CONTENTS LETTER TO THE SHAREHOLDERS ABOUT US CORPORATE STRUCTURE HEALTH & SAFETY

Transcription

1 ANNUAL REPORT 2016

2 1 CONTENTS LETTER TO THE SHAREHOLDERS ABOUT US CORPORATE STRUCTURE HEALTH & SAFETY GOVERNANCE & LEADERSHIP Governance Leadership Directors report / Statutory information OUR JOURNEY THE YEAR IN REVIEW Our network Network completion events 50,000th connection Deloitte Fast50 Awards Supporting our communities FIBRE CASE STUDIES Boon Goldsmith Bhaskar Brebner (BGBB) Team Architects ACG Tauranga FINANCIALS DIRECTORY pg4 pg6 pg7 pg9 pg11 pg12 pg14 pg16 pg19 pg23 pg28 pg30 pg32 pg33 pg34 pg37 pg38 pg40 pg43 pg64

3 2 3 Facts and figures are correct as of date of publication, referencing 2016 Financial Year (1 July 2015 to 30 June 2016).

4 4 5 LETTER TO THE SHAREHOLDERS Photo: Chairman Rodger Fisher and Chief Executive William Hamilton After almost five years work, we are delighted to have completed the build of our entire fibre network this year, six months ahead of schedule and to budget. This early completion is a significant milestone for all the Ultrafast Fibre team, including our shareholders, build partners, and Retail Service Providers. The 2015/16 financial year represents a turning point for Ultrafast Fibre, as we move from the build phase to now operating and managing our network. Strong financial progress has been made, with a positive EBITDA result of $3.8 million profit from a $5.3 million loss in 2014/15. Our Net Loss after tax was $6.9 million, predominantly due to non-cash depreciation and amortisation of $14 million. Ultrafast Fibre s strategic focus has evolved to meet the changing needs of the business and to continuously improve our service offering. We have been actively engaged with the communities where we operate, gaining insight from our customers and stakeholders. In particular we have prioritised improvements to our customers experience during the connection process, and we appreciate there is still more to be done. We continue to be highly motivated by the opportunities and potential for innovation that world-class fibre technology brings. New Zealand is moving away from last century legacy technology to a 21st century solution, and Ultrafast Fibre is proud to be a part of this. Demand for Ultra-Fast Broadband (UFB) is steadily rising and our team is connecting customers at a rate of around 150 new connections per working day. As at 30 June 2016 we have 51,641 customer connections, an increase of 30,532 connections from the previous financial year. Our Tauranga customers continue to lead the way, with the highest uptake rate in the country at around 32 per cent. Increasingly businesses are making the switch to UFB, and this is an ongoing focus for our growth strategy. We believe demand will only continue to rise as the true benefits of high-speed internet become more well-known. Ultrafast Fibre has also grown this year, from a team of 60 to now 115 full-time staff. Our people are the key to our success and this was recognised by our award for Deloitte Fast50 Fastest Growing Technology Business Central North Island, and our twelfth place national ranking overall. We want to acknowledge our shareholders and partners for their commitment and contribution to our business. We have appreciated working with Crown Fibre Holdings for the network rollout, and believe our recent move to being fully owned by WEL Networks Limited and Waipa Networks Limited is a positive step for Ultrafast Fibre s future. Looking ahead to the new financial year, we are excited to continue to push the boundaries and introduce new initiatives to advance the fibre revolution. Rodger Fisher, Chairman William Hamilton, Chief Executive

5 6 7 ABOUT US CORPORATE STRUCTURE Ultrafast Fibre is leading New Zealand s fibre revolution. Our team is focused on enhancing the experiences of our customers, as they connect to our world-class Ultra-Fast Broadband (UFB) network and experience what it means to truly go faster. Our vision is to enable more New Zealanders to tap into all the benefits that UFB brings. We believe that high-speed internet will enhance and in many ways revolutionise the way Kiwis communicate, work, play, learn and are entertained online. Established as a Local Fibre Company in 2010, Ultrafast Fibre built and now owns and operates the UFB network in the urban areas of Hamilton, Tauranga, Whanganui, New Plymouth, Tokoroa, Hawera, Cambridge and Te Awamutu. Our 3,000km fibre network represents about 13 per cent of the Government s national UFB1 initiative. It provides access to UFB technology for more than 195,000 households, schools, businesses and healthcare facilities in these areas. Ultrafast Fibre is passionate about working together as one team to get things done. We value our people s health, safety and wellbeing and we have respect for each member of our team and the contribution they make to our business achieving its goals. Innovation is key to how we operate. The status quo is never good enough we take a bold approach to New Zealand s digital future. Ultrafast Fibre Limited is fully owned by Waikato Networks Limited (WNL), a subsidiary of WEL Networks Limited (85 per cent shareholding) and its partner Waipa Networks Limited (15 per cent shareholding). In September 2016 WNL purchased all of the Government s shares in Ultrafast Fibre and became the sole shareholder. Prior to this, Ultrafast Fibre was in the joint shareholding of WNL and Government agency, Crown Fibre Holdings Limited. Our business is governed by a Board of Directors and led by an Executive Management team. Ultrafast Fibre works with key partners to grow and manage its UFB network. We outsource to Huawei Technologies (New Zealand) Company Ltd to operate the Layer 2 fibre network and to Broadspectrum Services (New Zealand) Limited to build and maintain the physical network. We provide wholesale fibre services to a large number of Retail Service Providers (RSPs), who in turn provide UFB products to End User customers, including households, schools, businesses, and healthcare facilities. 85% 15% 100% 48 RETAIL SERVICE PROVIDERS (RSPs) END USER CUSTOMERS

