AusNet Services: Leading Energy Infrastructure Company

About AusNet Services

Discuss about the Analyse the Financial Statement of Ausnet Services Ltd.

1. Lay Solid Foundations for management and Oversight: The charter which sets out the responsibilities of the board and the function which are delegated to the management is adopted by the board. The day to day management of AusNet Services ltd is delegated to the managing director of the company (Tricker and Tricker 2015). The board is responsible for reviewing the role and responsibility of the management and ensure that they are performing with in their scope. The company secretary is directly accountable to the board, through the chairmen on all matters related to the effective functioning of the management. For the purpose of appointing new independent Non-Executive Directors, the nomination committee reviews and recommends to the Board for appointment of an independent non-executive director (Ausnetservices.com.au. 2018). The company recognizes that diversity is required in the workforce for attaining long term sustainability.
2. Structure the board to add value: The board of directors comprises of 9 non-executive directors which includes the chairman and one executive director which is the managing director of the business (Beekes, Brown and Zhang 2015). For effective management of the business and discharge of duties, the board has established nomination committee, Remuneration Committee and Audit and Risk Management committee (Cybinski and Windsor 2013). The company has also appointed a new independent non-executive director who has 20 years of experience in different industries which will be adding value to the management.
3. Act Ethically and Responsibly: The board of AusNet Services is committed in setting up an ethical environment for the business dealings. The company has developed a code of business conduct which can guide the directors and all other personnel to maintain integrity and accountability for the activities of the business. In accordance with the code of conduct of business, the company has developed a Whistleblower policy which can help the business to respond appropriately to wrongful acts (Dhamija 2014). The company in order to adhere effectively to the Whistleblower strategy has decided to use the services of STOPline which is an external, confidential provider of Whistleblower disclosure services (Devine and Walden 2013). In addition to this, the board has developed conflict of interest deadline to solve any conflicts which may arise between the directors and AusNet services ltd which should also be in compliance with the Corporation Act. It is also an established guideline that relevant persons should not deal in the securities of the company.
4. Safeguard Integrity in Corporate Reporting: The board is responsible for the effective representation of the reporting framework of the company. The Audit and Risk Management committee provides assistance to the board in order to maintain the quality of reporting standard, monitoring compliance with applicable laws and regulation (Tao and Hutchinson 2013). The Audit and Risk management committee also has the power to conduct independent investigation which can ensure whether the reporting framework is being followed or not. The company has an Auditor Independence policy which the management intends to maintain by regulating the non-audit services which are provided by the external auditor (Badolato, Donelson and Ege 2014).
5. Make Timely and Balanced Disclosure: AusNet Services has successfully established and developed a continuous disclosure policy which guides the management about the continuous disclosure requirement (Glaum et al. 2013). The company secretary is responsible for the maintaining the continuous disclosure policy of the company and also handles communication with ASX and SGX-ST regarding the continuous disclosure requirements. In addition to this, the board also discusses issues which the company faces in continuous disclosure policies in its general meeting.
6. Respect the rights of the Shareholders: AusNet Services holds an annual Investor open day for all investors, proxy investors which focuses on key issues which impact the activities of the company and also provides an opportunity to the shareholders to meet the management of the company and also interact with the CEO of the company. The investor relations of the company also seek to act as an effective conduct between the market and AusNet Service board and senior management regularly communicating feedback from the market. The feedback of the investors is very important as it helps the management of AusNet Services ltd to frame its strategies and continuous disclosure plans (Cella, Ellul and Giannetti 2013). All important announcements and declaration of results are done on the website of AusNet Services ltd. The full year and half year results of AusNet is also published in the official website of the company. in addition to this the company has computer-share facilities that provides electronic communication of the investors with the management of the company (Cheng, Green and Ko 2014). The company also has a Customer Consultative Committee which meet quarterly with key investor representatives in order to gain customer insights which helps the business in decision making process.
7. Recognize and Manage Risk: The company is committed to managing risks of the business so that the it can provide greater certainty and confidence to the shareholders of the company. The company aims to provide a right balance between risk and return so that it can enhance the profitability and performance of the business (Dionne 2013). The board continuously manages the risk management and internal control system of the company and also ensures that the shareholders are well informed about the risk position of the management of the business. The board also receives assistance from the Audit and Risk Management committee in discharging its functions effectively. The managing director of the business is accountable for the risk management implementation process. The board also has internal audit plans to ensure that the risk management policies of the company are working effectively or not. The internal auditor conducts risk based internal audit and reports the results of the same to the Audit and Risk Management Committee and in times also directly to the CEO of the company.
8. Remunerate Fairly and Responsibly: The board recognizes the fact that the company needs to have an appropriate remuneration policy in order to attract talented directors and other personnel and also retain the same (Ben Shlomo, Eggert and Nguyen 2013). The details about the remuneration which is provided to key directors are clearly given in the director’s report which is shown in the financial statement of the company. The company has also set a remuneration committee which is responsible for such matters. The committee also reviews matters related to superannuation and other employment benefits and entitlements.

