the year we farewelled two key players in EROAD’s
journey thus far. The Board acknowledges the contribution
of director Sean Keane, who left the Board in May 2017, and
whose guidance during the company’s early phase, including
its initial public offering in 2014, was invaluable. We also
farewelled our founding Chief Technology Officer Bruce
Wilson in July 2017. Bruce was one of the founders of the
company, integral in developing our technology platform,
and the talented team committed to carrying on his legacy of
innovative, world-leading technology.
The year ahead is shaping up as no less challenging and no
less promising. A warm welcome to our new shareholders
and my thanks to our existing shareholders for your
continued support. On behalf of your Board, thank you to
everyone in the dedicated EROAD team that continues
to break new ground in the rapidly developing field of
regulatory telematics, and whose dedication to the needs of
our customers is at the heart of EROAD’s continuing success.
Yours sincerely
Michael Bushby, Chairman
In what was a dynamic and challenging year, EROAD
continued to work to improve its business for the future while
starting to enjoy the fruits of its investment.
The Board was particularly pleased to see EROAD
starting to realise benefits from its investment in the US
market, while continuing strong growth in New Zealand.
The result of this growth saw EROAD’s EBITDA grow to
$15 million, up 113% from FY17 $7.1 million. EROAD’s net profit
after tax of $0.2 million, vs a net loss after tax of $5.3 million
in FY17, reflects a turning point for EROAD of being able to
grow profitably and to fund its growth via self-sustaining
cash funding.
Your Board of Directors was delighted at the strong support
shown by the market, both by institutional investors and
individual investors, during our recent capital raise. The
placement raised $15.5 million against an initial target of
$14 million and the average institution received only 76% of
what they asked for. The Share Purchase Plan raised
$6 million versus an initial target of $4 million and was
90.78% over-subscribed. We look forward to seeing as many
investors as possible at our annual meeting on 2 August 2018.
Hard work in our US business has begun to pay off in the
record sales numbers (191% annual growth) we are reporting
for the full year, in line with guidance. But we know this is just
the beginning and that we have a lot of work still to do. We
have begun planning for our next phase of growth in the US,
that may involve deeper strategic partnerships, and we have
engaged First NZ Capital to help us with this work.
What is clear is that EROAD’s investment in R&D to build
best-in-class products and services is yielding results. This
means we are well placed at a time when the adoption of
electric vehicles is increasing and markets move towards
replacing fuel taxes with road user charges to fund and
maintain roads. We are seeing this at a federal and state level
in the US, and at a federal level in Australia. The opportunity
for EROAD as a global leader in the provision of these
services continues to expand. As we are continuing to invest
our available resources in these and other opportunities,
there will be no dividend this year.
Chairman’s Report
09
1.0 OVERVIEW
EROAD is a key part of New Zealand’s transport ecosystem with
now more than 42% of all heavy vehicle RUC being purchased
via EROAD’s electronic RUC system.
This rapid, voluntary uptake of an e-commerce solution to
replace a cumbersome and less accurate mechanical and
paper-based system is a testament both to the innovation
and adaptability of transport operators, but also the quality of
EROAD’s world-first eRUC solution, and our health and safety
and other compliance services that add value for customers.
Four consecutive record sales quarters this year reflects a
strong Australia and New Zealand business that is profitable
and focused on further innovation for customers and for
communities interested in better-managing roads and highways.
While we continue to foster and nurture our Australia and New
Zealand business, this strong platform is allowing us to invest
to seize the sizeable opportunities available in North America.
Record sales growth in North America this year is pleasing, but
we are ambitious to do even better and to create a profitable
and sustainable business in the US to complement our Australia
and New Zealand business. This is why we appointed First NZ
Capital to assist us with a strategic review of our North American
business.
YEAR IN REVIEW
We came into this financial year with strong momentum, and
succeeded in building on this to grow total contracted units by
61.5% across the network, adding 29,559 units. A total of 77,600
units were contracted in Australia, New Zealand and North
America as at 31 March 2018.
It was a busy year with respect to changes to the business
to prepare for the future. We reorganised our business in
July 2017 following a period of peak R&D and while our
ongoing investment is still at very high levels by NZ standards,
commensurate with leading global technology platforms, this
has allowed us to re-orient investment towards sales and other
activity to leverage our technology investment.
AUSTRALIA AND NEW ZEALAND (ANZ)
Particularly pleasing was that we surpassed our first half’s
additional 7,863 units in Australia and New Zealand with
a further 10,041 units added in the second half of FY 2018.
These 17,904 additional units in ANZ amounted to 42.7%
annual growth in what is still a growing market. While eRUC
is becoming the industry standard, considerable opportunity
remains as health and safety compliance and other services
enjoy growing demand, and an increasing number of light fleets
adopt telematics to improve safety.
Our focus on solving complex problems for our customers
applies to light as well as heavy vehicles. Operators of both are
subject to the same health and safety requirements, and are
discovering that preventative safety is key to improving road
safety and compliance – as well as reducing operating costs.
A feature of our ANZ growth was the rolling out of units into the
fleets of major enterprise customers, many of whom selected
EROAD as much for its health and safety compliance services as
for electronic RUC and fleet management. While Australian sales
continue to be steady, recent federal announcements around
the exploration of road user charges for heavy transport, in the
face of much faster than expected uptake of electric trucks,
may see medium to long term changes in that market that offer
significant potential.
CEO Report
10
1.0 OVERVIEW
NORTH AMERICA
The value and ease of our ELD is slowly but surely becoming
understood in the market, demonstrated by record sales
quarters in the US this year. A 59.6% growth in units in the first
half of the year was consolidated in our second half when the
ELD regulations came into force with 82.4% growth, ending the
year with 191% growth for North America where we now have
17,757 units, getting close to cash flow break even on a monthly
basis.
We were very pleased when we submitted our ELD for review to
an independent website, eldratings.com, to have it rated third in
the market. Our ELD is also the only device in the top five on the
site with a five-star customer rating.
It was heartening to be awarded Project of the Year by the
Project Management Institute of NZ for the development of our
ELD for the North American market. Our ELD was the first to be
independently verified as compliant by PIT Group, and was the
first tethered in-cab ELD solution on the register of the Federal
Motor Carrier Safety Administration (FMCSA), a tribute to our
design and development teams. We’re delighted that our ELD
is one of four in the market that the FMCSA has provided to the
US Department of Transportation’s National Training Centre for
the training of inspectors and investigators.
Following a successful experience participating in California’s
road user charges pilot, EROAD has been selected to participate
in a major multi-state pilot on the Eastern seaboard of the
US. Canada has announced it is considering ELD regulations
modelled on the US regulations, opening up opportunity for
cross-border fleets.
THE YEAR AHEAD
Our successful capital raise, combined with our re-negotiated
credit facility with BNZ, means that EROAD is well placed
to fund continued growth and expansion of its business to
capitalise on these considerable opportunities.
While there is plenty of growth left in the Australia and New
Zealand market, we are also preparing for a time when our US
business will outgrow and outpace our ANZ business.
This includes progressing with a number of strategic options in
the US. We are also continuing to refine and strengthen our US
sales and distribution, to enable the business to take advantage
of the opportunities offered by larger fleets, which make up
15% of the intrastate ELD market. On 16 December 2019 the
grandfathering provisions under the ELD regulations end. Many
fleets have postponed decisions on an ELD solution, relying on
grandfathering rules that allow carriers with an AOBRD installed
prior to the ELD regulations to use this until that time.
We continue to do all of this with our customers at the centre
of everything we do, grateful for their continued support, and
ambitious for how we can improve compliance and business
performance for them through smart, easy-to-use technology.
Yours sincerely
Steven Newman, CEO
11
2.0
GOVERNANCE
2.0 GOVERNANCE
121212
Board of Directors
MICHAEL BUSHBY
Chairman
Michael is a consultant at WSP Australia. Michael has previously held roles as General Manager of
the Ventia Asset and Infrastructure Services division and CEO at the Roads and Traffic Authority in
New South Wales. Michael joined the EROAD Board in May 2012 and was appointed Chair shortly
thereafter.
TONY GIBSON
Independent Director, Chairman of Remuneration, Talent and Nomination Committee,
and member of Finance, Risk and Audit Committee
Tony is the Chief Executive of Ports of Auckland and one of New Zealand’s most experienced
transport professionals, with 30 years’ experience in shipping and logistics. He has worked in
various senior management roles in Africa, Asia and Europe. In 2008 the Minister of Transport
appointed him to the Road User Review Group. Tony joined EROAD’s Board in October 2009.
CANDACE KINSER
Independent Director, Member of Remuneration, Talent and Nomination Committee,
and Finance, Risk and Audit Committee
Candace is an experienced director, CEO and tech entrepreneur. Previously the CEO of the NZ
Technology Industry Association and science software company Biomatters, she is currently an Advisor
for Palantir Technologies. She is also a Director for global technology recruitment company Talent
International, an NZTE Beachhead Advisor and a Director of Livestock Improvement Corporation.
Candace joined the EROAD Board in April 2014.
STEVEN NEWMAN
Executive Director/CEO
Steven brings a wealth of experience to EROAD after a long and successful association with
Navman, which he co-founded. In his roles as COO and CEO, Steven helped establish Navman as
a leading international brand within the Marine Electronics, Fleet Tracking, Precision GPS Modules
and Consumer Car Navigation sectors, with annual sales in excess of NZ$500 million. Steven has
been CEO and a member of the EROAD Board since 2007.
GREGG DAL PONTE
Independent Director, Member of Remuneration, Talent and Nomination Committee
Gregg joined the EROAD Board on 1 July 2016. Gregg has served in multiple executive leadership
positions in the transportation industry throughout his career. From 1996 until recently, he served
as Administrator for the Oregon Department of Transport’s Motor Carrier Transportation Division.
Gregg is Director of Regulatory Compliance for the Oregon Trucking Associations, Inc.
GRAHAM STUART
Independent Director, Chairman of the Finance, Risk and Audit Committee
Graham joined the EROAD Board in January 2018. He was previously CEO of Sealord Group,
CFO then Director of Strategy & Growth at Fonterra and has had extensive business experience
in South East Asia, Europe, the UK and Latin America. He is also an Independent Director of
Tower Insurance.
13
2.0 GOVERNANCE
13
Executive Management Team
STEVEN NEWMAN
CEO / Director
(See previous page)
JARRED CLAYTON
Chief Operating Officer
Jarred oversees EROAD’s global corporate, manufacturing, and research and development
operations. He joined EROAD in 2008, bringing a wealth of international software and leadership
experience. Jarred was instrumental in building EROAD’s initial SaaS platform and has been central
to the company’s growth, holding key positions, leading high-performing teams, and supporting
EROAD’s dedication to customer success.
JASON DALE
Chief Financial Officer
Jason is responsible for EROAD’s global financial functions. He has more than 25 years’ experience
in New Zealand, Australia and North America in finance and governance roles, and is a Fellow
of Chartered Accountants Australia and New Zealand. Jason was previously CFO at Sealord
Group, PGG Wrightson and Auckland International Airport, and Commercial Director at Fonterra
(Ingredients).
NORM ELLIS
President – North America
Norm joined EROAD in 2017 to lead our North American business. He has more than 30 years’
experience in the transportation and telematics sectors, in some of the largest businesses in the
US market. He was previously COO at I.D. Systems, Inc., a producer of wireless asset management
systems for the transport sector, and prior to that, led sales, services and marketing efforts at
Omnitracs for the US and Canada.
2.0 GOVERNANCE
141414
TONY WARWOOD
General Manager
New Zealand
Tony leads EROAD’s New Zealand business. Tony joined EROAD in 2009 having worked in the heavy
transport industry for a number of years. Until October 2015 Tony led the New Zealand sales team as
National Sales Manager.
MARK HEINE
Executive Vice President, General Counsel & Company Secretary
Mark is responsible for all aspects of legal compliance at EROAD including health and safety. Mark
joined EROAD in 2015 after a career in the legal profession, having worked for Bell Gully in Auckland
and Allens in Sydney.
REBECCA MCKASKELL
Vice President
People & Capability
Rebecca is responsible for all aspects of People & Capability, including recruitment, staff
engagement, training and career development. Rebecca joined EROAD in 2012 after extensive HR
and recruitment experience in New Zealand and the UK. Since joining, Rebecca has overseen the
growth in the EROAD team from 34 employees to 201.
SARA GOESSI
Vice President
Communications & Marketing
Sara has responsibility for EROAD’s global marketing and communications. Sara joined EROAD
in 2012, after working in media relations and marketing for New Zealand high-tech companies.
15
2.0 GOVERNANCE
The Board and management of EROAD are committed
to ensuring that the Company adheres to best practice
governance principles and maintains the highest ethical
standards. The Board reviews and assesses the Company’s
governance structures to ensure that they are consistent with
best practice.
As at 31 March 2018, EROAD was in full compliance with the
NZX Corporate Governance Code issued in May 2017 (NZX
Code). In this Corporate Governance section, each principle
of the NZX Code is provided below with explanation on how
EROAD meets each principle.
The Company’s corporate governance policies, practices and
procedures can be found on its website at
http://www.eroadglobal.com/global/investors/.
PRINCIPAL ACTIVITIES
EROAD has created an electronic solution to manage and
pay road user charges (RUC) and road tax regimes, support
regulatory compliance, including fatigue management and
driving hours, as well as provide value-added commercial
services to the heavy and light vehicle transport sectors.
There were no significant changes to the Company’s principal
activities during the financial year.
PRINCIPLE 1: CODE OF ETHICAL BEHAVIOUR
The Company expects its employees and directors to
maintain high ethical standards. The Code of Ethics for the
Company sets out these standards and addresses amongst
other things:
• confidentiality;
• conflicts of interest and corporate opportunities;
• receipt of gifts and personal benefits;
• expected conduct; and
• reporting concerns regarding breaches of the code, other
policies and the law.
The Code of Ethics requires directors and employees to act
in the best interests of the Company, its shareholders and
stakeholders at all times and to not accept from, or offer to,
anyone bribes or improper inducements. Prior to receiving
a gift or personal benefit, the Code of Ethics requires each
employee to submit an Approval to Accept Gift form for
approval by the CEO or a senior executive, depending on the
value of such gift or personal benefit.
Corporate Governance
The Code of Ethics specifically addresses EROAD’s
commitment to providing equal employment opportunities.
EROAD ensures that its selection process for recruitment and
employee development opportunities are free from bias and
are based on merit.
In addition to the Code of Ethics, the Company maintains the
following policies, guides and registers:
• Guidance on Receiving and Giving Gifts and Hospitality
– this document provides guidance to help employees
determine when they should offer or accept a gift or
other inducements.
• Whistle-blower – this policy encourages employees to
come forward if they have concerns regarding serious
wrongdoing, and ensures that employees have access to
a confidential process in which they can report any issues
in relation to serious wrongdoing without fear of reprisal
or victimisation.
• Market disclosure - the Company is committed to the
promotion of investor confidence by ensuring that the
trading of Company shares takes place in an efficient,
competitive and informed market. The Company’s
Market Disclosure Policy establishes the Company’s
disclosure policies for meeting the continuous disclosure
requirements of the NZX Main Board.
• Securities trading - in accordance with the Company’s
Securities Trading Policy, the NZX Listing Rules, and
the Financial Markets Conduct Act 2013, directors and
employees of the Company are subject to limitations on
their ability to buy or sell Company shares. The Securities
Trading Policy identifies circumstances where directors,
officers, employees and advisers are permitted to
trade, or prohibited from trading, Company shares. The
Company is committed to ensuring its directors, officers,
employees and advisers do not trade Company shares
while in possession of inside information.
• Interests register – In accordance with the Companies
Act 1993 and the Financial Markets Conduct Act 2013,
the Company maintains an Interests Register in which all
relevant transactions and matters involving the directors
are recorded.
The Company’s Code of Ethics, Market Disclosure, Securities
Trading and Whistle Blower policies can be found on the
Company’s website.
16
2.0 GOVERNANCE
PRINCIPLE 2: BOARD COMPOSITION AND
PERFORMANCE
Responsibilities of the Board and Executive Management
The business and affairs of the Company are managed under
the direction of the Board of Directors. At a general level, the
Board is elected by shareholders to:
• form the Company’s objectives;
• advance major strategies for achieving the Company’s
objectives;
• manage risks;
• determine the overall policy framework within which the
business of the Company is conducted; and
• monitor management’s performance with respect to
these matters.
The Board Charter sets internal Board procedure and
defines the Board’s specific role and responsibilities. The
Board delegates management of the day-to-day operations
and responsibilities of the Company to the executive
management team under the leadership of the Chief
Executive Officer to deliver the strategic direction and goals
determined by the Board.
Board Composition
At present, there are six directors on the Board, five of which
are non-executive directors. Steven Newman, Chief Executive
Officer, is the only executive director on the Board. The
Chairman of the Board is Michael Bushby.
A brief biography of each Board member, including each
director’s experience, length of service, expertise, role and the
term of office held at the date of this Annual Report, is set
out in the “Board of Directors” section of this Annual Report.
Independence of Directors
The factors that the Company takes into account when
assessing the independence of its directors are set out in the
Board Charter. A copy of the Board Charter can be found on
the Company’s website. After consideration of these factors,
the Company is of the view that:
1. No non-executive director is a substantial shareholder
of the Company or an officer of, or otherwise associated
directly with, a substantial shareholder of the Company.
2. Steven Newman is a director who, within the last three
years, has been employed in an executive capacity by
the Company and is a substantial shareholder.
3. No director has been a principal of a material
professional adviser to the Company, or an employee
materially associated with such service provider, within
the last three years.
4. No director is a material supplier or customer of the
Company, or an officer of, or otherwise associated
directly or indirectly with, a material supplier or customer.
5. No director has a material contractual relationship with
the Company other than as a director of the Company
except as follows: Steven Newman is an employee of the
Company and substantial shareholder.
6. No director has served on the Board for a period which
could, or could reasonably be perceived to, materially
interfere with the director’s ability to act in the best
interests of the Company.
