Annual report 2012
Breville Group Limited
Annual report 2012
Contents:
Chairman’s review
CEO’s review
Markets and brands
Financial report
Shareholder information
Company information
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Annual general meeting
Wednesday 14 November 2012 at 10am
Building 1, Port Air Industrial Estate,
1A Hale Street, Botany, New South Wales, 2019.
cover image:
the Kinetix® Control
With 7 task controls and timer
Chairman’s review
“The Breville Group remains firmly focused on its strategy
of delivering sustainable growth by leveraging its
product innovation, brand management and distribution
capabilities across an international platform”
During the 2012 financial year, the Breville
Group again delivered a strong result driven by
continued growth in the group’s international
business and an encouraging performance in
Australia. Net profit after tax for the year ended
30 June 2012 increased by 44.9% to $46.0m.
This growth in earnings and well managed
working capital has further strengthened
the group’s balance sheet providing a solid
foundation to drive future growth especially in
international markets. At 30 June 2012 the group
had a net cash position of $47.0m compared to
$27.3m at the same time last year.
The group has delivered strong shareholder
returns, with return on equity increasing to 25.9%
in the 2012 financial year compared to 15.9% just
4 years ago. Since 2008, earnings per share have
increased at a compound annual growth rate
(“CAGR”) of 21.0%.
This financial performance, together with
our strong cash position enabled the board
to increase dividends for the year by 46.0% to
24.0 cents per share fully franked (2011: 16.50
cents per share, 11.0 cents franked). Since 2008,
dividends per share have increased at a CAGR
of 23.0%.
The group’s diversity policy aims to ensure
a corporate culture that supports workplace
excellence. We value diversity and understand
that it enables us to differentiate our offering
and compete more effectively and efficiently.
Similarly, our management remuneration
policies are aligned with further improving
shareholder returns and the achievement of key
strategic objectives.
I would like to thank my board colleagues, our
experienced and dedicated management and
staff, suppliers, customers and shareholders for
their continued support.
I trust that you will find this annual report
informative and helpful. I, together with my
board and management colleagues, look forward
to meeting as many of you as possible at the
AGM in November.
John Schmoll
Non-executive chairman
Return on equity^
Earnings and dividends per share
%
E
O
R
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
e
r
a
h
s
r
e
p
s
t
n
e
c
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
FY08
FY09
FY10
FY11
FY12
FY08
FY09
FY10
FY11
FY12
^ ROE is calculated based on NPAT for the 12 months ended
30 June each year divided by the shareholders’ equity at
balance sheet date.
Earnings per share (basic)
Dividends per share
Breville Group Limited annual report 2012
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the Smart Scoop™
Ice cream maker with
automatic hardness settings
2
2
Breville Group Limited annual report 2012
Breville Group Limited annual report 2012
CEO’s review
Financial summary
$ Millions except where indicated
30 June 2012
30 June 2011
Revenue
EBITDA
Net profit after tax
Earnings per share (cents)
Return on equity (%)
427.9
72.5
46.0
35.4
25.9
393.6
52.0
31.7
24.5
20.7
The Breville Group made significant progress
in delivering on its strategy, with strong profit
growth in the 2012 financial year.
Group revenue increased by 8.7% to $427.9m.
Excluding the FY11 exit from the North
American non-electrical homewares category,
Group revenue increased by 13.3%.
Continued momentum and growth from the
international operations saw international
revenues increase 17.6% to $226.2m.
Australian revenue finished slightly up on the
prior year after showing good growth of 9.9% in
the second half.
Importantly, EBITDA from international
business units increased by 44.9% to $52.0m,
representing 71% of group EBITDA. Group
EBITDA increased by 39.3% to $72.5m.
Key highlights of the year included:
• A strong performance from the group’s
international operations particularly in North
America;
• An encouraging performance in Australia
despite difficult and competitive retail
trading conditions;
• A positive response to new higher value
Breville designed product launches in all
markets;
• An expanded product range in North
America within existing premium customers;
• Expansion of the Breville branded
distribution business internationally;
• Continued focus on operational cost control
and working capital management and a
reinvestment in growth driving marketing
activities;
• Strong shareholder returns with a higher
return on equity and dividend growth; and
• A strong balance sheet with a higher net “in
cash” position.
The strong international result was underpinned
by successful new product launches, strong
juicer sales and continued strong growth of the
Keurig distribution business in Canada.
In Australia, the business was impacted in
the first half by competitive changes in the
retail landscape and an increasing house
brand presence. The improved second half
performance was as a result of further focus on
the premium department store and specialist
electrical channels and the launch of higher
value Breville designed products.
Our ongoing investment in developing high
quality innovative products and the extension of
our geographic reach, positions the group well to
compete effectively in a global marketplace.
As our products become more sophisticated, the
importance of online consumer research, reviews
and communication increases. Breville has
embraced and continues to invest in both digital
and traditional media and is actively supporting
the growing online segment.
On a personal note, I would like to thank the
board and the entire Breville Group team for
their ongoing support and assistance.
Jonathan Lord
Chief executive officer
Breville Group Limited annual report 2012
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CRANBERRY
BLACK
SESAME
SHERBET
Comprehensive Colour
Premium Range
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Breville Group Limited annual report 2012
Markets and brands
Breville - Thought for food™
As the Breville brand prepares to celebrate
its 80th birthday, it does so from a position of
strength unrivalled in its history. In both of
its more established markets of Australia and
New Zealand, Breville reinforced its premium
market position during the financial year. In
international markets, Breville performed
well, expanding its branded presence to more
countries. In North America, the Breville brand
achieved strong sales growth, cementing itself as
a leader in the premium segment of the market.
Most significantly, in all of its key markets,
the Breville brand continues to build a deeper
relationship with its customers, centred around
Food Thinking, and developing products that
empower people to do things more impressively
or easily than they thought possible in their own
kitchens.
The main driver of the Breville brand’s growing
customer acceptance continues to be its
investment in, and focus on, quality, design and
innovation in its product development. Breville
has continued to deepen its understanding of
food, and how the consumer interacts with it,
applying this to solving problems in ways that
are both valuable to people, and differentiated
from competitors. Breville is actively protecting
this customer value through investment in
product development and intellectual property
protection, developing a portfolio of products for
sustainable growth.
In 2012, we continued to build upon our range
of flagship products. These products are core to
Breville’s growth, as well as its strategic market
position as a differentiated, quality focused
brand.
Some of the more notable launches during the
year were:
The Kitchen Wizz Pro Food Processor
The big mouth food processor with finer
more even slicing (2011 Australian Design
Award winner, 2012 German Red Dot Design
Award winner)
The YouBrew Drip Coffee Maker
The coffee maker with adjustable flavour and
strength that brews directly into a cup, travel
mug or carafe (2012 Australian International
Design Award, 2012 German Red Dot Design
Award winner)
The Dual Boiler Espresso Machine
For precision extraction and simultaneous
steam (2012 Australian Good Design
Award winner)
The Control Grip Hand Blender
The hand blender with ergonomic control,
full power and reduced suction
The Kinetix Control Blender
Kinetix blender with a one piece, ultra light
jug and seven task controls and timer
The Smart Scoop Ice Cream Maker
Ice cream maker with hardness control and
‘keep cool’ (2012 Australian Good Design
Award winner)
The Thermal Pro Frypans
High quality electric frypans with thermally
tested even heat distribution
Leveraging off its product development
capabilities, Breville increased its marketing
investment in key geographies with national
television campaigns across the U.S., New
Zealand, Canada and Australia. Running
throughout the year, the campaigns focused on
‘seeing is believing’ and showcasing Breville’s
flagship innovations. Each campaign delivered
strong results and further strengthened
consumer perception of the brand.
Breville’s strategy of Food Thinking and
creativity continues to gain momentum.
The strategy continues to centre around:
• Deeper consumer understanding;
• Protectable innovation;
• Superior quality and design; and
• Increased marketing communication.
With the Breville brand voted the most trusted
kitchen appliance brand in Australia and New
Zealand*, Breville’s product range continues to
build brand strength.
* Reader’s Digest Most Trusted brand awards, 2012,
Australia, New Zealand.
Breville Group Limited annual report 2012
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Markets and brands continued
Kambrook - The Smarter Choice™
Kambrook has become synonymous with
quality, durable products at an affordable price.
The ever-expanding product range encompasses
appliances for the kitchen, living room, laundry
and bedroom.
Kambrook highlights the durability of its
appliances and the rigorous testing process
that each new product undergoes. Each product
is subjected to extensive laboratory and quality
testing before receiving the Kambrook seal
of approval.
Philips
The group is the exclusive distributor for Philips’
personal care and garment care appliances in
Australia and New Zealand. Our relationship
with Philips is now in its 12th year and we
continue to work collaboratively to grow sales
and market share.
Key markets
Australia
Revenues of $201.7m were marginally up on the
prior year, with second half revenues growing
9.9% on the previous corresponding period.
EBITDA for the year was also in line with the
prior year.
The Australian business’ multi-brand strategy
contributed to its resilient FY12 performance.
Breville focused on strengthening its position at
upper and premium price points in the kitchen
appliance category. By upgrading its product
range and focussing on premium department
stores and specialist electrical channels it
successfully increased its average sales price.
The strong performance in the second half of
the financial year was driven by the success
of these new high value product launches and
targeted product specific marketing activity.
The Breville brand was voted Australia’s most
trusted kitchen appliance brand*, highlighting
that the brand is as powerful and relevant in
Australia today as ever.
* Reader’s Digest Most Trusted brand awards, 2012,
Australia, New Zealand.
Why don’t they
make ‘em
LIKE THEY
USED TO?
the Classic ‘74™
Durable stainless steel
jaffle maker
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Breville Group Limited annual report 2012
Key markets continued
In a challenging retail environment, Kambrook
performed well by expanding existing product ranges
and entering new categories. The business continues
to invest in brand marketing and each new product is
supported by a public relations campaign.
Philips continued to set the benchmark for innovation
and performance with its flagship shaver range and it
also made strong inroads into the steam-generator iron
market, with its first of a kind PerfectCare steam system.
North America
Total revenue increased by 22.4% to $152.2m
(2011: $124.4m) in AUD. Excluding North American
homewares (fully exited in FY11), total revenue
increased by 40.2%.
The Breville brand’s revenue grew by 34.5% driven by
the release of new higher value flagship products in
both new and existing categories, through the group’s
premium and specialist retail customers.
The Keurig “single serve” coffee distribution business
in Canada also performed very well with commission
income before operating costs growing from $9.9m
to $19.5m.
North America delivered a significant increase in
EBITDA of 76.1% to $34.7m (2011: $19.7m). This increase
in profitability resulted from not only the revenue
growth, but also from the FY11 exit of the lower margin,
non-electrical homewares category and the full year
benefit of the restructured lower operating cost base.
How can you get a
HOT, BOLD, SINGLE CUP
from a drip coffee
machine?
the YouBrew™
With built-in grinder &
adjustable flavour control
Breville Group Limited annual report 2012
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Markets and brands continued
Key markets continued
New Zealand
International Distributors
International Distributors reported revenue of
$47.3m (2011: $44.2m) an increase of 7.0%, and an
EBITDA of $13.7m (2011: $13.5m).
The group is focused on broadening its
distributor network, especially across the
important Asia-Pacific region and accelerating
the launches of Breville designed products in
these markets.
New Zealand again produced a very pleasing
result with revenue increasing by 12.8% and
EBITDA by 33.3% to $3.6m. This growth was
driven principally by the success of recently
launched higher value Breville-designed
products and the Philips distribution business.
The Breville brand was voted New Zealand’s
most trusted kitchen appliance brand*.
* Reader’s Digest Most Trusted brand awards, 2012,
Australia, New Zealand.
How do you control the
BLEND, MASH, CHOP & SLICE
all in the one station?
the All In One™
Blend, mash & processing station
with control grip.
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Breville Group Limited annual report 2012
People - creativity and food
thinkers
We enjoy the benefits of a highly experienced
and talented team across all departments and
geographies. Integrated through our food
thinking culture, the passion, creativity and
insight of our team has helped us continue to
deliver world class, innovative products to our
customers. The team continues to be awarded
both domestically and internationally with
multiple design awards, and recognition through
all media including print, broadcast and online.
How do you
KEEP THE HEAT UP
when cold food
hits the pan?
Breville Group invests in the training and
education of its team, building strong
collaborative links with world experts in food
thinking and technology.
We are strongly committed to our core values
of creativity, simplicity, insight and excellence
in all departments, and we recruit, train, assess
and reward employees on this basis. With a
team anchored around these common values,
we are able to foster a workplace that stimulates
idea generation, is passionate about learning,
and continually searches for new and better
solutions.
Breville is committed to ensuring a safe
workplace. Our employees participate in
regular Work Health and Safety audits and
the organisation promotes and encourages a
proactive safety culture.
Breville advocates diversity in our workforce.
We value diversity and understand the insight
and creativity that it brings to our business.
the Thermal Pro Grill™
with 2400W fast recovery element
Breville Group Limited annual report 2012
Breville Group Limited annual report 2012
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Sustainability and social
responsibility
The Breville Group is committed to ethical,
responsible and sustainable conduct across the
entire business. We remain determined to build a
culture, through the commitment of our employees
which reduces our impact on the environment and
increases our contribution to society.
The Group selects its suppliers and partners with
its social, ethical and sustainability commitments
top of mind, and is developing a system of regular
audits to ensure ongoing compliance. As a
signatory to the Australian Packaging Covenant,
an action plan was developed in 2012 with the key
goal to reduce the amount of product packaging
that ends up in landfill by designing better, longer
lasting products, and by using packaging materials
that can either be reused or recycled.
the Smart Toast™
4 slice motorised diecast long slot toaster
How do you toast
ANY TYPE OF BREAD
and get it
JUST THE WAY
YOU LIKE IT?
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Breville Group Limited annual report 2012
Breville Group Limited
Financial report 2012
Contents:
Directors’ report
Corporate governance statement
Income statement
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Cash flow statement
Notes to the financial statements
Directors’ declaration
Independent audit report
Auditor’s independence declaration
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28
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79
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Breville Group Limited annual report 2012
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Directors’ report
The board of directors of Breville Group Limited
(company) has pleasure in submitting its report in
respect of the year ended 30 June 2012.
Board of directors
The names and details of the company’s directors in
office during the year and until the date of this report are
as below. Directors were in office for this entire period.
John Schmoll
Non-executive chairman
B.Com, FCA, FAICD
Mr Schmoll completed his executive career on his
retirement in 2002 as Chief Financial Officer of Coles
Myer Ltd. Prior to this he held senior corporate and
professional roles in Australia and South Africa including
Arthur Young and Edgars Stores Ltd (South Africa’s
largest apparel and homewares retailer). Since his
retirement he has accepted various non-executive
director positions and undertaken some executive
coaching roles. Accordingly, he brings to Breville over
35 years of experience in finance, investor relations,
information technology and corporate governance,
primarily in the distribution and financial sectors.
During the last three years he has served as a director
of the following other listed companies:
• OrotonGroup Ltd #
• Patties Foods Ltd #
• AWB Limited (March 2005 – December 2010)
# denotes current directorship
Prior to this he was also a non-executive director of
Australian Leisure and Hospitality Limited, Chandler
Macleod Ltd and Golden Circle Ltd.
Steven Fisher
Non-executive director
B.ACC, CA(SA)
Mr Fisher has more than 25 years experience in general
management positions in the wholesale consumer
goods industry and is currently chief executive of the
Voyager Group. Prior to entering into the consumer
goods industry Mr Fisher was a practicing chartered
accountant having qualified in South Africa with a
Bachelor of Accounting degree. In addition, Mr Fisher
serves on various private company boards.
During the last three years he has not served as a
director of any other listed company.
Dean Howell
Non-executive director
FCA, FTIA
Mr Howell has had an extensive career in accounting,
spanning some 40 years, and accordingly has a wealth
of commercial and advisory experience. He was the
former senior partner of a Melbourne firm of chartered
accountants and also served on that firm’s national
and international boards. He is currently a consultant
with Grant Thornton. He is also a director of Peter
MacCallum Cancer Foundation Ltd. Mr Howell is
chairman of the audit & risk committee.
During the last three years he has not served as a
director of any other listed company.