AusNet Services ltd is engaged in distribution of safe and reliable gas and electricity to more than 1.3 million customers. The company is a developing company and are leading energy delivery service providers which has an asset of approximately of $ 11 million of electricity and gas network. The company has more than 2,200 employees working across our regulated network for the new commercial Energy Services (Ausnetservices.com.au. 2018). The company is also in the process of developing new products which can be more useful to the customers of the company. The company plans to to make the distribution of electricity and gas safe and free from trouble for the customers. In addition to this, the company is regarded as Australia’s Largest ASX-listed regulated energy infrastructure company which has an asset base growth of 3% per annum.

AusNet Services ltd is engaged in distribution services in both Australia and Singapore and it is listed in both the stock exchanges. The headquarter of the company is situated in Melbourne, Australia. The company is regarded as Australia’s Largest ASX-listed regulated energy infrastructure company and moreover the company has been attaining continuous growth in asset base of the company of 3% (Ausnetservices.com.au. 2018). The aim of the management of AusNet Services is to improve the services and further develop the business by the year end 2020. As per the financial statement of the company the company has made a growth in the assert base of 5%. The company has acquired new customers worth 28,919 which shows the company’s development and reputation in the market (Ausnetservices.com.au. 2018). The company is also one of the leading provider of electricity and gas in Australia and also has an established business in Singapore.

The business of AusNet Services is regulated by Australian Stock Exchange (ASX) where the business is listed and also by the relevant accounting standards which are in force in the country.

The company is trying to expand the operation of the business by developing a new product which can empower the customers and also be useful to them. The mission of the company is to ensure that the services which are provided are safe and secure. For such purpose the company the company has launched missionZero strategy which supports safety leadership, safe behavior, continuous improvement in safety systems and commitment in making the workplace environment safer.

Statement Showing ratios
Particulars	2017	2016
Profit and Loss A/c ratios
Operating Profit Ratio	34.41%	39.09%
Net Profit ratio	13.56%	25.50%
Return on Shareholder’s Equity	17.50%	21.09%
Balance Sheet Ratio
Current ratio	0.833609	0.62538
Debt equity ratio	1.802212	1.938754
Total Asset Turnover ratio	0.160039	0.164354

Statement Showing Income and Expenses
Particulars	2017	2016	Amount	Percentage
	$- million	$- million
Revenue	$ 1,881.50	$ 1,919.00	-37.5000	-0.0195
Expenses
Use of system and associated charges	$       99.30	$       98.30	1.000	0.010
Easement and land tax	$     115.90	$     116.50	-0.600	-0.005
Employee benefits expenses	$     252.40	$     235.60	16.800	0.071
External maintenance and contractors’ services	$       97.80	$     104.00	-6.200	-0.060
Materials	$       42.00	$       38.90	3.100	0.080
Information technology and communication costs	$       54.90	$       48.70	6.200	0.127
Operating lease rental expenses	$       13.80	$       15.00	-1.200	-0.080
Administrative expense	$       42.30	$       55.00	-12.700	-0.231
Service level payments	$       19.10	$         6.90	12.200	1.768
Disposal of property, plant and equipment	$         6.10	$         6.20	-0.100	-0.016
Other costs	$       64.60	$       51.40	13.200	0.257
Total expenses excluding depreciation, amortisation, interest and tax	$     808.20	$     776.50	31.700	0.041
Earnings before interest, tax, depreciation and amortisation	$ 1,073.30	$ 1,142.50	-69.200	-0.061
Depreciation and amortisation	$     425.90	$     392.30	33.600	0.086
Profit from operating activities	$     647.40	$     750.20	-102.800	-0.137
Finance income	$       18.20	$       23.00	-4.800	-0.209
Finance costs	$     302.30	$     315.30	-13.000	-0.041
Profit before income tax	$     363.30	$     457.90	-94.600	-0.207
Income tax (expense)/benefit	$     108.20	$     -31.40	139.600	-4.446
Profit for the year	$     255.10	$     489.30	-234.200	-0.479

 