6 8 9 HEALTH & SAFETY Ultrafast Fibre considers the health, safety and wellbeing of our communities, team members and contractors as being central to everything we do. It is a continuous focus for our business and over the past year we have allocated more resources to improvements in this area. To meet our obligations under the Health and Safety at Work Act (2015), our team has developed a new Health and Safety Management System. This allows us to achieve the highest standards of governance and fulfil the requirements of the legislation. Our Health and Safety Manager has been tasked with ensuring the latest workplace training competencies deliver meaningful health and safety results across Ultrafast Fibre. We also have a specific and dedicated focus on aerial working practices. Ultrafast Fibre has engaged with PowerCo, WEL Networks, Waipa Networks and Chorus to confirm that the latest pole assessment and hazard identification processes are effective in allowing fibre, copper and power assets to coexist safely. During the past financial year, we are pleased to have had no medical treatment or recordable injuries within the company. Externally, our contractor Broadspectrum significantly reduced the Total Recordable Injury Frequency Rate and Lost Time Injury Frequency Rate. However, there is always room for improvement. Within the wider build and provisioning environment there were five lost time injuries, 22 medical treatment injuries and 187 near-miss accidents (no injury) reported during the 12-month period. We were delighted that our recent company-wide survey results showed that Ultrafast Fibre staff are fully invested in our go home safe objectives. This work programme will be ongoing and is one that we are fully invested in for the benefit of our people.

7 10 11 GOVERNANCE & LEADERSHIP Governance Leadership Directors report / Statutory information pg12 pg14 pg16

8 12 GOVERNANCE & LEADERSHIP GOVERNANCE & LEADERSHIP 13 GOVERNANCE RODGER FISHER Independent Chairman A highly experienced business leader, Rodger has chaired Ultrafast Fibre s Board since its inception in Rodger is also Chairman of The Property Group, Chairman of Eurotech Group, a Director and Deputy Chair of Ports of Auckland and a Director of Tenon (formerly Fletcher Forests). He is a former Chairman of the Civil Aviation Authority, Aviation Security Services and WEL Networks Limited. Currently practicing as a business consultant, Rodger was previously Managing Director of Owens Group between 1987 and He is a Fellow of the Chartered Institute of Secretaries, the Chartered Institute of Transport, the Institute of Directors in New Zealand and the New Zealand Institute of Management. TONY STEELE Director A specialist business adviser and Chartered Accountant, Tony was Managing Partner of KPMG s Hamilton office and a member of KPMG s National Management Board for 11 years. He is an Independent Director of Innovation Waikato Limited and Waikato Innovation Park Limited. Tony is Independent Chairman of Maisey Group (formerly Forlong and Maisey) Limited and sits on the boards of several Maisey Group subsidiaries in New Zealand and Australia. He is also a Director of WEL Networks Limited and Waikato Networks Limited. Tony is a Fellow of both the Institute of Directors and Chartered Accountants Australia and New Zealand. He is an independent member of Hamilton City Council s Audit and Risk Committee, and has been an Ultrafast Fibre Board Member since October MARK FRANKLIN Director Mark is Chief Executive of Stevenson Group, a position he has held since early Prior to his current role, Mark was founding Chief Executive of TZ1, the global carbon registry, and before that, Chief Executive of Vector - one of New Zealand s largest companies. Mark s other directorships include Stevenson Group Ltd, WEL Networks, Auckland Chamber of Commerce, Chairman of Committee for Auckland and Precinct Management Ltd. Mark was formerly a Director of NZ Rail Corporation (Kiwirail) and has also been a member of the Prime Minister s Climate Change Leadership Forum and the Australia and New Zealand Joint Prime Minister s Leadership Forum. GARTH DIBLEY Director Garth has extensive experience in the generation, retail, transmission, and distribution sectors of New Zealand s electricity industry. He took up the position of Chief Executive at WEL Networks in September Garth has previously held leadership roles at both Transpower and Meridian Energy. Appointed as General Manager Grid Performance at Transpower in 2010, he led the operations and asset maintenance functions of the national grid. Prior to this, Garth was based at Meridian Energy, working as General Manager, Markets and Production and then General Manager, External Relations. Garth has a Bachelor of Engineering (Mechanical) from the University of Canterbury and an MBA from Waikato University. He has completed executive training programmes at Kellogg and INSEAD business schools of management. GRAHAM MITCHELL Director* Graham is Chief Executive Officer of Crown Fibre Holdings Limited, the Government agency tasked with managing its $1.5 billion investment in UFB infrastructure. He has considerable corporate finance experience from his time in previous roles with Telecom, Brierley Investments, Electricity Corporation and Transpower. Graham is the former CEO of Cogent Communications, part of the OneSource Group, and prior to this headed US telecommunications venture capital funded, Optical WDM OEM. Graham spent 10 years at Telecom New Zealand, where he worked as Group General Manager of Business, Wholesale and Network Services and General Manager of the Internet and Directories Division, both in Australia. DANELLE DINSDALE Director* Danelle is a member of the Crown Fibre Holdings Limited Board, and has expertise in change management, infrastructure and technology projects. She has advised on Public Private Partnerships in the education, health and transport sectors. Danelle returned to New Zealand after spending 14 years in the UK as a senior partner and Head of IT and Telecoms for global law firm DLA Piper. She has worked with innovation leaders including Cable and Wireless, Verizon, British Telecom, Accenture and ITV. As an Independent Director Danelle also serves on the Boards for Medical Assurance Society NZ Ltd and Hawkes Bay Regional Investment Co. Ltd. SEAN WYNNE Director* Sean has been Chief Commercial Officer of Crown Fibre Holdings Limited since 2010, and has previously held positions across the legal, media and telecommunications sectors. Prior to joining Crown Fibre Holdings, Sean was the CEO of twenty4media, an out of home media business that operates television networks for banks and airlines in Australasia. Sean is also the former CEO of Independent Newspapers Limited, where he was responsible for selling the company s publishing interests to Fairfax Media for $1.25 billion and for its $2.5 billion merger with Sky Television. Sean has previously worked for Saturn Communications and later TelstraSaturn, and also in private law practice. * CFH Directors resigned from the Board on 6 September 2016 after Waikato Networks Limited had completed a transaction to purchase all of the shares in Ultrafast Fibre.