Steven Klein
Non-executive director
LLB, B.Com
Mr Klein is a Principal of SBA Law. He has had over
20 years experience acting on behalf of both public
and private companies in merger and acquisition
transactions.
During the last three years he has not served as a
director of any other listed company.
Samuel Weiss
Non-executive director
AB, Harvard University; MS, Columbia Business
School; FAICD
Mr Weiss has had a long corporate career in the United
States, Europe and Australia with leading consumer
brand companies such as Nike, Gateway Computers
and Sheridan. He devotes considerable time and energy
to education, the arts and disadvantaged communities
through his work as a past president of the Harvard
Club of Australia, president of The Benevolent Society
and as a director of The Sydney Festival. Mr Weiss is
chairman of the people and performance committee.
During the last three years he has served as a director
of the following other listed companies:
• Altium Limited #
•
iProperty Group Ltd #
• OrotonGroup Ltd #
• GLG Corp Limited
# denotes current directorship
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Breville Group Limited annual report 2012
Company secretaries
Performance indicators
The names and details of the company’s company
secretaries in office during the year and until the date of
this report are as below. The company secretaries were
in office for this entire period as indicated below.
Management and the board monitor the financial
performance of the company by measuring actual
results against expectations as developed through an
annual business planning and budgeting process.
Michelle Waters – appointed 15 March 2012
B.Com, CA
Ms Waters is a chartered accountant and has over 7
years experience in senior finance roles in print media
production and consumer products companies. Prior
to the senior finance roles, Ms Waters was a practicing
chartered accountant.
Shiraz Khan – resigned 15 March 2012
B.Bus, CPA
Mr Khan is a certified practicing accountant and has
over 20 years experience in senior finance roles in a
number of manufacturing and consumer products
companies in Australia and New Zealand.
Reporting currency and rounding
The financial report is presented in Australian dollars
and all amounts have been rounded to the nearest
thousand dollars ($’000) unless otherwise stated under
the option available to the company under ASIC class
order 98/100. The company is an entity to which the
class order applies.
Principal activities
During the year, the principal activities of the
consolidated entity were the innovation, development,
marketing and distribution of small electrical appliances
in the consumer products industry. The consolidated
entity operated in the principal markets of Australia,
North America, New Zealand and Hong Kong.
Company overview
Appropriate key performance indicators (KPI’s) are used
to monitor operating performance and management
effectiveness.
Review of results and operations
Revenue of the consolidated entity for the year to
30 June 2012 was $427,940,000 which was 9%
higher than the consolidated revenue for the previous
corresponding year of $393,589,000.
The group’s profit after income tax attributable to
shareholders for the year to 30 June 2012 was
$45,982,000. This was a 45% increase on the previous
corresponding year result of $31,735,000.
The basic earnings per share for the consolidated entity
was 35.35 cents per share (2011: 24.47 cents per
share).
Financial position
Operating cash flow for the year was $51,111,000
(2011: $46,997,000) and proceeds were used to pay
dividends. Net cash at year end was $47,019,000
(2011: $27,332,000).
Risk management
The company’s risk management is discussed in the
corporate governance statement on page 24.
Dividends
The following dividends have been paid, declared or
recommended since the end of the preceding year.
$’000
Cents per
ordinary
share
11.5 14,961
The underlying strategic intent of the company is a
stated commitment to innovative product development,
to drive growth in sales and profits in the principal
markets in which it operates. In line with this intent, the
company has:
Final dividends
recommended:
• built and staffed a world class product development
Dividends paid in the year:
centre in Sydney;
• maintained an efficient procurement and quality
assurance centre in Hong Kong;
• employed experienced marketing and sales
executives in its key markets around the world; and
• maintained effective administration processes
to support growth initiatives on an international
platform.
Interim FY12 dividend paid
Final FY11 dividend paid
12.5 16,262
7.0
9,107
Breville Group Limited annual report 2012
13
Directors’ report
continued
Significant changes in the state of
affairs
There were no significant changes in the state of affairs
of the consolidated entity that occurred during the year
that have not otherwise been disclosed in this report or
the consolidated financial statements.
Directors’ interests
As at the date of this report, the interests of the
directors in the shares or other instruments of Breville
Group Limited were:
J. Schmoll
S. Fisher
D. Howell
S. Klein
S. Weiss
Ordinary
shares
100,000
50,288
100,000
117,189
121,775
Remuneration report (audited)
This remuneration report outlines the compensation
arrangements in place for directors and executives
(collectively “key management personnel”) of Breville
Group Limited. For the purposes of this report, key
management personnel (KMP) of the group are defined
as those persons having authority and responsibility for
planning, directing and controlling the major activities of
the group, directly or indirectly.
Details of key management personnel
(i) Directors:
J. Schmoll Non-executive chairman
S. Fisher
Non-executive director
D. Howell Non-executive director and chairman of
audit and risk committee
S. Klein
Non-executive director
S. Weiss
Non-executive director and chairman of
people and performance committee
(ii) Executives:
S. Audsley Group chief executive officer (KMP to 9
November 2011)
S. Brady
General manager global marketing
M. Cohen Group chief financial officer
C. Dais
J. Lord
Group general manager - business
development and operations (KMP from
28 November 2011)
Acting group chief executive officer (Group
general manager marketing and product
development to 9 November 2011)
Other than the appointment of J. Lord to the position of
group chief executive officer on 23 August 2012, there
were no other changes of key management personnel
after reporting date.
Compensation philosophy
The performance of the company depends, in part,
upon the quality of its directors and executives. The
company must attract, retain, motivate and develop
highly skilled directors and executives in order to secure
the short and long term success of the business so to
enhance shareholder value.
Based on this philosophy, the company’s compensation
strategy and framework embodies two interrelated
outcomes: improved business results and building a
culture of high performance.
The following principles define the compensation
framework:
• Provide competitive rewards (for fixed and variable
compensation) to attract high calibre employees;
• Link reward to sustained growth in shareholder
value from dividends and growth in share price and
the delivery of a consistent return on assets;
• Link rewards with the strategic goals and
performance of the company; and
• Reinforce a competitive business strategy to deliver
organisational success and enhanced shareholder
value.
People and performance committee
The people and performance committee of the board
of directors of the company is responsible for reviewing
and recommending to the board executive and
employee remuneration arrangements and executive
succession as set out in the people and performance
committee charter.
The people and performance committee assesses
the appropriateness of the nature and amount of
compensation of executives and employees on an
annual basis by reference to relevant individual and
company performance and market conditions.
The people and performance committee is responsible
for the engagement of any external compensation
consultants for work on executive remuneration.
14
Breville Group Limited annual report 2012
Remuneration report (audited) continued
Compensation structure
Structure
In accordance with best practice corporate governance,
the structure of non-executive director and executive
compensation is separate and distinct.
Non-executive director compensation
Objective
The board seeks to set compensation at a level which
provides the company with the ability to attract and
retain directors of high calibre whilst maintaining a level
commensurate with companies of a similar size
and type.
Structure
The Constitution and the ASX Listing Rules specify that
the aggregate compensation of non-executive directors
shall be determined from time to time by general
meeting. The aggregate compensation of $950,000
per year was approved by shareholders at the annual
general meeting held in November 2010.
The compensation of non-executive directors is
reviewed annually. Each director receives a fee for
being a director of the company. An additional fee is
also paid to each director who also acts as chairman
of a board committee. The payment of additional fees
for acting as chairman of a committee recognises the
additional time commitment required by the director to
facilitate the running of the committee.
The compensation of non-executive directors for the
year ended 30 June 2012 is detailed in Table 1 on page
19 of this report.
Executive compensation
Objective
The company aims to remunerate and reward
executives with a level and mix of compensation
commensurate with their positions and responsibilities
within the company and to:
• Reward executives for company and individual
performance against specific targets set with
reference to business objectives and results;
• Align the interest, focus and performance of the
executives with those of the shareholders;
• Attract, retain and motivate high performing
executives; and
• Ensure total compensation is competitive by market
standards.
In determining the level and make-up of executive
compensation, the people and performance committee
may engage an external consultant as appropriate, to
provide independent advice detailing market related
levels of compensation. No such external consultants
were engaged for the year ended 30 June 2012. The
group chief executive officer makes recommendations
to the people and performance committee for
consideration.
Employment contracts are entered into with executives.
Details of the contracts are provided on page 21.
Compensation consists of the following key elements:
• Fixed compensation
• Variable compensation
• Short term incentive (STI); and
• Long term incentive (LTI).
The proportion of the fixed compensation and variable
compensation (potential short term and long term
incentives) is established for each executive by the
people and performance committee and approved by
the board.
Table 3 on page 21 of this report details the
components (%) of the compensation of key
management personnel of the group.
Fixed compensation
Objective
The level of fixed compensation is set so as to provide
a base level of compensation which is appropriate to
the position and responsibility and is competitive in the
market.
Fixed compensation is reviewed annually by the people
and performance committee. The process consists of
reviewing company and individual performance, relevant
comparative market compensation, internal relativities
and, where appropriate, external advice on policies and
practices.
Structure
Executives are given the opportunity to receive their
fixed compensation in a variety of forms including cash
and other non-cash benefits.
Breville Group Limited annual report 2012
15
Directors’ report
continued
Remuneration report (audited) continued
Variable compensation – short term
incentive (STI)
Objective
The objective of the STI plan is to reward executives
and other employees on the achievement of
company and individual value adding performance
objectives established annually, providing them with
the opportunity to earn over and above their fixed
compensation should the agreed objectives be
achieved. Depending upon their position and seniority
in the organisation, executives and other employees are
eligible for a STI award of between 20-40% of their fixed
or base annual remuneration. The incentive payment is
based on the achievement of financial and non financial
objectives, with the former dependant upon a multiplier
in accordance with a sliding scale. Objectives for each
participant are determined on an individual basis aligned
to enhance shareholder value.
The principle objectives of the plan are:
• To ensure that the company delivers its primary
financial results and achieves its targets every year
to deliver sustainable performance and continued
organisational growth;
• To achieve business goals through rewarding value
adding individual performance;
• To contribute to the development of a performance
culture across the company; and
On an annual basis, after consideration of performance
against the established targets/objectives, incorporating
both company financial targets and individual objectives,
the group chief executive officer recommends to the
people and performance committee an amount, if
any, of the STI payment each executive (excluding the
group chief executive officer) is eligible to receive. This
recommendation, together with a recommendation
by the people and performance committee of an
amount if any, of the STI payment the group chief
executive officer is eligible to receive, is then put to the
board for approval. The group chief executive officer
may also award discretionary bonuses to recognise
and reward key contributions from high performing
employees. All discretionary bonuses are presented
as recommendations to the people and performance
committee for approval.
The aggregate of the annual STI payments available
for executives across the company are subject to the
approval of the people and performance committee
and the board and payments are typically paid as a
cash bonus. The minimum amount of the STI payments
assuming that no executives meet their respective
targets/objectives (including company financial targets
and individual objectives) for the 2012 financial year is nil
(2011: nil).
Variable compensation – long term
incentive (LTI)
• To promote and facilitate the concept of shared
Objective
ownership whereby executives and employees who
contribute to the success of the company will also
share in that success.
The total potential STI available is set at a level to
provide an incentive to the executives and employees
to achieve and exceed personal, financial and
operational targets.
Structure
Actual STI payments are determined on the basis of the
achievement of specific targets and objectives set at
the commencement of the year. Financial performance
targets include net profit before tax. Individual objectives
are aligned to the non financial components of the
group strategy. The company has predetermined
financial performance benchmarks which must be met
in order to trigger payments under the STI plan and
these are varied on a yearly basis in line with the annual
budgeting process.
The objective of the LTI plan is to reward executives and
other employees in a manner that aligns this element of
compensation with the creation of shareholder value.
The LTI plan is only made available to executives
and other employees who are able to influence the
generation of shareholder value and have a direct
impact on the company’s performance against relevant
long term performance hurdles. Depending upon their
position and seniority in the organisation, executives
and other employees are eligible for a LTI award of
between 20-40% of their fixed annual compensation.
Structure – performance rights plan
From April 2009, LTI grants to executives and other
employees (collectively “participants”) were provided
in the form of performance rights awards issued in
accordance with the Breville Group Limited Performance
Rights Plan (PRP). LTI grants to participants (excluding
the group chief executive officer) are recommended
by the group chief executive officer to the people
and performance committee. This recommendation,
together with a recommendation by the people and
performance committee of a LTI grant to the group chief
executive officer, is then put to the board for approval.
An offer under the PRP grants a participant the right
to a certain number of fully paid ordinary shares in the
company. Upon satisfaction of the performance hurdles,
the right will vest and be convertible into shares.
16
Breville Group Limited annual report 2012
The options vest if and when the group’s underlying
EPS increases by at least 10% per annum compounded
annually over the term. If the EPS growth condition
is not achieved in any financial year, the EPS growth
for that financial year will be carried forward and
recalculated at the end of each following financial year
until the end of the term of the options. As a result,
options may still vest and become exercisable where
the vesting conditions are satisfied in a subsequent
financial year. If this increase is not met within three
years from the date of grant, the options are forfeited.
EPS represents the earnings per share from operations
adjusted for non-trading items. The use of EPS ensures
an alignment between shareholder return and reward for
participants.
There are no cash alternatives. The options cannot be
transferred and are not quoted on the ASX.
Other
The number of ordinary shares in the company which
could be acquired by executives and other employees
holding performance rights and options if all outstanding
performance rights and options were vested shall not
exceed 5% of the total number of issued shares of the
company.
Remuneration report (audited) continued
Variable compensation – long term
incentive (LTI) continued
The company uses time-based and financial-based
hurdles. Earnings per share (EPS) is the financial-based
performance hurdle for the LTI plan. EPS represents the
earnings per share from operations adjusted for non-
trading items. The use of EPS ensures an alignment
between shareholder return and reward for participants.
In addition to the grant of performance rights awards
which are subject to an EPS performance hurdle,
performance rights awards also may be granted in
accordance with the PRP as a retention award where
the performance condition is continued employment
with the company to vesting date.
If the performance hurdle is not met or if the
participant ceases to be employed by the company,
any unvested performance rights will lapse unless
otherwise determined by the board. There are no
cash alternatives. The performance rights cannot be
transferred and are not quoted on the ASX. Holders
of performance rights are not entitled to notice of, or
attend, a meeting of shareholders of the company, or
receive any dividends declared by the company, until
the rights have vested and then converted into shares.
Once allocated, disposal of shares is subject to
restrictions whereby board approval is required to sell
the shares granted within three years of the shares
being allocated to the participant or; if the participant
ceases to be employed by the company, within twelve
months of the date employment ceases; or such other
date as the board determines.
In the event of a takeover bid where the bidder and its
associates become entitled to at least 50% of the voting
shares of the company, any performance rights granted
will vest where the board, in its absolute discretion, is
satisfied that pro rata performance is in line with any
performance condition applicable to those performance
rights. Any performance rights which do not vest will
immediately lapse, unless otherwise determined by the
board.
Structure – second senior executive option plan
Prior to April 2009, LTI grants to participants were
provided in the form of options issued in accordance
with the second senior executive option plan. No further
options are intended to be granted under the second
senior executive option plan.
Options, whether vested or unvested will be forfeited if
the participant ceases to be employed by the company
on or before the date of exercise, unless otherwise
determined by the board.
Breville Group Limited annual report 2012
17
Directors’ report
continued
Remuneration report (audited) continued
Variable compensation – long term incentive (LTI) continued
Relationship of rewards to performance
The table below shows the details of LTI plans for which compensation has been included in the remuneration tables
on pages 19 to 21 of this report.
Number
outstanding
30 June 2012
(Executive
only)
Number
outstanding
30 June 2011
(Executive
only)
-
100,000
LTI Plan
(for the year
ended)
Options
June 2009
Performance hurdles/conditions
Issued for nil consideration.
-
- Exercise price - $1.12 - based on volume weighted average price of all the company’s
shares traded on ASX on the five trading days up to/including the issue date plus a
premium of 11%.
- Term of four years and are exercisable in equal tranches on the first three anniversaries
of the date of issue as follows:
• 1/3 of options, any time during the one year period commencing one year after the
issue;
• 1/3 of options, any time during the one year period commencing two years after the
issue;
• 1/3 of options, any time during the one year period commencing three years after
the issue.