Balance Sheet
	2017	2016	Amount	Percentage
Assets	$- million	$- million
Current assets
Cash and cash equivalents	328.8	441.4	-112.600	-26%
Receivables	214.1	198.5	15.600	8%
Desalination licence receivable	12.4	12.5	-0.100	-1%
Inventories	43.3	52	-8.700	-17%
Derivative financial instruments	5.7	89.1	-83.400	-94%
Current tax receivable	25.9	0	25.900
Other assets	25.1	28.5	-3.400	-12%
Total current assets	655.3	822	-166.700	-20%
Non-current assets
Inventories	17.4	18.5	-1.100	-6%
Property, plant and equipment	10000	9597.1	402.900	4%
Intangible assets	554.8	561.2	-6.400	-1%
Desalination licence receivable	189.6	198.4	-8.800	-4%
Derivative financial instruments	306	476.3	-170.300	-36%
Other assets	33.4	2.5	30.900	1236%
Total non-current assets	11101.2	10854	247.200	2%
Total assets	11756.5	11676	80.500	1%
LIABILITIES
Current liabilities
Payables and other liabilities	271.3	338.2	-66.900	-20%
Provisions	106.1	110.6	-4.500	-4%
Borrowings	398.4	843.5	-445.100	-53%
Derivative financial instruments	10.3	18.8	-8.500	-45%
Current tax payable	0	3.3	-3.300	-100%
Total current liabilities	786.1	1314.4	-528.300	-40%
Non-current liabilities
Deferred revenue	73.7	57.8	15.900	28%
Provisions	41.9	51.7	-9.800	-19%
Borrowings	6266.9	6054.2	212.700	4%
Derivative financial instruments	303.1	174.3	128.800	74%
Deferred tax liabilities	586.4	465.8	120.600	26%
Total non-current liabilities	7272	6803.8	468.200	7%
Total liabilities	8058.1	8118.2	-60.100	-1%
EQUITY
Contributed equity	5153.2	5057.3	95.9	2%
Reserves	-1464.5	-1529.4	64.9	-4%
Retained profits	1104.8	1125	-20.2	-2%
Other equity	-1095.1	-1095.1	0	0%
Total equity	3698.4	3557.8	140.6	4%
Total Equity and Liabilities	11756.5	11676	80.5	1%

The various audit risks which the business faces are given below in the points form:

1. The debt-equity ratio of the company shows that it has reduced from the previous year’s figure, however there is still significant amount as shown in the ratio analysis table as shown above. The financial statements also show that the company uses more of debt capital as compared equity capital which is a bit risky (Li 2014).
2. The asset turnover ratio of the company has fallen from previous year which means that the company is not using the assets of the company properly in order to generate revenues which is a possible risk for the company (Delen, Kuzey and Uyar 2013).
3. The cash and cash equivalent has decreased from previous year and the amount of debt which the business has taken signifies that the company is facing liquidity crisis which is a risk for the business.

The measures which can be suggested to overcome the risks which are provided above are given below:

• The company needs to lower the amount of debts so that the burden of leverages can be lowered on the company. In addition to this, the management needs to ensure that the debts amount is correctly stated in the financial statements considering all payback of debts. The auditor while conducting the process of audit needs to verify the same and also ensure that the debts are accurately recorded and no misstatements are present.
• The management of the company needs to utilize the assets of the company properly and ensure that no resources of the company is wasted in order to ensure that the company does not miss out on any revenues. The auditor needs to verify the value of assets of the company and ensure they are valued according to the relevant standards (Haimes 2015).
• The management of the company needs to look after its liquidity requirements and maintain a minimum cash balance so that the operation of the business can be handled smoothly. The cash balance can be verified by reviewing the cash book and all related ledgers.

References

Ausnetservices.com.au. (2018). Home. [online] Available at: https://www.ausnetservices.com.au/ [Accessed 26 Apr. 2018].

Badolato, P.G., Donelson, D.C. and Ege, M., 2014. Audit committee financial expertise and earnings management: The role of status. Journal of Accounting and Economics, 58(2-3), pp.208-230.

Beekes, W., Brown, P. and Zhang, Q., 2015. Corporate governance and the informativeness of disclosures in Australia: A re?examination. Accounting & Finance, 55(4), pp.931-963.

Ben Shlomo, J., Eggert, W. and Nguyen, T., 2013. Regulation of remuneration policy in the financial sector: Evaluation of recent reforms in Europe. Qualitative Research in Financial Markets, 5(3), pp.256-269.

Cella, C., Ellul, A. and Giannetti, M., 2013. Investors’ horizons and the amplification of market shocks. The Review of Financial Studies, 26(7), pp.1607-1648.

Cheng, M.M., Green, W.J. and Ko, J.C.W., 2014. The impact of strategic relevance and assurance of sustainability indicators on investors’ decisions. Auditing: A Journal of Practice & Theory, 34(1), pp.131-162.

Cybinski, P. and Windsor, C., 2013. Remuneration committee independence and CEO remuneration for firm financial performance. Accounting Research Journal, 26(3), pp.197-221.

Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.

Devine, T. and Walden, S., 2013. International best practices for whistleblower policies. Government Accountability Project.

Dhamija, S., 2014. Whistleblower Policy—Time to Make it Mandatory. Global Business Review, 15(4), pp.833-846.

Dionne, G., 2013. Risk management: History, definition, and critique. Risk Management and Insurance Review, 16(2), pp.147-166.

Glaum, M., Baetge, J., Grothe, A. and Oberdörster, T., 2013. Introduction of International Accounting Standards, disclosure quality and accuracy of analysts’ earnings forecasts. European Accounting Review, 22(1), pp.79-116.

Haimes, Y.Y., 2015. Risk modeling, assessment, and management. John Wiley & Sons.

Li, W., 2014. Risk assessment of power systems: models, methods, and applications. John Wiley & Sons.

Tao, N.B. and Hutchinson, M., 2013. Corporate governance and risk management: The role of risk management and compensation committees. Journal of Contemporary Accounting & Economics, 9(1), pp.83-99.

Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.