7. All directors are free from any close family ties with any
person who falls within the above categories.
8. All directors are free from any interest or any business
or other relationship which could, or could reasonably
be perceived to, materially interfere with the director’s
ability to act in the best interests of the Company.
Based on these assessments, the Company considers that,
as at 31 March 2018, Michael Bushby, Tony Gibson, Gregg Dal
Ponte, Candace Kinser and Graham Stuart were independent
directors.
Nomination, appointment, retirement and re-election
In accordance with the Company’s Constitution and the NZX
Listing Rules, one third of the directors are required to retire
by rotation and may offer themselves for re-election by
shareholders each year. Procedures for the appointment and
removal of directors are also governed by the Constitution.
The Remuneration, Talent and Nomination Committee
identifies and nominates candidates to fill director vacancies
for Board approval.
In addition to the Constitution, the Company has an
Appointment and Selection of New Directors Policy which
specifies the criteria which the Board will consider during the
process of selecting and appointing new directors. A copy of
the policy can be found on the Company’s website.
As at 31 March 2018, all new directors are required to
enter into a written agreement with the Company, which
establishes the terms of their appointment.
17
2.0 GOVERNANCE
Diversity and Inclusion
The Company and its Board are committed to a workplace
culture that promotes and values diversity and inclusion.
The Company pursues a broader sense of diversity by
recognising, valuing and considering its employees’ different
backgrounds, knowledge, skills, needs and experiences.
The Board recognises that diversity and inclusion lead
to a better experience at work for EROAD’s employees,
makes teams stronger, leads to greater creativity and
performance, contributes to a more meaningful relationship
with customers and stakeholders, and ultimately increases
value to shareholders. When there is a variety of thinking
styles, backgrounds, experiences, perspectives and abilities,
employees are more able to understand customers’ needs
and to respond effectively to them.
The Company encourages diversity and inclusion by:
• having a robust recruitment process in place to attract
capable motivated, engaged, creative and diverse
candidates; and
• fostering a culture and environment of inclusion
through various initiatives, policies and development
opportunities.
The Board has adopted a Diversity and Inclusion Policy in
accordance with the NZX Code. The policy is available on the
Company’s website.
To ensure continued focus and prioritisation, the policy
requires the Board to set, review and report on measurable
objectives for achieving and promoting diversity across
EROAD’s business. While the Board considers that the
Company has addressed the requirements of the NZX Code,
as at 31 March 2018, the Board has not yet set measurable
objectives. However, a diversity and inclusion strategy has
been developed and includes the following key initiatives that
are currently underway:
• establishment of a Diversity and Inclusion Committee,
to drive the Company’s strategy and implementation
of initiatives. The committee is responsible for
recommending measurable objectives and will
periodically review progress against approved
measurable objectives to enable reporting on such
progress by the Board;
• design and delivery of ongoing diversity and inclusion
training for employees, including leadership training
programmes. As at 31 March 2018, the Company has
delivered training to senior employees on unconscious
bias;
• articulation of the Company’s initiatives that support
diversity and inclusion in internal and external
communication;
• fostering a transparent and open culture that enables
and encourages employees to provide candid feedback,
including anonymously through surveys;
• assessment and removal of roadblocks to greater
diversity, including gender and at senior leadership levels.
The table below shows the respective number of men and
women on the Board, in executive management positions (as
“Officers”) and across the whole organisation (including both
full time and part time employees) as at 31 March 2017 and 31
March 2018:
20172018
WomenMenWomenMen
Board1515
Officers2626
Other employees8514972121
“Officers” are the Chief Executive Officer and senior
executives reporting directly to the Chief Executive Officer,
who are concerned or take part in the management of the
Company.
Board Performance
The Board has a policy in place relating to the performance
evaluation of the Board, the Board’s committees, individual
directors and senior executives. Once each calendar year,
performance evaluations take place in relation to the Board,
the Board’s committees, individual directors and senior
executives in accordance with the Company’s policies.
The Board Charter requires the Board to undertake an annual
performance evaluation of itself that:
• compares the performance of the Board with the
requirements of its Charter;
• reviews the performance of the Board’s committees and
individual Directors; and
• makes improvements to the Board Charter where
considered appropriate.
PRINCIPLE 3: BOARD COMMITTEES
Specific responsibilities are delegated to the Finance, Risk
and Audit Committee and the Remuneration, Talent and
Nomination Committee. These Board committees support the
Board by working with management and advisors on relevant
issues at a suitably detailed level and report to the Board.
These committees have specific charters setting out objectives,
procedures, composition and responsibilities. Copies of these
charters are available on the Company’s website.
18
2.0 GOVERNANCE
Finance, Risk and Audit Committee
The primary function of the Finance, Risk and Audit
Committee is to assist the Board in fulfilling its oversight
responsibilities relating to the Company’s risk management
and internal control framework, the integrity of its financial
reporting and the Company’s auditing processes and
activities. Five meetings of the Finance, Risk and Audit
Committee were held during the year ended 31 March 2018.
Under the Finance, Risk and Audit Committee Charter, the
Committee must be comprised of non-executive directors,
all of whom must be independent. Further, the Chair of the
Committee must be an independent director and cannot
be the Chairman of the Board. Employees only attend the
Finance, Risk and Audit Committee meetings at the invitation
of the Committee. In the year ended 31 March 2018, the
Chief Executive and the Chief Financial Officer were invited
to attend each meeting of the Finance, Risk and Audit
Committee.
The current members of the Finance, Risk and Audit
Committee are Graham Stuart (Chairman), Tony Gibson
and Candace Kinser and their qualifications are specified
in “The Board” section of this Annual Report. Prior to Mr.
Stuart’s appointment on 1 January 2018, the members of
the Finance, Risk and Audit Committee between 5 May 2017
and 1 January 2018 were Tony Gibson (Chairman), Candace
Kinser and Michael Bushby. Prior to 5 May 2017 the members
of the Finance, Risk and Audit Committee were Sean Keane
(Chairman), Tony Gibson and Candace Kinser. All members
of the Finance, Risk and Audit Committee are independent
non-executive directors.
Remuneration, Talent and Nomination Committee
EROAD has established a Remuneration, Talent and
Nomination Committee which is comprised of independent
directors. This committee met three times in the year ended
31 March 2018.
The Remuneration, Talent and Nomination Committee’s role
is to oversee and regulate remuneration and organisation
matters of the Company and recommend candidates to
be nominated as a director or candidate for a committee.
Responsibilities encompass remuneration and benefits
policies; performance objectives and remuneration of
the Company’s senior executives; succession planning
and associated management development for the chief
executive and senior executives. The Remuneration, Talent
and Nomination Committee is also responsible for assisting
the Board with establishing, publishing, implementing and
monitoring effective health and safety policies, processes and
practices, under a separate Safety and Wellbeing Charter.
When recommending candidates to act as director, the
committee takes into account the factors in the Appointment
and Selection of New Directors policy, which includes the
diversity of the background, experience and qualifications of
the candidate.
The current members of the Remuneration, Talent and
Nomination Committee are Anthony Gibson (Chairman),
Candace Kinser and Gregg Dal Ponte.
In order to comply with the NZX Code, on 29 November 2017
Steven Newman resigned as a member of the Remuneration,
Talent and Nomination Committee. Following his resignation,
Steven Newman attended two Remuneration, Talent and
Nomination Committee meetings at the invitation of the
Committee. All current members of the Remuneration, Talent
and Nomination Committee are independent directors.
Board
Finance, Risk and
Audit Committee
Remuneration, Talent and
Nomination Committee
Eligible to attendAttendedEligible to attendAttendedEligible to attendAttended
Michael Bushby8833--
Sean Keane*1111--
Anthony Gibson885533
Candace Kinser875433
Steven Newman88-513
Gregg Dal Ponte88-133
Graham Stuart**2211--
* Sean Keane resigned from the EROAD Board in May 2017.
** Graham Stuart joined the EROAD Board in January 2018.
19
2.0 GOVERNANCE
Board Processes
The Board held eight meetings during the year ended 31
March 2018. The table above shows attendance at the Board
and committee meetings.
If circumstances arise where a director needs to obtain
independent advice, that director is, as a matter of practice,
at liberty to seek such advice at the expense of the Company.
Other committees
EROAD complies with Recommendation 3.5 as the Board
has considered whether it is appropriate to establish any
additional standing board committees and concluded that
no further standing committees are required at this stage.
Noting the importance of health and safety to EROAD’s
business, the Remuneration, Talent and Nomination
Committee is responsible for health and safety and performs
its functions in this regard under the Safety and Wellbeing
Charter. In addition, each month, members of the Board are
provided with a Safety and Wellbeing report summarising
EROAD’s risk profile and management actions, the current
safety and wellbeing focus, lead and lag indicators and
updates from the Safety and Wellbeing staff committee.
The Safety and Wellbeing Charter is available on the
Company’s website.
Takeover protocol
The Board established a formal written protocol that sets out
procedure to be followed in the event that a takeover offer is
received by EROAD.
PRINCIPLE 4 – REPORTING & DISCLOSURE
Making timely and balanced disclosure
The Company is committed to promoting shareholder confidence
through open, timely and accurate market communication. The
Company has in place procedures designed to ensure compliance
with its disclosure obligations under the NZX Listing Rules. The
Company’s Market Disclosure Policy sets out the responsibilities
of the Board and management in disclosure and communication
and procedures for managing this obligation. A copy of this policy
is available at http://www.eroadglobal.com/global/investors.
Non-financial reporting
EROAD conducts a comprehensive risk assessment by reviewing
risk information from all its business units on a periodic basis.
The results are incorporated into future action plans to mitigate
the identified risks. This includes carefully considering and taking
into account environmental, economic, social sustainability and
other risks that EROAD may face. EROAD plays a critical role in
improving sustainability in the transportation industry, as follows:
• Environmental Sustainability
a. EROAD’s fleet management solutions help improve
fuel economy and reduce engine wear and tear. By
monitoring idle events and tracking driver behaviour,
EROAD not only provides its customers with
improvements to their bottom line but also helps lessen
their businesses’ impact on the environment; and
b. EROAD remanufactures products and recycles materials
to the extent possible and with minimal waste.
• Economic Sustainability
c. EROAD invests in research and development to deliver
products that allow customers to enjoy efficiencies
across their business. For example, EROAD’s paperless
electronic RUC systems for monitoring and paying road
charges and taxes helps customers reduce the amount
of time and money spent on RUC administration and
reinvest the time to grow their business
d. EROAD’s subject matter experts work with governments
to assist them in creating regulatory frameworks to
meet challenges in funding growing infrastructure
requirements;
e. Data used to help optimise transportation solutions,
various road network and resilience planning,
improvement initiatives and ensuring infrastructure
funding is being used efficiently; and
f. EROAD chooses suppliers who have sound business
practices, comply with the law and conduct activities in a
manner that respects human rights.
• Social Sustainability
g. EROAD’s safety and wellbeing professionals deliver
health and safety programmes and provide expertise and
support to EROAD’s operations in New Zealand, North
America and Australia. EROAD’s safety risk assessment
process brings focus to safety, further driving a reduction
in injuries;
h. EROAD’s product suite benefits the community by
accurately recording and collecting road user charges,
reduces poor driving incidences and results in safer
vehicles on the road;
i. EROAD provides its employees with opportunities to
volunteer in the community and make a difference to
those in need; and
j. EROAD has a clear Diversity and Inclusion policy and
strategy, which includes maintaining a supportive culture
and providing learning and leadership opportunities.
20
2.0 GOVERNANCE
PRINCIPLE 5 – REMUNERATION
Directors’ Remuneration
The Remuneration, Talent and Nomination Committee is
responsible for establishing and monitoring remuneration
policies and guidelines for directors which enable the
Company to attract, motivate and retain the high calibre of
directors who will contribute to the successful governing of
the Company and create value for shareholders.
When determining the fees for directors and Chairs of the
Board and its committees, the Board considers the median
director fee levels for comparable listed companies in New
Zealand. As a result, effective from 1 January 2018, the Board
resolved to increase the directors’ remuneration and to start
paying remuneration to the Chair of the Finance, Risk and
Audit Committee and the Chair of the Remuneration, Talent
and Nomination Committee (given the extra workload for
these roles) as follows:
• NZ$110,000 for the Chair of the Board,
• NZ$55,000 for non-executive directors,
• NZ$10,000 for the Chair of the Finance, Risk and Audit
Committee, and
• NZ$8,000 for the Chair of the Remuneration, Nomination
and Talent Committee.
Non-executive directors received the following directors’ fees
from the Company in the year ended 31 March 2018:
The BoardNZ$
Michael Bushby85,094
Candace Kinser50,546
Graham Stuart13,750
Sean Keane4,088
Anthony Gibson50,546
Gregg Dal Ponte50,546
Total254,570
Chair of the Board’s Committees NZ$
Graham Stuart2,500
Anthony Gibson2,000
Total4,500
Directors do not take a portion of their remuneration under a
share plan but directors may hold shares in the Company, details
of which are set out in the “Directors’ Shareholdings” section
of this Annual Report. It is the Company’s policy to encourage
directors to acquire shares on-market.
Non-executive directors are entitled to be reimbursed for
reasonable costs directly associated with attending the Board
meetings.
Steven Newman, in his capacity as an executive director, does not
receive remuneration as a director of the Company.
No director of any EROAD subsidiary receives or retains any
remuneration or other benefits in their capacity as a director of
that subsidiary.
Executive Remuneration
The Remuneration, Talent and Nomination Committee is
responsible for reviewing the remuneration of the Company’s
senior employees in consultation with EROAD’s Chief Executive
Officer. The Board is responsible for approving remuneration of
the senior employees.
EROAD’s remuneration policy for members of the senior
executive team, including the Chief Executive Officer, provides
the opportunity for them to receive, where performance merits, a
total remuneration package made up of three components:
• Fixed Remuneration
Fixed remuneration consists of base salary and benefits. EROAD’s
policy is to set fixed remuneration in line with external market
trends, the intrinsic value of a job and internal relativities. Fixed
remuneration is reviewed, but not necessarily increased, annually.
Any remuneration increases for the senior executive team must
be approved by the Board. In conducting reviews, EROAD takes
into account individual performance of each senior executive.
• Short-term Incentives
Short-term incentives (STIs) are at-risk payments designed to
motivate and reward for performance, typically in that financial
year. The target value of an STI payment is set annually, usually as
a percentage of the executive’s base salary.
For the year ended 31 March 2018, a proportion (50%) of the STI
is related to achievement of Company-wide performance metrics
which aim to align executives to a shared set of operational
and strategic objectives based on business priorities for the
next 12 months. The balance of the STI is related to individual
performance measures. In the event that underlying Company
performance against budget is determined by the Board to be
less than 60% or where the individual fails to achieve performance
contribution of 70% or higher, no STI is payable.
21
2.0 GOVERNANCE
CEO Remuneration FY17 and FY18
Fixed RemunerationPerformance Based Remuneration
Chief ExecutiveSalarySTILT ISubtotalTotal
Steven Newman FY17**$551,499$89,525-$89,525$640,974
Steven Newman FY18***$555,859---$555,859
*The FY17 STI payment was based on performance in FY16 and was paid in FY17. Mr. Newman did not participate in the FY16 LTI.
**The FY18 STI payment was based on performance in FY17. However, as the Company did not meet its targets for FY17 no STI payment or
granting of shares under the LTI occurred. Mr. Newman has no outstanding LTI shares.
• Long-term Incentives
Eligible senior employees are invited to purchase EROAD
shares under the EROAD long term incentive plan (LTI).
Under the terms of the scheme the purchase of the shares
is funded by a loan granted to eligible senior employees
by EROAD. At the end of the vesting period, the senior
employee will be paid a net bonus in relation to the shares
that vest to the senior employee, equal to the amount of their
loan outstanding to the Company, enabling the loan to be
repaid.
Shares issued under the scheme are held in trust for the
senior employees during a 3 year restrictive period. If the
employee ceases to be an employee during the restrictive
period the Trustee will repurchase the employee’s shares at
the original issue price.
The eligible senior employees must meet certain performance
conditions during each year of the restrictive period, as
determined by the remuneration committee and approved
by the Board. 50% of the scheme shares initially granted will
be forfeited for each year the participant fails to achieve their
performance conditions. Additionally, the employee’s shares
will also be forfeited if the enterprise value of the Company
has not doubled by the end of the restrictive period.
In the year ended 31 March 2018, 78,168 shares granted
through the LTI scheme to senior employees in FY15 were
forfeited due to the failure to double the enterprise value of
the Company between FY15 and FY18.
Employee’s shares that are forfeited due to failure to
meet market and non-market performance conditions are
repurchased by the Trustee at the original grant date price
Chief Executive Officer Remuneration
The Chief Executive remuneration is made of three
components, fixed remuneration, STI and LTI, as follows:
22
2.0 GOVERNANCE
Breakdown of pay for performance for FY18
DescriptionPerformance measures
Performance hurdles and shares
vested
STI*Set at 30% of fixed pay.
Based on a combination of
financial and non-financial
performance measures.
75% weighting company performance. Minimum
threshold for vesting 60%.
The Company weighting considers
the Company’s performance against
the metrics of EBITDA, revenue,
units on Depot and customer
retention.
25% weighting individual performance. Minimum
threshold for vesting 60%.
Individual performance considers
the Chief Executive’s performance
in establishing and maintaining
leadership teams, the overall
performance of the EROAD group
and the delivery of key projects.
LTI**Conditional awards of
shares under the long term
incentive scheme.
Annual individual’s performance at the end of each of
the three years must be equal to or greater than the
minimum performance threshold of 70% (expected
performance). 50% of the shares initially granted will be
forfeited for each year below the performance hurdle.
For vesting to occur, enterprise value needs to have
doubled in value in three years.
51,172 shares forfeited due to failure
to double the enterprise value of the
Company between FY15 and FY18
*Based on a FY17 remuneration policy.