9 14 GOVERNANCE & LEADERSHIP GOVERNANCE & LEADERSHIP 15 LEADERSHIP WILLIAM HAMILTON Chief Executive William was appointed Chief Executive in 2014, and with over 30 years experience as a director and executive he brings a wealth of commercial and strategic acumen to the business. Formerly the General Manager, Operations, Fibre, and Customer Delivery for WEL Networks, he was instrumental in helping to successfully negotiate the UFB1 contract with Crown Fibre Holdings. William s career has spanned a range of industries, through his senior leadership roles for companies including Excel Corporation, Bayleys Real Estate, United Group and General Cable New Zealand. Prior to this, William was Managing Director of a large electrical contracting company for 13 years, before selling the business in RICHARD JEFFARES Chief Operating Officer Richard oversees all Ultrafast Fibre business operations, including the Program Management Office, IT, Network Operations Centre, Business Assurance and Service Desk teams. Appointed Chief Operating Officer in 2014, Richard was formerly Chief Technology Officer at UK Broadband. He brings extensive data analytics and business intelligence knowledge from the banking, media, internet and telecoms sectors. Richard has held leadership roles at Telstra, IBM, Inmarsat/ICO Global, Siemens AG, Credit Suisse, Cap Gemini and Motorola. He holds a Master of Information Systems from Griffith University and is an active member of the Internet Engineering Task Force (IETF), Institute of Electrical and Electronics Engineers (IEEE) and Association for Computing Machinery (ACM). RICHARD RILEY Chief Marketing Officer As Chief Marketing Officer (CMO), Richard drives Ultrafast Fibre s external reputation and leads its growth, sales and marketing strategy. He is responsible for ensuring delivery of exceptional customer experience and effective stakeholder and industry relationships. Richard joined Ultrafast Fibre in 2011 and prior to becoming CMO, Richard was Ultrafast Fibre s Programme Director, where he led the initiative to establish the Local Fibre Company business, a fast and stabilised UFB communal build, and the start of a scalable operational environment. A senior manager for over 20 years across Australasian and European telecommunications and infrastructure with Vector, National Grid and Crown Castle, Richard has previously managed major commercial bid programmes, established and run PMOs and driven significant acquisition, governance, sales and marketing outcomes. MARK PEACOCK Chief Financial Officer Mark has specialist expertise in management accounting and financial control. He joined Ultrafast Fibre as Chief Financial Officer in June 2015, coming from Orion Health where he was Accounting Manager. Over his career Mark has gained experience across the telecommunications, financial management, and airline industries. He is a former Finance Manager at Spark Digital, Vodafone New Zealand and Chorus, and has worked as a Project Manager for Air New Zealand and JP Morgan. Prior to this, Mark was a tax consultant at PwC. Mark is a Chartered Accountant and is admitted as a Barrister and Solicitor of the High Court of New Zealand. HIRAMAI ROGERS Head of Legal and Regulatory Compliance Hiramai joined Ultrafast Fibre in 2012, and established the company s internal legal, commercial and regulatory functions. He provides legal services and advice to ensure the business s long term commercial success, and to steer Ultrafast Fibre through the regulatory review process. In addition to working with a number of key partners, Hiramai oversees the company s secretarial function and the key services contract with RSPs. He is involved in representing Ultrafast Fibre via the Telecommunications Forum (TCF) and for other industry-related matters. Hiramai has extensive experience in commercial and corporate law, working in both private practice and in-house roles in New Zealand and Dubai. LYNDON TEMPLETON General Manager, Build and Provisioning Lyndon is a skilled Programme Manager with decades of experience leading high calibre projects in the telecommunications and finance industries. As Ultrafast Fibre s General Manager, Build and Provisioning, Lyndon is responsible for ensuring the company s efficient and safe delivery of build and provisioning services to meet growing customer demands. He also leads the contract management of Ultrafast Fibre s technology, supply, and logistical partners. Prior to his role as General Manager, Lyndon managed the deployment of the communal network build under Waikato Networks Limited. He moved into the telecommunications industry in 2011, after working for ANZ and also Craigs Investment Partners in various project management roles.