- To vest, the group’s underlying EPS must increase by at least 10% per annum
compounded annually over the four year term off the base year underlying EPS of
16.58 cents per share.
- 100% of issued options vested and exercised at 30 June 2012.
Performance
rights
June 2009
Issued for nil consideration.
-
- Exercise price is $0.
- To vest, the group’s underlying EPS for the year ended 30 June 2011 must be at least
-
870,000
21.00 cents per share.
- 100% vested at 30 June 2012.
Performance
rights
June 2010
Issued for nil consideration.
-
- Exercise price is $0.
- Term of three years and there are 2 performance hurdles each representing 50% of the
151,000
294,000
total number of performance rights:
(a) Base EPS hurdle – to vest, group’s underlying EPS for the year ending 30 June
2012 must be at least 26.50 cents per share.
(b) Stretch EPS hurdle – to vest, the group’s underlying EPS for the year ending 30
June 2012 must be at least 29.00 cents per share.
- 0% vested at 30 June 2012.
Performance
rights
June 2011
Issued for nil consideration.
-
- Exercise price is $0.
- Term of three years and there are 2 performance hurdles each representing 50% of the
135,000
261,000
total number of performance rights:
(a) Base EPS hurdle – to vest, group’s underlying EPS for the year ending 30 June
2013 must be at least 30.00 cents per share.
(b) Stretch EPS hurdle – to vest, the group’s underlying EPS for the year ending 30
June 2013 must be at least 33.00 cents per share.
- 0% vested at 30 June 2012.
Issued for nil consideration.
-
- Exercise price is $0.
- Term of three years and to vest, the group’s underlying EPS for the year ending 30
June 2013 must be at least 37.00 cents per share.
- 0% vested at 30 June 2012.
47,000
91,000
Performance
rights
June 2012
Issued for nil consideration.
-
- Exercise price is $0.
- Term of three years and there are 2 performance hurdles each representing 50% of the
152,000
total number of performance rights:
(a) Base EPS hurdle – to vest, group’s underlying EPS for the year ending 30 June
2014 must be at least 33.50 cents per share.
(b) Stretch EPS hurdle – to vest, the group’s underlying EPS for the year ending 30
June 2014 must be at least 36.50 cents per share.
- 0% vested at 30 June 2012.
Issued for nil consideration.
-
- Exercise price is $0.
- Term of up to twenty four months:
(a) 50% of the performance rights to vest, participants must be employed by the
company on 3 December 2012.
(b) 50% of the performance rights to vest, participants must be employed by the
company on 2 December 2013.
- 0% vested at 30 June 2012.
69,000
-
-
18
Breville Group Limited annual report 2012
Remuneration report (audited) continued
Group performance
The table below shows the performance of the group over the past five years.
Year ended
Underlying basic earnings per share (cents)
Basic earnings per share (cents)
Total dividends (cents)
Share price at 30 June ($)
30 June
2008
15.37
16.50
10.50
1.05
30 June
2009
13.32
9.08
5.50
0.92
30 June
2010
30 June
2011
30 June
2012
21.98
17.44
11.00
2.14
27.61
24.47
16.50
3.30
35.35
35.35
24.00
4.38
Remuneration of key management personnel
Table 1: Remuneration for the year ended 30 June 2012
Short-term employee benefits
Post-em-
ployment
benefits
Long-
term
employee
benefits
Salary &
fees
Cash
bonuses
Other
Super-
annuation
Long
service
leave
Share-
based
payment
Per-
formance
rights /
options
$
175,776
107,489
112,790
105,795
112,790
614,640
212,243
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
$
15,820
2,012
10,151
-
10,151
38,134
$
-
-
-
-
-
-
$
-
-
-
-
-
-
Total
$
191,596
109,501
122,941
105,795
122,941
652,774
18,519
2,670
(139,369)
94,063
296,105
107,065
31,154
28,799
8,250
129,217
600,590
341,057
139,894
31,154
25,000
10,381
190,458
737,944
228,823
61,005
466,002
209,730
-
-
-
-
14,942
304,770
41,940
8,748
263,270
989,690
Non-executive directors
J. Schmoll – chairman
S. Fisher
D. Howell
S. Klein (a)
S. Weiss
Sub-total non-executive directors
Other key management personnel
S. Audsley (b)
S. Brady
M. Cohen
C.Dais (c)
J. Lord
Sub-total executive KMP
1,544,230
517,694
62,308
114,258
30,049
458,518
2,727,057
Totals
Notes
2,158,870
517,694
62,308
152,392
30,049
458,518
3,379,831
(a) S. Klein was a principal of the legal firm SBA Law from 1 August 2011. Up until 30 June 2011, S. Klein was partner of a legal
firm Arnold Bloch Leibler. His director’s fees from 1 August 2011 were paid to SBA Law and prior to that, to Arnold Bloch Leibler.
These fees are subject to GST. The amounts shown above are net of GST.
(b) S. Audsley did not meet the definition of key management personnel after 9 November 2011. Total remuneration reflected is to
9 November 2011. Share-based payment represents reversal of related non-cash expenditure following cessation of employment
and the forfeiture and lapse of unvested performance rights.
(c) C.Dais did not meet the definition of key management personnel for the 2011 financial year but became key management
personnel on 28 November 2011. Total remuneration is reflected from 28 November 2011.
Breville Group Limited annual report 2012
19
Directors’ report
continued
Remuneration report (audited) continued
Remuneration of key management personnel continued
Table 2: Remuneration for the year ended 30 June 2011
Short-term employee benefits
Post-em-
ployment
benefits
Long-
term
employee
benefits
Share-
based
payment
Per-
formance
rights /
options
$
-
-
-
-
-
-
Total
$
182,749
104,188
116,833
104,188
116,833
624,791
Long
service
leave
$
-
-
-
-
-
-
Salary &
fees
Cash
bonuses
$
167,660
95,585
107,186
104,188
107,186
581,805
$
-
-
-
-
-
-
533,828
244,400
Other
$
Super-
annuation
$
15,089
8,603
9,647
-
9,647
42,986
-
-
-
-
-
-
-
47,051
9,983
224,558
1,059,820
280,945
103,813
29,999
27,355
5,888
102,894
550,894
322,725
123,513
30,000
25,000
5,613
130,738
637,589
426,892
148,096
-
38,420
7,602
115,684
736,694
269,788
93,747
28,499
27,324
5,643
101,545
526,546
197,023
73,632
23,250
15,836
3,027
57,823
370,591
Non-executive directors
J. Schmoll – chairman
S. Fisher
D. Howell
S. Klein (a)
S. Weiss
Sub-total non-executive directors
Other key management personnel
S. Audsley
S. Brady
M. Cohen
J. Lord
M. Melis
H. Silver (b)
Sub-total executive KMP
2,031,201
787,201
111,748
180,986
37,756
733,242
3,882,134
Totals
Notes
2,613,006
787,201
111,748
223,972
37,756
733,242
4,506,925
(a) S. Klein’s fees were paid to Arnold Bloch Leibler, a firm of which he was a partner of until 30 June 2011. These fees are subject to
GST. The amounts shown above are net of GST.
(b) H. Silver ceased to meet the definition of key management personnel on 31 March 2011. Total remuneration reflected is to
31 March 2011.
20
Breville Group Limited annual report 2012
Remuneration report (audited) continued
Table 3: Key management personnel compensation mix
Name
Non-executive directors
J. Schmoll
S. Fisher
D. Howell
S. Klein
S. Weiss
Fixed compensation Short term incentive Long term incentive (a)
2012
2011
2012
2011
2012
2011
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
100.00% 100.00%
-
-
-
-
-
-
-
-
-
-
-
23.06%
-
-
-
-
-
-
-
-
-
-
-
21.19%
18.68%
20.51%
-
Other key management personnel
S. Audsley (b)
100.00% 55.75%
S. Brady
M. Cohen
C.Dais (c)
J. Lord
60.65% 62.48%
17.83% 18.84%
21.52%
55.23% 60.12%
18.96% 19.37%
25.81%
75.08%
-
20.02%
-
4.90%
52.21% 64.20%
21.19% 20.10%
26.60%
15.70%
(a) LTI values are based on the accounting value of performance rights in 2012 and performance rights and options in 2011 based
on 100% proportion of performance rights and options.
(b) S. Audsley did not meet the definition of key management personnel after 9 November 2011. Total remuneration reflected is to
9 November 2011.
(c) C.Dais did not meet the definition of key management personnel for the 2011 financial year but became key management
personnel on 28 November 2011. Total remuneration is reflected from 28 November 2011.
Employment contracts
None of the key management personnel have fixed
term employment contracts. Amounts payable on
termination vary from a minimum statutory entitlement
to a maximum of 12 months based on a calculation of
total fixed remuneration (which includes base salary,
superannuation and allowances (if applicable)). In
accordance with the terms of the performance rights
plan and the second senior executive option plan, any
performance rights or options not vested at the date
of termination will be forfeited and shall lapse, unless
otherwise determined by the board.
Prohibition on hedging by key
management personnel
The group has adopted a policy which prohibits key
management personnel and their closely related
parties from entering into an arrangement that has the
effect of limiting the exposure of a member of the key
management personnel to risk relating to an element of
that member’s compensation. The policy complies with
the requirements of section 206J of the Corporations
Act 2001.
Breville Group Limited annual report 2012
21
Directors’ report
continued
Remuneration report (audited) continued
Performance rights and compensation options
Table 4: Performance rights granted
The terms and conditions of each grant of performance rights affecting remuneration of key management
personnel in this financial year or future reporting years are as follows:
Grant Date *
First
exercise
date
Last
exercise
date
Expiry date
Exercise
price
20 Apr 09 (a)
1 Sept 11
3 Oct 11
3 Oct 11
22 Dec 10 (b)
3 Sept 12
5 Oct 12
5 Oct 12
22 Dec 10 (c)
2 Sept 13
4 Oct 13
4 Oct 13
20 Apr 11 (d)
2 Sept 13
4 Oct 13
4 Oct 13
12 Oct 11 (e)
1 Sept 14
3 Oct 14
3 Oct 14
23 Dec 11 (f)
3 Dec 12
4 Jan 13
4 Jan 13
23 Dec 11 (g)
2 Dec 13
3 Jan 14
3 Jan 14
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Fair
value per
performance
right at grant
date ($)
(Note 27)
Vested and
exercised 30
June 2012
Vested and
exercised 30
June 2011
0.57
2.64
2.54
3.32
2.41
2.47
2.33
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
Performance rights relating to two financial years were granted in the financial year ended 30 June 2011. For details of
performance rights grants to key management personnel, refer to note 29.
(a) There is one performance hurdle representing 100% of the total number of performance rights granted - group
underlying EPS for the year ending 30 June 2011 is at least 21.00 cents per share.
(b) There are two performance hurdles each representing 50% of the total number of performance rights granted -
Base EPS (group underlying EPS for the year ending 30 June 2012 is at least 26.50 cents per share) and Stretch
EPS (group underlying EPS for the year ending 30 June 2012 is at least 29.00 cents per share).
(c) There are two performance hurdles each representing 50% of the total number of performance rights granted -
Base EPS (group underlying EPS for the year ending 30 June 2013 is at least 30.00 cents per share) and Stretch
EPS (group underlying EPS for the year ending 30 June 2013 is at least 33.00 cents per share).
(d) Group underlying EPS for the year ending 30 June 2013 is at least 37.00 cents per share.
(e) There are two performance hurdles each representing 50% of the total number of performance rights granted -
Base EPS (group underlying EPS for the year ending 30 June 2014 is at least 33.50 cents per share) and Stretch
EPS (group underlying EPS for the year ending 30 June 2014 is at least 36.50 cents per share).
(f) Performance condition being that participants must be employed by the company on 3 December 2012.
(g) Performance condition being that participants must be employed by the company on 2 December 2013.
*
In addition to the EPS performance hurdle, the participant must be employed by the company on the vesting date.
Table 5: Shares issued on exercise of compensation options during the year ended 30 June 2012
30 June 2012
M. Cohen
Options exercised/shares issued
Price paid per share
Number
100,000
100,000
$
1.12
Table 6: Shares issued on exercise of compensation options during the year ended 30 June 2011
30 June 2011
M. Cohen
M. Cohen
Options exercised/shares issued
Price paid per share
Number
100,000
200,000
300,000
$
2.36
1.12
22
Breville Group Limited annual report 2012
Directors’ meetings
Corporate governance
The number of meetings of directors (including meetings
of committees of directors) held during the year and the
number of meetings attended by each director was as
follows:
Full board
Audit & risk
(A&RC)
People and
performance
13
13(c)
13
13
13
13
4
4
3
4(c)
4
4
4
4
3
4
4
4(c)
Number of
meetings
J. Schmoll
S. Fisher
D. Howell
S. Klein
S. Weiss
(c) Designates the current chairman of the board or committee.
Committee membership
As at the date of this report, the company had an
audit & risk committee and a people and performance
committee of the board of directors. The details of
the functions and memberships of the committees of
the board are presented in the corporate governance
statement.
Indemnification of directors and
officers
The directors and officers of the company are
indemnified by the company against losses or liabilities
which they may sustain or incur as an officer of the
company in the proper performance of their duties.
During the financial year, the company paid premiums
in respect of contracts to insure the directors of the
company against a liability to the extent permitted by
the Corporations Act 2001. The contract of insurance
prohibits disclosure of the nature of liability and the
amount of the premiums.
Likely developments and expected
results
Disclosure of information as to likely developments in
the operations of the consolidated entity and expected
results of those operations would be prejudicial to the
interests of the consolidated entity. Accordingly, such
information has not been included in this report.
Environmental regulations and
performance
The consolidated entity is not involved in any activities
that have a marked influence on the environment within
its area of operation.
In recognising the need for the highest standards of
corporate behaviour and accountability, the directors
of Breville Group Limited support the principles of
good corporate governance. The company’s corporate
governance statement is on page 24.
Share options and performance rights
Unissued shares
As at the date of this report and the reporting date,
there were nil unissued ordinary shares under options
(2011: 100,000) and 727,000 potential unissued shares
under performance rights (2011: 1,039,000). Refer to
note 27 of the financial report for further details of the
options and performance rights outstanding. Option
and performance right holders do not have any right, by
virtue of the option or performance right, to participate
in any share issue of the company.
Shares issued as a result of the exercise of options
During the year, 100,000 options were exercised to
acquire fully paid ordinary shares in Breville Group
Limited (2011: 480,000).
Lapse of unvested performance rights
During the year, 598,000 unvested performance rights
lapsed following the cessation of employment of
employees or executives (2011: nil).
Auditor’s declaration of independence
Attached is a copy of the auditor’s declaration provided
under section 307C of the Corporations Act 2001 in
relation to the audit for the year ended 30 June 2012.
This auditor’s declaration forms part of this directors’
report.
Non-audit services
During the financial year ended 30 June 2012 the
company’s primary auditor, Ernst & Young Australia did
not provide any non-audit services.
Significant events after year end
No matters or circumstances have arisen since the end
of the year which significantly affected or may affect the
operations of the consolidated entity.
Signed in accordance with a resolution of directors.
John Schmoll
Non-executive chairman
Sydney
23 August 2012
Breville Group Limited annual report 2012
23
Corporate governance statement
The board of directors is responsible for the corporate
governance practices of the company and is committed
to adhering to the Australian Stock Exchange (‘ASX’)
Corporate Governance Council (‘council’) ‘Corporate
Governance Principles and Recommendations’.
The ASX principles that have been adopted are
outlined below.
The company’s corporate governance practices
throughout the year ended 30 June 2012 were
compliant with the council’s principles and
recommendations, except for those differences
disclosed and explained in this statement.
The following documents are available on the investor
relations, corporate governance section of the
company’s website brevillegroup.com
• selection and appointment of directors
• criteria for assessing independence
• code of conduct
• continuous disclosure policy
• share trading policy
• shareholder communications policy
• board charter
• audit and risk committee charter
• people and performance committee charter
• diversity policy
The term of the current directors as at the date of this annual report are as follows:
Director
John Schmoll
(chairman)
Steven Fisher
Dean Howell
Steven Klein
Samuel Weiss
Appointed Term in office
Non-
executive
Independent
Last elected
2004
2004
2008
2003
2008
8 years
8 years
4 years
9 years
4 years
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
Yes
2009
2010
2011
2011
2011
In accordance with the requirements of the company’s constitution, Mr Schmoll will seek re-election at the company’s
AGM later this year.