**Based on a share based incentive scheme that commenced on 1 April 2015.
23
2.0 GOVERNANCE
Employee remuneration
The Company and its subsidiaries have employees in two
countries where remuneration market levels differ. The
overseas remuneration amounts are converted into New
Zealand dollars. Of the employees noted in the table below
30% are employed by EROAD in the United States of America.
During the year, a number of employees, not being directors of
the Company and its subsidiaries, received remuneration and
other benefits that exceeded NZ$100,000 in value as follows:
NZ$Number of Employees
100,000 – 110,00015
110,001 – 120,00010
120,001 – 130,0009
130,001 – 140,00013
140,001 – 150,0005
150,001 – 160,0003
160,001 – 170,0006
170,001 – 180,0004
180,001 – 190,0003
190,001 – 200,0001
200,001 – 210,0003
210,001 – 220,0001
220,001 – 230,0002
230,001 – 240,0001
250,001 – 260,0002
260,001 – 270,0001
350,001 – 360,0002
420,001 – 430,0001
430,001 – 440,0001
440,001 – 450,0001
TOTAL84
PRINCIPLE 6 - RISK MANAGEMENT
Risk Management Framework
The Company has risk management policies for the oversight
and management of financial and non-financial material
business risks, as well as related internal systems that are
designed to:
• optimise the return to, and protect the interests of,
stakeholders;
• safeguard the Company’s assets and maintain its
reputation;
• improve the Company’s operating performance; and
• support the Company’s strategic objectives.
EROAD’s risk management framework is in place to identify,
oversee, manage and control risk. The risk management
framework requires senior executives to review and update
the Risk Register on a periodic basis. The register identifies
all known risks, including those that are key to EROAD’s
strategy and business priorities. The Risk Register records
risks by impact, probability, and trending, and records the
controls for those risks. The Risk Register is shared with the
Finance, Risk and Audit Committee on a quarterly basis
and the Committee reports the key risks to the Board. Key
risks are EROAD’s greatest strategic and operational risks,
specified by the senior executive team and plotted in a matrix
of impact and probability, after taking into consideration the
controls on those risks. For high risk projects, risk mitigation
must be addressed from inception and be supervised by
the appropriate senior executive team members. The senior
executive team reviews the Risk Register in setting EROAD’s
strategy and budgets.
A summary of the Company’s Risk Management Policy is
available on the Company’s website. The Board ultimately
has responsibility for internal compliance and control. The
Finance, Risk and Audit Committee undertakes an annual
review of the risk management framework. In addition,
a review is undertaken, with the external auditors and
management, of the policies and procedures in relation to
material business risks.
The Finance, Risk and Audit Committee, in conjunction with
management, reports to the Board on the effectiveness of
the Company’s management of its material business risks
and whether the risk management framework is operating
effectively in all material respects.
Health and Safety Risk Management
EROAD has a Safety and Wellbeing Policy for the oversight
and management of health and safety risks. The Safety
and Wellbeing Policy outlines EROAD’s core safety and
wellbeing principles, EROAD’s commitment to ensure that
safety and wellbeing is a top priority for EROAD and is
24
2.0 GOVERNANCE
embedded into every aspect of EROAD’s business. The policy
is reviewed every two years to ensure it remains consistent
with the EROAD safety and wellbeing goals and legislative
requirements. The Remuneration, Talent and Nomination
Committee supports the Board in establishing, publishing,
implementing and monitoring effective health and safety
policies, processes and practices under EROAD’s Safety and
Wellbeing Charter. The Board ultimately has responsibility for
internal compliance and control.
EROAD’s Safety and Wellbeing Management System
Framework outlines safety and wellbeing activities at EROAD
and articulates safety and wellbeing responsibilities for the
Board, the senior executive team and the people performing
work for EROAD. The framework requires Objectives and
Key Results to be established and incorporated into business
planning processes to enable the Safety and Wellbeing
Policy’s intent and related strategies and procedures to be
achieved. The framework also requires EROAD to create a
safety and wellbeing strategy every two years that aligns to
EROAD’s values, the overall business strategy and the safety
and wellbeing vision.
Each month, members of the Board are provided with a
safety and wellbeing report summarising EROAD’s risk profile
and management actions, the current safety and wellbeing
focus, Objectives and Key Results, lead and lag indicators and
updates from the Safety and Wellbeing staff committee. In
the year ended 31 March 2018, there have been no notifiable
events to report to WorkSafe NZ.
PRINCIPLE 7 – AUDITORS
EROAD does not have an internal audit function. However,
the senior executive team reports periodically to the Finance,
Risk & Audit Committee on improvements and changes to
internal controls. Through the steps outlined under the Risk
Management section, the Board ensures EROAD is reviewing,
evaluating and continually improving the effectiveness of its
risk management.
The Company has an External Auditor Independence Policy
which is available on the Company’s website. Pursuant to this
policy the Company maintains external auditor independence
consistent with regulatory and stock exchange requirements
and current best practice in New Zealand for companies of
similar nature and size. The Company’s external auditors
attend the annual shareholders meeting to answer questions
from shareholders in relation to audits.
PRINCIPLE 8 – SHAREHOLDER RIGHTS AND
INTERESTS
The Company seeks to ensure that its shareholders
understand its activities by communicating effectively with
them and giving them ready access to clear and balanced
information about the Company. To assist with this, the
Company’s website is maintained with relevant information,
including copies of presentations and reports. The Company’s
key corporate governance policies are also included on the
website.
The Company also operates in accordance with its
Shareholder Communication Policy. The aim of the
Company’s communication arrangements is to provide all
shareholders with information about the Company and to
enable shareholders to actively engage with the Company
and exercise their rights as shareholders in an informed
manner. The Company’s Shareholder Communication Policy
facilitates communication with shareholders through written
and electronic communication, and by facilitating shareholder
access to directors, executive management and the
Company’s auditors. The Shareholder Communication Policy
is available on the Company’s website.
Shareholders are able to easily communicate with the
Company, including by way of email to the address investor@
eroad.com. The Company’s major communications with
shareholders during the financial year include its annual and
half-year reports and the annual meeting of shareholders.
The annual and half-year reports are available in electronic
and hard-copy formats. Shareholders have the option to
receive communications from the Company electronically.
Shareholders have the right to vote on major decisions as
required by the NZX Listing Rules. Each person who invests
money into EROAD has one vote per share which they own
equally with other shareholders.
The Notice of Meeting is sent to shareholders and published
on the Company’s website at least 28 days prior to the annual
shareholders’ meeting each year.
25
3.0
FINANCIAL
PERFORMANCE
26
3.0 FINANCIAL PERFORMANCE
PERFORMANCE INDICATORS
Financial Review
201320142015201620172018
Retention Rate99.5%99.3%99.2%97.1 %99.0%98.0%
Retention Rate is a non-GAAP measure that represents the number of Units installed at the beginning of the period and retained on Depot at the
end of the period as a percentage of the number of Units on Depot at the beginning of that period. A unit ceases to be on Depot if the contract is
terminated and the Unit is returned to EROAD.
-
10,000
20,000
30,000
50,000
60,000
70,000
80,000
40,000
20132017
48,041
14,332
2014
6,612
2016
36,953
11,091
11,088
2018
77,600
29,559
7,720
2015
11,530
25,862
TOTAL CONTRACTED UNITS
-
10.0
20.0
30.0
40.0
50.0
60.0
6.2
10.0
17.6
26.2
2014201320152016
32.8
51.5
20172018
REVENUE ($Millions)
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
201420132015201620172018
11.5
19.5
32.6
45.3
2.7
8.2
51.7
8.7
84.1
FUTURE CONTRACTED INCOME ($Millions)
North America
Australia & New Zealand
Future Contracted Income is a non-GAAP
measure which represents future hardware
and SaaS cash inflows relating to income
under non-cancellable long-term rental
agreements. Note that this definition has
changed from the previous period in order
to include the future cash flows from
finance leases, where the revenue has been
recognised in advance of cash flows.
Refer to Note 6 of the Financial Statements.
Total Contracted Units is a measure that
represents Units on Depot and Units that have
been dispatched pending installation. Total
Contracted Units is a non-GAAP measure
that EROAD management uses to track sales
growth.
27
3.0 FINANCIAL PERFORMANCE
FIVE YEAR SUMMARY
($'000)20142015201620172018
Revenue9,964 17,550 26,16532,764 51,524
EBITDA before
non-operating costs
1
4,029 5,038 5,687 7,056 15,010
Depreciation(2,320)(3,560)(5,813)(8,086) (9,946)
Amortisation(648)(1,140)(1,676)(3,992) (5,594)
EBIT before
non-operating costs
1,062 338 (1,802) (5,021) (530)
Net financing costs(42)758 491 (236) (1,014)
Net Profit / (loss) before
tax and listing costs
1,020 1,096 (1,311) (5,257) (1,544)
1
EBITDA before non-operating costs is earnings before interest income and expense,
taxation, depreciation, amortisation and non-operating costs. EBITDA before non-
operating costs is a non-GAAP measure presented to enable readers to consider
EROAD’s profitability before non-operating costs. Non-operating costs in the year-
ended 31 March 2015 comprised costs of listing on the NZX Main Board.
2018 FINANCIAL PERFORMANCE:
Revenue
Operating revenues of $51.5 million for the year ended 31 March
2018 were 57% higher than the prior year. Total Contracted
Units increased by 61.5% to 77,600 units during the year.
Our Australian and New Zealand segment contributed
revenues of $40.6 million, an increase of 46% on the previous
year. Total Contracted Units grew by 43% during the year to
59,843 at 31 March 2018. Volume was driven by continued
penetration into larger enterprise accounts and lighter vehicles
with our health and safety offering. The growth in these areas
has led to some downwards pressure in recurring revenue per
unit, however this has been offset in the current period by a
significant increase in the number of longer term contracts
that are accounted for as finance leases. During the year
ended 31 March 2018, $5.8 million of revenue was recognised
for finance leases, an increase of $5.0 million on the previous
financial year.
The North American segment contributed revenues of
$10 million, an increase of 145% on the previous financial year.
Total Contracted Units grew by 191% during the year to 17,757
at 31 March 2018. The ELD mandate significantly changed the
landscape for EROAD in North America, delivering record
sales results. As motor carriers prepared their fleets for the
December 2017 compliance deadline, a significant proportion
of the unit growth was realised in the second half of the year.
External Corporate & Development revenues of
$0.9 million relate primarily to Callaghan R&D Grant income.
Operating Expenses
Operating expenses of $36.5 million for the year ended
31 March 2018 were 42% higher than the previous financial
year. Certain operating expenses such as SaaS platform
costs increased as a result of the additional volume of
units. The cost of hardware and accessories expensed were
significantly higher compared to the previous year, primarily
due to a significant number of finance leases recognised in
the Australian and New Zealand segment as well as a higher
number of direct sales and accessory sales in the North
American market.
In the first half of the year expenses grew at a higher rate than
revenue primarily due to investment in customer acquisition
costs in North America. In addition, the Group incurred some
restructuring costs, primarily in our Corporate segment, as the
size of the team was reduced from the peak levels required
to deliver ELD. As expected, margin improved in the second
half of the year as the revenue benefits from the investment
in customer acquisition materialised and the cost savings as a
result of the restructure were realised.
Depreciation and Amortisation
Depreciation costs of $9.9 million has increased by 23% on
the previous financial year. Depreciation has not grown at the
same rate as unit growth partly due to a higher number of
finance leases and direct sales in the current period resulting
in the cost of the unit being expensed upfront rather than
depreciated and additionally a higher proportion of unit
growth coming in the second half of the year.
Amortisation of $5.6 million has increased by 40% on the
previous financial year. During the previous year a large portion
of the development spend relating to ELD remained in Work
in Progress for most of the year and was not amortised. The
current year includes a full of amortisation on these assets
following the commercial launch of our ELD in the last quarter
of the previous year.
28
3.0 FINANCIAL PERFORMANCE
Finance Income and Finance Expenses
Net finance costs of $1 million are up significantly on the
previous year following the Group securing new debt facilities
to assist with the funding of our long-term rental agreements.
20182017
Earnings Per Share - Ordinary (cents) 0.34 (8.82)
Earnings Per Share - Diluted (cents) 0.34 (8.81)
Net Tangible Assets per Security 0.55 0.28
2017 FINANCIAL POSITION AND CASH FLOW
Property, Plant & Equipment
Additions to Property, Plant and Equipment amounted to
$14.5 million for the year ended 31 March 2018. $14.1 million
of these additions relate to additions to leased assets (units
rented to customers under operating leases) and leased
assets under construction.
Development Assets
During the year ended 31 March 2018 a further $6.8 million
was invested into Development and Software assets, down
from $9.4 million in the prior year. This decrease is due to
reductions in headcount after reaching peak development
levels prior to the launch of our ELD solution, in addition to
an increased proportion of expensed costs for research and
maintenance activities. In addition to working on creating
a more efficient and scalable platform, investment has
continued to be focused on improving our ELD solution,
developing our driver inspection products for both markets,
and continuing to expand our health and safety offering.
Investment in Software Assets includes the first-stage
implementation of a new financial system.
Cash increased by $20.9 million during the period.
Operating cash flows of $2.0 million were suppressed partly
due higher levels of expensed research and maintenance
costs as well as adverse working capital movements and
increases in finance lease receivables.
Cash flows and funding
Cash outflows from investing activities were $21.4 million
for the year ended 31 March 2018, an increase of 7% on the
previous period driven largely by a 38% increase in payments
for Property, Plant and Equipment due to the increase in
sales volume and partly offset by 27% lower payments for
Intangible Assets as a result of lower levels of capitalisation of
Development Assets.
Cash flows from financing activities were $40.3 million up
from $6.3 million in the comparative period. The Group
has received $19.5 million of debt financing during the
year. To support funding requirements in connection with
the Group’s growth and to manage the related working
capital requirements, the Group entered a new Multi-Option
Credit Facility Agreement with the Bank of New Zealand.
The facilities include a Committed Cash Advance Facility
to finance the up-front costs in connection with securing
Future Contracted Income in the form of long-term rental
agreements. In addition the Group received $21.5 million
of equity funding during the period following our successful
equity placement in December 2017 and share purchase plan
in March 2018. The Group paid costs of raising capital of
$0.7 million.
DIVIDEND
Consistent with its Dividend Policy, EROAD does not intend
to pay a final dividend for the period ended 31 March 2018.
2929
X.0 HEADER
Financial
Statements
- Directors’ Responsibility Statement
- Consolidated Statement of Comprehensive Income
- Consolidated Statement of Financial Position
- Consolidated Statement of Changes in Equity
- Consolidated Statement of Cash Flows
- Notes to the Consolidated Financial Statements
- Independent Auditor’s Report
30
3.0 FINANCIAL PERFORMANCE
In the opinion of the Directors of EROAD Limited, the consolidated financial statements and
notes, on pages 31 to 65, comply with New Zealand Generally Accepted Accounting Practice
and have been prepared using the appropriate accounting policies, which have been
consistently applied and supported by reasonable judgements and estimates.
The Directors believe that proper accounting records have been kept which enable, with
reasonable accuracy, the determination of the financial position of EROAD Limited and its
subsidiaries (the “Group”) and facilitate compliance of the financial statements with the
Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013.
The Directors consider that they have taken adequate steps to safeguard the assets of the
Group, and to prevent and detect fraud and other irregularities. Internal control procedures
are also considered to be sufficient to provide reasonable assurance as to the integrity and
reliability of the financial statements.
The Directors are pleased to present the financial statements of the Group for the period
ended 31 March 2018.