10 16 GOVERNANCE & LEADERSHIP GOVERNANCE & LEADERSHIP 17 DIRECTORS REPORT / STATUTORY INFORMATION 1. DIRECTORS REMUNERATION Directors fees and other remuneration paid during the year were: Year ended 30 Jun 2016 $ Year ended 30 Jun 2015 $ R H Fisher 82,500 81,458 M X Franklin 40,000 40,000 D Dinsdale 40,000 40,000 A V Steele (appointed 1/10/14) 40,000 30,000 Hon R W Prebble (ceased 1/10/14) - 10,000 M Devlin (ceased 1/10/14) - 10,000 G W Dibley (appointed 27/5/15) - - G R Mitchell - - M S Wynne DONATIONS Donations of $2,245 made by the Company during the year (2015 $1,850). 3. DIRECTORS INDEMNITIES AND INSURANCE 202, ,458 The Deeds of Indemnity given by the Company in favour of those Directors who held office at the beginning of the financial year to which this report relates, and to Directors appointed since the beginning of the financial year and who still hold office as Directors of the Company, remain in full force and effect on the same terms and conditions under which they were given. As permitted by, and to the extent permitted by, the Company s Constitution, the Company has effected insurance for Directors and officers which, together with the Deeds of Indemnity, generally ensures that the Directors will not incur any monetary loss as a result of actions undertaken by them as Directors. The Directors and officers insurance comprises cover of $20 million and a Statutory Liability Insurance cover of $1 million has also been effected. 4. DIRECTORS TRANSACTIONS All transactions in entities in which Directors disclosed an interest have been conducted on an arm s length basis in the normal course of business. 5. EMPLOYEES REMUNERATION The number of employees (excluding Directors) whose income was within specified bands is as follows: Continuing Employees Year ended 30 Jun 2016 $ Year ended 30 Jun 2015 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Total BOARD MEETINGS Number of Board meetings attended by each Director Year ended 30 Jun 2016 Year ended 30 Jun 2015 R Fisher M Franklin Hon R W Prebble (ceased 1/10/14) 0 3 D Dinsdale M Devlin (ceased 1/10/14) 0 3 G R Mitchell M S Wynne D E Smith (appointed 1/10/14, ceased 27/5/15) 0 4 A V Steele (appointed 1/10/14) 11 8 G W Dibley (appointed 27/5/15) SHAREHOLDERS Year ended 30 Jun 2016 $ Year ended 30 Jun 2015 $ Crown Fibre Holdings Limited 141,028, ,553,089 Waikato Networks Limited 164,901,136 81,648,007 Her Majesty the Queen in Right of New Zealand 1 1 Total 305,929, ,201,097 Refer to note 9 of the Financial Statements for detailed information on share capital.

11 18 19 OUR JOURNEY Ultrafast Fibre has gone from strength to strength since the Company s establishment in Join us in tracking our journey to becoming a key leader of New Zealand s fibre revolution.

12 20 OUR JOURNEY The network build in Hawera was completed. OUR JOURNEY 21 Ultrafast Fibre completed the network build in Cambridge. The communal build was completed for New Plymouth, Tauranga, and Hamilton, bringing to a close Ultrafast Fibre s UFB network build programme. Communal build commenced. The network build was completed in Te Awamutu. The Tokoroa network build was completed. To celebrate the completion of the network build in Whanganui, Ultrafast Fibre organised a threeday technology expo and workshop series for the community called Beyond Broadband. KEY BUILD Q March 2015 Ultrafast Fibre moved to its May 2014 Aug 2014 Nov 2014 Dec 2014 new premises in Hamilton. May 2015 Dec 2015 ORDER May 2012 Nov 2012 Oct 2013 Jul 2014 Sep 2014 Feb 2015 CONNECTION May 2012 Feb 2013 Jun 2013 Dec 2013 Jun 2016 Ultrafast Fibre completed its first business connection. Ultrafast Fibre received its first order for a residential service. Demand for fibre steadily grew, with Ultrafast Fibre processing more than 100 service orders for the first time. Ultrafast Fibre hit another milestone and connected its 500 th End User to the network. Ultrafast Fibre completed its 1,000 th connection, doubling the number of connections to its network in less than five months. Demand continued to rise and Ultrafast Fibre was now processing more than 500 service orders a month. Ultrafast Fibre completed its 3,000 th connection to its network. Ultrafast Fibre was now processing more than 1,000 service orders a month. Barely two months later, with systems and process improvement, Ultrafast Fibre s Service Desk team doubled processing capacity and were now managing more than 2,000 service orders a month. Ultrafast Fibre was now processing more than 5,000 service orders a month. Ultrafast Fibre complete its 50,000 th connection to its network.

13 22 23 THE YEAR IN REVIEW Key metrics Our network Network completion events 50,000th connection Deloitte Fast50 Awards Supporting our communities pg27 pg28 pg30 pg32 pg33 pg34

14 24 THE YEAR IN REVIEW This year has brought many successes for Ultrafast Fibre, with our most significant achievement being the completion of our 3,000km fibre network. The completed network covers eight urban centres in the Central North Island, and it is important to us to engage and connect with all these communities where we operate. To mark the completion of our UFB network in our biggest cities, Ultrafast Fibre hosted a Beyond Broadband Expo in New Plymouth, Tauranga and Hamilton. The events proved a great opportunity for residents to speak directly with experts and discover first-hand how to maximise the opportunities that our world-class fibre network offers. As the benefits of fibre broadband become more wellknown, many more New Zealanders are connecting to the Ultrafast Fibre network. We were excited to celebrate our 50,000th connection in June 2016, and throughout the year to speak with so many businesses, teachers and families who are using fibre in innovative and inspiring ways. Our engagement with our communities also extends to supporting initiatives that align with our values. This year we have been pleased to be involved with helping a range of sporting teams and community groups in the Waikato, Bay of Plenty and Taranaki regions. Ultrafast Fibre is growing rapidly as a business, and was recognised as the Deloitte Fast50 Fastest Growing Technology Business Central North Island. This recognition was an enormous privilege for our team and gave us even more motivation to grow stronger. Health and safety has continued to be a key focus for us this year, and we have devoted extra resources to ensure we are meeting all our obligations under the new legislation. Overall, we are pleased with how Ultrafast Fibre has performed during the 2015/16 financial year, with good progress made in line with our Key Performance Indicators. I know this is the future and that s why I connected and hopefully I will keep learning and will get the best out of it. My whole connection experience was friendly, helpful, and delivered as was promised. - End User, Te Awamutu My neighbour used a different company and her experience was not as good as mine, so I believe you are delivering a well-rounded service. - End User, Hamilton THE YEAR IN REVIEW Very good service. One hundred percent better than dealing with [company redacted] on previous connection. Loads of information, kept to timings, quoted on first meeting. Good communication with notification of any changes to schedule why. - End User, Tauranga 25 Left to right: Tony Steele, Graham Mitchell, Margaret Devlin, Hamilton Mayor Julie Hardaker, Danelle Dinsdale, and William Hamilton during the preview of Ultrafast Fibre s Beyond Broadband Expo in Hamilton. The service offers more than standard copper lines. I had a really good connection with my copper VDSL, but my fibre connection blows it away. Here s what End User customers are saying about Ultrafast Fibre. I understand it to be cheaper, faster and more reliable than copper. Inevitably one must move onto the newer technologies or be left behind. How many people still listen to eight track tape players in their car? - End User, Cambridge - End User, Hawera Overall it has been a satisfying experience. We are pleased with the speed of the connection and the approach given by workers during the installation process. - End User, Tokoroa We live up a driveway so there was some distance to get the fibre into our house. The contractors did a great job negotiating the storm water and sewage pipes as well as locating power and telephone cables. The technician who installed the fibre into our house was friendly and explained clearly what was involved in the installation. - End User, Whanganui