Principle 1: Lay solid foundations for
management and oversight
Role of the board and management
The board guides and monitors the business and
affairs of the company on behalf of the shareholders,
by whom it is elected and to whom it is accountable.
The board has adopted formal guidelines for board
operation and membership. These guidelines outline the
roles and responsibilities of the board and its members
and establish the relationship between the board and
management.
The board is responsible for approving the strategic
direction of the company, establishing goals for
management, monitoring the achievement of those
goals and establishing a sound system of risk oversight
and management. The board will regularly review its
performance and the performance of its committees.
Evaluating the performance of key executives
The performance of key executives is reviewed against
specific and measurable qualitative and quantitative
performance criteria and includes:
•
financial measures of the company’s performance;
• development and achievement of strategic
objectives;
• development of management and staff;
• compliance with legislative and company policy
requirements; and
• achievement of key performance indicators.
Performance evaluation
All key executives were subject to a performance review
as described above during the reporting period.
24
Breville Group Limited annual report 2012
Principle 2: Structure the board to add
value
Board composition
The company’s constitution states that there must be
a minimum of three directors and contains detailed
provisions concerning the tenure of directors. The board
currently comprises five non-executive directors. The
directors’ report, on page 12, outlines the relevant skills,
experience and expertise held by each director in office
at the date of this report.
Director independence
In considering whether a director is independent, the
board refers to the company’s “Criteria for assessing
independence of directors” which is consistent with
the council’s recommendations. Independent directors
of the company are those that are not involved in the
day-to-day management of the company and are free
from any real or reasonably perceived business or
other relationship that could materially interfere with the
exercise of their unfettered and independent judgement.
In accordance with the definition of independence
above, and the materiality thresholds outlined in the
company’s policy ‘Criteria for assessing independence
of directors’, it is the board’s view that Mr Dean Howell,
Mr John Schmoll and Mr Samuel Weiss are independent
directors. The following directors are not independent
directors:
• Mr Steven Fisher (non-executive director) is
employed by an entity associated with a substantial
shareholder of the company; and
• Mr Steven Klein (non-executive director) is a
principal of SBA Law which is a professional adviser
to the company.
Regardless of whether directors are defined as
independent, all directors are expected to bring
independent views and judgement to board
deliberations.
Majority independence
Of the five directors, two are considered not to be
independent for the reasons noted above.
The majority of the board is considered to be
independent.
Independent chairman
Mr John Schmoll was non-executive chairman
throughout the year. Mr Schmoll is considered to be an
independent chairman.
Material personal interest requirement
The Corporations Act provides that unless agreed by
the board, where any director has a material personal
interest in a matter, the director will not be permitted to
be present during discussions, or to vote on the matter.
Access to independent advice
There are procedures in place to enable directors, in
connection with their duties and responsibilities as
directors, to seek independent professional advice at
the expense of the company. Prior written approval of
the chairman is required, which will not be unreasonably
withheld.
Board committees
The board has established the audit and risk committee
and people and performance committee to assist
in the execution of its duties and to allow detailed
consideration of complex issues. Each of these
committees is comprised of all the directors.
Nomination committee
During the year ended 30 June 2012, the company
did not have a separately established nomination
committee. All duties and responsibilities typically
delegated to such a committee are the responsibility of
the full board. Although the council’s recommendation
2.4 recommends that a nomination committee can be
a more efficient mechanism for the detailed examination
of selection and appointment practices, particularly in
larger companies, the board does not believe at this
time that any marked efficiencies or enhancements
would be achieved by the creation of a separate
nomination committee.
Evaluating the performance of the board
There is no formal review process of the performance
of the board, its committees and individual directors.
Currently, the chairman informally assesses the
performance of committees and individual directors and
their contribution to board affairs.
Principle 3: Promote ethical and
responsible decision-making
Code of conduct
The board has formally adopted a code of conduct
(“code”) for all employees (including directors). The
code aims at maintaining the highest ethical standards,
corporate behaviour and accountability across the
group. These obligations are also consistent with the
duties imposed on directors by the Corporations Act.
In addition, directors are obliged to be independent
in judgement and to ensure that all reasonable steps
are taken to be satisfied as to the soundness of board
decisions.
Diversity policy
The company is an equal opportunity employer and
values differences such as gender, age, culture,
disability, ethnicity and lifestyle choices. The company’s
diversity policy aims to ensure a corporate culture that
supports workplace diversity whilst providing access to
equal opportunities at work based on merit. This policy
is available on the company’s website at the investor
relations, corporate governance section and is subject
to periodic review by, and may be changed by resolution
of the Board. The policy has no contractual effect.
Breville Group Limited annual report 2012
25
Corporate governance statement
continued
Principle 3: Promote ethical and
responsible decision-making continued
Principle 4: Safeguard integrity in
financial reporting
Diversity policy objectives
Audit and risk committee
The objectives set by the board in accordance with the
diversity policy and progress towards achieving them
are:
• Representation of women trained in recruitment
and selection panels: Further progress was made
in Australia during the year and the program was
expanded to other regions;
•
Issuing the company equal opportunity statement to
recruiting agencies: This was achieved in Australia
during the year and the program was expanded
across other regions;
• Explicit requirement of recruiting agencies to provide
a gender balance of suitable, qualified, shortlisted
candidates for interview: This initiative achieved
further progress during the year as the program was
expanded across other regions;
• Promoting a safe workplace free from harassment
or discrimination of any kind: Training and education
programs which included topics on harassment,
bullying, victimisation and discrimination were
conducted in Australia and North America during
the year;
• Enhancing the gender balance of women in
succession plans in senior and managerial roles
through a mentoring program; and
• Continue flexible working arrangements where
operationally appropriate.
The proportion of women employees in the company
and the current targets are as follows:
30 June
2011
30 June
2012
Target by
June 2015
0%
18%
50%
0%
15%
18%
20%
53%
50%
Women on
the board
Women in
senior roles
Women in
company
To assist the board in fulfilling its responsibilities in
relation to diversity, the implementation of these
objectives is overseen by the people and performance
committee.
The people and performance committee shall:
•
•
report to the board at least annually, on the
company’s progress in achieving the objectives set
for achieving gender diversity;
regularly oversee a review of the relative proportion
of women across the company and their relative
positions; and
• consider other initiatives to promote diversity in the
workplace.
The board has an audit and risk committee (A&RC),
which operates under a charter approved by the board.
It is the board’s responsibility to ensure that an effective
internal control framework exists within the consolidated
entity. This includes internal controls to deal with both
the effectiveness and efficiency of significant business
processes, the safeguarding of assets, the maintenance
of proper accounting records and the reliability of
financial information. The board has delegated the
responsibility for the establishment and maintenance of
a framework of internal control and ethical standards of
the company to the A&RC.
Among its responsibilities, the A&RC:
• ensures that company accounting policies and
practices are in accordance with current and
emerging accounting standards;
•
•
reviews all accounts of the group to be publicly
released;
recommends to the board the appointment and
remuneration of the external auditors;
•
reviews the scope of external audits;
• assesses the performance and independence of the
external auditors, including procedures governing
partner rotation;
•
reviews corporate governance practices; and
• monitors and assesses the systems for internal
compliance and control, legal compliance and risk
management.
Composition of committee
The current members of the A&RC are:
• Mr Dean Howell (chairman)
• Mr Steven Fisher
• Mr Steven Klein
• Mr John Schmoll
• Mr Samuel Weiss
The directors’ report, on page 23, outlines the number
of A&RC meetings held during the year and the names
of the attendees at those meetings. It also outlines the
qualifications of A&RC members on page 12.
The group chief executive officer; company secretary;
group chief financial officer; the external auditors and
any other persons considered appropriate may attend
meetings of the A&RC by invitation. The committee
also meets from time to time with the external auditors
independent of management.
In accordance with the council’s recommendation 4.2,
the A&RC is structured so that it:
• comprises only non-executive directors;
• comprises a majority of independent directors;
26
Breville Group Limited annual report 2012
Principle 4: Safeguard integrity in
financial reporting continued
•
is chaired by an independent chair, who is not chair
of the board; and
• has at least three members.
The majority of the A&RC is considered to be
independent as at the date of this report, although of
the five committee members, Mr Steven Fisher and Mr
Steven Klein are considered not to be independent for
the reasons noted above.
Principle 5: Make timely and balanced
disclosure
The company’s continuous disclosure policy complies
with the council’s recommendation 5.1. This policy
is available on the company’s website at the investor
relations, corporate governance section.
Principle 6: Respect the rights of
shareholders
Communication policy
The company is committed to providing all shareholders
with comprehensive, timely and equal access to
information about its activities to enable them to
make informed investment decisions. The company’s
shareholder communication policy is available on the
company’s website at the investor relations, corporate
governance section.
Electronic communication
The company’s website displays recent ASX
announcements and contains information about
the company.
Briefings
The company keeps a record for internal use of one to
one briefings held with investors and analysts, including
a record of those present and the time and place of
the meeting.
Principle 7: Recognise and manage risk
The company is committed to the identification,
monitoring and management of risks associated with
its business activities including financial, operational,
compliance, ethical conduct, brand and product quality
risks. The company has embedded in its management
and reporting systems a number of risk management
controls. These include:
• guidelines and limits for approval of capital
expenditure;
• policies and procedures for the management of
financial risk and treasury operations including
exposures to foreign currencies and movements in
interest rates;
• annual budgeting and monthly reporting systems
for all businesses which enable the monitoring
of progress against performance targets and the
evaluation of trends;
• policies and procedures which enable management
of the company’s material business risks;
•
formal strategic planning sessions; and
• presentation of periodic reports to the board and the
A&RC identifying items that represent a potential risk
and the manner in which these are being managed
and responded to.
Management is ultimately responsible to the board for
the system of internal control and risk management and
has reported to the board as to the effectiveness of the
company’s management of its material business risks.
The A&RC assists the board in monitoring this function.
In accordance with the council’s recommendation
7.3 the group chief executive officer and group chief
financial officer provided the board with a written
declaration confirming that the declaration provided in
accordance with section 295A of the Corporations Act
is founded on a sound system of risk management and
internal control and that the system operated effectively
in all material respects.
Principle 8: Remunerate fairly and
responsibly
People and performance committee
The board has a people and performance committee,
comprising the following directors:
• Mr Samuel Weiss (chairman)
• Mr Steven Fisher
• Mr Dean Howell
• Mr Steven Klein
• Mr John Schmoll
In accordance with the council’s recommendation 8.1,
the people and performance committee comprises:
• an independent chairman; and
• at least three members.
The majority of the people and performance committee
is considered to be independent as at the date of this
report, although of the five committee members, Mr
Steven Fisher and Mr Steven Klein are considered not
to be independent for the reasons noted above.
For details on the number of meetings of the people
and performance committee held during the year and
the attendees at those meetings, refer to the directors’
report on page 23.
Remuneration disclosure
For details of the company’s remuneration philosophy
and framework, and the remuneration received by
directors and executives in the current period, please
refer to the remuneration report contained in the
directors’ report on pages 14 to 22.
Breville Group Limited annual report 2012
27
Income statement
for the year ended 30 June 2012
Revenue
Cost of sales
Gross profit
Other income
Employee benefits expenses
Onerous lease expense
Premises, lease & utilities expenses
Advertising expenses
Other expenses
Earnings before interest, tax, depreciation & amortisation
(EBITDA)
Depreciation & amortisation expense
Earnings before interest and tax (EBIT)
Finance costs
Profit before income tax
Income tax expense
Net profit after income tax for the year attributable to
members of Breville Group Limited
Note
2(a)
2(b)
2(c)
2(f)
2(d)
2(g)
30 June 2012
$’000
30 June 2011
$’000
427,940
(267,304)
160,636
449
(46,966)
-
(11,836)
(16,817)
(12,999)
72,467
(6,887)
65,580
(913)
64,667
393,589
(255,000)
138,589
376
(45,711)
(5,366)
(10,321)
(12,771)
(12,788)
52,008
(6,705)
45,303
(1,694)
43,609
3
(18,685)
(11,874)
45,982
31,735
Cents
Cents
Earnings per share for profit attributable to the ordinary
equity holders of Breville Group Limited:
- basic earnings per share
- diluted earnings per share
4
4
35.35
35.35
24.47
24.44
The accompanying notes form an integral part of this income statement.
28
Breville Group Limited annual report 2012
Statement of comprehensive income
for the year ended 30 June 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Net profit after income tax for the year
45,982
31,735
Other comprehensive income/(loss)
Foreign currency translation differences
Net change in fair value of cash flow hedges
Income tax on other comprehensive income/(loss) and other
items taken directly to equity
Other comprehensive income/(loss) for the year, net of
income tax
20(a)
20(c)
3
956
3,236
(5,122)
(5,345)
(616)
1,819
3,576
(8,648)
Total comprehensive income for the year attributable to
members of Breville Group Limited
49,558
23,087
The accompanying notes form an integral part of this income statement.
Breville Group Limited annual report 2012
29
Statement of financial position
as at 30 June 2012
Note
30 June 2012
$’000
30 June 2011
$’000
6
7
8
9
3
10
11
3
12
13
15
16
3
17
18
16
3
17
19
20
21
53,095
73,579
61,596
479
476
3,298
192,523
3,875
12,462
45,298
24,558
86,193
27,768
67,272
57,870
21
1,678
1,504
156,113
5,096
11,966
45,417
24,558
87,037
278,716
243,150
63,679
57
9,580
7,120
17
80,453
6,019
6,251
8,581
20,851
101,304
177,412
138,760
(14,783)
53,435
177,412
59,084
242
6,735
5,921
2,896
74,878
194
6,372
8,128
14,694
89,572
153,578
135,642
(14,886)
32,822
153,578
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Current tax assets
Other assets
Total current assets
Non-current assets
Plant and equipment
Deferred tax assets
Intangible assets – other
Intangible assets – goodwill
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Equity attributable to equity holders of the parent
Issued capital
Reserves
Retained earnings
Total equity
The accompanying notes form an integral part of this income statement.
30
Breville Group Limited annual report 2012
Statement of changes in equity
for the year ended 30 June 2012
Issued capital
$’000
Note
Reserves
$’000
Retained
earnings
$’000
Total equity
$’000
At 1 July 2010
137,653
(7,306)
19,876
150,223
Foreign currency translation reserve
Cash flow hedges
Income tax on items taken directly
to equity
Net income recognised directly
in equity
Profit for the year
Total recognised (loss)/income for
the year
Dividends paid
Issue of ordinary shares – exercise
of options
Ordinary shares acquired by the
Trustee of the Breville Group
Performance Share Plan Trust
Repayment of non-recourse senior
executive option plan loans
Share-based payments
At 30 June 2011
Foreign currency translation reserve
Cash flow hedges
Income tax on items taken directly
to equity
Net income recognised directly
in equity
Profit for the year
Total recognised income for
the year
Dividends paid
Issue of ordinary shares – exercise
of options
Ordinary shares acquired by the
Trustee of the Breville Group
Performance Share Plan Trust
Transferred to participants of the
performance rights plan
Share-based payments
At 30 June 2012
20(a)
20(c)
3
5(a)
19(a)
19(b)
19(c)
20(b)
20(a)
20(c)
3
5(a)
19(a)
19(b)
19(b)
20(b)
-
-
-
-
-
-
-
842
(4,296)
1,443
-
135,642
-
-
-
-
-
-
-
112
(1,290)
4,296
-
(5,122)
(5,345)
1,819
(8,648)
-
-
-
-
(5,122)
(5,345)
1,819
(8,648)
-
31,735
31,735
(8,648)
31,735
23,087
-
-
-
-
1,068
(14,886)
956
3,236
(616)
3,576
(18,789)
(18,789)
-
-
-
-
842
(4,296)
1,443
1,068
32,822
153,578
-
-
-
-
956
3,236
(616)
3,576
-
45,982
45,982
3,576
45,982
49,558
-
-
-
(4,296)
823
(25,369)
(25,369)
-
-
-
-
112
(1,290)
-
823
138,760
(14,783)
53,435
177,412
The accompanying notes form an integral part of this income statement.