For and on behalf of the Board of Directors:
Michael Bushby Graham Stuart
18 May 2018 18 May 2018
Directors’
Responsibility Statement
31
3.0 FINANCIAL PERFORMANCE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2018
GROUP
31 March 201831 March 2017
Notes$$
Revenue251,523,75732,763,801
Expenses3(36,513,784)(25,707,729)
Earnings before interest, taxation, depreciation and amortisation 15,009,9737,056,072
Depreciation13(9,945,960)(8,085,688)
Amortisation14(5,594,391)(3,991,636)
Earnings before interest and taxation(530,378)(5,021,252)
Finance income7245,616100,283
Finance expense7(1,259,442)(336,358)
Net financing costs(1,013,826)(236,075)
Profit/(loss) before tax (1,544,204)(5,257,327)
Income tax (expense)/benefit81,753,820(16,829)
Profit/(loss) from continuing operations209,616(5,274,156)
Profit/(loss) after tax for the year attributable to the shareholders209,616(5,274,156)
Other comprehensive income (196,793)(233,688)
Total comprehensive income/(loss) for the year12,823(5,507,844)
Earnings per share - Basic (cents) 100.34(8.82)
Earnings per share - Diluted (cents) 100.34(8.81)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
32
3.0 FINANCIAL PERFORMANCE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2018
GROUP
31 March 201831 March 2017
Notes$$
CURRENT ASSETS
Cash and cash equivalents1121,870,415935,359
Restricted bank account119,173,4349,208,289
Trade and other receivables1213,419,4276,800,780
Finance lease receivable61,816,447498,142
Current tax receivable21,456361,912
Total Current Assets46,301,17917,804,482
NON-CURRENT ASSETS
Property, plant and equipment1328,337,66823,763,937
Intangible assets1429,901,46928,662,777
Finance lease receivable64,421,483906,265
Deferred tax assets93,878,9711,925,352
Total Non-Current Assets66,539,59155,258,331
TOTAL ASSETS112,840,77073,062,813
CURRENT LIABILITIES
Overdrafts11-873
Borrowings1610,574,689-
Trade payables and accruals155,184,3115,632,175
Payable to NZTA9,114,5029,243,383
Current tax payable85,245-
Deferred revenue182,265,0442,656,518
Employee entitlements1,147,4621,201,002
Total Current Liabilities28,371,25318,733,951
NON-CURRENT LIABILITIES
Borrowings1615,908,6707,029,304
Deferred revenue181,236,1491,743,824
Deferred tax liabilities164,134-
Total Non-Current Liabilities17,308,9538,773,128
TOTAL LIABILITIES45,680,2062 7, 5 07, 07 9
NET ASSETS67,160,56445,555,734
EQUITY
Share capital1080,326,43858,965,367
Translation reserve(540,182)(343,389)
Retained earnings(12,625,692)(13,066,244)
TOTAL SHAREHOLDERS' EQUITY67,160,56445,555,734
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Chairman, 18 May 2018
Chairman of the Finance, Risk and Audit Commitee, 18 May 2018
33
3.0 FINANCIAL PERFORMANCE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2018
GROUP
Share Capital Retained Earnings Translation ReserveTotal
Notes$$$$
Balance at 1 April 2016 58,819,932 (7,991,750) (109,701)50,718,481
Profit after tax for the period - (5,274,156) - (5,274,156)
Other comprehensive income - - (233,688)(233,688)
Total comprehensive loss for the period, net of tax - (5,274,156) (233,688) (5,507,844)
Equity settled share-based payments 145,435 199,662 - 345,097
Share capital issued10 - - - -
Balance at 31 March 2017 58,965,367 (13,066,244) (343,389) 45,555,734
Balance as at 1 April 2017 58,965,367 (13,066,244) (343,389)45,555,734
Profit after tax for the period - 209,616 - 209,616
Other comprehensive income - - (196,793)(196,793)
Total comprehensive Income for the period, net of tax - 209,616 (196,793) 12,823
Equity settled share-based payments 37,818 230,936 - 268,754
Share capital issued10 21,323,253 --21,323,253
Balance at 31 March 2018 80,326,438 (12,625,692) (540,182) 67,160,564
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
34
3.0 FINANCIAL PERFORMANCE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2018
GROUP
31 March 201831 March 2017
Notes$$
Cash flows from operating activities
Cash received from customers39,172,43829,586,648
Payments to suppliers and employees(36,408,233)(22,952,847)
Interest received 161,375 100,283
Interest paid (1,259,442) (200,775)
Tax received 340,456 94,969
Net cash inflow from operating activities 2,006,594 6,628,278
Cash flows from investing activities
Payments for purchase of property, plant & equipment13 (14,519,691) (10,488,345)
Payments for purchase of intangible assets14 (6,833,083) (9,385,454)
Net cash outflow from investing activities (21,352,774) (19,873,799)
Cash flows from financing activities
Receipts from bank loans16 22,831,244 6,026,999
Repayment of bank loans16(3,377,189)-
Receipts from repayment of loans to directors - 279,996
Receipts from issue of equity10 21,501,711-
Payments for costs of raising equity10(673,657) -
Net cash inflow from financing activities 40,282,109 6,306,995
Net increase/(decrease) in cash held 20,935,929 (6,938,526)
Cash at beginning of the financial period934,4867,873,012
Closing cash and cash equivalents (net of overdrafts)21,870,415934,486
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
35
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2018
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES
EROAD Limited (the “Parent”) is a company domiciled in New Zealand registered under the Companies Act 1993
and listed on the New Zealand Stock Exchange (NZX) Main Board. The Company is an FMC reporting entity for the
purposes of the Financial Markets Conduct Act 2013 and the financial statements have been prepared in accordance
with the requirements of that Act and the Financial Reporting Act 2013. The consolidated financial statements
comprise EROAD Limited and its subsidiaries (the “Group”). The Group provides electronic on-board units and
software as a service to the transport industry.
The financial statements for the Group are for the period ended 31 March 2018.
The financial statements were authorised for issue by the directors on 18 May 2018.
The accounting policies below have been applied consistently to all periods presented in these financial statements.
(a) Basis of preparation
Statement of compliance with IFRS
The consolidated financial statements comprise the following: consolidated statement of comprehensive income,
consolidated statement of changes in equity, consolidated statement of financial position, consolidated statement of
cash flows, and accounting policies and notes to the financial statements contained on pages 31 to 65.
The consolidated financial statements have been prepared in accordance with New Zealand Generally Accepted
Accounting Practice (“NZ GAAP”). They comply with the New Zealand equivalents to International Financial Reporting
Standards (NZ IFRS) and other applicable Financial Reporting Standards as appropriate to Tier 1 for-profit entities.
Comparative Figures
Where a change in presentation of the financial statements has been made during the period, comparative
statements and notes have been restated to align with current year presentation.
Basis of measurement
The financial statements are prepared on the historical cost basis. Except for certain financial instruments carried
at fair value as described in (g) and (h).
Going concern
The financial statements have been prepared using the going concern assumption.
Presentation currency
The financial statements are presented in New Zealand dollars and all values are rounded to the nearest dollar ($).
The functional currency of EROAD Limited is New Zealand Dollars (NZD).
Use of estimates and judgements
In preparing these consolidated financial statements in conformity with NZ IFRS, management has made
judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the
reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in any future periods affected.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment within the next financial period are included in the following notes:
• Note 6: assessment of whether a long-term rental agreement is a finance or operating lease (also refer note (d)).
• Note 9: recognition of deferred tax assets: availability of future taxable profit against which carry forward tax
losses can be used.
• Note 14: impairment testing for intangible assets, key assumptions underlying recoverable amounts, including
the recoverability of development costs.
36
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b) Basis of Consolidation
The Group financial statements consolidate the financial statements of subsidiaries using the purchase method
of accounting. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until the date on which control ceases.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions are eliminated.
(c) Business Combinations
The Group accounts for business combinations using the purchase method when control is transferred to the
Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable
net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is
recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue
of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships.
Such amounts are generally recognised in the statement of comprehensive income. Any contingent consideration
is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the
definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted
for within equity. Otherwise, subsequent changes in the fair value of contingent consideration are recognised in
equity.
(d) Revenue
Hardware revenue - direct sales
Revenue from the sale of goods is recognised in the statement of comprehensive income when the significant
risks and rewards of ownership have been transferred to the buyer and the amount of revenue can be reliably
measured. Revenue is measured net of returns and trade and volume discounts. No revenue is recognised if there
are significant uncertainties regarding recovery of the consideration due, associated costs or possible return of
goods, or where there is continuing management involvement with the goods.
Recurring operating lease revenue
When the Group retains the significant risks and rewards of ownership of hardware products under long-term
rental agreements, the hardware assets are carried on the balance sheet and revenue relating to the hardware
is accounted for as an operating lease and recognised in the statement of comprehensive income on a straight
line basis over the term of the lease. Any lease incentives provided are recognised as an integral part of the total
lease, over the term of the lease.
Finance lease revenue
The substance of long-term rental agreements is assessed by management and if it is considered that substantially
all the risks and rewards incident to ownership have been transferred, the arrangement is accounted for as a finance
lease.
Recurring service fee revenue
Revenue from services rendered is recognised in the Statement of Comprehensive Income in proportion to the
stage of completion.
Transaction Fees
When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue
recognised is the net amount of commission made by the Group.
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
37
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(e) Finance income and finance expenses
The Group’s finance income and finance expenses include: interest payable and receivable recognised using
the effective interest rate method, foreign exchange gains and losses and fair value movements on derivative
financial instruments.
(f) Taxation
Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or
loss except to the extent that it relates to a business combination, or items recognised directly in equity or in
other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
periods. Current tax payable also includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured
at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets
and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred
tax assets are reviewed at each reporting date and are adjusted to reflect managements assessment of whether it
is probable that the related tax benefit will be realised.
(g) Financial Instruments
Derivative financial instruments
The Group, may on occasion, use derivative financial instruments to hedge its exposure to foreign currency
fluctuations.
Derivatives are initially recognised at fair value; any directly attributable transaction costs are recognised in profit
or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein
are generally recognised in the statement of comprehensive income.
Non-derivative financial instruments
The Group initially recognises loans and receivables, deposits, debt securities issued and subordinated liabilities
on the date that they are originated. All other financial assets and liabilities are recognised initially on the trade
date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire,
or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in
transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position
when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis
or to realise the asset and settle the liability simultaneously.
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
38
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group classifies non-derivative financial assets and liabilities into the following categories: loans and
receivables and other financial liabilities.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position
when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis
or to realise the asset and settle the liability simultaneously.
The Group classifies non-derivative financial assets and liabilities into the following categories: loans and
receivables and other financial liabilities.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less
any impairment losses.
Loans and receivables comprise cash and cash equivalents, trade and other receivables and loans to shareholders
and directors.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or
less.
Other liabilities
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial
liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised cost using the effective interest method. Other
financial liabilities comprise loans and borrowings, bank overdrafts, and trade and other payables.
(h) 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 values of financial instruments that are not traded in an active market are 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. Other techniques, such as estimated discounted cash flows, are used to determine
fair value for the remaining financial instruments. The fair value of forward exchange contracts is determined
using forward exchange market rates at the balance sheet date. Fair values reflect the credit risk of the financial
instrument and include adjustments to take account of the credit risk of the Group and counterparty when
appropriate.
The carrying value less impairment provision of trade receivables is assumed to approximate its fair value due
to its short term nature. The fair value of non-current 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.
(i) Property, Plant and Equipment
Owned assets
Items of plant and equipment are stated at cost, less accumulated depreciation and impairment losses. Cost
includes the purchase consideration, and those costs directly attributable to bringing the asset to the location and
condition necessary for its intended use. Where an item of plant and equipment is disposed of, the gain or loss
recognised in the statement of comprehensive income is calculated as the difference between the net sales price
and the carrying amount of the asset.
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
39
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing
part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within
the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in
the statement of comprehensive income as an expense in the period they are incurred.
Depreciation
Depreciation begins when the asset is in the location and condition necessary for it to be capable of operating in
the manner intended by management. The following rates have been used:
Leasehold improvements12 - 30%Straight line
Leased equipment16 - 33%Straight line
Plant and equipment 9 - 30%Straight line
Computer/Office equipment36 - 60%Straight line
Motor vehicles20 - 30%Straight line
The above rates reflect the estimated useful lives of the respected categories. Leasehold improvements are
depreciated over the contracted lease term.
(j) Leases as a lessee
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified
as finance leases. Other leases are operating leases and the leased assets are not recognised on the Group’s
statement of financial position. Payments made under operating leases are recognised in the statement of
comprehensive income on a basis representative of the pattern of benefits expected to be derived from the
leased asset.
(k) Intangible assets
Research and Development
Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and
understanding, is recognised in the statement of comprehensive income when incurred.
Development activities involve a plan or design for the production of new or substantially improved products
and processes. Development expenditure is capitalised only if development costs can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable, and the Group
intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure
capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to
preparing the asset for its intended use. Other development expenditure is recognised in the statement of
comprehensive income when incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated
impairment losses.
Other intangible assets
Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less
accumulated amortisation and accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is only capitalised only when it increases the future economic benefits embodied in the
specific asset to which is relates. All other expenditure, including expenditure on internally generated goodwill
and brands, is recognised in the statement of comprehensive income when incurred.
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
40
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Amortisation
Amortisation is recognised in the statement of comprehensive income on a straight line basis over the estimated
useful life of intangible asset. The estimated useful lives for the current and comparative periods are as follows:
Patents10–20 years
Development Hardware & Platform7–15 years
Development Products 5–10 years
Software 5–7 years
(l) Inventories
Inventories are valued at the lower of cost or net realisable value. Costs are based on actual costs, applying the
first in first out principle, and include expenditure incurred in acquiring the inventories and bringing them to the
existing condition and location. In the case of manufactured inventories, cost includes direct materials and labour.
(m) Foreign Currencies
Transactions in foreign currencies are translated into the respective functional currencies of Group companies at
the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into functional currency at
the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value
in a foreign currency are translated into the functional currency at the exchange rate when the fair value was
determined. Foreign currency differences are generally recognised in the statement of comprehensive income.
Non-monetary items that are measured based on historical cost in a foreign currency are not translated. Foreign
currency gains and losses are reported on a net basis as either finance income or finance expenses.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
acquisition, are translated into NZD at the exchange rates at the reporting date. The income and expenses
of foreign operations are translated into NZD at the exchange rates at the dates of the transactions. Foreign
currency differences are recognised in Other Comprehensive Income and accumulated in the translation reserve.
(n) Goods and Services Tax
All amounts are shown exclusive of Goods and Services Tax (GST), except for receivables and payables that are
stated inclusive of GST.
(o) Employee benefits
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the
amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation can be estimated reliably.
Share-based payments
The grant-date fair value of equity-settled share-based payment awards to employees is generally recognised as an
expense, with a corresponding increase in equity, over the vesting period of the awards. The amounts recognised as
an expense is adjusted to reflect the number of awards for which the related service and non-market conditions are
expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the
related service and non-market performance conditions at the vesting date. For share-based payment awards with
non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions
and there is no true-up for differences between the expected and actual outcomes.
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
41
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(p) Impairment of assets
The carrying amounts of the Group’s assets other than inventories are reviewed at each balance date to
determine whether there is any objective evidence of impairment. If any such indication exists, the assets
recoverable amount is estimated.
If the estimated recoverable amount of an asset is less than its carrying amount, an impairment test is undertaken
to reduce the carrying amount of assets to the estimated recoverable amount and an impairment loss is
recognised in the statement of comprehensive income.
Estimated recoverable amount of receivables carried at amortised cost are calculated as the present value of
estimated future cash flows, discounted at their original effective interest rate. Receivables with a short duration
are not discounted.
Estimated recoverable amount of other assets is the greater of their fair value less costs to sell and value in use.
Value in use is determined by estimating future cash flows from the use and ultimate disposal of the asset and
discounting these to their present value using a pre-tax discount rate that reflects current market rates and the
risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable
amount is determined for the cash-generating unit to which the asset belongs.
(q) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset
are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the period
in which they are incurred.
(r) Grant income
Government Government grants are recognised at fair value in the statement of comprehensive income over the
same periods as the costs for which the grants are intended to compensate.
(s) Segment reporting
Segment results that are reported to the Chief Executive Officer include items directly attributable to a segment
as well as those that can be allocated on a reasonable basis. Unallocated items comprise income tax.
(t) Standards issued but not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods
beginning on or after a 1 April 2018, and have not been applied in preparing these consolidated financial
statements.
NZ IFRS 15 Revenue from Contracts with Customers - The standard establishes a comprehensive framework
for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition
guidance, including NZ IAS 18 Revenue, NZ IAS 11 Construction Contracts and NZ IFRIC 13 Customer Loyalty
Programmes. NZ IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018 with early
adoption permitted. Management has performed a preliminary assessment of the impact of NZ IFRS 15. Recurring
rental revenues are under long-term lease agreements and will continue to be accounted for in accordance with
the relevant lease standard (NZ IAS 17/NZ IFRS 16), however the contract must be unbundled and the Software as
a Service (SaaS) component will be recognised in accordance with NZ IFRS 15.
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
42
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Based on our assessment of the performance obligations for SaaS and other revenue streams, management
does not believe the standard will have a significant impact on the amount and timing of revenue. Under the
existing standards, management capitalises certain costs in relation to establishing a lease, as lease establishment
costs and depreciates these costs over the life of the lease. Under the new standard incremental costs of
obtaining a contract, that are expected to be recovered, are recognised as a contract asset. Management have
assessed our current capitalisation of lease establishment costs against the requirements of the new standard
and have concluded that impact of adopting NZ IFRS 15 will result in less costs being capitalised as either lease
establishment costs or contract costs. Management estimate that had the standard been in effect for the current
financial year ended 31 March 2018, an additional $1.9-$2.2m of expenses would have be recognised in the
Statement of Comprehensive Income, with a corresponding reduction to leased assets.
NZ IFRS 9 Financial Instruments - The standard replaces the existing guidance in NZ IAS 39 Financial Instruments:
Recognition and Measurement. NZ IFRS 9 includes revised guidance on the classification and measurement
of financial instruments, including a new expected credit loss model for calculating impairment on financial
assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition
and derecognition of financial instruments from NZ IAS 39. NZ IFRS 9 is effective for annual reporting periods
beginning on or after 1 January 2018. Management has performed a preliminary assessment of the impact of NZ
IFRS 9. It is expected that the new expected credit loss model for calculating impairment on financial assets will
change the way impairment is assessed and recognised for our accounts receivable balances. The Group does not
currently have any have any hedge accounting in place and therefore does not expect any significant impact as a
result of the new general hedge accounting requirements.
NZ IFRS 16 Leases - The standard requires lessees to account for all leases under a single on-balance sheet model
(subject to certain exemptions) in a similar way to finance leases under NZ IAS 17. Lessees recognise a liability
to pay rentals with a corresponding asset, and recognise interest expense and depreciation separately. Lessor
accounting is substantially the same as NZ IAS 17’s dual classification approach. Application of NZ IFRS 16 is
required for annual periods beginning on or after 1 January 2019 with early adoption permitted but not before
an entity applied NZ IFRS 15. The Group is assessing the potential impact on its financial statements resulting
from the application of NZ IFRS 16. Management has performed a preliminary assessment of the impact of NZ
IFRS 16. A significant number of the Groups contracts with customers are long-term lease agreements which
will fall within the scope of NZ IFRS 16. However as lessor accounting is substantially the same as NZ IAS 17’s
dual classification approach management believe the standard will not have a material impact on the timing and
amount of lease revenue recognised. The definition of initial direct costs under the new standard may result in
certain costs currently capitalised as lease establishment costs being expensed when incurred. As a lessor, the
Group’s main significant operating leases relate to offices and other premises. The Group will recognise a liability
to pay rentals and recognise a corresponding asset for these premises. The Group is currently in negotiations to
renew the lease for our head office and will quantify the impact of the change once these negotiations have been
completed.
