43 Explanatory Statement

a) Significant variations between estimates and actual results for the financial year

Details and reasons for significant variations between estimates and actual results are detailed below. Significant variations are considered to be those greater than 10% or $1 million.

 

2007

2007

 

Actual

Estimate

Variance

 $000

 $000

 $000

Revenue from ordinary activities

134,835

125,647

       9,188

Cost of Services

762,761

797,426

     34,665

Net Cost of (Surplus from) Services

627,926

671,779

     43,853

Revenue

Revenue was $9.2 million (7.3%) above the estimate. The positive variations include the following significant items:

i) MultiRider, SmartRider and cash fares increased by $8.8 million as a result of increased patronage;

ii) Increased in revenue from External works of $5.0 million;

iii) Advertising revenue increased by $2.3 million from changed contractual arrangements;

iv) Increase in rental revenue of $2.1 million;

v) Increase in interest revenue of $1.6 million; and

vi) Service contribution revenue $1.5 million due to joint ticketing of various sporting and entertainment events.

vii) This is offset by a reduction in the lease income from the prepaid freight network of $14.4 million due to a change in accounting policy of amortising the deferred lease income to straight line method.

Total cost of services

Cost of services for the year was $34.6 million (4.3%) below estimate.

There were several significant positive and negative variations that contributed to this overall variation.

These variations include:

i) Reduced interest of $23.3 million due to lower than budgeted interest rate and delay in Capital works program and a reduction of $7.0 million on notional interest due to a change in accounting policy of amortising the deferred lease income to straight line method;

ii) Reduced depreciation of $7.5 million mainly due to delay in the start of the Southern Suburbs Railway;

iii) Reduced grants and subsidies of $10.0 million mainly due to delay in implementation of school buses seatbelts;

iv) Reduced grant to Local Government of $9.0 million due to deferral of asset transfers to Local Governments by New MetroRail because construction was not completed at 30 June 2007; offset by

v) Increased Transperth bus costs of $7.0 million mainly due to remedial works related to contaminated sites, settlement of long service leave as a result of an amendment to the Long Service Leave Act 1958, security and maintenance contracts;

vi) Increase in land rationalisation expenses $3.8 million mainly due to clean up of contamination, investigation and remediation at Kewdale;

vii) Increased infrastructure costs of $2.0 million mainly due to concrete re-sleepering on the Midland line and painting of station structures at Warwick station;

viii) Foreign exchange loss of $1.6 million on Euros for the purchase of bus chassis and Swiss Francs for the purchase of ticket vending machines;

ix) Increased costs related to external works $1.4 million; and

x) Loss of $1.0 million mainly due to disposal of CAT buses.

b) Significant variations between actual revenues and expenditures for the financial year and revenues and expenditures for the immediately preceding financial year

Details and reasons for significant variations between actual results with the corresponding items of the preceding year are detailed below. Significant variations are considered to be those greater than 10% or $1 million.

 

2007

2006

 

Actual

Actual

Variance

 $000

 $000

 $000

Employee benefit expenses

79,736

68,874

           10,862

Supplies and Services

131,710

98,828

           32,882

Depreciation and amortisation expense

85,546

92,477

           (6,931)

Finance costs

62,734

100,047

         (37,313)

Grants and subsidies expense

249,176

243,341

             5,835

Capital user charge

130,340

65,052

           65,288

Land rationalisation expense

4,492

6,223

           (1,731)

Loss on disposal of non-current assets

1,031

83

948

Other expenses

9,113

10,933

(1,820)

User charges and fees

105,029

98,727

6,302

Interest revenue

2,341

1,084

1,257

Employee benefit expense

Increase in employee benefit expense due to increase in transit guards and train drivers in preparation for the opening of the Southern Suburbs line to Mandurah, and the increase in salary and wage rates in accordance with EBA arrangements.

Supplies and Services

i) External works costs of $1.3 million for project costs recovered from third party.

ii) Increased remediation works on fuel line leakage, AS1940 compliance and provision for contaminated sites $4.2 million.

iii) Increased security costs relating to special events and NightRider $1.0 million.

iv) Write off of concept or discontinued capital works $4.7 million.

v) Increased maintenance of EMU railcars and security $8.6 million.

vi) Increased maintenance of Prospector and Australind railcars $2.4 million.

vii) Increase costs in preparation for the opening of the Southern Suburbs Railway in 2007/08 including provision of security services for new stations not yet operational, set up costs for new depot and offices, advertising and promotion.

Depreciation and amortisation expense

Decrease in depreciation of $6.9 million is mainly due to depreciation in the prior year on stations and train control system no longer used.

Finance costs

i) Decrease in Finance costs of $37.3 million is mainly due to repayment of the New MetroRail debt of $913 million.

ii) Foreign exchange loss of $1.6 million on Euros for the purchase of bus chassis and Swiss Francs for the purchase of ticket vending machines.

Grants and subsidies expense

Increased Transperth bus contract costs mainly due to fuel, labour and settlement of long service leave as a result of an amendment to the Long Service Leave Act 1958.

Capital user charge

The capital user charge is based on the average net assets multiplied by 8%. The variance is mainly due to the repayment of the New MetroRail (NMR) debt - $913 million and this year’s NMR capital works being funded by an equity injection from DTF.

Land rationalisation expense

Decrease in expenditure due to lower land rationalisation activity.

Loss on disposal of non-current assets

Increase in loss on disposal of non-current assets is mainly due to the disposal of the Central Area Transit buses.

Other expenses

Decrease expenditure due to 2005/06 contribution to Main Roads WA - $3.0 million and City of Joondalup - $0.6 million offset by 2006/07 notional charge for services provided by Landgate ($2.0 million).

User charges and fees

Increase due to fare increase by 10 cents and increased patronage on the Transperth system including the full year impact of the Thornlie line.

Interest revenue

Increase due to maintaining a higher cash balance in the bank as a result of the timing of the drawdown of capital user charge funding and the actual payment of the capital user charge.