Breville Group Limited annual report 2012
31
Cash flow statement
for the year ended 30 June 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Finance costs paid
Income tax paid
Finance income received
Net cash flows from operating activities
6(b)
Cash flows used in investing activities
Purchase of plant and equipment
Proceeds from sale of plant and equipment
Purchase of intangible assets
Net cash flows used in investing activities
Cash flows used in financing activities
Net proceeds/(repayment) of borrowings
Proceeds from issue of shares
Irretrievable cash contributions paid to the Trustee of the Breville
Group Performance Share Plan Trust to acquire ordinary shares
Proceeds from repayment of senior executive option plan loans
Equity dividends paid
Net cash flows used in financing activities
19(a)
19(b)
19(c)
5(a)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Net foreign exchange difference
Cash and cash equivalents at end of the year
6(a)
The accompanying notes form an integral part of this income statement.
576,021
(510,309)
(1,998)
(13,587)
984
51,111
(745)
23
(4,297)
(5,019)
5,839
112
(1,290)
-
(25,369)
(20,708)
25,384
27,564
134
53,082
420,541
(366,891)
(2,533)
(4,622)
502
46,997
(461)
89
(5,936)
(6,308)
(4,035)
842
(4,296)
1,443
(18,709)
(24,755)
15,934
13,509
(1,879)
27,564
32
Breville Group Limited annual report 2012
Notes to the financial statements
for the year ended 30 June 2012
Note 1. Summary of significant accounting policies
Breville Group Limited is a for profit company limited by
shares incorporated in Australia. Breville Group Limited
shares are quoted on the Australian Stock Exchange.
This financial report covers the consolidated entity
comprising Breville Group Limited and its subsidiaries
(company or group).
A description of the group’s operations and of its
principal activities is included in the review of results and
operations and principal activities in the directors’ report
on page 13. The directors’ report is unaudited (except
for the remuneration report) and does not form part of
the financial report.
(a) Basis of preparation
The financial report is a general-purpose financial
report, which has been prepared in accordance with
the requirements of the Corporations Act 2001 and
Australian Accounting Standards.
The financial report has also been prepared on a
historical cost basis, except for derivative financial
instruments which have been measured at fair value.
The financial report is presented in Australian dollars
and all values are rounded to the nearest thousand
dollars ($’000) unless otherwise stated under the option
available to the company under ASIC class order
98/100. The company is an entity to which the class
order applies.
(b) Statement of compliance
The financial report complies with Australian Accounting
Standards as issued by the Australian Accounting
Standards Board and International Financial Reporting
Standards (IFRS) as issued by the International
Accounting Standards Board.
Australian Accounting Standards and Interpretations
that have recently been issued or amended but are not
yet effective have not been adopted by the group for the
annual reporting period ended 30 June 2012.
The amendments to standards and interpretations not
yet adopted are not expected to have a material impact
on the group in the period of initial application.
(c) Basis of consolidation
The consolidated financial statements comprise the
financial statements of Breville Group Limited and its
subsidiaries as at 30 June each year.
Subsidiaries are all those entities over which the group
has the power to govern the financial and operating
policies so as to obtain benefits from their activities. The
existence and effect of potential voting rights that are
currently exercisable or convertible are considered when
assessing whether the group controls another entity.
The financial statements of subsidiaries are prepared for
the same reporting period, using consistent accounting
policies.
In preparing the consolidated financial statements, all
inter-group balances and transactions, income and
expenses and profit and loss resulting from intra-group
transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on
which control is obtained by the group and cease to
be consolidated from the date on which control is
transferred out of the group.
The acquisition of subsidiaries is accounted for using
the purchase method of accounting. The purchase
method of accounting involves allocating the cost of
the business combination to the fair value of assets
acquired and the liabilities and contingent liabilities
assumed at the date of acquisition.
(d) Significant accounting judgements,
estimates and assumptions
The carrying amounts of certain assets and liabilities are
often determined based on estimates and assumptions
of future events. The key estimates and assumptions
that have a significant risk of causing a material
adjustment to the carrying amounts of certain assets
and liabilities within the next annual reporting period are:
Impairment of goodwill & intangibles with
indefinite useful lives
The group determines whether goodwill and intangibles
with indefinite useful lives are impaired at least on
an annual basis. This requires an estimation of the
recoverable amount of the cash generating units to
which the goodwill and intangibles with indefinite
useful lives are allocated. The assumptions used in
this estimation of recoverable amount and the carrying
amount of goodwill and intangibles with indefinite useful
lives are discussed in note 14.
Share-based payment transactions
The group measures the cost of equity-settled
transactions with employees by reference to the fair
value of the equity instruments at the date at which they
are granted. The fair value is determined by an external
valuer using either the Black-Scholes or binomial option
pricing model, using the assumptions detailed in
note 27.
Onerous lease provision
The onerous lease provision represents the present
value of the future lease payments that the consolidated
entity is presently obligated to make in respect of
onerous lease contracts under non-cancellable
operating lease agreements, less revenue expected
to be earned on the lease including estimated future
sub-lease revenue, where applicable. The calculation of
this provision requires various assumptions associated
with the sub-letting of the premises. The related carrying
amounts are disclosed in note 17.
Breville Group Limited annual report 2012
33
Notes to the financial statements
for the year ended 30 June 2012
Note 1. Summary of significant accounting policies continued
(d) Significant accounting judgements,
estimates and assumptions continued
Taxes
Uncertainties exist with respect to the interpretation
of complex tax regulations, changes in tax laws, and
the amount and timing of future taxable income. Given
the wide range of international business relationships
and the long-term nature and complexity of existing
contractual agreements, differences arising between
the actual results and the assumptions made, or future
changes to such assumptions, could necessitate
future adjustments to tax income and expense already
recorded. The group establishes provisions, based on
reasonable estimates, for possible consequences of
audits by the tax authorities of the respective countries
in which it operates. The amount of such provisions
is based on various factors, such as experience of
previous tax audits and differing interpretations of tax
regulations by the taxable entity and the responsible tax
authority. Such differences of interpretation may arise
on a wide variety of issues depending on the conditions
prevailing in the respective group company’s domicile.
As the group assesses the probability for litigation and
subsequent cash outflow with respect to taxes as
remote, no contingent liability has been recognised.
Deferred tax assets are recognised for all unused tax
losses to the extent that it is probable that taxable
profit will be available against which the losses can be
utilised. Significant management judgement is required
to determine the amount of deferred tax assets that
can be recognised, based upon the likely timing and
the level of future taxable profits together with future tax
planning strategies.
Warranty and faulty goods
Provision for warranty and faulty goods is recognised at
the date of sale of the relevant products, at the group’s
best estimate of the expenditure required to settle the
group’s liability. Factors that could impact the estimated
claim information include the success of the group’s
productivity and quality initiatives, as well as parts
and labour costs. The related carrying amounts are
disclosed in note 17.
Provision for make-good
The provision for make-good represents the value of
expected future payments to be made in respect of
restoration of leased premises under contracts that
have clauses potentially requiring these premises to
be restored to their original condition at the conclusion
of the lease. The estimate may vary as a result of
negotiations between the parties at the end of the lease
term. The related carrying amounts are disclosed in
note 17.
(e) Business combinations
All identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination
are measured initially at their fair values at the
acquisition date, irrespective of the extent of any
minority interest. The excess of the cost of the business
combination over the net fair value of the group’s share
of the identifiable net assets acquired is recognised as
goodwill. Any transaction costs incurred in connection
with a business combination are expensed as incurred.
(f) Operating segments
An operating segment is a component of the group that
engages in business activities from which it may earn
revenues and incur expenses, including certain inter-
group revenues and expenses, whose operating results
are regularly reviewed by the entity’s chief operating
decision maker to make decisions about resources to
be allocated to the segment and assess its performance
and for which discrete financial information is available.
Operating segments have been identified based on the
information provided to the chief operating decision
makers being the group chief executive officer and
board of directors.
Operating segments that meet the quantitative criteria
as prescribed by AASB 8 Operating Segments are
reported separately. However, an operating segment
that does not meet the quantitative criteria is still
reported separately where information about the
segment would be useful to the users of the financial
report.
(g) Foreign currency translation
(i) Functional and presentation currency
Both the functional and presentation currency of
Breville Group Limited and its Australian subsidiaries
are Australian dollars (AUD or A$). Each entity in the
group determines its own functional currency and items
included in the financial statements of each entity are
measured using that functional currency.
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded
in the functional currency at the exchange rates
ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the
balance sheet date.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rate as at the date of the initial
transaction. Non-monetary items measured at fair value
in a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
34
Breville Group Limited annual report 2012
Note 1. Summary of significant accounting policies continued
(g) Foreign currency translation continued
(ii) Transactions and balances continued
The functional currency of the foreign subsidiaries is
either:
• USD - United States dollars (Breville Holdings USA,
Inc. and Breville USA, Inc.);
• HKD - Hong Kong dollars (HWI International
Limited, Gannet Holdings Limited and Breville
Export Limited);
• CAD - Canadian dollars (HWI Canada, Inc.,
Holdings HWI Canada, Inc. and Anglo-Canadian
Housewares, L.P.); and
• NZD - New Zealand dollars (Breville New Zealand
Limited).
As at the reporting date the assets and liabilities of these
foreign subsidiaries are translated into the presentation
currency of Breville Group Limited. They are translated
at the rate of exchange ruling at the balance sheet
date and the income statements are translated at the
weighted average exchange rates for the year.
The exchange differences arising on the retranslation of
the financial statements of foreign subsidiaries are taken
directly to a separate component of equity. On disposal
of a foreign entity, the deferred cumulative amount
recognised in equity relating to that particular foreign
operation is recognised in the income statement.
(h) Cash and cash equivalents
Cash and cash equivalents in the balance sheet
comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or
less that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of
changes in value.
Bank overdrafts are shown within borrowings in current
liabilities on the balance sheet.
For the purposes of the cash flow statement, cash and
cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts.
(i) Trade and other receivables
Trade receivables, which generally have 30-60
day terms, are initially recognised at fair value and
subsequently measured at amortised cost.
Bad debts are written off when incurred. An allowance
for uncollectible receivables is established when there
is objective evidence that the group will not be able to
collect all amounts due. The amount of the allowance is
recognised in the income statement.
(j) Inventories
Inventories are valued at the lower of cost and net
realisable value.
The cost of inventories comprises all costs of purchase,
costs of conversion and other costs incurred in bringing
the inventories to their present location and condition.
This includes the transfer from equity of gains and
losses on qualifying cash flow hedges of purchases of
finished goods.
Costs are assigned to individual items of inventory on a
weighted average cost basis.
Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
necessary to make the sale.
(k) Derivative financial instruments and
hedging
The group uses derivative financial instruments such
as forward exchange contracts, foreign exchange
option contracts and interest rate swaps to hedge its
risks associated with foreign currency and interest rate
fluctuations. Such derivative financial instruments are
initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently
remeasured to fair value. Derivatives are carried as
assets when their fair value is positive and as liabilities
when their fair value is negative.
Any gains or losses arising from changes in the fair
value of derivatives, except for those that qualify for
hedge accounting, are taken directly to the income
statement for the year.
The fair value of forward exchange contracts and foreign
exchange option contracts are calculated by reference
to current forward exchange rates for contracts with
similar maturity profiles and where applicable exercise
prices. The fair value of interest rate swap contracts is
determined by reference to market values for similar
instruments.
For the purposes of hedge accounting, hedges are
classified as cash flow hedges when they hedge
exposure to variability in cash flows that is attributable
either to a particular risk associated with a recognised
asset or liability or to a forecast transaction.
At the inception of a hedge relationship, the group
formally designates and documents the hedge
relationship to which the group wishes to apply hedge
accounting and the risk management objective and
strategy for undertaking the hedge. The documentation
includes identification of the hedging instrument, the
hedged item or transaction, the nature of the risk being
hedged and how the entity will assess the hedging
instrument’s effectiveness in offsetting the exposure to
changes in the hedged item’s cash flows attributable to
the hedged risk. Such hedges are expected to be highly
effective in achieving offsetting changes in cash flows
and are assessed on an ongoing basis to determine
that they actually have been highly effective throughout
the financial reporting periods for which they were
designated.
Breville Group Limited annual report 2012
35
Notes to the financial statements
for the year ended 30 June 2012
Note 1. Summary of significant accounting policies continued
(k) Derivative financial instruments and
hedging continued
When accounting for foreign exchange option contracts,
the intrinsic value of the option is the only component
subject to the hedging relationship. The time value of
money is excluded from the hedge relationship.
Hedges that meet the strict criteria for hedge
accounting are accounted for as follows:
Cash flow hedges
Cash flow hedges are hedges of the group’s exposure
to variability in cash flows that is attributable to a
particular risk associated with a recognised asset or
liability or a highly probable forecast transaction and that
could affect profit or loss. The effective portion of the
gain or loss on the hedging instrument is recognised
directly in equity, while the ineffective portion is
recognised in income statement.
Amounts taken to equity are transferred to the income
statement when the hedged transaction affects profit
or loss, such as when hedged income or expenses are
recognised or when a forecast purchase occurs. When
the hedged item is the cost of a non-financial asset or
liability, the amounts taken to equity are transferred to
the initial carrying amount of the non-financial asset or
liability.
If the forecast transaction is no longer expected to
occur, amounts previously recognised in equity are
transferred to the income statement. If the hedging
instrument expires or is sold, terminated or exercised
without replacement or rollover, or if its designation as
a hedge is revoked, amounts previously recognised
in equity remain in equity until the forecast transaction
occurs. If the related transaction is not expected to
occur, the amount is taken to the income statement.
A hedge of the foreign currency risk of a firm
commitment is accounted for as a cash flow hedge.
(l) Plant and equipment
Plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses.
Depreciation on plant and equipment is calculated on
a straight line basis over the estimated useful life of
between 2 and 10 years.
The assets’ residual values, useful lives and amortisation
methods are reviewed, and adjusted if appropriate, at
each year end.
An item of plant and equipment is derecognised upon
disposal or when no further future economic benefits
are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the asset at
the time of derecognition) is included in the income
statement in the year in which they arise.
(m) Intangible assets - goodwill
Goodwill acquired in a business combination is initially
measured at cost, being the excess of the cost of
the business combination over the group’s interest in
the net fair value of the acquiree’s identifiable assets,
liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at
cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill
acquired in a business combination shall, from the
acquisition date, be allocated to each of the group’s
cash generating units, or groups of cash generating
units, that are expected to benefit from the synergies of
the combination, irrespective of whether other assets
or liabilities of the group are assigned to those units or
groups of units. Each unit or group of units to which
the goodwill is so allocated represents the lowest level
within the group at which the goodwill is monitored for
internal management purposes.
Impairment is determined by assessing the recoverable
amount of the cash generating unit to which the
goodwill relates. When the recoverable amount of a
cash generating unit is less than the carrying amount,
an impairment loss is recognised. When goodwill forms
part of a cash generating unit and an operation within
that unit is disposed of, the goodwill associated with
the operation disposed of is included in the carrying
amount of the operation when determining the gain or
loss on disposal of the operation. Goodwill disposed of
in this manner is measured based on the relative values
of the operation disposed of and the portion of the cash
generating unit retained.
Impairment losses recognised for goodwill are not
subsequently reversed.
(n) Intangible assets - other
Intangible assets acquired separately or in a business
combination are initially measured at cost. The cost of
an intangible asset acquired in a business combination
is its fair value as at the date of acquisition. Following
initial recognition, intangible assets are carried at
cost less any accumulated amortisation and any
accumulated impairment losses. Internally generated
intangible assets, excluding capitalised development
costs, are not capitalised and expenditure is charged
against profits in the year in which the expenditure is
incurred.
The useful lives of intangible assets are assessed to be
either finite or indefinite.
36
Breville Group Limited annual report 2012
Note 1. Summary of significant accounting policies continued
(n) Intangible assets – other continued
Intangible assets with finite lives are amortised over
the useful life and assessed for impairment whenever
there is an indication that the intangible asset may be
impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life
are reviewed at least at each year end. Changes in
the expected useful life or the expected pattern of
consumption of future economic benefits embodied
in the asset are accounted for by changing the
amortisation period or method, as appropriate, which
is a change in accounting estimate. The amortisation
expense on intangible assets with finite lives is
recognised in the income statement in the expense
category consistent with the function of the intangible
asset.