There are a number of other new or amended standards that are effective for annual period beginning on or after
1 April 2018 that are not expected to have a significant impact on the Group’s consolidated financial statements.
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
43
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 • REVENUE
GROUP
20182017
Notes$$
Recurring operating lease and service fee revenue36,316,30826,316,354
Hardware revenue - direct sales2,073,407574,638
Finance lease revenue65,800,225789,749
Transaction fee revenue 1,847,0061,492,420
Grant revenue894,552845,813
Other revenue4,592,2592,744,827
Total Revenues 51,523,75732,763,801
NOTE 3 • EXPENSES
GROUP
20182017
Notes$$
Personnel expenses512,900,15111,182,925
Administrative and other operating expenses12,392,1968,678,935
SaaS platform costs4,983,4183,452,086
Hardware and accessory costs expensed4,565,378749,1 67
Operating lease expense171,008,964987,708
Directors fees25259,070260,725
Auditor's remuneration - KPMG189,525169,125
Tax compliance services - KPMG57,509114,622
Tax advisory services - KPMG69,55419,312
Health & Safety Advisory - KPMG-93,124
Corporate Finance - KPMG*88,019-
Total Expenses36,513,78425,707,729
* Gross Corporate Finance fees were $250,393 of which $162,374 was capitalised. These fees were for support
provided in relation to the establishment of new debt facilities during the year ended 31 March 2018.
During the year the costs expensed in Research and Development was $4,472,760 (2017: $3,974,137).
44
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 • SEGMENTAL NOTE
The Group has three segments as described below, which are the Group’s strategic divisions. The strategic
divisions offer different services and are managed separately because they require different technology, services
and marketing strategies. For each strategic division, the Group’s CEO (the chief operating decision maker)
reviews internal management reports. The following summary describes the operations in each of the Group’s
segments.
EROAD reports selected financial information segmented by geographic location for operating companies and
corporate and development costs.
• Corporate & Development: Corporate head office costs and R&D activities for development of new and
existing products and services
• North America: Operating company serving customers in North America
• Australia & New Zealand: Operating companies serving customers in Australia & New Zealand
Inter-segment pricing is determined on an arm’s length basis.
Reportable segment information
Information related to each reportable segment is set out below. Segment result represents Earnings before
Interest, Taxation, Depreciation & Amortisation (EBITDA), which is the measure reported to the chief operating
decision maker.
Change in segment presentation
Due to changes in the group and the reporting information provided to the chief operating decision maker, the
Group has changed both its reportable segments from those reported at 31 March 2017. The segment result has
also been changed from net profit after tax to EBITDA. As a result of the change, comparative amounts in the
operating segment disclosure have been restated to align with the current year’s presentation.
Corporate & DevelopmentNorth AmericaAustralia & New Zealand
201820172018201720182017
$$$$$$
Revenue ₁23,656,6017,795,03710,009,4884,080,43440,564,89427,837,554
Earnings Before Interest,
Taxation, Depreciation &
Amortisation
(5,333,338)(5,922,305)(1,412,726)(3,861,929)24,242,43917,094,780
Total assets69,533,97152,526,89816,375,9525,024,01538,447,72431,573,920
Depreciation (548,894)(610,875)(2,282,949)(1,038,136)(7,448,884)(6,610,008)
Amortisation(5,594,391)(3,991,636)----
₁ Revenue from Corporate & Development Markets includes R&D Grant Income of $894,552 (2017:$845,813)
45
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation of information on reportable segments
GROUP20182017
$$
Revenue
Total revenue for reportable segments73,230,98339,713,025
Elimination of inter-segment revenue(21,707,226)(6,949,224)
Consolidated revenue51,523,75732,763,801
EBITDA
Total EBITDA for reportable segments17,496,3757,310,546
Elimination of inter-segment EBITDA(2,486,402)(254,474)
Consolidated EBITDA15,009,9737,056,072
Depreciation
Total depreciation for reportable segments(10,280,727)(8,259,019)
Elimination of inter-segment profit334,767173,331
Consolidated depreciation(9,945,960)(8,085,688)
Total assets
Total assets for reportable segments124,357,64789,124,833
Elimination of inter-segment balances(11,664,508)(16,062,020)
Consolidated total assets112,693,13973,062,813
Development Assets
Included within Total Assets are Development Assets of $26,852,630 (2017: $26,197,426), which for the purpose
of the segment note, have been allocated to the Corporate & Development Market based on the ownership of
intellectual property. The amortisation for these assets is presented in the Corporate & Development segment. For
impairment testing purposes management allocate the Development Assets to the cash generating units (CGUs)
based on the specific CGU that the Development Asset relates to, or if the Development Asset is developed for use
globally across all CGU’s, the asset is allocated to CGU’s based on the proportionate share of the Group’s Contracted
Units. At 31 March 2018 there was $16,911,642 (2017: $16,210,673) of global Development Assets that have been
allocated across CGU’s based on the Contracted Units. The allocation of the Development Asset to CGU’s within the
following reportable segments for the purpose of impairment testing was as follows:
20182017
$$
North America
12,822,74413,133,177
Australia & New Zealand 14,029,88613,064,249
26,852,63026,197,426
NOTE 4 • SEGMENTAL NOTE (CONTINUED)
46
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Geographic information
The geographic information below analyses the Group’s revenue and non-current assets by the Company’s
country of domicile and other countries. In presenting the following information segment revenue has been
based on the geographic location of customers and segment assets were based on the geographic location of the
assets.
GROUP
20182017
$$
Revenue
New Zealand40,813,41128,261,731
All foreign countries:
USA10,009,4884,080,434
Australia700,858421,636
Total revenue51,523,75732,763,801
Non-current assets
New Zealand49,724,48649,940,994
All foreign countries:
USA12,227,6463,104,861
Australia708,488287,124
Total non-current assets62,660,62053,332,979
Non-current assets exclude financial instruments and deferred tax assets.
NOTE 5 • PERSONNEL EXPENSES
GROUP
20182017
$$
Salaries and wages - excluding capitalised lease establishment costs
16,898,43716,979,730
Annual leave (107,912)285,786
Performance bonus894,9831,039,370
Share-based payments268,754345,097
Salaries and wages capitalised to Development and Software Assets(5,054,111)(7,467,058)
Total personnel expenses12,900,15111,182,925
NOTE 4 • SEGMENTAL NOTE (CONTINUED)
47
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 • LEASES AS A LESSOR
Operating leases
The Group leases out products on long-term rentals, usually for a period of 36 months. At 31 March, the future
minimum lease payments (future contracted income) under non-cancellable operating leases are receivable as follows.
GROUP
20182017
$$
Future minimum lease payments
Not later than one year12,809,37110,791,554
Later than one year, not later than five years20,925,18510,346,171
Later than five years--
33,734,55621,137,725
During the period revenue of $32,332,849 (2017: $26,316,354) was recognised as revenue in the statement of
comprehensive income in relation to long-term rentals accounted for as operating leases and related software as
a service (SaaS) revenue.
Finance leases
In situations where the Group leases products on long-term rentals agreement, the substance of the transaction
is assessed and if it is considered that substantially all the risks and rewards incident to ownership have been
transferred, the arrangement is accounted for as a finance lease. At 31 March, the future minimum lease payments
(future contracted income) under non-cancellable leases are receivable as follows.
Gross investment
in the lease
Unearned
finance income
Present value of minimum
lease payments
201820172018201720182017
$$$$$$
Not later than one year 2,103,918 542,355 2 8 7, 47 1 44,213 1,816,447 498,142
Later than one year not later
than five years
4,759,214 944,988 337,731 38,723 4,421,483 906,265
Later than five years - - - - - -
6,863,132 1,487,343 625,202 82,936 6,237,930 1,404,407
During the period $5,800,225 (2017: $789,749) was recognised as revenue in the statement of comprehensive
income in relation to long-term rentals accounted for as finance leases.
Total Future Contracted Income
Amounts disclosed above in relation to future minimum lease payments (operating leases) and gross
investment in leases (finance leases) only relate to the hardware element of long-term rentals accounted for as
leases. The Total Future Contracted Income (hardware and SaaS) under non-cancellable long-term agreements
at 31 March 2018 is $86,518,216 (2017: $58,538,888) excluding revenue already recognised under finance leases,
and $92,756,146 (2017: $59,943,295) including finance lease revenue already recognised in advance of cash flows.
During the period the Group amended its definition of the non-GAAP measure of Future Contacted Income in
order to include the Future cash flows from finance leases, where the revenue has been recognised in advance
of cash flows. The Group expects the profile of future recognition of this income to be consistent with the profile
of the future minimum lease payments for the hardware element of this income which is outlined above for
operating leases.
48
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 • FINANCE INCOME & FINANCE EXPENSES
GROUP
20182017
$$
Finance income
Interest income161,375100,283
Foreign exchange gains84,241-
245,616100,283
Finance expenses
Interest expense(1,259,442)(200,775)
Foreign exchange losses-(135,583)
(1,259,442)(336,358)
Net financing costs(1,013,826)(236,075)
NOTE 8 • INCOME TAX EXPENSE
GROUP
20182017
$$
(a) Reconciliation of effective tax rate
Income tax using the Company's domestic tax rate of 28% (1,544,204)(5,257,327)
Reduction in tax rate(432,378)(1,472,051)
Non-deductible expense/(non-assessable income)
Temporary differences(99,927)-
Losses and timing differences (recognised)/not recognised24,90935,978
Effect of different tax rates
(1,264,614)1,442,356
Income tax expense/(benefit)18,19010,546
Income tax expense/(benefit)(1,753,820)16,829
(b) Current tax (benefit)/expense
Current period107,774-
107,774-
(c) Deferred tax (benefit)/expense
Current period(1,861,594)16,829
(1,861,594)16,829
At 31 March 2018 there were no imputation credits available to shareholders (2017: Nil)
49
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 • DEFERRED TAX ASSETS / (LIABILITIES)
GROUP
20182017
$$
Recognised deferred tax assets and liabilities
Deferred tax assets and (liabilities) are attributable to the following:
Tax loss carry forward9,085,6886,856,761
Property, plant and equipment (131,234)(400,099)
Deferred development expenditure(3,826,229)(2,947,973)
Provisions and accruals601,694340,619
Equity-settled share-based payments191,046126,384
Revenue recognition(2,206,128)(2,050,340)
Total deferred tax asset/(liability)3,714,8371,925,352
The movement in temporary differences has been recognised in profit or loss. Deferred tax assets have been recognised at a
rates between 21% to 30% at which they are expected to be realised.
Movement in temporary differences during the period:
GROUP
Balance
31 March 18
Recognised
in profit
or loss
Under/(over)
from prior
periods
Changes in
tax rates
Currency
Translation
Balance
31 March 17
Movement in
Period
Balance
31 March 16
$$$$$$$
Tax loss carry forward9,085,6882,877,629(231,306)(406,688)(10,708)6,856,761 1,895,252 4,961,509
Property, plant and
equipment
(131,234)(93,057)(6,473)412,065(43,670)(400,099) (525,787) 125,688
Deferred development
expenditure
(3,826,229)(878,256)---(2,947,973) (1,032,284) (1,915,689)
Provisions and
accruals
601,69488,063231,306(56,794)(1,500)340,619 107,779 232,840
Equity-settled share-
based payments
191,04664,662---126,384 55,905 70,479
Revenue recognition(2,206,128)(311,696)-151,3454,563(2,050,340) (528,219) (1,522,121)
Total 3,714,837 1,747,345 (6,473) 99,928 (51,315) 1,925,352 (27,354) 1,952,706
The New Zealand tax group consists of EROAD Limited and EROAD Financial Services Limited. Losses incurred within this Group are
transferred freely within the Group with no compensation being recognised. Deferred tax assets have been recognised in respect of these
items because it is probable that future taxable profit will be available against which the Group can utilise the benefits there from based on
the expected profitability of the New Zealand Group. Determining the extent to which losses will be utilised requires judgement.
In the prior period the Group determined that $5,342,575 of gross tax losses had not meet the criteria for recognition as a deferred tax
asset. These tax losses relate to losses in the New Zealand tax group. Management have reassessed unrecognised deferred tax assets
during the current reporting period, and have concluded that there is convincing evidence that there will be future taxable profit that
will allow the deferred tax asset to be recognised. The evidence considered included the fact the New Zealand tax group will report an
accounting profit before tax in the current period, review of forward looking forecasts for the New Zealand tax group, the impact of
group transfer pricing policies and the expected impact of timing differences. The recognition of previously unrecognised losses in the
current period has resulted in a tax credit of $1,495,921 being recognised in the Statement of Comprehensive Income and a corresponding
increase in the deferred tax asset.
50
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 • PAID UP CAPITAL
All issued shares are fully paid up and have equal voting rights and share equally in dividends and surplus on
winding up.
GROUP
Number of
ordinary shares
Issue price
$
Issued Capital
$
At 31 March 201660,168,86458,819,932
Issue of shares to staff under LTI/LTS schemes
76,796$2.83217,678
Held in trust as treasury stock $2.83(72,243)
At 31 March 201760,245,66058,965,367
Issue of shares to staff under LTI schemes490,000$2.151,053,500
Held in trust as treasury stock (1,053,500)
Vested under LTS scheme37,818
Shares issued to employees for 2017 bonus281,351$1.65463,976
Vested under LTI scheme31,223
Shares issued in December 2017 Equity Placement5,099,247$3.0415,501,711
Shares issued in March 2018 Share Purchase Plan1,973,673$3.046,000,000
Costs of raising capital (673,657)
At 31 March 201868,089,93180,326,438
At 31 March 2018 there was 68,089,931 authorised and issued ordinary shares (2017: 60,245,660). 906,783 (2017:
416,783) shares are held in trust for employees in relation to the long-term incentive plan and are accounted for as
treasury stock.
On 15 December 2017, the Company issued 5,099,247 new shares at a price of $3.04 per share under an equity
placement which raised $15,501,711. Additionally on 6 March 2017, the company allotted an additional 1,973,673
new shares relating to $6,000,000 raised under a share purchase plan at a price of $3.04 per share.
The calculation of both basic and diluted earnings per share at 31 March 2018 was based on the profit
attributable to ordinary shareholders of $209,616 (2017: ($5,274,156)). The weighted number of ordinary shares
was 61,668,093 (2017: 59,777,568) for basic earnings per share and 62,027,558 for diluted earnings per share
(2017: 59,777,568).
Other components of equity include:
• Translation reserve - comprises foreign currency translation differences arising from the translation of financial
statements of the Group’s foreign subsidiaries into New Zealand Dollars.
• Retained earnings - includes all current and prior period retained profits and share-based employee remuneration.
51
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 • CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
GROUP
20182017
$$
Cash and bank21,870,415935,359
Overdrafts-(873)
21,870,415934,486
Restricted bank accounts are presented separately from cash and cash equivalents on the face of the Statement of
Financial Position and, as a result, movements in restricted bank accounts are excluded from the Statement of Cash
Flows. The restricted bank accounts relate to road users taxes collected from clients due for payment to the appropriate
government agency.
NOTE 12 • TRADE AND OTHER RECEIVABLES
GROUP
20182017
$$
Trade receivables8,251,3553,484,027
Provision for doubtful debts(555,073)(21,634)
7,696,2823,462,393
Prepayments and other receivables 5,723,1453,338,387
13,419,4276,800,780
In addition to the movement in the provision for doubtful debts, the Group has written off $56,334 (2017: nil) of bad debts
to the statement of comprehensive income during the year ended 31 March 2018. Bad bad provisioning and write-offs are
assessed based on a specific review of the Groups debtors aged trial balance and management making and assessment
on the collectability of aged balances. Considerations include past payment history for customers and outcomes of
collections discussions in relation to these customers.
(a) Credit risk
The ageing of the Group’s Trade receivables at the reporting date was as follows:
GROUP
Gross
Allowance for
doubtful debtsGross
Allowance for
doubtful debts
2018201820172017
$$$$
Not past due3,914,796(14,600)2,270,080(167)
Past due 1-30 days1,732,962(80,123)704,548(773)
Past due 31-60 days843,233(56,801)229,225(773)
Past due over 61 days1,760,364(403,549)280,174(19,921)
8,251,355(555,073)3,484,027(21,634)
52
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 • PROPERTY, PLANT AND EQUIPMENT
GROUP
Leased
equipment
Plant and
equipment
Leasehold
improvements
Motor
vehicles
Office
equipmentComputersTotal
$$$$$$$
Year ended 31 March 2017
Opening net book
amount
18,735,45490,216725,706489,273548,215772,41621,361,280
Additions10,195,04971,1923,559123,608101,391172,86110,667,660
Disposals---(90,627)(24,736)-(115,363)
Depreciation charge(7,136,241)(33,210)(132,703)(142,712)(184,719)(456,103)(8,085,688)
Depreciation
recovered
---34,9196,238-41,157
Effect of movement
in exchange rates
(75,286)-(17,415)(313)(8,231)(3,864)(105,109)
Closing net book
amount
21,718,976128,198579,147414,148438,158485,31023,763,937
Cost40,607,259347,9201,105,111806,152937,0042,525,00346,328,449
Accumulated
depreciation
(18,888,283)(219,722)(525,964)(392,004)(498,846)(2,039,693)(22,564,512)
Net book amount21,718,976128,198579,147414,148438,158485,31023,763,937
GROUP
Leased
equipment
Plant and
equipment
Leasehold
improvements
Motor
vehicles
Office
equipmentComputersTotal
$$$$$$$
Year ended 31 March 2018
Opening net book
amount
21,718,976128,198579,147414,148438,158485,31023,763,937
Additions14,081,181158,808-166,93581,65751,02814,539,609
Disposals---(42,170)-(3,205)(45,375)
Depreciation charge(9,009,581)(69,011)(132,876)(165,270)(202,180)(367,042)(9,945,960)
Depreciation
recovered
---34,633-62335,256
Effect of movement
in exchange rates
(1,184)-(5,724)-(2,112)(779)(9,799)
Closing net book
amount
26,789,392217,995440,547408,276315,523165,93528,337,668
Cost54,648,767506,7291,096,375930,9181,013,7732,570,00260,766,564
Accumulated
depreciation
(27,859,375)(288,734)(655,828)(522,642)(698,250)(2,404,067)(32,428,896)
Net book amount26,789,392217,995440,547408,276315,523165,93528,337,668
Included in the Leased equipment is equipment under construction to be leased of $4,630,977 (2017: $4,711,866).