15 26 THE YEAR IN REVIEW 27 KEY METRICS HEALTH & SAFETY TRIFR LTIFR LTI Nov-15 Feb-16 Apr-16 Jun-16 TRIFR LTIFR LTI Total Recordable Injury Frequency Rate Lost Time Injury Frequency Rate (Per one million hours worked (12 month rolling average) ) Lost Time Injury UPTAKE Connections End Users Able to Connect 51,641/193,315 * = 26.4% * Includes small volume of non-cfh greenfields. NET PROMOTER SCORE (NPS)* +26 Previous year s NPS was +2. *FY 15/16 Annual Retail Service Provider Survey provided by an independent market research agency

16 28 THE YEAR IN REVIEW THE YEAR IN REVIEW 29 OUR NETWORK HAMILTON CAMBRIDGE TE AWAMUTU TOKOROA Uptake* 14.1% 26.1% Uptake* 11.9% 25.7% Uptake* 12.7% 23.1% Uptake* 9.2% 21.5% TAURANGA NEW PLYMOUTH HAWERA WHANGANUI Uptake* 18.1% 31.7% Uptake* 11.6% 23.4% Uptake* 8.2% 20% Uptake* 9.1% 21% *Uptake: Percentage of connections against number of End Users able to connect. Includes small volume of non-cfh greenfields.

17 30 THE YEAR IN REVIEW THE YEAR IN REVIEW 31 NETWORK COMPLETION EVENTS Ultrafast Fibre celebrated one network build completion milestone after another, starting with New Plymouth, followed by Tauranga and Hamilton. Beyond Broadband is a multi-day technology expo and workshop series showcasing the power and capability of fibre technology for home, education, and business use. Ultrafast Fibre was very proud to host Communications Minister Amy Adams for the three Beyond Broadband events which were also well-attended by local MPs, Mayors, and Councillors. NEW PLYMOUTH The city s UFB network includes 350kms of fibre optic network. Around 26,000 premises are able to connect to UFB. The Beyond Broadband Expo was held on 19 and 20 February 2016 at TSB Showplace. Play it Strange Trust brought their mobile recording studio to New Plymouth and recorded a live musical performance with a group of talented school children singing and playing ukuleles. Communications Minister Amy Adams with Ultrafast Fibre Chief Executive William Hamilton presenting a commemorative plaque to New Plymouth Mayor Andrew Judd. Full capacity at a workshop on cloud computing for businesses. Future musicians and recording artists on a videoconference with Jordan Luck, lead singer and songwriter for The Exponents. TAURANGA To build the network, Ultrafast Fibre completed approximately 680kms of underground drilling and 94kms of aerial build. Around 45,000 premises are able to connect to UFB. The Beyond Broadband Expo was held on 11 and 12 March 2016 at Baycourt Community & Arts Centre. The Cloud Speaker Series partnered with Ultrafast Fibre in delivering a series of high calibre workshops on business solutions such as inventory management, cloud accounting, retail management, and e-commerce, all free to public. OMGTech! partnered with Ultrafast Fibre to deliver exciting workshops for school-aged children on coding, game development, and robotics. PriorityOne conducted a mini Mash-up session for secondary school students, offering them an insight into the world of business solutions and app development. OMGTech! workshop attendees sign in before commencing their workshop modules. Communications Minister Amy Adams inspects the award-winning robots of Otumoetai College s Robotics team. Children getting pointers from OMGTech! workshop lead on basics of coding and game development. HAMILTON To complete our biggest network, Ultrafast Fibre built 413 roadside cabinets and undertook 733kms of underground drilling and 112kms of aerial build. Approximately 55,000 premises are able to connect to UFB. The Beyond Broadband Expo was held in conjunction with The Waikato Show on 8 to 10 April 2016 at Claudelands Event Centre. The Cloud Speaker Series brought their workshop series to Hamilton for the first time, delivering in-demand workshops on job management, e-commerce for businesses, and online payroll management. Ultrafast Fibre supported the annual Waikato Show s Schools Day Out Programme by hosting OMGTech! and sponsoring free workshops for more than 150 school children around the Waikato. The students experienced five different modules on coding, game development, robotics, 3D printing, and deconstructing computer hardware. Future game developers brush up on basic coding skills. Waikato school children check out Ultrafast Fibre s fulfilment van. OMGTech! workshop participants deconstructing computer hardware.