Intangible assets with indefinite useful lives are tested
for impairment annually either individually or at the
cash generating unit level. Such intangibles are not
amortised. The useful life of an intangible asset with
an indefinite life is reviewed each reporting period to
determine whether indefinite life assessment continues
to be supportable. If not, the change in the useful life
assessment from indefinite to finite is accounted for
as a change in an accounting estimate and is thus
accounted for on a prospective basis.
Research and development costs
Research costs are expensed as incurred. An intangible
asset arising from development expenditure on an
internal project is recognised only when the group can
demonstrate the technical feasibility of completing the
intangible asset so that it will be available for use or
sale, its intention to complete and its ability to use or sell
the asset, how the asset will generate future economic
benefits, the availability of resources to complete the
development and the ability to measure reliably the
expenditure attributable to the intangible asset during its
development.
Following the initial recognition of the development
expenditure, the cost model is applied requiring the
asset to be carried at cost less any accumulated
amortisation and accumulated impairment losses. Any
expenditure so capitalised is amortised over the period
of expected benefits from the related project.
The carrying value of an intangible asset arising from
development expenditure is tested for impairment
annually or more frequently when an indication of
impairment arises during the reporting period.
A summary of the policies applied to the group’s
intangible assets is as follows:
Brand names
Internally generated or
Acquired
Useful lives
Acquired
Indefinite
Amortisation method used No amortisation
Impairment test
Annually and more
frequently when an
indication of impairment
exists.
Computer software
Internally generated or
Acquired
Acquired
Useful lives
Finite
Amortisation method used Amortised over the useful
life, not exceeding 3
years, on a straight line
basis.
When an indication of
impairment exists. The
amortisation method is
reviewed at each year
end.
Internally generated
Impairment test
Development costs
Internally generated or
Acquired
Useful lives
Finite
Amortisation method used Amortised over the period
Impairment test
of expected future sales,
not exceeding 3 years,
from the related project on
a straight line basis.
Annually and more
frequently when an
indication of impairment
exists. The amortisation
method is reviewed at
each year end.
Gains or losses arising from derecognition of an
intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of
the asset and are recognised in the income statement
when the asset is derecognised.
Breville Group Limited annual report 2012
37
Notes to the financial statements
for the year ended 30 June 2012
Note 1. Summary of significant accounting policies continued
(o) Impairment of non-financial assets
other than goodwill
Intangible assets that have an indefinite useful life are
not subject to amortisation and are tested annually for
impairment; or more frequently if events or changes in
circumstances indicate that they might be impaired.
Other assets are tested for impairment whenever events
or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. Recoverable
amount is the higher of an asset’s fair value less costs
to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash inflows
that are largely independent of the cash inflows from
other assets or groups of assets (cash generating
units). Non-financial assets other than goodwill that
suffered impairment are tested for possible reversal
of the impairment whenever events or changes in
circumstances indicate that the impairment may have
reversed.
(p) Investments and other financial assets
Financial assets in the scope of AASB 139 Financial
Instruments: Recognition and Measurement are
classified as either financial assets at fair value through
profit or loss, loans and receivables or held-to-maturity
investments, as appropriate. When financial assets are
recognised initially, they are measured at fair value, plus,
in the case of investments not at fair value through the
income statement, directly attributable transactions
costs. The group determines the classification of its
financial assets after initial recognition and, when
allowed and appropriate, re-evaluates this designation
at each year end.
All regular way purchases and sales of financial assets
are recognised on the trade date i.e. the date that
the group commits to purchase the asset. Regular
way purchases or sales are purchases or sales of
financial assets under contracts that require delivery of
the assets within the period established generally by
regulation or convention in the marketplace.
(i) Financial assets at fair value through the
income statement
Financial assets classified as held for trading are
included in the category ‘financial assets at fair value
through the income statement’. Financial assets are
classified as held for trading if they are acquired for the
purpose of selling in the near term. Derivatives are also
classified as held for trading unless they are designated
as effective hedging instruments. Gains or losses on
investments held for trading are recognised in the
income statement.
(ii) Held-to-maturity investments
Non-derivative financial assets with fixed or
determinable payments and fixed maturity are classified
as held-to-maturity when the group has the positive
intention and ability to hold to maturity. Investments
intended to be held for an undefined period are not
included in this classification. Investments that are
intended to be held-to-maturity, such as bonds, are
subsequently measured at amortised cost. This cost
is computed as the amount initially recognised minus
principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any
difference between the initially recognised amount
and the maturity amount. This calculation includes all
fees and points paid or received between parties to
the contract that are an integral part of the effective
interest rate, transaction costs and all other premiums
and discounts. For investments carried at amortised
cost, gains and losses are recognised in the income
statement when the investments are derecognised or
impaired, as well as through the amortisation process.
(iii) Loans and receivables
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are
not quoted in an active market. Such assets are
carried at amortised cost using the effective interest
method. Gains and losses are recognised in the
income statement when the loans and receivables
are derecognised or impaired, as well as through the
amortisation process.
(iv) Available-for-sale investments
Available-for-sale investments are those non-derivative
financial assets that are designated as available-for-
sale or are not classified as any of the three preceding
categories. After initial recognition available-for-sale
investments are measured at fair value with gains or
losses being recognised as a separate component of
equity until the investment is derecognised or until the
investment is determined to be impaired, at which time
the cumulative gain or loss previously reported in equity
is recognised in the income statement.
The fair value of investments that are actively traded in
organised financial markets is determined by reference
to quoted market bid prices at the close of business
on the balance sheet date. For investments with no
active market, fair value is determined using valuation
techniques. Such techniques include using recent arm’s
length market transactions; reference to the current
market value of another instrument that is substantially
the same; discounted cash flow analysis and option
pricing models.
38
Breville Group Limited annual report 2012
Note 1. Summary of significant accounting policies continued
(q) Trade and other payables
Trade and other payables are carried at amortised
cost. They represent liabilities for goods and services
provided to the group prior to the end of the year that
are unpaid and arise when the group becomes obliged
to make future payments in respect of the purchase of
these goods and services. The amounts are unsecured
and are usually paid within 30 days of recognition.
Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-
monetary benefits, annual leave and accumulating
sick leave expected to be settled within 12 months
of the reporting date are recognised in trade and
other payables in respect of employees’ services
up to the reporting date. They are measured at the
amounts expected to be paid when the liabilities are
settled. Liabilities for non-accumulating sick leave are
recognised when the leave is taken and are measured
at the rates paid or payable.
Contributions to the defined contribution fund are
recognised as an expense as they become payable.
(r) Share-based payment transactions
Equity settled transactions
The group provides benefits to employees (including
key management personnel) in the form of share-based
payments, whereby employees render services in
exchange for shares or rights over shares (equity-settled
transactions). Refer to note 27 for details.
The charge to the income statement for the period is
the cumulative amount as calculated above less the
amounts already charged in previous periods. There is a
corresponding entry to equity.
Until an award has vested, any amounts recorded are
contingent and will be adjusted if more or fewer awards
vest than were originally anticipated to do so. Any
award subject to a market condition is considered to
vest irrespective of whether or not that market condition
is fulfilled, provided that all other conditions are satisfied.
If the terms of an equity-settled award are modified, as
a minimum an expense is recognised as if the terms had
not been modified. An additional expense is recognised
for any modification that increases the total fair value of
the share-based payment arrangement, or is otherwise
beneficial to the employee, as measured at the date of
modification.
If an equity-settled award is cancelled, it is treated as
if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised
immediately. However, if a new award is substituted for
the cancelled award and designated as a replacement
award on the date that it is granted, the cancelled and
new award are treated as if they were a modification
of the original award, as described in the previous
paragraph.
The dilutive effect, if any, of outstanding options is
reflected as additional share dilution in the computation
of diluted earnings per share (see note 4).
(s) Provisions
The cost of these equity-settled transactions with
employees is measured by reference to the fair value
of the equity instruments at the date at which they are
granted. The fair value has been determined by an
external valuer using a Black Scholes or binomial model,
further details of which are given in note 27.
Provisions are recognised when the group has a
present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of
the amount of the obligation.
In valuing equity-settled transactions, no account
is taken of any performance conditions, other than
conditions linked to the price of the shares of Breville
Group Limited (market conditions), if applicable.
The cost of equity-settled transactions is recognised,
together with a corresponding increase in equity, over
the period in which the performance and/or service
conditions are fulfilled (the vesting period), ending on
the date on which the relevant employees become fully
entitled to the award (the vesting date).
At each subsequent reporting date until vesting, the
cumulative charge to the income statement is the
product of (i) the grant date fair value of the award;
(ii) the current best estimate of the number of awards
that will vest, taking into account such factors as the
likelihood of employee turnover during the vesting
period and the likelihood of non-market performance
conditions being met; and (iii) the expired portion of the
vesting period.
Where the group expects some or all of a provision
to be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a
separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision
is presented in the income statement net of any
reimbursement.
Provisions are measured as the present value of
management’s best estimate of the expenditure required
to settle the present obligation at the balance sheet
date. If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate
that reflects the risks specific to the liability. Where
discounting is used, the increase in the provision due to
the passage of time is recognised as a finance cost.
Breville Group Limited annual report 2012
39
Notes to the financial statements
for the year ended 30 June 2012
Note 1. Summary of significant accounting policies continued
(s) Provisions continued
Onerous contracts
(u) Contributed equity
(i) Ordinary shares
An onerous contract is considered to exist when the
group has a contract under which the unavoidable
cost of meeting the contractual obligations exceed
the economic benefits estimated to be received.
Present obligations arising under onerous contracts are
recognised as a provision to the extent that the present
obligation exceeds the economic benefit estimated to
be received.
Warranties and faulty goods
Provision for warranty and faulty goods are recognised
at the date of sale of the relevant products, at the
group’s best estimate of the expenditure required to
settle the group’s liability.
Employee leave benefits - long service leave
The liability for long service leave is recognised as
a provision and measured as the present value of
expected future payments to be made in respect of
services provided by employees up to the reporting
date. Consideration is given to the expected future
wage and salary levels, experience of employee
departures and periods of service. Expected future
payments are discounted using appropriate market
yields at the reporting date to estimate the future cash
outflows.
Provision for make-good
The provision for make-good represents the value of
expected future payments to be made in respect of
restoration of leased premises under contracts that
have clauses potentially requiring these premises to
be restored to their original condition at the conclusion
of the lease. The estimate may vary as a result of
negotiations between the parties at the end of the lease
term.
(t) Borrowings
All borrowings, including cash advance facilities, are
initially recognised at the fair value of the consideration
received less directly attributable transaction costs.
After initial recognition, borrowings, including cash
advance facilities, are subsequently measured at
amortised cost using the effective interest method.
Gains and losses are recognised in the income
statement when the liabilities are derecognised.
Borrowings are classified as current liabilities unless the
group has an unconditional right to defer settlement of
the liability for at least 12 months after the balance sheet
date.
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax,
from the proceeds.
(ii) Ordinary shares held by the Breville Group
Performance Share Plan Trust
Ordinary shares held by the Breville Group Performance
Share Plan Trust in order to fulfil its obligations under
the Breville Group Limited Performance Rights Plan are
deducted from equity. No gain or loss is recognised in
the income statement on the purchase of the group’s
equity instruments by the Breville Group Performance
Share Plan Trust.
(v) Revenue recognition
Revenue is recognised at the fair value of the
consideration received or receivable to the extent it is
probable that the economic benefits will flow to the
group and the revenue can be reliably measured. The
following specific recognition criteria must also be met
before revenue is recognised:
(i) Sale of goods
Revenue is recognised when the significant risks and
rewards of ownership of the goods have passed to the
buyer and can be measured reliably. Risks and rewards
are considered passed to the buyer at the earlier of
delivery of the goods or the transfer of legal title to the
buyer. Revenue is measured at the fair value of the
consideration received or receivable, net of returns,
allowances, trade discounts and volume rebates.
(ii) Commission income
Where an agency relationship exists, the amount
included in revenue represents the commission received
or receivable.
(iii) Finance revenue
Revenue is recognised as interest accrues using the
effective interest method. This is a method of calculating
the amortised cost of a financial asset and allocating
the interest income over the relevant period using the
effective interest, which is the rate that exactly discounts
estimated future cash receipts through the expected life
of the financial asset to the net carrying amount of the
financial asset.
(iv) Dividends
Revenue is recognised when the group’s right to receive
the payment is established.
40
Breville Group Limited annual report 2012
Note 1. Summary of significant accounting policies continued
Deferred income tax assets are recognised for all
deductible temporary differences, carry-forward of
unused tax assets and unused tax losses, to the extent
that it is probable that taxable profit will be available
against which the deductible temporary differences and
the carry-forward of unused tax assets and unused tax
losses can be utilised, except:
• when the deferred income tax asset relating to
the deductible temporary difference arises from
the initial recognition of an asset or liability in a
transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting nor taxable profit or loss; or
• when the deductible temporary difference is
associated with investments in subsidiaries in
which case a deferred tax asset is only recognised
to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and
taxable profit will be available against which the
temporary differences can be utilised.
The carrying amount of deferred income tax assets is
reviewed at each balance sheet date and reduced to
the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are
reassessed at each balance sheet date and are
recognised to the extent that it has become probable
that future taxable profit will allow the deferred tax asset
to be recovered.
Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based
on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.
Income taxes in relation to items recognised directly in
equity are recognised in equity and not in the income
statement.
Deferred tax assets and deferred tax liabilities are offset
only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred
tax assets and liabilities relate to the same taxable entity
and the same taxation authority.
(w) Borrowing costs
Borrowing costs are recognised as an expense when
incurred.
(x) Leases
The determination of whether an arrangement is or
contains a lease is based on the substance of the
arrangement and requires an assessment of whether
the fulfilment of the arrangement is dependent on the
use of a specific asset or assets and the arrangement
conveys a right to use the asset.
(i) Group as a lessee
Operating lease payments are recognised as an
expense in the income statement on a straight line basis
over the lease term. Any lease incentives are recognised
in the income statement as an integral part of the total
lease expense.
(ii) Group as a lessor
In some instances the group sub leases surplus
operating lease space. Rentals received under sub
leases are recognised as a reduction in operating lease
expense. Future rentals to be received under non-
cancellable sub leases are disclosed in note 24.
(y) Income tax and other taxes
(i) Current tax
Current tax assets and liabilities for the current and prior
periods are measured at the amounts expected to be
recovered from or paid to the taxation authorities. The
tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted by the
balance sheet date.
(ii) Deferred tax
Deferred income tax is provided on all temporary
differences between the tax bases of assets/liabilities
and their carrying amounts at balance sheet date for
financial reporting purposes.
Deferred income tax liabilities are recognised for all
taxable temporary differences except:
• when the deferred income tax liability arises from the
initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination
and that, at the time of the transaction, affects
neither the accounting profit nor taxable profit or
loss; or
• when the taxable temporary difference is associated
with investments in subsidiaries and the timing of
the reversal of the temporary difference can be
controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Breville Group Limited annual report 2012
41
Notes to the financial statements
for the year ended 30 June 2012
Note 1. Summary of significant accounting policies continued
(y) Income tax and other taxes continued
(z) Earnings per share
(iii) Tax consolidation legislation
Breville Group Limited and its wholly-owned Australian
resident controlled entities (excluding the Breville Group
Performance Share Plan Trust) have implemented the
tax consolidated legislation as of 1 July 2003.
The head entity, Breville Group Limited and the
controlled entities in the tax consolidated group
continue to account for their own current and deferred
tax amounts. These tax amounts are measured as if
each entity in the tax consolidated group continues to
be a stand alone tax payer in its own right.