53
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Change in estimates
During the previous accounting period, the Group conducted a review of the expected useful life of its leased
equipment. The Group determined that hardware assets (excluding Tubo’s) were generally lasting two standard
36-month cycles, and therefore the expected useful life of the equipment was increased from 5 years to 6 years.
Conversely the Group determined that the expected useful life of trailer units (Tubo’s) should be reduced from 5
years to 3 years. Unlike other hardware assets which are generally installed in-cab, Tubo’s are installed externally
and subject to greater wear and tear. The change in estimate was approved by the Board in April 2017 and was
applied prospectively.
NOTE 14 • INTANGIBLE ASSETS
GROUP
PatentsTrade MarksDevelopmentSoftwareTotal
$$$$$
Year ended 31 March 2017
Opening net book amount15,00132,57620,825,0492,396,33323,268,959
Additions--8,655,609729,8459,385,454
Amortisation charge(350)-(3,283,232)(708,054)(3,991,636)
Closing net book amount14,65132,57626,197,4262,418,12428,662,777
Cost17,80032,57632,685,6144,006,85936,742,849
Accumulated amortisation(3,149)-(6,488,188)(1,588,735)(8,080,072)
Net book amount14,65132,57626,197,4262,418,12428,662,777
GROUP
PatentsTrade MarksDevelopmentSoftwareTotal
$$$$$
Year ended 31 March 2018
Opening net book amount14,65132,57626,197,4262,418,12428,662,777
Additions--5,309,7361,523,3476,833,083
Amortisation charge(350)-(4,654,532)(939,509)(5,594,391)
Closing net book amount14,30132,57626,852,6303,001,96229,901,469
Cost17,80032,57637,995,3485,530,20643,575,930
Accumulated amortisation(3,499)-(11,142,718)(2,528,244)(13,674,461)
Net book amount14,30132,57626,852,6303,001,96229,901,469
The useful lives of the Group’s Intangible Assets are assessed to be finite. Assets with finite lives are amortised
over their useful lives and tested for impairment whenever there are indications that the assets may be impaired.
Where an indicator of impairment exists the Group makes a formal assessment of the recoverable amount. Where
the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. The recoverable amount is the greater of fair value less costs to sell of the assets
value in use. For the purposes of assessing impairment, assets are Grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units).
NOTE 13 • PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
54
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Recoverability of development costs
Included in the carrying amount of development costs at 31 March 2018 is an amount of $12,822,744 relating to
our North American Market. Management note unit sales within the North American Market were lower than
originally expected due to uncertainty in the market in relation to the ELD mandate, as a result management has
carried out an impairment test.
The recoverable amount of the CGU that these corporate assets relate to (North American Market) was estimated
based on the present value of future cash flows expected to be derived from the CGU (value in use). Key
assumptions included using a pre-tax discount rate of 15% and a terminal growth rate of 1.5%. The recoverable
amount of the CGU was estimated to be higher than its carrying value and no impairment was considered
necessary.
NOTE 15 • TRADE PAYABLES AND ACCRUALS
GROUP
20182017
$$
Trade creditors2,471,6621,658,383
Sundry accruals2,712,6493,973,792
5,184,3115,632,175
NOTE 16 • BORROWINGS
GROUP
20182017
$$
Current borrowings
Term Loans - NZ $ denominated 7,425,008 -
Term Loans - US $ denominated 1,564,784 -
NZ Growth Funding - Committed Cash Advance Facility 1,102,579-
US Growth Funding - Committed Cash Advance Facility 716,622-
Capitalised borrowing costs(234,304)-
10,574,689-
Non-Current borrowings
Term Loans - NZ $ denominated9,448,6707,029,304
Term Loans - US $ denominated2,636,790-
NZ Growth - Committed Cash Advance Facility 2,482,044-
US Growth - Committed Cash Advance Facility 1,341,166-
15,908,6707,029,304
NOTE 14 • INTANGIBLE ASSETS (CONTINUED)
55
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Terms and debt repayment schedule
GROUP
Nominal
Interest
Year of
Maturity
2018201820172017
Face
Value
Carrying
amount
Face
Value
Carrying
Amount
$$$$
Term Loans - NZ $
denominated
5.12%201916,873,67816,873,6787,029,3047,029,304
Term Loans - US $
denominated
4.93%20194,201,5744,201,574--
NZ Growth - Committed Cash
Advance Facility
4.29%20193,584,6233,584,623--
US Growth - Committed Cash
Advance Facility
3.99%20192,057,7882,057,788--
Capitalised borrowing costs - 2019-(234,304)--
26,717,66326,483,3597,029,3047,029,304
On 3 July 2017, in order to support funding requirements in connection with the Group’s growth and to manage
the related working capital requirements, the Company entered into a Multi-Option Credit Facility Agreement
with the Bank of New Zealand (BNZ). The agreement was subsequently amended and restated in December 2017.
Since the December 2017 refinance date, EROAD has had the following facilities in place:
$9,450,000 Term Loan Facility A – to restructure existing term facilities. The Term Loan has a term of 16 months
from the December refinance date, with the facility having a maturity date of 1 April 2019. The interest rate is
variable based on the 3-month BKBM bid plus a margin of 3.10%. Principal and interest payments are made
quarterly in line with a 30 month repayment profile.
$8,247,910 (NZD) Term Loan Facility E – used to restructure previous amounts drawn under the Committed
Cash Advance Facility up to the refinance date in December 2017. The Term Loan has a term of 16 months from
the December refinance date, with the facility having a maturity date of 1 April 2019. The interest rate is variable
based on the 3-month BKBM bid plus a margin of 3.10%. Principal and interest payments are made quarterly in
line with a 33 month repayment profile.
$3,000,328 (USD) Term Loan Facility E – used to restructure previous amounts drawn under the Committed
Cash Advance Facility up to the refinance date in December 2017. The Term Loan has a term of 16 months from
the December refinance date, with the facility having a maturity date of 1 April 2019. The interest rate is variable
based on the 3-month US LIBOR plus a margin of 3.10%. Principal and interest payments are made quarterly in
line with a 33 month repayment profile.
$21,000,000 Committed Cash Advance Facility – to finance the up-front costs in connection with securing Future
Contracted Income. The Committed Cash Advance Facility has a 16 month term from the December refinance
date, with the facility having a maturity date of 1 April 2019. Structurally the facility is paid down and redrawn
(revolving credit) each time the Company presents a certificate outlining the Group’s growth in new Future
Contracted Income on a monthly basis. For drawings in New Zealand Dollars of a 1-month duration, the interest
rate is the 1-month BKBM plus margin of 2.50%. For drawings in USD of a 1-month duration, the interest rate is
the 1 month US LIBOR plus a margin of 2.50%. In addition to a 1.50% line fee on the total facility limit, payable
quarterly in advance.
NOTE 16 • BORROWINGS (CONTINUED)
56
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$5,150,000 Overdraft Facilities – for general working capital purposes. This is an on demand facility with the
interest rate based on the Market Connect Overdraft Prime Rate plus a margin of 1.25%.
EROAD’s operating covenants to support the above facilities include Loan to Total FCI Ratio, Interest Cover Ratio,
Total Assets (Obligators) to Total Assets (Group) ratio, and an umbrella limit on the aggregate of all facilities
being below $35,000,000. EROAD was compliant with all covenants during the period and at 31 March 2018.
The security package for the Multi-Option Credit Facility Agreement includes an all obligations cross-guarantee
granted by EROAD Australia Pty Limited and EROAD Inc in favour of the BNZ in respect of the obligations
of EROAD Limited, and a General Security Agreements granted by EROAD Limited, EROAD Inc and EROAD
Australia Pty Limited in favour of the BNZ as secured parties.
The Group has positive operating cash flows which funds the day-to-day servicing and support of its existing
customer base. The Group plans to fund future research and development spend with excess operating cash
flows of the business, whilst looking to fund the capex needed for future growth in leased units with debt funding
facilities.
NOTE 17 • OPERATING LEASES AS A LESSEE
Leases as lessee
GROUP
20182017
$$
Non-cancellable operating lease commitments due:
Not later than one year956,006903,871
Later than one year not later than five years1,387,6562,076,278
Later than five years-239,009
2,343,6623,219,158
Operating lease expense recognised1,008,964987,708
The Group leases premises. Operating leases held over properties give the Group the right to renew the lease
subject to redetermination of the lease rental by the lessor. The lease for the head office expires on 10 July 2019
and has a current annual rental of $584,764.
NOTE 18 • DEFERRED REVENUE
The Group has dealer agreements with third-party financiers. Under the terms of the dealer agreements, the third
parties enter into a lease agreement with the Company’s customers (where agreed by all parties) and the third
party makes an upfront payment for the use of the Company’s hardware products. Under the revenue recognition
policy for hardware income it is deemed that the Company in substance retains the significant risks and rewards
of ownership of the hardware assets. Revenue relating to hardware is therefore accounted for an operating lease
and recognised in the statement of comprehensive income on a straight-line basis over the term of the lease, and
any amounts received in advance are included as deferred revenue. Under the terms of the dealer agreements,
the Company would be liable to repay the third parties in the event the customer operating lease was cancelled
prior to the end of the agreed term.
NOTE 16 • BORROWINGS (CONTINUED)
57
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In addition, the Group provides hardware to clients under long-term rental agreements. These are accounted for
as operating leases. If the Group receives any up-front prepayments of operating lease revenue, these amounts
are initially deferred and recognised in the statement of comprehensive income over the life of the rental
agreement.
GROUP
20182017
$$
Opening balance
4,400,3425,374,647
Amounts deferred during the period2,066,5002,866,842
Amount recognised in the Statement of Comprehensive Income(2,965,649)(3,841,147)
3,501,1934,400,342
At 31 March 2018, $2,265,044 is expected to be recognised in the statement of comprehensive income in the next
financial period and has been classified as current in the balance sheet (2017: $2,656,518).
NOTE 19 • FINANCIAL RISK MANAGEMENT
The Group’s principal financial instruments include trade receivables and payables, cash and short term deposits,
and advances from Group companies.
As a result of the Group’s operations and sources of finance, it is exposed to credit risk, liquidity risk and market risks
which include foreign currency risk, commodity price risk and interest rate risk. These risks are described below.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework. The Group’s risk management policies are established to identify and analyse the
financial risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence
to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions
and the Group’s activities.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis upon which income and expenses are recognised, in respect of each class of
financial asset and financial liability are disclosed in note 1.
NOTE 18 • DEFERRED REVENUE (CONTINUED)
58
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group holds the following financial instruments:
20182017
GROUP
$$$$
Loans and
receivables
Other
amortised cost
Loans and
receivables
Other
amortised cost
Financial assets
-
Cash and cash equivalents
21,870,415-935,359
-
Restricted bank account
9,173,434-9,208,289-
Trade receivables
8,251,355-3,484,027-
Other receivables
1,266,587-193,926-
Finance Lease receivables
6,237,930-1,404,407-
46,799,721-15,226,008-
Financial liabilities
Overdraft
---873
Borrowings
-26,483,359-7,029,304
Employee Entitlements
-1,147,462-1,201,002
Trade and other payables
-5,184,311-5,632,175
Payable to NZTA
-9,114,502-9,243,383
-41,929,634-23,106,737
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and it arises principally from the Group’s trade receivables from customers in the
normal course of business.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The
creditworthiness of a customer or counterparty is determined by a number of qualitative and quantitative factors.
Qualitative factors include external credit ratings (where available), payment history and strategic importance of
customer or counterparty. Quantitative factors include transaction size, net assets of customer or counterparty,
and ratio analysis on liquidity, cash flow and profitability.
In relation to trade receivables, it is the Group’s policy that all customers who wish to trade on terms are subject
to credit verification on an ongoing basis with the intention of minimising bad debts. The nature of the Group’s
trade receivables is represented by regular turnover of product and billing of customers based on the Group’s
contractual payment terms.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of
trade and other receivables. The main components of this allowance are a specific loss component that relates
to individually significant exposures, and a collective loss component established for Groups of similar assets in
respect of losses that have been incurred but not yet identified.
The carrying amount of the Group’s financial assets represents the maximum credit exposure as summarised above.
Refer to note 12 for an aging profile for the Group’s trade receivables at reporting date.
NOTE 19 • FINANCIAL RISK MANAGEMENT (CONTINUED)
59
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they become
due and payable. The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its liabilities when they become due and payable, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period
of 90 days, including the servicing of financial obligations; this excludes the potential impact of extreme
circumstances that cannot reasonably be predicted, such as natural disasters.
Maturities of financial liabilities
The following table details the Group’s contractual maturities of financial liabilities, including estimated interest
payments and excluding the impact of netting agreements, as at the reporting date:
GROUP 2018
1 year or less
Over
1 to 5 years
Over
5 years
Total
contractual
cash flows
Carrying
amount of
liabilities
$
$$
$
$
Non-derivative financial liabilities
Borrowings10,808,99315,908,670-26,717,66326,483,359
Employee entitlements1,147,462--1,147,4621,147,462
Trade and other payables5,184,311--5,184,3115,184,311
Payable to NZTA9,114,502--9,114,5029,114,502
26,255,26815,908,670-42,163,93841,929,634
GROUP 2017
1 year or less
Over
1 to 5 years
Over
5 years
Total
contractual
cash flows
Carrying
amount of
liabilities
$$$$$
Non-derivative financial liabilities
Borrowings-7,029,304-7,029,3047,029,304
Employee entitlements1,201,002--1,201,0021,201,002
Trade and other payables5,632,175--5,632,1755,632,175
Payable to NZTA9,243,383--9,243,3839,243,383
16,076,5607,029,304-23,105,86423,105,864
NOTE 19 • FINANCIAL RISK MANAGEMENT (CONTINUED)
60
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(c) Market risk
Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates and
interest rates, will affect the Group’s income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the return on risk.
Foreign currency risk
The Group is exposed to currency risk on sales transactions that are denominated in a currency other than the
respective functional currencies of Group entities, primarily the US Dollars (USD) and Australian Dollar (AUD).
The Group, may on occasion, enter into forward exchange contracts to hedge the exposure to foreign currency
fluctuations on sales receipts.
The Group reports in New Zealand dollars. Movements in foreign currency exchange rates affect reported
financial results, financial position and cash flows. Where practical, the Group attempts to reduce this risk by
matching revenues and expenditures, as well as assets and liabilities, by country and by currency.
Foreign exchange rates applied against the New Zealand Dollar, at 31 March are as follows:
20182017
$$
AUD 10.940.93
USD 10.720.71
The Group’s exposure to foreign currency risk at the reporting date was as follows (all amounts are denominated
in New Zealand Dollars):
AUDUSD
2018$$
Cash and cash equivalents7,8661,122,704
Finance lease receivables402,677-
Trade receivables111,7801,909,317
Borrowings-6,259,362
AUDUSD
2017$$
Cash and cash equivalents188,363132,039
Finance lease receivables165,392-
Trade receivables34,189316,526
Borrowings--
NOTE 19 • FINANCIAL RISK MANAGEMENT (CONTINUED)
61
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Interest rate risk
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
20182017
%
Carrying
amount
$%
Carrying
amount
$
Term Loans - NZ $ denominated5.12%16,873,6785.30%7,029,304
Term Loans - US $ denominated4.93%4,201,574--
NZ Growth - Committed Cash Advance Facility 4.29%3,584,623--
US Growth - Committed Cash Advance Facility 3.99%2,057,788--
Net exposure to interest rate risk26,717,6637,029,304
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to foreign
currency risk and interest rate risk.
Foreign currency risk
(1)
Interest rate risk
(2)
GROUP 2018
-10%+10%-100bps+100bps
ProfitEquityProfitEquityProfitEquityProfitEquity
$$$$$$$$
Cash and cash equivalents(81,574)(81,574)81,57481,574(218,704)(218,704)218,704218,704
Finance lease receivables(37,852)(37,852)37,85237,852----
Trade receivables(147,978)(147,978)147,978147,978----
Borrowings(450,674)(450,674)450,674450,674267,177267,177(267,177)(267,177)
Total increase/ (decrease)(718,078)(718,078)718,078718,07848,47348,473(48,473)(48,473)
Foreign currency risk
(1)
Interest rate risk
(2)
GROUP 2017
-10%+10%-100bps+100bps
ProfitEquityProfitEquityProfitEquityProfitEquity
$$$$$$$$
Cash and cash equivalents(9,375)(9,375)9,3759,375(9,345)(9,345)9,3459,345
Finance lease receivables(15,381)(15,381)15,38115,381----
Trade receivables(22,473)(22,473)22,47322,473----
Borrowings----70,29370,293(70,293)(70,293)
Total increase/ (decrease)(47,229)(47,229)47,22947,22960,94860,948(60,948)(60,948)
(1)
The foreign currency sensitivity above represents a 10% decrease and increase in spot foreign exchange rates.
(2)
The interest rate sensitivity above represents a 100 basis point (bps) decrease and increase in variable interest rates.
NOTE 19 • FINANCIAL RISK MANAGEMENT (CONTINUED)
62
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 • FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence
and to sustain future development of the business. The Board monitors the return on capital employed, which the
Group defines as reported EBIT (Earnings Before Interest and Tax) divided by capital employed.
(e) Fair value measurement
The carrying amounts of the Groups financial assets and liabilities approximate their fair value due to their short
maturity periods or fixed rate nature.
NOTE 20 • SHARE-BASED PAYMENTS
At 31 March 2018, the Group had the following share-based payment arrangements:
EROAD LTI Plan (equity-settled)
Eligible employees are invited to purchase EROAD shares under the EROAD LTI plan. Under the terms of the scheme
the purchase of the shares is funded by a loan granted to the eligible employees by EROAD Limited. At the end of the
vesting period the employee will be paid a net bonus in relation to the shares that vest to the employee, equal to the
amount of their loan outstanding to the Company, enabling the loan to be repaid.