18 32 THE YEAR IN REVIEW THE YEAR IN REVIEW 33 50,000 TH CONNECTION DELOITTE FAST50 AWARDS In June 2016, Ultrafast Fibre welcomed its 50,000 th connection, marking an important milestone in our work as a Local Fibre Company. Reaching this level of connectivity reflected our strength as a trusted infrastructure provider and our continued work in laying the foundation for our country s digital future. The 50,000 th connection was for a new Show Home as part of the 145-home Ridgedale housing development in Hamilton s north, designed by Yeoman Property Group. All of Yeoman Property Group s residential housing and mixed-use developments are now designed and built with access to the fibre network. The Group also uses fibre in its internal business operations. Yeoman Property Group Project Manager Rebekah Kenny said UFB was definitely the best-performing product when you are looking at internet. Fibre was a selling point for their clients, she said, as they could see the advantages that came from having a fibre-option in their homes. Yeoman Property Group is a great example of how companies can harness the power of UFB to boost their business operations. All levels of business can reap the benefits of UFB, with easy access to their customers and clients across New Zealand and around the world. The Ultrafast Fibre team was thrilled to be awarded the Deloitte Fast50 Fastest Growing Technology Business Central North Island this year. The announcement was made at an event in Hamilton in October, where we were also confirmed as listed in the Deloitte Fast50 Index. Ultrafast Fibre went on to attend the National Awards, held in Auckland in November 2015, where we ranked twelfth overall. We were enormously privileged to receive the award, which acknowledged our impressive growth as a Local Fibre Company, both internally and externally. Deloitte private partner Bill Hale said the award-winning companies proved business success stories were thriving throughout the regions. These companies live and breathe innovation, challenge the status quo and have the determination and drive that s seen them achieve phenomenal year-on-year growth, he said. He said a common theme behind their success was the ability to identify and capitalise on a point of difference from competitors. Ultrafast Fibre Chief Executive William Hamilton said that as a young, local business on a mission, this was great recognition for Ultrafast Fibre and our pioneering shareholders, Waikato Networks Limited and Crown Fibre Holdings. It adds even more motivation for us to grow stronger, he said. Ultrafast Fibre Chief Executive William Hamilton presenting a commemorative plaque to Yeoman Property Group Project Manager Rebekah Kenny. Ultrafast Fibre Chief Marketing Officer Richard Riley (centre) accepting the award on behalf of Ultrafast Fibre, with Doug Wilson from Deloitte and Debbie Wilton from BNZ.

19 34 THE YEAR IN REVIEW THE YEAR IN REVIEW 35 SUPPORTING OUR COMMUNITIES As a Local Fibre Company, we take pride in showing our support for the communities where we operate. Over the past year Ultrafast Fibre has sponsored four sports teams across the Waikato and Taranaki regions. In August, we assisted the Sacred Heart Girls College Hockey Team to get to their National tournament in Carterton. The girls finished eighth overall in the playoffs for the Jenny Hair Cup. Sixteen-year-old Emma Hope scored five goals over the week and was named one of the top 10 goal scorers of the tournament. Ultrafast Fibre was pleased to provide practice jackets for the Hamilton Lawn Bowls Team in November, and to supply the West Hamilton United Football Club new training jerseys in February for their competitions across multiple levels of football in the Waikato and Bay of Plenty regions. Most recently, we arranged a variety of new merchandise for the Taranaki U12 Football Team. It was great to be involved with a team further afield, and show our support for the Taranaki region. Ultrafast Fibre has also been involved with organisations outside of sport. In September 2015 we provided 100 pizza vouchers as part of goodie bags for a movie-screening fundraising evening to support Friends of the Bereavement Suite. Taranaki Under 12 Football team Thank you very much Ultrafast Fibre for giving the team some money towards our tournament. We had a great time and played some great hockey... The team really enjoy getting out there in all types of weather and playing the game we love. Thanks again. - Holly Stokes Year 10 Sacred Heart Girls College Hamilton West Football Club

20 36 FIBRE CASE STUDIES FIBRE CASE STUDIES 37 FIBRE CASE STUDIES Boon Goldsmith Bhaskar Brebner (BGBB) Team Architects ACG Tauranga pg38 pg40

21 38 FIBRE CASE STUDIES FIBRE CASE STUDIES 39 BOON GOLDSMITH BHASKAR BREBNER (BGBB) TEAM ARCHITECTS NEW PLYMOUTH ARCHITECTS WORK ACROSS THE COUNTRY WITH UFB For us it s just about assisting that seamless connectivity so that we re working in realtime with our partners outside our region. - Glenn Brebner Managing Director Disjointed design conversations over patchy video calls are a thing of the past for the creative minds behind projects like New Plymouth s Govett Brewster Art Gallery and Rotorua s Energy Event Centre. Boon Goldsmith Bhaskar Brebner (BGBB) Team Architects was one of the first New Plymouth businesses to connect to UFB when the cable was laid down their stretch of the CBD. Managing Director Glenn Brebner says the seamless connectivity they have been experiencing since then means geographical distance is no longer a barrier for the architects and their clients. For us it s just about assisting that seamless connectivity so that we re working in real-time with our partners outside our region. More than half of their clients are based outside of New Plymouth, so UFB is crucial for their business liaisons, he says. The fast and reliable internet speed makes working with clients across the country more feasible. We work with some pretty contemporary software systems and drawing files are particularly large. On some projects we ll have architects here in New Plymouth and engineers down in Christchurch and everyone needs to share a common file. We need to be able to share large files quickly and easily and UFB allows that. The company is also part of the national Team Architects group and fortnightly Skype calls have been smooth and seamless since switching to UFB, Glenn says. Typically, we have about eight people on the same call, from different accounts. That sheer number was causing us problems and we could only connect by voice in New Plymouth. Calling with UFB, that s no longer a problem. We can connect by voice and video and it works perfectly. Even when calling clients in Australia, the UK and the Pacific, video and voice are clear and have no interruptions, he says. It has taken a disjointed and often awkward call to the point where we can now have a complex design conversation face-to-face.