Basic earnings per share is calculated as net profit
attributable to members of the parent, adjusted to
exclude any costs of servicing equity (other than
dividends), divided by the weighted average number of
ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit or
loss attributable to members of the parent, adjusted for:
• cost of servicing equity (other than dividends);
•
the after tax effect of dividends and interest
associated with dilutive potential ordinary shares
that have been recognised as expenses; and
In addition to its own current and deferred tax amounts,
Breville Group Limited also recognises:
(a) the current tax liabilities (or assets) and the deferred
tax assets arising from unused tax losses and
unused tax credits assumed from controlled entities
in the tax consolidated group; and
• other non-discretionary changes in revenues or
expenses during the period that would result from
the dilution of potential ordinary shares;
divided by the weighted average number of ordinary
shares and dilutive potential ordinary shares, adjusted
for any bonus element.
(aa) Comparatives
Where necessary, comparatives have been reclassified
and repositioned for consistency with current year
disclosures.
(b) assets or liabilities arising for Breville Group Limited
under the tax funding agreement as amounts
receivable from or payable to other entities in the
group.
Assets or liabilities arising under tax funding agreements
with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in
the group.
(iv) Other taxes
Revenues, expenses and assets are recognised net of
the amount of goods and services tax (GST) or value
added tax (VAT) except:
• where the GST/VAT incurred on the purchase of
goods and services is not recoverable from the
taxation authority, in which case the GST/VAT is
recognised as part of the cost of acquisition of the
asset or as part of the expense item as applicable;
and
•
receivables and payables, which are stated with the
applicable amount of GST/VAT included.
The net amount of GST/VAT recoverable/payable is
included in receivables/payables in the statement of
financial position.
Cash flows are included in the cash flow statement on
a gross basis and the GST/VAT component of cash
flows arising from investing and financing activities are
classified as operating cash flows.
Commitments and contingencies are disclosed net of
recoverable/payable GST/VAT.
42
Breville Group Limited annual report 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Note 2. Revenue and expenses
(a) Revenue
Sale of goods
Commission income
Total revenue
(b) Cost of sales
Costs of inventories recognised as an expense [includes write-
down of inventory to net realisable value (note 8)]
Costs of delivering goods to customers
Warranty provision
Total cost of sales
(c) Other income
Other income
Total other income
(d) Depreciation and amortisation expense
Depreciation – plant and equipment
Amortisation – computer software
Amortisation – development costs
Total depreciation and amortisation expense
11
12(b)
2(h)
(e) Lease payments and other expenses included
in income statement
Included in premises, lease & utilities expenses:
• Minimum lease payments – operating lease (excludes onerous
leases)
Included in other expenses:
• Net loss/(profit) on disposal of plant and equipment
• Impairment of plant and equipment
• Doubtful debts
• Bad debts written off
• Net foreign exchange (gain)/loss
• Other product related costs
(f) Employee benefits expenses
Wages & salaries, leave and other employee related benefits
Defined contribution plan expense
Share-based payments expense
Total employee benefits expenses
408,476
19,464
427,940
237,016
17,234
13,054
267,304
449
449
2,170
241
4,476
6,887
383,665
9,924
393,589
227,841
16,466
10,693
255,000
376
376
2,373
251
4,081
6,705
8,983
7,937
494
-
(157)
402
(182)
(66)
494
291
-
866
1,727
1,470
44,097
2,046
823
46,966
42,621
2,022
1,068
45,711
Breville Group Limited annual report 2012
43
Notes to the financial statements
for the year ended 30 June 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Note 2. Revenue and expenses continued
(g) Finance costs
Finance costs paid or payable on borrowings and bank overdrafts:
- interest
- other borrowing costs
Finance revenue
Interest rate swap gain
Total finance costs
(h) Research and development costs
Amortisation of previously capitalised development costs included
in amortisation expense
Research and development costs charged directly to the income
statement
Total research and development costs
Note 3. Income tax
The major components of income tax expense are:
Income statement
Current income tax
Current income tax charge
Adjustments in respect of current income tax of previous years
Deferred income tax
Relating to the origination and reversal of temporary differences
Total income tax expense reported in the income statement
Statement of changes in equity
Deferred income tax related to items charged or credited
directly to equity
Foreign currency translation differences
Employee equity benefits reserve
Net gain/(loss) on revaluation of cash flow hedges
Income tax expense/(benefit) reported in equity
A reconciliation between tax expense and the product of
accounting profit before income tax multiplied by the parent
entity’s applicable income tax rate is as follows:
Profit before income tax
At the parent entity’s statutory income tax rate of 30% (2011: 30%)
• adjustments in respect of current income tax of previous years
• effect of different rates of tax on overseas income
• expenditure not allowable for income tax purposes
• other
412
1,586
(984)
(101)
913
2(d)
4,476
6,613
11,089
20,075
(156)
(1,234)
18,685
(197)
(276)
1,089
616
64,667
19,400
(156)
(719)
203
(43)
573
2,132
(582)
(429)
1,694
4,081
5,065
9,146
10,872
(827)
1,829
11,874
516
(828)
(1,507)
(1,819)
43,609
13,083
(827)
(601)
360
(141)
Income tax expense reported in the income statement
18,685
11,874
44
Breville Group Limited annual report 2012
Note 3. Income tax continued
Deferred income tax
Deferred income tax at 30 June relates to the
following:
Deferred tax liabilities
Brand names
Development costs
Foreign currency translation reserve
Gross deferred income tax liabilities
Deferred tax assets
Losses available for offset against future taxable
income
Provisions and accruals
Unrealised foreign exchange gains and losses
Employee benefits
Revaluation of inventories
Cash flow hedge reserve
Employee equity benefits reserve
Other
Gross deferred income tax assets
Deferred tax income/(expense)
Current income tax
Current tax asset
Current tax liabilities
Statement of financial
position
Income statement
30 June 2012
$’000
30 June 2011
$’000
30 June 2012
$’000
30 June 2011
$’000
1,875
3,957
419
6,251
-
7,686
(85)
2,831
748
(157)
404
1,035
12,462
1,875
3,972
525
6,372
-
7,766
(140)
1,850
504
884
269
833
11,966
-
15
-
-
(80)
55
981
244
50
(233)
202
-
(538)
-
(88)
(672)
(147)
101
66
-
(971)
420
1,234
(1,829)
30 June 2012
$’000
30 June 2011
$’000
476
9,580
1,678
6,735
At 30 June 2012, there is no recognised or unrecognised deferred income tax liability (2011: $nil) for taxes that would
be payable on the unremitted earnings of certain of the group’s subsidiaries, as the group has no current intention of
distributing existing retained earnings in jurisdictions where liability for additional taxation exists should such amounts
be remitted.
Breville Group Limited annual report 2012
45
Notes to the financial statements
for the year ended 30 June 2012
Note 3. Income tax continued
Tax consolidation
Breville Group Limited and its 100% owned Australian resident subsidiaries (excluding the Breville Group Performance
Share Plan Trust) have formed a tax consolidated group with effect from 1 July 2003.
The head entity, Breville Group Limited, and each subsidiary in the tax consolidated group are required to account
for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax
consolidated group continues to be a stand alone tax payer in its own right.
In addition to its own current and deferred tax amounts, Breville Group Limited also recognises:
(a) the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax
credits assumed from controlled entities in the tax consolidated group; and
(b) assets or liabilities arising for Breville Group Limited under the tax funding agreement as amounts receivable from
or payable to other entities in the group.
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement
supports the calculation of current tax liabilities (and assets) and deferred tax assets/liabilities on a stand-alone
basis. Calculation is performed in accordance with AASB 112 Income Tax. The allocation of taxes under the tax
funding agreement is recognised as an increase/decrease in the subsidiaries’ intercompany accounts with the tax
consolidated group head company, Breville Group Limited.
No amounts have been recognised in the financial statements in respect of the tax sharing agreement should the
head entity default on its tax payment obligations on the basis that the possibility of default is remote.
30 June 2012
$’000
30 June 2011
$’000
Note 4. Earnings per share
The following reflects the income and share data used in the basic and
diluted earnings per share computations:
Earnings used in calculating basic and diluted earnings per share:
Net profit attributable to ordinary equity holders of Breville Group
Limited
45,982
31,735
Thousands
Thousands
Weighted average number of shares:
Weighted average number of ordinary shares for basic earnings
per share
130,077
129,687
Effect of dilution:
• share options
Weighted average number of ordinary shares adjusted for the effect
of dilution
12
181
130,089
129,868
Weighted average number of exercised, forfeited or expired
potential ordinary shares included in diluted earnings per share
12
120
There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change
the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of
completion of these financial statements.
46
Breville Group Limited annual report 2012
Note
30 June 2012
$’000
30 June 2011
$’000
(i)
(ii)
(i)
(ii)
Note 5. Dividends
(a) Dividends on ordinary shares declared and paid during
the year:
Final fully franked dividend for 2011 of 7.0 cents per share
(2011: final unfranked dividend for 2010 of 5.0 cents
per share)
• Paid in cash
• Retained as interest income
Final dividend
Fully franked interim dividend for 2012 of 12.5 cents per
share (2011: partially franked interim dividend for 2011 of
9.5 cents per share (4.0 cents franked))
• Paid in cash
• Retained as interest income
Interim dividend
Total fully franked dividends declared and paid during the
year of 19.5 cents per share (2011: 14.5 cents per share
(4.0 cents franked))
(i) Total dividends paid in cash
(ii) Total dividends retained as interest income
Total dividends
(b) Dividends on ordinary shares proposed and not
recognised as a liability:
Final franked dividend for 2012 of 11.5 cents per share
(2011: final fully franked dividend for 2011 of 7.0 cents
per share)
(c) Franking credit balance
The amount of franking credits in the parent available for the
subsequent year are:
• franking account balance as at the end of the year at 30%
(2011: 30%)
• franking credits that will arise from the payment of income tax
payable as at the end of the year
The amount of franking credits in the parent available for future
reporting periods:
• impact on the franking account of dividends proposed or
declared before the financial report was authorised for issue
but not recognised as distribution to equity holders during the
period
Total franking credit balance
The tax rate at which dividends are franked is 30% (2011: 30%).
9,107
-
9,107
16,262
-
16,262
25,369
-
25,369
6,445
31
6,476
12,264
49
12,313
18,709
80
18,789
14,961
9,107
1,674
5,550
7,224
1,526
5,612
7,138
(6,412)
812
(3,900)
3,238
Breville Group Limited annual report 2012
47
Notes to the financial statements
for the year ended 30 June 2012
Note 6. Cash and cash equivalents
Cash at bank and on hand
(a)
53,095
27,768
Note
30 June 2012
$’000
30 June 2011
$’000
Notes:
(a) Cash at bank earns interest at floating rates based on daily
bank deposit rates.
(b) At 30 June 2012, the Group had available $28,424,000 (2011:
$71,886,000) of undrawn committed borrowing facilities in
respect of which all conditions precedent had been met.
(c) The fair value of cash and cash equivalents is $53,095,000
(2011: $27,768,000).
(a) Reconciliation of cash flow statement:
For the purposes of the cash flow statement, cash and cash
equivalents comprise the following at 30 June:
Cash and cash equivalents
Bank overdraft
Total cash and cash equivalents, net
16
53,095
(13)
53,082
27,768
(204)
27,564
(b) Reconciliation of net profit after tax for the
year to net cash flows from operating activities
Net profit for the year
Adjustments for:
Depreciation and amortisation
Share-based payments
Net loss/(gain) on disposal of plant and equipment
Impairment of plant and equipment
Interest rate swap gain
Foreign exchange (gains)/losses
Dividend retained as interest income
Changes in assets and liabilities:
(Increase)/decrease in:
Trade and other receivables
Inventories
Prepayments
Other current assets
Non-current assets
Increase in:
Current liabilities
Non-current liabilities
Net cash flows from operating activities
(c) Disclosure of financing facilities
Refer to note 16.
48
Breville Group Limited annual report 2012
45,982
31,735
6,887
823
494
-
(101)
(182)
-
(5,372)
(3,174)
(1,783)
1,131
(1,217)
7,196
427
51,111
6,705
1,068
(66)
494
(429)
866
(80)
(4,114)
1,839
(305)
288
693
4,313
3,990
46,997
Note 7. Trade and other receivables
Current
Trade receivables
Allowance for uncollectible receivables
Trade receivables, net
Other receivables
Total current trade and other receivables
Notes:
Note
30 June 2012
$’000
30 June 2011
$’000
(a)
(b)
73,659
(470)
73,189
390
73,579
66,978
(614)
66,364
908
67,272
(a) Trade receivables are non-interest bearing and are generally on 30-60 day terms. An allowance for uncollectible
receivables is made when there is objective evidence on a case by case basis that a trade receivable is impaired.
A reversal of $157,000 (2011: $291,000 charge) has been recognised by the group as an expense in ‘other
expenses’ for the current year for specific debtors for which such evidence exists. The amount of the allowance/
impairment loss has been measured as the difference between the carrying amount of the trade receivables and
the estimated future cash flows expected to be received from the relevant debtors.
Movements in the allowances for uncollectible receivables are as follows:
Balance at beginning of year
(Reversal)/charge for the year
Net foreign exchange
Amounts utilised
Balance at end of year
30 June 2012
$’000
30 June 2011
$’000
614
(157)
2
11
470
405
291
(26)
(56)
614
At 30 June 2012 an ageing analysis of those trade receivables which are past due but not impaired are as follows:
1 – 30 days overdue
31 – 60 days overdue
61+ days overdue
Total past due but not impaired
30 June 2012
$’000
30 June 2011
$’000
18,624
262
10
18,896
7,070
229
269
7,568
Trade receivables past due but not impaired amount to $18,896,000 (2011: $7,568,000). Of this balance,
$15,565,000 (2011: $5,474,000) is covered by insurance to be used in the event of default of payment. In all
instances each operating unit has been in contact with the relevant debtor and is satisfied that payment will be
received in full.
(b) Non-trade other receivables are non-interest bearing and have repayment terms between 30 and 60 days.
Balances within other receivables do not contain impaired assets and are not past due. It is expected that these
balances will be received when due.
The carrying value and estimated net fair values of the trade and other receivables is assumed to approximate
their fair value, being the amount at which the asset could be exchanged between willing parties.
Details regarding the effective interest rate and credit risk of current receivables are disclosed in note 23.
Breville Group Limited annual report 2012
49
Notes to the financial statements
for the year ended 30 June 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Note 8. Inventories
Finished goods (at lower of cost and net realisable value)
(a)
Stock in transit (at cost)
Total inventories
Notes:
50,093
11,503
61,596
47,888
9,982
57,870
(a) Total net finished goods provision movements recognised in the income statement totalled a $304,000 expense (2011:
$726,000 credit) for the group. This net expense (2011: credit) is included in the cost of inventories line in the cost of sales.
Note 9. Other financial assets
Derivative assets
Forward exchange contracts – cash flow hedges
Total other financial assets
Notes:
Note
30 June 2012
$’000
30 June 2011
$’000
479
479
21
21
Derivative assets represent the fair value receivable arising from forward exchange contracts disclosed in note 18.
Note 10. Other assets
Insurance claim receivable
Prepayments
Total other assets
Note 11. Plant and equipment
At the beginning of the year
At cost (gross carrying amount)
Accumulated depreciation and impairment
Net carrying amount
At the end of the year
At cost (gross carrying amount)
Accumulated depreciation and impairment
Net carrying amount
(i) Reconciliation of the carrying amount
Carrying amount at the beginning of year
Additions
Disposals
Depreciation
Impairment
Net exchange difference
Carrying amount at the end of year
50
Breville Group Limited annual report 2012
Note
30 June 2012
$’000
30 June 2011
$’000
1,777
1,521
3,298
-
1,504
1,504
(i)
(i)
2(d)
2(e)
30,213
(25,117)
5,096
30,948
(27,073)
3,875
5,096
1,454
(517)
(2,170)
-
12
3,875
32,218
(24,506)
7,712
30,213
(25,117)
5,096
7,712
689
(23)
(2,373)
(494)
(415)
5,096
Note 12. Intangible assets – other
Development costs
Computer software
Brand names
Total intangible assets - other
Notes:
Note
30 June 2012
$’000
30 June 2011
$’000
(a)
(b)
(c)
13,190
305
31,803
45,298
13,242
372
31,803
45,417
Development costs are internally generated and have been capitalised at cost. This intangible asset has been assessed as having
a finite life and is amortised using the straight line method over a maximum period of 3 years. If an impairment indication arises, the
recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the
carrying amount.