Shares issued under the scheme are held in trust for the employees during a 3 year restrictive period. If the employee
ceases to be an employee during the restrictive period the Trustees will repurchase the employees shares at the original
issue price.
The eligible employees must meet certain performance conditions during each year of the restrictive period, as
determined by the remuneration committee and approved by the board. 50% of the scheme shares initially granted
will be forfeited for each year the participant fails to achieve their performance conditions. Additionally the employee’s
shares will also be forfeited if the enterprise value of the Company has not doubled by the end of the restrictive period.
Employee’s shares that are forfeited due to failure to meet market and non-market performance conditions will be
repurchased by the Trustee at the original grant date price.
The EROAD LTI Plan has been accounted for as grant of shares to employees in accordance with NZ IFRS 2. The key
terms and conditions relating to the grants under this Scheme are disclosed in the table below.
EROAD US President Incentive Scheme
The US President was invited to purchase EROAD shares under the EROAD US President Incentive Scheme. Under the
terms of the scheme the purchase of the shares is funded by a loan granted to the employee by EROAD Limited. At
the end of the vesting period the employee will be paid a net bonus in relation to the shares that vest to the employee,
equal to the amount of their loan outstanding to the Company, enabling the loan to be repaid.
Shares issued under the scheme are held in trust for the employee during a 3 year restrictive period. If the employee
ceases to be an employee during the restrictive period the Trustees will repurchase the employees shares at the original
issue price.
Key operational measures and targets for the North American business are outlined in the employees grant letter,
these include Total Contract Units, Average Revenue Per Unit, Customer Acquisition Cost Payback Period, and Renewal
Rate targets. Each operational measure has a percentage weighting for each of the three-year periods, with the
performance for each year being calculated based on the percentage of target achieved multiplied by the percentage
weighting for each operational measures. The total percentage of shares to vest at the end of the restrictive period is
calculated based on the average percentage performance over the three years. If the total average performance is less
than 60% then all shares granted under the scheme will be forfeited.
Employee’s shares that are forfeited due to failure to meet the non-market performance conditions will be repurchased
by the Trustee at the original grant date price.
The EROAD US President Incentive Scheme has been accounted for as grant of shares to employees in accordance
with NZ IFRS 2. The key terms and conditions relating to the grants under this Scheme are disclosed in the table below.
63
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
EROAD LTS Plan (equity-settled)
During the period EROAD granted shares to certain senior executives in recognition of their long-term service to the
Company. Shares issued under the scheme are held in trust for the employee until vesting date. Provided the employees
were still employed by EROAD at 31 March 2017, 47% of the shares granted under the scheme were transferred from the
trust to the employee on 1 June 2017. Provided the employees were still employed by EROAD at 31 March 2018, 53% of the
shares granted under the scheme will be transferred from the trust to the employee on 1 June 2018.
If the employee leaves between 1 April 2016 and 31 March 2018, there is a good-leaver clause that may result in the
shares vesting to the employee, provided that the “good leaver” criteria is met. Due to this clause the full fair value of
shares granted to employees under this scheme was recognised in the statement of comprehensive income in the year
ended 31 March 2017.
Grant date/
employees entitled
Shares
granted
Vesting
conditions
Vesting
period
On 1 April 2015On 1 April 2016On 1 April 2017
Shares granted to key management personnel
EROAD LTI Plan 69,896 53,725• 3 years service from grant date
• Employees performance equal or greater
than the Company's as determined by
remuneration committee
• Enterprise value must double by end of
restrictive period
3 years
EROAD LTS Plan - 76,796 • Must be continue to be employed on 31
March 2017 (47% of shares granted) and
31 March 2018 (53% of shares granted) or
meet ""good leaver"" criteria.
1-2 years
EROAD US
President Incentive
Scheme
490,000 • 3 years service from grant date
• Meet minimum targets for key
operational metrics: Total Contracted
Units, Average Revenue per Unit, Cost
of Customer Acquisition Payback and
Renewal Rates.
• Each years performance is measured on
a weighted calculation of percentage
achieved vs. target for operational
metrics.
• The percentage of shares to vest is
calculated based on the average of each
years weighted percentage achieved. If
the vested amount is less than 60% all
shares will be forfeited.
3 years
Shares granted to other employees
EROAD LTI Plan 98,968 121,032 • 3 years’ service from grant date
• Employee’s performance equal
or greater than the Company’s as
determined by remuneration committee
• Enterprise value must double by end of
restrictive period
3 years
168,864 251,553 490,000
NOTE 20 • SHARE-BASED PAYMENTS (CONTINUED)
64
3.0 FINANCIAL PERFORMANCE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Measurement of fair value
The fair value of the shares issued under the EROAD LTI plans during the year ended 31 March 2018 was
determined with reference to the Company’s share price on the NZX at grant date. A discount was applied to the
fair value of the shares issued under the EROAD LTI scheme to reflect the non-vesting market conditions.
The number of shares granted and forfeited during the period were as follows:
GROUP
20182017
Outstanding at 1 April 388,168221,027
Granted during the period490,000251,553
Forfeited during the period(187,522)(33,103)
Vested during the period(27,171)(51,309)
Outstanding at 31 March 663,475388,168
During the year-ended 31 March 2018 an amount of $268,754 (2017: $345,097) was recognised as an expense
within the statement of comprehensive income in relation to share-based payments.
NOTE 21 • CAPITAL COMMITMENTS
As at 31 March 2018, the Group had confirmed purchase orders with its third party manufacturer of hardware units
amounting to $6,983,048 (2017: Nil).
NOTE 22 • CONTINGENT LIABILITIES
There are no contingent liabilities to report at 31 March 2018 (2017: Nil).
NOTE 23 • EVENTS SUBSEQUENT TO BALANCE DATE
There are no other events subsequent to balance date which have not already been taken up in the accounts (2017: Nil).
NOTE 24 • RECONCILIATION OF CASH FLOWS
GROUP
20182017
$$
Reconciliation of operating cash flows with reported profit/(loss) after tax:
Profit/(loss) after tax for the year attributable to the shareholders209,616(5,274,156)
Add/(less) non-cash items
Tax asset recognised(1,789,485)2 7, 3 5 4
Depreciation and amortisation15,540,35112,077,324
Other non-cash expenses/(income)567,160111,409
14,318,02612,216,087
Add/(less) movements in other working capital items:
Decrease/(increase) in trade and other receivables(6,618,647)(1,688,135)
Decrease/(increase) in finance lease receivables(4,833,523)(379,130)
Decrease/(increase) in current tax receivables340,45694,969
Decrease/(increase) in current tax payables85,245-
Increase/(decrease) in deferred income(899,149)(974,305)
Increase /(decrease) in trade payables, interest payable and accruals(595,430)2,632,948
(12,521,048)(313,653)
Net cash from operating activities2,006,5946,628,278
NOTE 20 • SHARE-BASED PAYMENTS (CONTINUED)
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
65
NOTE 25 • RELATED PARTY TRANSACTIONS
The subsidiaries of the Company are:
CompanyCountry of IncorporationInterest %Principal activity
EROAD Financial Services LtdNew Zealand100Financing activities within group
EROAD LTI Trustee LimitedNew Zealand100LTI Scheme Trustee
EROAD (Australia) Pty LimitedAustralia100Transport Technology & SaaS
EROAD IncUnited States of America100Transport Technology & SaaS
Key management personnel compensation comprised:
20182017
$$
Short-term employee benefits2,246,6572,118,780
Share-based payments251,59371,040
2,498,250 2,189,820
(a) Loans to key management personnel
There have been no loans to management personnel.
(b) Other transactions with key management personnel
There were no other transactions with key management personnel during the period. From time to time, key
management personnel of the Group may purchase goods from the Group. These purchases are on the same terms
and conditions as those entered into by other Group employees or customers and are trivial or domestic in nature.
(c) Remuneration of Non-Executive Directors
20182017
$$
Michael Bushby (Chair)85,09476,792
Anthony Gibson52,54649,061
Sean Keane (resigned 5 May 2017)4,08849,061
Candace Kinser50,54649,061
Gregg Dal Ponte50,54636,750
Graham Stuart (appointed 1 January 2018)16,250-
259,070
260,725
The following additional fees were paid to certain Directors for additional consultancy work provided to the Company:
20182017
$$
Gregg Dal Ponte6,29765,365
6,297 65,365
(d) Remuneration of Executive Director
20182017
$$
Salary and bonus555,859641,024
Share-based payments-35,440
555,859 676,464
© 2018 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
66
Independent Auditor’s Report
To the shareholders of EROAD Limited
Report on the consolidated financial statements
Opinion
In our opinion, the accompanying consolidated
financial statements of EROAD Limited (the
company) and its subsidiaries (the Group) on pages
31 to 65:
i.present fairly in all material respects the Group’s
financial position as at 31 March 2018 and its
financial performance and cash flows for the
year ended on that date; and
ii.comply with New Zealand Equivalents to
International Financial Reporting Standards.
We have audited the accompanying consolidated
financial statements which comprise:
—the consolidated statement of financial position
as at 31 March 2018;
—the consolidated statement of comprehensive
income, statement of changes in equity and
statement of cash flows for the year then
ended; and
—notes, including a summary of significant
accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (“ISAs (NZ)”). We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of
Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the
International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA
Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the Auditor’s Responsibilities for the Audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the Group in relation to tax compliance, tax advisory and corporate
finance. Subject to certain restrictions, partners and employees of our firm may also deal with the Group on
normal terms within the ordinary course of trading activities of the business of the Group. These matters have
not impaired our independence as auditor of the Group. The firm has no other relationship with, or interest in,
the Group.
Scoping
The scope of our audit is designed to ensure that we perform adequate work to be able to give an opinion on the
consolidated financial statements as a whole, taking into account the structure of the Group, the financial
reporting systems, processes and controls, and the industry in which it operates.
The context for our audit is set by the Group's major activities in the financial year ended 31 March 2018. We
tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the
66
consolidated financial statements as a whole, taking into account the structure of the Group, the accounting
processes and controls, and the industry in which the Group operates. The Group’s finance function is located at
the Head Office in Auckland and in the USA office in Oregon. All audit work in respect of the consolidated
financial statements was performed by the Group engagement team.
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and on the consolidated financial statements as a whole. The materiality for the consolidated financial
statements as a whole was set at $490,000 determined with reference to a benchmark of Group total revenues.
We chose the benchmark because, in our view, this is a key measure of the Group’s performance.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the consolidated financial statements in the current period. We summarise below those matters and our key
audit procedures to address those matters in order that the shareholders as a body may better understand the
process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely
for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not
express discrete opinions on separate elements of the consolidated financial statements.
The key audit matter How the matter was addressed in our audit
Development asset capitalisation and impairment ($26.9m)
Refer to note 14 of the consolidated financial
statements.
The Group has reported a development asset of
$26.9m (2017: $26.2m). This investment requires
significant judgement as to whether the largely
internal costs should be expensed or capitalised,
and assessing the indicators of impairment. We
focused on this area due to the quantum of the
development costs capitalised.
The Group’s process for calculating the amount of
internally developed platform costs to be
capitalised is judgmental and involves estimating
the hours which staff spend developing software
and determining the costs attributable to that time.
The Directors have assessed whether any
impairment indicators existed for each major
development asset by considering, among other
factors, sales achieved to date and the overall
operating and cash performance of the entity.
Indicators of impairment were identified in the US
operations and the Group performed an
impairment test of the development assets on a
value in use basis. This assessment requires
judgment when forecasting future sales and the
related cash flows, including considering the
We assessed the judgement related to the internal costs
capitalised by:
—Understanding the nature and background of the
activities that are capitalised to the development
asset through inquiry of the key operational,
financial,
legal, and engineering personnel;
—Assessing whether the costs capitalised during the
year comply with the accounting requirements; and
—Assessing the accuracy of calculation of the amount
of internal costs based on the hours which staff
spend developing software a
nd the attributable costs
that have been capitalised.
We assessed management’s impairment testing of the
development asset by obtaining the supporting model
and assessing the methodology and key assumptions
made:
—We confirmed our understanding of the US
telematics industry and country specific regulation
obtained during our visit to the EROAD Oregon
operations through interviews held with relevant
members of the US management team.
—We reconfirmed the external advice management
has obtained in respect of the market strategy to be
67
The key audit matter How the matter was addressed in our audit
difficulties in achieving current year budgeted sales
levels for US market.
adopted in the US through discussions with
management to confirm our understanding of the
operation’s strategy.
—We used our corporate finance experts to challenge
and assess the appropriateness and mathematical of
the model used by management to assess
impairment.
—We challenged management’s future cash flow
forecasts. Our assessment included comparing
previous forecasts to actual results, those approved
in the 31 March 2018 budget, and other relevant
supporting documentation such as sales pipelines to
evidence the feasibility of the forecasts and to
assess the reliability of historical forecasting.
—We used our corporate finance experts to challenge
the reasonableness of management’s weighted
average cost of capital used as the discount rate in
the model and the reasonableness of the long term
growth rates applied, in managements model;
—To challenge management’s forecasts we performed
sensitivity analysis over the forecasted sales
volumes, discount rate, and expenses. We
performed sensitivity analysis in order to ascertain
the extent of change in those assumptions required
to result in an impairment of the development
assets.
We did not identify any factors that indicated that
management’s overall conclusions were not supportable.
Revenue ($51.5m)
Refer to note 2 of the consolidated financial
statements.
The Group’s revenue consists of only small a
number revenue streams out of which the most
significant is leasing and subscription revenue.
Leasing revenue is derived from renting the in-
vehicle hardware units to customers. These
contracts span more than one accounting period
(typically three years to five years). The majority of
revenue in respect of the hardware rental is treated
as operating lease revenue and is recorded evenly
over the contractual term. Finance lease revenue
represents rental contracts that transfer
substantially all the risks and rewards of
ownership.
The determination of a contract as operating or
financing is dependent on multiple factors. These
Our procedures included the following:
—Assessing the Group’s operating and finance lease
revenue recognition policy for compliance with the
relevant accounting requirements;
—Reviewing any changes or new contractual terms
and conditions entered into with new customers
during the period, and consideration of the potential
impact on revenue recognition applied;
—Assessing the appropriateness of the useful life by
examining the physical historical performance and
time the units have operated for;
—Selecting a sample of revenue contracts operating
during the year and agreeing the sample back to the
contract terms, assessing the revenue recognition
68
The key audit matter How the matter was addressed in our audit
factors determine whether the Group retains or
transfers substantially all the risk and rewards of
ownership.
We focused on this area because the accounting
determination of whether the contract is an
operating or finance lease has a significant impact
on the recognition of profit and loss and balance
sheet.
based on the contractual terms and agreeing the
revenue to cash received from the customer;
—Checking a sample of customer contracts
immediately prior to and after year end to confirm
revenue has been recognised in their respective
financial years.
We did not identify any matters that indicated that the
reported revenue is materially misstated.
Deferred Tax Asset ($3.9m)
The key audit matter How the matter was addressed in our audit
Refer to note 9 of the consolidated financial
statements.
The Group has a net deferred tax asset balance of
$3.9m, of which $9.0m relates to deferred tax
assets arising from past tax losses. We focused on
the deferred tax asset from tax losses arising in
New Zealand as its recoverability is sensitive to the
Group’s expected future profitability and its
entitlement to offset these losses against future
profits.
In assessing the recognition and recoverability of
the deferred tax asset, management prepared
detailed forecasts of the taxable profits expected
to be generated from the New Zealand business.
This as a key risk due to the significance of the
deferred tax asset to the financial position of the
Group and the judgement applied by management
in determining the extent to which a deferred tax
asset should be recognised for the related
accumulated tax losses.
Our procedures included the following:
—We evaluated the Group’s assessment of whether
there would be sufficient taxable profits in future
periods to support the carrying value of the deferred
tax asset in New Zealand;
—We confirmed that the assumptions used in the
forecasts of taxable profit were consistent with the
assumptions applied in management’s FY19
budgets;
—We challenged the key assumptions in the forecasts
presented;
—We also considered whether the recognition of
additional deferred tax assets in relation to current
year tax losses and previously unrecorded losses
were in compliance with the relevant accounting
requirements;
—We examined correspondence with the Inland
Revenue Department supporting the calculation of
available tax losses;
—We used our tax specialists to assess whether the
shareholder continuity requirements under New
Zealand tax legislation had been maintained in the
current financial reporting period;
The results of our procedures did not identify any
inconsistencies with management’s conclusion the
recognition of previously unrecognised losses and current
year losses meets the criteria for recognition.
Other Information
The Directors, on behalf of the Group, are responsible for the other information included in the entity’s Annual
Report. Other information includes the Overview, Governance, Financial Performance, Regulatory Disclosures,
and other information included in the Annual Report. Our opinion on the financial statements does not cover any
other information and we do not express any form of assurance conclusion thereon.
69
In connection with our audit of the financial statements our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears materially misstated. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have received the Overview, Governance, Financial Performance, Regulatory Disclosures,
and other information and have nothing to report in regards to it.
Use of this Independent Auditor’s Report
This report is made solely to the shareholders as a body. Our audit work has been undertaken so that we might
state to the shareholders those matters we are required to state to them in the Independent Auditor’s Report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the shareholders as a body for our audit work, this report, or any of the opinions we have
formed.
Responsibilities of the Directors for the consolidated financial
statements
The Directors, on behalf of EROAD Limited, are responsible for:
—the preparation and fair presentation of the consolidated financial statements in accordance with generally
accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial
Reporting Standards) and International Financial Reporting Standards;
—implementing necessary internal control to enable the preparation of a consolidated set of financial
statements that is fairly presented and free from material misstatement, whether due to fraud or error; and
—assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the consolidated financial
statements
Our objective is:
—to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error; and
—to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of these financial statements is located at the External
Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
70
The engagement partner on the audit resulting in this independent auditor's report is Ross Buckley.
For and on behalf of
Ross Buckley
KPMG Auckland
18 May 2018
71
72
“It was good having the Inspect
reports but I found I couldn’t do
anything with it, but now with the
defect board, I can take action.