22 40 FIBRE CASE STUDIES FIBRE CASE STUDIES 41 ACG TAURANGA STUDENTS CONNECT TO THE FUTURE WITH FIBRE The online connectivity that students at ACG Tauranga are experiencing thanks to UFB is among the best in the world, Principal Shawn Hutchinson says. Shawn has worked all around the world and says that UFB is allowing his students to receive a world-class education. Course work, teaching and learning resources and class discussion boards online interactive tools are all accessible through the school s online learning portal, myacg. If we experienced any kind of lag time with loading courses, it would become quite a frustrating environment, Shawn says. The students need to be able to view that content without any delay. As the school grows, a fast and reliable connection will only become more important, he adds. We want to be ahead of the trend, so, as much as possible, we want to continue to use technology. The students here are experiencing an education that I think is world-class. I believe that the use of technology in the classroom and the access to technology is at a level that is comparable to the best international schools in the world, says Shawn. I believe that the use of technology in the classroom and the access to technology is at a level that is comparable to the best international schools in the world. - Shawn Hutchinson School Principal

23 42 43 FINANCIALS

24 44 FINANCIAL STATEMENTS FINANCIAL STATEMENTS 45 STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2016 BALANCE SHEET As at 30 June Notes Notes Revenue from continuing operations 3 26,709 10,095 Other operating expenses 4 (36,901) (24,055) Net operating loss (10,192) (13,960) Income tax 5 3,243 3,979 Loss from continuing operations (6,949) (9,981) Other comprehensive income: Other comprehensive income - - Total comprehensive loss for the year (6,949) (9,981) The above statement of comprehensive income should be read in conjunction with the accompanying notes. ASSETS Current assets Cash and cash equivalents 6,086 1,886 Trade and other receivables 8 4,556 2,593 Prepaid Asset Purchases 3,516 - Total current assets 14,158 4,479 Non current assets Property, plant and equipment 6 280, ,740 Intangible assets 7 2,878 1,011 Prepaid Asset Purchases 7,715 - Deferred tax assets 10 13,959 10,716 Total non current assets 304, ,467 Total assets 318, ,946 LIABILITIES Current liabilities Trade and other payables 11 42,160 19,774 Deferred income 5,047 2,311 Total current liabilities 47,207 22,085 Non current liabilities Total non current liabilities - - Total liabilities 47,207 22,085 Net assets 271, ,861 EQUITY Contributed equity 9 305, ,201 Retained earnings (34,289) (27,340) Total equity 271, ,861 The above balance sheet should be read in conjunction with the accompanying notes. R Fisher, Director 18 August 2016 A V Steele, Director 18 August 2016

25 46 FINANCIAL STATEMENTS FINANCIAL STATEMENTS 47 STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2016 STATEMENT OF CASH FLOWS For the year ended 30 June 2016 Share Capital Retained earnings Total equity Notes $ 000 Balance as at 1 July ,548 (17,359) 134,189 Comprehensive income Profit or loss for the year - (9,981) (9,981) Total comprehensive income - (9,981) (9,981) Transactions with owners Issue of A and B shares 9 81,653-81,653 Total transactions with owners 81,653-81,653 Balance as at 30 June ,201 (27,340) 205,861 Balance as at 1 July ,201 (27,340) 205,861 Comprehensive income Profit or loss for the year - (6,949) (6,949) Total comprehensive income - (6,949) (6,949) Transactions with owners Issue of A and B shares 9 72,729-72,729 Total transactions with owners 72,729-72,729 Balance as at 30 June ,930 (34,289) 271,641 The above statement of changes in equity should be read in conjunction with the accompanying notes. Cash flows from operating activities Notes Receipts from customers 24,632 11,288 Payments to employees and suppliers (18,222) (15,306) Interest received Proceeds from disposal of other financial assets at fair value through profit or loss 3 - Net cash inflow / (outflow) from operating activities 6,485 (3,933) Cash flows from investing activities Purchase of Layer 1 Network Assets (27,968) (53,004) Purchase of Layer 2 Communal Assets (3,835) (8,727) Purchase of End User Connection Assets (39,416) (14,053) Purchase of other Property, Plant and Equipment (3,795) (1,749) Net cash inflow / (outflow) from investing activities (75,014) (77,533) Cash flows from financing activities Proceeds from issue of 'A' Shares 25,562 52,570 Proceeds from issue of 'B' Shares 47,167 29,085 Net cash inflow / (outflow) from financing activities 72,729 81,655 Net increase (decrease) in cash and cash equivalents 4, Cash and cash equivalents at the beginning of the year 1,886 1,697 Cash and cash equivalents at end of year 6,086 1,886 The above statement of cash flows should be read in conjunction with the accompanying notes.

26 48 FINANCIAL STATEMENTS FINANCIAL STATEMENTS GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Ultrafast Fibre Limited is a Local Fibre Company set up to design, implement and provide ultra fast broadband (UFB) to retail (internet) service providers. It is part of the New Zealand Government's commitment to roll-out UFB in New Zealand. The Company was incorporated on the 15th December Ultrafast Fibre Limited is a profit oriented company incorporated in New Zealand under the Companies Act The Company is a limited liability company incorporated and domiciled in New Zealand. The address of its registered office is Bell Gully, Vero Centre, 48 Shortland Street, Auckland These financial statements have been approved for issue by the Board of Directors on 18 August Once issued the entity's owners do not have the power to amend these financial statements. The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Basis of preparation The financial statements of the Company have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand ( NZ GAAP ). They comply with New Zealand equivalents to International Financial Reporting Standards ( NZ IFRS ) Reduced Disclosure Regime and other applicable Financial Reporting Standards, as applicable for profit oriented entities. The Company is eligible and has elected to report in accordance with Tier 2 for profit accounting standards, NZ IFRS Reduced Disclosure Regime (NZ IFRS RDR) on the basis that the Company has no public accountability and is not a large for profit public sector entity. In applying NZ IFRS RDR, the Company has taken advantage of all disclosure concessions available. New standards and interpretations effective in the year were not material to the company. Standards and interpretations not yet adopted. Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Company s accounting periods beginning on or after 30 June 2016 or later periods but which the Company has not adopted early and are not expected to result in a material impact on the Company s financial statements. The following new standards are applicable to the Company: NZ IFRS 15: Revenue from contracts with customers (Effective date: periods beginning on or after 1 January 2017). NZ IFRS 15, 'Revenue from contracts with customers' deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces NZ IAS 18 'Revenue' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted. The Company intends to adopt NZ IFRS 15 on its effective date. This impact is yet to be assessed by the company. NZ IFRS 9: Financial Instruments (Effective date: periods beginning on or after 1 January 2018). NZ IFRS 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of NZ IFRS 9 was issued in September It replaces the guidance in NZ IAS 39 that relates to the classification and measurement of financial instruments. NZ IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in NZ IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. NZ IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the hedged ratio to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under NZ IAS 39. The standard is effective for accounting periods beginning on or after 1 January Early adoption is permitted. The Company intends to adopt NZ IFRS 9 on its effective date. This impact is yet to be assessed by the company. NZ IFRS 16: Leases (Effective date: periods beginning on or after 1 January 2019). NZ IFRS 16 Leases replaces the current guidance in NZ IAS 17. Under NZ IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Under NZ IAS 17, a lessee was required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). NZ IFRS 16 now requires a lessee to recognise a lease liability reflecting future lease payments and a 'right of use asset' for virtually all lease contracts. Included is an optional exemption for certain short term leases and leases of low value assets; however, this exemption can only be applied by lessees. The company intends to adopt NZ IFRS 16 on its effective date and has yet to assess its full impact. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company. Ultrafast broadband contract with Crown Fibre Holdings Limited and Waikato Networks Limited. On 15 December 2010 Ultrafast Fibre Limited entered into an agreement with Crown Fibre Holdings Limited (CFH) and Waikato Networks Limited (WNL) relating to construction, deployment and operation of the UFB network for the Hamilton, Cambridge, Te Awamutu, Tokoroa, Tauranga, Hawera and New Plymouth candidate areas. This is part of the wider project by the Crown to provide a UFB network to 75% of the population in urban New Zealand. The agreement sets out the key commercial terms of the relationship between CFH (the Crown entity that negotiated and administers the agreement), WNL (the partner responsible for the build and operation of the network) and the Company (Ultrafast Fibre Limited). This includes CFH and WNL having shareholdings in the Company that will reflect the level of each entity's investment in the deployment of the UFB network in each candidate area. CFH and WNL have equal board representation on the Company's Board of Directors (up to three directors each) with an independent chairman appointed. The deployment plans drive CFH's level of investment in the Company. As each stage of the deployment plan is completed by WNL the Company purchases the UFB network from WNL based on an agreed cost per premises passed (CPPP) for the number of premises passed by fibre optic cable upon successful user acceptance testing (UAT). CFH will in turn fund the purchase of each stage by way of subscribing to 'A' Shares in the Company, the price for which is the agreed CPPP. In July 2014 amendments to the transaction documents were agreed between UFF and WNL. As a result of the changes, for the period up to 30 June 2016, as UFF connect customers to the network CFH will receive either CPPP paid from the sale of the 'A' Shares under the recycling mechanism, or dividend bearing Ordinary Shares, at the option of WNL. Post 1 July 2016, WNL will have an obligation to purchase 'A' Shares from CFH under the recycling mechanism up to an agreed level, then has the option to purchase 'A' Shares from CFH or allow CFH to convert its 'A' Shares into dividend bearing Ordinary Shares for the CPPP of a connected premise. WNL is required to fund the cost to connect a premise and end customer (essentially fibre optic lead in from the street), the electronics necessary to light the optical fibre and operational costs. The cost of connections and Layer 2 expenditure is based on an agreed cost per premises connected for end user specific infrastructure (CPPC), cost per premises passed for communal Layer 2 infrastructure (CPPP L2) and cost per premises passed for end user specific Layer 2 infrastructure (CPPC L2). WNL generally receives 'B' Shares for funding these obligations with the exception of funding for connections. WNL can receive 'B' Shares for at least 50% of the connection assets and the balance in cash up to a maximum of 50%. The percentage of shares and level of voting control held by WNL and CFH will change throughout the lifecycle of the project. All 'A' and 'B' class shares in the Company convert to ordinary shares 10 years from the establishment date. Statutory base The financial statements have been prepared in accordance with the requirements of the Companies Act Critical accounting estimates The preparation of financial statements in conformity with NZ IFRS RDR requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The financial statements are presented in New Zealand dollars, rounded to the nearest $1,000, which is the Company s functional and presentation currency.