It has saved me 1.5 hours most
mornings. I now have time to do other
things. I’m more focused and I don’t
lose my way through the information.
It’s a piece of cake. It’s fantastic.
So much easier. I love it.”
MARTIN JONES
FLEET SERVICE AND PERFORMANCE SUPERVISOR
FOODSTUFFS
74
4.0
REGULATORY
DISCLOSURES
75
4.0 REGULATORY DISCLOSURES
75
DIRECTORS
The persons who held office as directors of EROAD Limited
at any time during the year ended 31 March 2018, are as
follows:
Michael Bushby Chairman, Non-Executive, Independent
Steven Newman Chief Executive Officer
Candace Kinser Non-Executive, Independent
Anthony Gibson Non-Executive, Independent
Gregg Dal Ponte Non-Executive, Independent
Graham Stuart Non-Executive, Independent*
Sean Keane Non-Executive, Independent**
*Graham Stuart joined the EROAD Board in January 2018.
**Sean Keane resigned from the EROAD Board in May 2017.
SUBSIDIARY COMPANY DIRECTORS
The persons who held office as directors of subsidiary
companies at 31 March 2018 are as follows:
EROAD Financial Services Limited (New Zealand)
Anthony Gibson
EROAD (Australia) Pty Limited (Australia)
Michael Bushby, Steven Newman
EROAD Inc. (USA)
Michael Bushby, Steven Newman
EROAD LTI Trustee Limited (New Zealand)
Anthony Gibson, Candace Kinser
INTERESTS REGISTER
In accordance with Section 140(2) of the Companies Act,
the directors named below have made a general disclosure
of interest by a general notice disclosed to the Board and
entered in the Company’s interests register. General notices
given by directors which remain current as at 31 March 2018
are as follows:
Michael Bushby
• Director, Lowelly Pty Limited
• Director, 45 Mimosa Pty Limited
• Strategic Advisor, WSP Australia
Graham Stuart joined as of January 2018
• Director, Tower Limited
• Director, Tower Insurance Limited
• Director, Tower Financial Services Group Limited
• Director, Leroy Holdings Limited
• Director, Goodcows Limited
• Advisory Board Member, Vinpro Limited*
• Director, Focal Dairies LLC (USA)*
*Notice given by Graham Stuart after the year ended 31 March 2018
Anthony Gibson
• Chief Executive Officer, Ports of Auckland Limited
• Chairman, North Tugz Limited
• Director, AMG Consulting Limited
• Director, Seafuels Limited
• Director, Waikato Freight Hub Limited
• Director, Marsden Maritime Holdings Limited*
*Notice given by Anthony Gibson in April 2018.
Candace Kinser
• Non-Executive Director, Talent International Limited
(Australia)
• Director, Kinser Trustee Limited
• Director, Sagitas Consulting Limited
• Independent Director, Livestock Improvement
Corporation Limited
• Advisor, Palantir Technologies
• Advisor, Return on Science Program for the University of
Auckland*
• Beachheads Advisor, New Zealand Trade & Enterprise*
• Advisor, BECA New Ventures Team Advisory Board**
*Notice given by Candace Kinser In May 2018.
**Notice given by Candace Kinser during the year ended 31 March 2018.
Steven Newman
• Director, NMC Trustees Limited
Gregg Dal Ponte
• Director of Regulatory Compliance, Oregon Trucking
Association, Inc.
Director
Disclosures
76
4.0 REGULATORY DISCLOSURES
76
The following details included in the Company’s interests
register as at 31 March 2017 have been removed as at 31
March 2018:
• Sean Keane is no longer a director of EROAD Limited as
of 5 May 2017 and therefore all of his interests disclosed
on the interests register (as set out in last year’s annual
report) have been removed.
Share dealings by directors
In accordance with Section 148(2) of the Companies Act, the
Board has received disclosures from the directors named
below of acquisitions or dispositions of relevant interests in
the company between 1 April 2017 and 31 March 2018, and
details of those dealings were entered in the company’s
interests register. The particulars of such disclosures are:
Graham Stuart
• 1) Purchase of 19,964 ordinary shares, at $3.49 per share,
on 8 March 2018; 2) purchase of 36 ordinary shares, at
$3.49 per share, on 9 March 2018.
Michael Bushby
• 1) Allotment of 4,934 ordinary shares under a share
purchase plan, at $3.04 per share, on 6 March 2018.
Candace Kinser
• 1) Allotment of 4,934 ordinary shares under a share
purchase plan, at $3.04 per share, on 6 March 2018.
Anthony Gibson
• 1) Allotment of 4,934 ordinary shares under a share
purchase plan, at $3.04 per share, on 6 March 2018.
Steven Newman
• 1) Disposal of 1,644,737 ordinary shares pursuant to a
placement and underwriting agreement, at $3.04 per
share, on 15 December 2017; 2) transfer of beneficial
interest in 51,172 ordinary shares forfeited under EROAD’s
LTI plan for the period between 1 April 2014 and 31 March
2017, at $2.77 per share, on 15 December 2017.
Use of Company information
There were no notices from directors of the Company
requesting to use Company information received in their
capacity as directors that would not otherwise have been
available to them.
Directors’ and officers’ insurance and indemnity
EROAD has arranged, as provided for under the Company’s
constitution, policies of directors’ and officers’ liability
insurance which, with a Deed of Indemnity entered into
with all directors, ensures that generally directors will incur
no monetary loss as a result of actions undertaken by them
as directors. Certain actions are specifically excluded, for
example, the incurring of penalties and fines that may be
imposed in respect of breaches of the law.
Directors’ relevant interests
The following directors held relevant interests in the following
ordinary shares in the Company as at 31 March 2018:
NameOrdinary shares
Steven Newman14,363,557
Michael Bushby161,004
Graham Stuart20,000
Anthony Gibson567,999
Candace Kinser41,999
77
4.0 REGULATORY DISCLOSURES
77
ANNUAL SHAREHOLDERS’ MEETING
The Company’s 2018 annual shareholders’ meeting will be
held at QBE Stadium, Stadium Drive, Albany, Auckland on
Thursday, 2 August 2018 commencing at 4:45pm.
DISTRIBUTION OF SHAREHOLDERS AND HOLDINGS
Holding Range
Number
of holders
%
Number of
ordinary shares
%
1 to 99927416.6134,1640.2
1,000 to 4,99975745.841,776,9792.61
5,000 to 9,99926115.811,685,7402.48
10,000 to 49,99927916.95,761,6608.46
50,000 to 99,999271.641,900,4762.79
100,000 and over533.2156,830,91283.46
Total165110068,089,931100
The details set out above were as at 6 April 2018..
The Company only has one class of shares on issue, ordinary
shares, and these shares are quoted on the NZX Main Board
SUBSTANTIAL PRODUCT HOLDERS
According to notices given under the Financial Markets Conduct
Act 2013, the substantial product holders in ordinary shares (being
the only class of quoted voting products) of the Company and
their relevant interests according to the substantial product holder
file as at 31 March 2018, were as follows:
Substantial
product holder
Date of
Notice
Number of
shares
% of
shares on
issue at
31 March
2018
Steven Newman (includes NMC
Trustees Limited’s relevant
interest)
15/12/201714,363,55721.725%
NMC Trustees Limited as trustee
of the NMC Investment Trust
15/12/201714,354,45721.711%
Commonwealth Bank of
Australia
06/12/20175,168,2628.47%
Colonial First State Asset
Management
16/11/20175,091,2628.34%
The total number of ordinary shares (being the only class of
quoted voting products) on issue in the Company as at 31
March 2018 was 68,089,931.
Shareholder
Information
78
4.0 REGULATORY DISCLOSURES
78
PRINCIPAL SHAREHOLDERS
The names and holdings of the twenty largest registered
shareholders in the Company as at 6 April 2018 were:
Holder NameShares%
New Zealand Central Securities Depository Limited23,467,86934.46
NMC Trustees Limited14,354,45821.08
FNZ Custodians Limited4,264,8226.26
David Murray Jarrett & Julie Patricia Jarrett &
Vlatkovich & Mcgowan Trustee Company Limited
1,805,9342.65
Andrew Bowker
956,065
1.4
John Grant Sinclair740,1591.08
Alister Moss621,9070.91
Slk Asset Management Limited573,9960.84
Anthony Gibson567,9990.83
Paul Geoffrey Hewlett & Catherine Patricia Carter
& Hoffman Trustees Limited
561,6590.82
JB Were (NZ) Nominees Limited (54145 A/C)549,1980.8
EROAD LTI Trustee Limited490,0000.71
JB Were (NZ) Nominees Limited (NZ Resident A/C)
466,7820.68
Somac Holdings Limited 412,7400.6
First NZ Capital Securities Limited 380,5550.55
Jarred Blair Clayton328,1550.48
Arden Capital Limited309,9340.45
Nicholas Raymond Scott & Trustee Services
Limited
305,9640.44
Matu Limited300,0000.44
Sean Hope263,6160.38
Shareholdings larger than 1% held through New Zealand
Central Securities Depository Limited (NZCSD) as at 5 April
2018 were:
Holder NameHolding%
Citibank Nominees (New Zealand) Limited -
NZCSD
6,194,0299.10
BNP Paribas Nominees (NZ) Limited - NZCSD3,424,8055.03
HSBC Nominees (New Zealand) Limited -
NZCSD
3,333,2764.90
HSBC Nominees (New Zealand) Limited A/C
State Street - NZCSD
3,030,5574.45
Accident Compensation Corporation - NZCSD2,772,7274.07
Tea Custodians Limited Client Property Trust
Account - NZCSD
2,313,5983.40
BNP Paribas Nominees (NZ) Limited 717,196 1.05
79
4.0 REGULATORY DISCLOSURES
Other
Information
NZX WAIVERS
No waivers were sought from the NZX during the year ended
31 March 2018.
DISCIPLINARY ACTION TAKEN BY THE NZX
The NZX has not taken any disciplinary action against the
company during the year ended 31 March 2018
AUDITOR’S FEES
KPMG has continued to act as auditor of EROAD and
its subsidiaries. The amount payable by EROAD and its
subsidiaries to KPMG as audit fees during the year ended
31 March 2018 was $189,525. The amount of fees payable to
KPMG for non-audit work during the year ended 31 March
2018 was $377,456. Note 3 in the Financial Statements
section of this Annual Report includes a detailed breakdown
of auditor’s fees for audit and non-audit work.
DONATIONS
The Company and its subsidiaries made donations totaling
$4,498 during the year ended 31 March 2018.
CREDIT RATING
The company does not currently have a credit rating.
80
5.0
GLOSSARY
81
Glossary
Annualised Recurring Revenue Monthly Recurring Revenue recognised or expected to be recognised in the month of March multiplied
by 12
Automatic On Board Recording
Device (AOBRD)
AOBRDs are electronic devices that can be used to automatically record drivers’ hours of service
AuditorKPMG
Companies ActCompanies Act 1993
CompanyEROAD Limited
DepotEROAD’s web-based platform that allows customers to manage (and pay) their RUC, WMT and
fleet management services
Driver Vehicle Inspection
Report (DVIR)
A report created by a driver identifying defects and safety risks to a commercial vehicle
EBIT before
non-operating costs
Earnings before non-operating costs, interest and tax.
Ehubo and Ehubo2EROAD’s first and second generation electronic distance recorder which replaces mechanical
hubo-dometers. Ehubo is a trade mark registered in New Zealand
Electronic Logging Device
(ELD)
An electronic solution that synchronises with a vehicle engine to automatically record driving
time and hours of service records
EROADEROAD Limited, and where the context permits, includes its subsidiaries.
® EROAD is a trade mark registered in New Zealand
eRUCElectronic Road User Charges. Refer to page 82 for definition of Road User Charges
Future Contracted IncomeA non-GAAP measure which represents future hardware and SaaS cash inflows relating to
income under non-cancellable long-term rental agreements. Note that this definition has
changed from the previous period in order to include the future cash flows from finance leases,
where the revenue has been recognised in advance of cash flows.
FMCSAFederal Motor Carrier Safety Administration
FYFinancial year ended 31 March
GroupEROAD Limited and its subsidiaries
Heavy VehicleA truck, or a truck and trailer, weighing over:
• 3.5 tonnes in New Zealand (required to pay RUC);
• 12 tonnes in Oregon (required to pay WMT); or
• 4.5 tonnes in Australia
5.0 GLOSSARY
82
International Fuel
Tax Agreement (IFTA)
A cooperative agreement between all states (excluding Alaska and Hawaii) of the United States,
and the Canadian provinces, designed to make it simpler for inter-jurisdictional carriers to report
and pay fuel excise taxes, requiring only one fuel licence to operate across multiple jurisdictions
International
Registration Plan (IRP)
An agreement between all states (excluding Alaska, Hawaii and Washington D.C.) of the
United States, and the Canadian provinces, for the registration of inter-jurisdictional vehicles.
Registration fees are paid to a fleet’s base jurisdiction, which then distributes them to other
jurisdictions based on the miles travelled in each member jurisdiction
Listing RulesThe listing rules applying to the NZX Main Board as amended from time to time
Ministry of Transport (MOT)The New Zealand government's principal transport policy adviser to the Minister and
Associate Minister of Transport
New Zealand
Transport Agency (NZTA)
A government entity, whose role is to provide a link between government policy making and
the operation of the sector. NZTA aims to achieve better use of existing transport capacity, more
efficient freight and a resilient and secure transport network
NZ GAAP or GAAPNew Zealand Generally Accepted Accounting Practice
NZ IFRSNew Zealand equivalents to International Financial Reporting Standards
NZXNZX Limited
NZX Main BoardThe main board equity security market, operated by NZX
Oregon Department
of Transportation (ODOT)
A department of the state government of Oregon, responsible for managing the state's
transportation systems
Recurring RevenueThe revenue EROAD expects to receive in future months from existing Total Contracted Units
from monthly charging of services, monthly hardware rentals and current monthly rates of
transaction fees
Retention RateThe number of Units installed at the beginning of the period and retained on Depot at the end of
the period as a percentage of the number of Units on Depot at the beginning of that period
Road User Charges (RUC)In New Zealand, RUC is applicable to Heavy Vehicles and all vehicles powered by a fuel not taxed
at source. The charges are paid into a fund called the National Land Transport Fund, which is
controlled by NZTA, and go towards the cost of repairing the roads
TuboThe trailer version of the Ehubo1
Total Contracted UnitsTotal Contracted Units represents the total Units subject to a customer contract and includes
both Units on Depot and Units pending installment
UnitAn EROAD device
Units on DepotThe number of EROAD devices installed in vehicles and subject to a customer contract
Weight-Mile Tax (WMT)A mileage-based tax imposed on Heavy Vehicles according to a combination of the number of
axles and/or combined weight of the vehicle and the number of miles driven in Oregon, USA
5.0 GLOSSARY
• CEO Steven Newman joins the company.
EROAD begins commercialising its vision to become a global GPS tolling provider
2007
• Field trials of Ehubo, EROAD’s electronic distance recorder
2008
• EROAD launches a network-wide GPS/cellular-based road charging system – a world first
• EROAD implements the first electronic RUC service in New Zealand
2009
• NZTA and MOT approve Ehubo (for trucks) and Tubo (for trailers)
• EROAD wins at the NZ Hi-Tech Awards
2010
• EROAD implements the first mobile RUC application – for management and purchase using any
web-enabled device
2011
• EROAD undertakes first commercial pilot in North America of a GPS/cellular-based road charging platform
• Ranked fifth on the New Zealand Green 50 list
• Ranked 10th on Deloitte Technology Fast500 Asia Pacific
2012
• EROAD ranks 9th on Deloitte Fast50
• Finalist in Emerging Company of the Year, NZ Hi-Tech Awards 2013
• Included on Deloitte Technology Fast500 Asia Pacific 2013
2013
• EROAD launches commercial services in North America and Australia
• Lists on the NZX Main Board Included on Deloitte Technology Fast500 Asia Pacific 2014
• Included on Deloitte Fast50 – Regional Winner
• EROAD electronic weight mile tax solution received independent unqualified opinion from
Oregon Secretary of State Audits Division
• Launches NZ Transport Agency-approved electronic logbook in New Zealand
2014
• EROAD launches electronic IFTA service in North America
• Launches electronic logbook in North America
• Included on Deloitte Technology Fast500 Asia Pacific 2015
2015
• Launches EROAD Inspect on Ehubo2 in North America
2018
• Launch of Ehubo2 in New Zealand, its NZ Transport-Agency approved second-generation electronic
distance recorder
• Included on Deloitte Technology Fast500 Asia Pacific 2016
• Participates in California Road Charge Pilot as sole heavy vehicle technology provider
2016
• Launches FMCSA-registered, independently verified ELD (electronic logging device) in North America
• Launches mobile DVIR product, Inspect, in New Zealand
• Selected as sole heavy vehicle technology provider for first multi-state MBUF truck pilot on I-95 in US
• Finalist, Best Hi-Tech Technology Solution for the Public Sector, NZ Hi-Tech Awards 2017
• Finalist, Most Innovative Hardware Product, NZ Hi-Tech Awards 2017
• Finalist, Most Innovative Hi-Tech Service, NZ Hi-Tech Awards 2017
2017
• EROAD founded
• R & D begins
• EROAD electronic distance recorder obtains New Zealand patent
2000–2007
Company timeline
83
84
EROAD
NEW ZEALAND
260 Oteha Valley Road
Albany, Auckland, 0632
USA
7618 SW Mohawk Street
Tualatin, OR 97062
SHARE REGISTRAR
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna, Auckland 0622
SOLICITORS
Chapman Tripp
Level 35, ANZ Centre
23-29 Albert Street, Auckland 1010
AUDITOR
KPMG
KPMG Centre
18 Viaduct Harbour Avenue, Auckland 1010
BANKER
Bank of New Zealand
80 Queen Street
Auckland Central, Auckland 1010
Directory
84
EROAD.COM
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.