Computer software is purchased computer software that has been capitalised into other intangible assets at cost.
Brand names include intangible assets acquired through previous business combinations. These intangible assets have been
determined to have indefinite useful lives as the economic benefits which are obtained from them are expected to be ongoing. The
cost model is utilised for their measurement. These assets were tested for impairment as at 30 June 2012 (see note 14).
Note
30 June 2012
$’000
30 June 2011
$’000
(a) Development costs
At the beginning of the year
At cost (gross carrying amount)
Accumulated amortisation and impairment
Net carrying amount
At the end of the year
At cost (gross carrying amount)
Accumulated amortisation and impairment
Net carrying amount
(i) Reconciliation of the carrying amount
Carrying amount at the beginning of year
Additions – internal development
Amortisation
Carrying amount at the end of year
(b) Computer software
At the beginning of the year
At cost (gross carrying amount)
Accumulated amortisation and impairment
Net carrying amount
At the end of the year
At cost (gross carrying amount)
Accumulated amortisation and impairment
Net carrying amount
27,418
(14,176)
13,242
31,843
(18,653)
13,190
13,242
4,424
(4,476)
13,190
3,481
(3,109)
372
3,695
(3,390)
305
21,628
(10,095)
11,533
27,418
(14,176)
13,242
11,533
5,790
(4,081)
13,242
3,759
(3,124)
635
3,481
(3,109)
372
(i)
(i)
2(d)
(i)
(i)
Breville Group Limited annual report 2012
51
Notes to the financial statements
for the year ended 30 June 2012
Note 12. Intangible assets – other continued
(b) Computer software continued
(i) Reconciliation of the carrying amount
Carrying amount at the beginning of year
Additions
Amortisation
Net exchange difference
Carrying amount at the end of year
(c) Brand names
At the beginning and at the end of the year
Net carrying amount
Note 13. Intangible assets – goodwill
At the beginning and at the end of the year
Net carrying amount
Note
30 June 2012
$’000
30 June 2011
$’000
2(d)
372
170
(241)
4
305
635
86
(251)
(98)
372
31,803
31,803
24,558
24,558
52
Breville Group Limited annual report 2012
Note 14. Impairment testing of goodwill and intangibles with indefinite lives
Goodwill and brand names acquired through business combinations have been allocated to cash generating units for
impairment testing as follows:
• Breville Group Limited
• Breville Pty Limited
• North America Distribution
• New Zealand Distribution
•
International Distributors
In all cases the recoverable amount of the individual cash generating unit has been determined based on a value in
use calculation using cash flow projections based on financial budgets approved by senior management.
The discount rate applied to cash flow projections is 16.6% (2011: 15.2%). Cash flows beyond the approved 30 June
2013 budgets are extrapolated using a 2.0% growth rate (2011: 2.0%), which is the same as the long-term average
growth rate for the wholesale consumer products industry generally.
Management has performed sensitivity testing by cash generating unit (CGU), based on assessing the effect of
changes in revenue growth rates as well as discount rates. Management consider any reasonable likely combination
of changes in these key assumptions would not result in the carrying value of the goodwill exceeding the recoverable
amount.
Note
30 June 2012
$’000
30 June 2011
$’000
Carrying amount of goodwill and brand names
allocated to each of the cash generating units
Breville Group Limited
- brand names with indefinite useful lives
Breville Pty Limited
- goodwill
- brand names with indefinite useful lives
North America Distribution
- goodwill
New Zealand Distribution
- goodwill
International Distributors
- goodwill
All cash generating units
- goodwill
- brand names with indefinite useful lives
Total carrying amount of goodwill and brand names
13
12(c)
13,800
13,800
20,277
18,003
38,280
20,277
18,003
38,280
1,764
1,764
276
276
2,241
56,361
24,558
31,803
56,361
2,241
56,361
24,558
31,803
56,361
Key assumptions used in value in use calculations for the cash generating units for
30 June 2012 and 30 June 2011
The following describes each key assumption on which management has based its cash flow projections when
determining the value in use of the cash generating units.
• Budgeted gross margins – the basis used to determine the value assigned to the budgeted gross margins is
based on past performance and expectations for the future.
• Bond rates – the yield on a ten-year government bond rate at the beginning of the budgeted year is used.
Breville Group Limited annual report 2012
53
Notes to the financial statements
for the year ended 30 June 2012
Note 15. Trade and other payables
Current
Trade payables – unsecured
Employee benefits
Total current trade and other payables
Note
30 June 2012
$’000
30 June 2011
$’000
(a)
28
59,929
3,750
63,679
55,675
3,409
59,084
Terms and conditions relating to the above financial instruments:
(a) Trade payables are non-interest bearing and are normally settled on 30 day terms.
The carrying value and estimated net fair values of the trade and other payables is assumed to approximate their
fair value, being the amount at which the liability could be settled in a current transaction between willing parties.
Details regarding interest rate, foreign exchange and liquidity risk exposure are disclosed in note 23.
Note 16. Borrowings
Current
Bank overdrafts – on demand
Other loans:
- Term loan
Total current borrowings
Non-current
Other loans:
- Cash advance facilities
- Term loan
Total non-current borrowings
Terms and conditions
Note
30 June 2012
$’000
30 June 2011
$’000
6(a)
13
44
57
5,859
160
6,019
204
38
242
-
194
194
The group operates under one primary facility with Australia and New Zealand Banking Group Limited (ANZ) enabling
all jurisdictions to borrow under one global facility. The facility agreement has a number of financial covenants all of
which have been fully complied with as at the years ended 30 June 2012 and 30 June 2011.
The Australia and New Zealand financing facilities are secured by a first ranking fixed and floating registered charge
(or general security for Breville New Zealand Limited), over all the assets and undertakings of Thebe International Pty
Limited, Breville Pty Limited, Breville Holdings Pty Limited, Breville R&D Pty Limited and Breville New Zealand Limited
and are guaranteed by Breville Group Limited. The Hong Kong facility is secured via a security agreement over
the assets and undertakings of HWI International Limited. The day to day Canadian transactional banking facilities
(HSBC) are secured by a standby letter of credit from ANZ (NY). Breville Group Limited has issued a corporate
guarantee in favour of the local bank (HSBC) which provides the day to day US transactional banking facilities. A
security agreement in favour of ANZ is in existence over the assets and undertakings of Breville USA, Inc.
Borrowings may include Australian dollar, US dollar, Canadian dollar and New Zealand dollar denominated amounts.
Fair value
The carrying value and estimated net fair values of the borrowings is assumed to approximate their fair value, being
the amount at which the liability could be settled in a current transaction between willing parties. Details regarding
interest rate, foreign exchange and liquidity risk are disclosed in notes 18 and 23.
54
Breville Group Limited annual report 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Note 16. Borrowings continued
Financing facilities available
At reporting date, the following financial facilities have been
negotiated and were available to the group:
Facilities used at the reporting date
Facilities unused at the reporting date
Total facilities
(a) Facilities used at the reporting date:
- Non-current cash advance facilities
- Current cash advance facilities
- Trade finance facilities
- Overdraft facilities
- Business transactions facilities
- Indemnity/guarantee facilities
- Documentary credit facilities
Facilities used as at reporting date
(b) Facilities unused at the reporting date:
- Non-current cash advance facilities
- Current cash advance facilities
- Trade finance facilities
- Overdraft facilities
- Business transactions facilities
- Indemnity/guarantee facilities
- Documentary credit facilities
Facilities unused as at reporting date
(c) Total facilities:
- Non-current cash advance facilities
- Current cash advance facilities
- Trade finance facilities
- Overdraft facilities
- Business transactions facilities
- Indemnity/guarantee facilities
- Documentary credit facilities
Total facilities
Seasonal facility
(a)
(b)
(c)
8,764
32,170
40,934
5,859
-
-
13
488
1,756
648
8,764
8,709
4,395
2,882
12,438
488
-
3,258
32,170
14,568
4,395
2,882
12,451
976
1,756
3,906
40,934
3,881
74,612
78,493
-
-
-
204
485
1,702
1,490
3,881
26,665
30,133
2,861
12,227
486
-
2,240
74,612
26,665
30,133
2,861
12,431
971
1,702
3,730
78,493
Under the primary facility with ANZ, the group also has a seasonal facility available between October 2012 - January
2013 (2011: October 2011 – January 2012) of $26,000,000 (2011: $22,000,000). This facility is under the same
terms and conditions as described above.
Borrowings may include Australian dollar, US dollar and Canadian dollar denominated amounts.
Breville Group Limited annual report 2012
55
Notes to the financial statements
for the year ended 30 June 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Note 17. Provisions
Current
Warranty and faulty goods
Employee benefits – long service
Onerous lease contracts
Total current provisions
Non-current
Employee benefits – long service
Provision for make-good
Onerous lease contracts
Total non-current provisions
28
(a)
28
(a)
4,495
1,597
1,028
7,120
880
935
6,766
8,581
Warranty and
faulty goods
$’000
Employee
benefits -
long service
$’000
Provision for
make-good
$’000
Onerous
lease
contracts
$’000
2,503
1,374
2,044
5,921
972
-
7,156
8,128
Total
$’000
(a) Movement in provisions
Carrying amount at the beginning of the year:
Current
Non-current
Total
2,503
-
2,503
Movement in provisions during the year:
Additional provisions made
in the year
Amounts utilised
during the year
Net exchange differences
Net movement
13,054
(11,086)
24
1,992
Carrying amount at the end of the year:
Current
Non-current
Total
4,495
-
4,495
Warranty and faulty goods
1,374
972
2,346
262
(136)
5
131
1,597
880
2,477
-
-
-
935
-
-
935
-
935
935
2,044
7,156
9,200
5,921
8,128
14,049
691
14,942
(2,120)
(13,342)
23
(1,406)
1,028
6,766
7,794
52
1,652
7,120
8,581
15,701
A provision for warranty and faulty goods represents the present value of the best estimate of the future sacrifice
of economic benefits expected that will be required for warranty and faulty goods claims on products sold. This
estimate is based on the historical trends experienced on the level of repairs and returns. It is expected that these
costs will be incurred in the next year. Assumptions used to calculate the provision for warranty and faulty goods
were based on the level of warranty and faulty goods claims experienced during the last year.
56
Breville Group Limited annual report 2012
Note 17. Provisions continued
Employee benefits – long service
The provision for employee benefits represents the present value of expected future payments to be made in respect
of services provided by employees up to the reporting date. Consideration is given to the expected future wage and
salary levels, experience of employee departures and periods of service. Expected future payments are discounted
using appropriate market yields at the reporting date to estimate the future cash outflows.
Provision for make-good
The provision for make-good represents the value of expected future payments to be made in respect of restoration
of leased premises under contracts that have clauses potentially requiring these premises to be restored to their
original condition at the conclusion of the lease. The estimate may vary as a result of negotiations between the parties
at the end of the lease term.
Onerous lease contracts
The provision for onerous lease contracts represents the present value of the future lease payments that the
consolidated entity is presently obligated to make in respect of onerous lease contracts under non-cancellable
operating lease agreements, less revenue expected to be earned on the lease including estimated future sub-lease
revenue, where applicable. The estimate may vary as a result of changes in the utilisation of the leased premises and
sub-lease arrangements where applicable.
Note
30 June 2012
$’000
30 June 2011
$’000
Note 18. Other financial liabilities
Derivative liabilities
Forward exchange contracts – cash flow hedges
Interest rate swap contracts – held for trading
Total other financial liabilities
Instruments used by the group
(i)
(ii)
17
-
17
2,796
100
2,896
Derivative financial instruments are used by the group in the normal course of business in order to hedge exposures
to fluctuations in interest and foreign exchange rates.
Breville Group Limited annual report 2012
57
Notes to the financial statements
for the year ended 30 June 2012
Note 18. Other financial liabilities continued
(i) Forward exchange contracts - cash flow hedges
The majority of the group’s inventory purchases from suppliers are denominated in US dollars (US$). The group also
has other payments, included in the calculation of commission received, denominated in US$. In order to manage
exchange rate movements and to manage the inventory costing process, the group has entered into forward
exchange contracts to purchase US$. These contracts are hedging highly probable forecasted purchases and highly
probable forecasted payments and they are timed to mature when settlement of purchases or the payments are
scheduled to be made.
The cash flows are expected to occur between 0-5 months from 1 July 2012 (2011: 0-12 months) and the cost of
sales and where applicable the sale of goods within the income statement will be affected in the next financial year as
the inventory is sold or the payments are made. At balance date, the details of outstanding contracts are:
30 June 2012
30 June 2011
Average
exchange
rate
A$’000
Average
exchange
rate
A$’000
Buy US$ / Sell Australian $
Buy US$ - maturity 0-5 months (2011: 0-11 months)
13,184
1.0349
22,102
0.9751
Buy US$ / Sell New Zealand $
Buy US$ - maturity 0-5 months (2011: 0-12 months)
2,832
0.8072
6,715
0.7610
Buy US$ / Sell Canadian $
Buy US$ - maturity 0-4 months (2011: 0-6 months)
24,414
0.9898
27,977
0.9837
The cash flow hedges of the forecast purchases and forecast payments are considered to be highly effective
and any gain or loss on the contracts is taken directly to equity. Where the contracts are hedging highly probable
forecasted inventory purchases, when the inventory is received the amount recognised in equity is adjusted to the
inventory account in the balance sheet. Where the contracts are hedging highly probable forecasted payments,
when the payments are made the amount recognised in equity is adjusted to the income statement. During the year
$3,122,000 (2011: $6,675,000) was charged to inventory and $1,523,000 (2011: $1,036,000) was charged to the
income statement in respect of the group. In addition, during the year $993,000 was credited (2011: $13,055,000
debited) to equity in respect of the group.
(ii) Interest rate swap contracts – held for trading
Borrowings of the group currently bear an average variable interest rate including margin of 1.4% (2011: 3.6%). In
order to protect against rising interest rates the group had entered into interest rate swap contracts under which it
has a right to receive interest at variable rates and to pay interest at fixed rates.
At 30 June 2012, the group did not have any interest rate swap agreements in place. At 30 June 2011 the group
had interest rate swap agreements in place with a notional amount of $25,000,000 whereby it received a variable
rate equal to the BBSW on the notional amount and pays an average fixed rate of interest of 6.59%. The swaps
were used to hedge the exposure in the fair value of the cash advance facilities and commercial bills. The swaps in
place at 30 June 2011 were in excess of the cash advances. In 2012, a pre tax gain of $101,000 (2011: $429,000) is
included in the income statement in respect of these contracts.
The interest rate swaps required settlement of net interest receivable or payable each 120 days. The swaps are
measured at fair value and all gains and losses are taken directly to the income statement.
At 30 June, the notional principal amounts and period of expiry of the
interest rate swap contracts are as follows:
<1 year
1-2 years
30 June 2012
$’000
30 June 2011
$’000
-
-
-
25,000
-
25,000
58
Breville Group Limited annual report 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Note 19. Issued capital
Ordinary shares – issued
Ordinary shares – held by the Breville Group Performance Share
Plan Trust
Ordinary shares – reserved under SEOP
Total contributed equity
(a)
(b)
(c)
140,050
139,938
(1,290)
-
(4,296)
-
138,760
135,642
Ordinary shares are held by the Breville Group Performance Share Plan Trust in order to fulfil its obligations under the
Breville Group Limited Performance Rights Plan. The ordinary shares held by the Breville Group Performance Share
Plan Trust are yet to be allocated to LTI participants. They will be allocated to participants once performance rights
vest and they are exercised. The ordinary shares held by the Breville Group Performance Share Plan Trust have the
right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds
from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. The ordinary
shares held by the Breville Group Performance Share Plan Trust entitle their holder to one vote, either in person or by
proxy, at a meeting of the company. Details are provided in note 25(b) and note 27.
Ordinary shares issued and reserved under the senior executive option plan (SEOP) have the right to receive
dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of
all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their
holder to one vote, either in person or by proxy, at a meeting of the company.
30 June 2012
30 June 2011
Note
Number of
shares
$’000
Number of
shares
$’000
(a) Movements in ordinary
issued shares:
Beginning of the year
Movements during the year
129,995,322
139,938
129,515,322
139,096
Exercise of options - cash
(i)
100,000
112
480,000
842
End of the year
130,095,322
140,050
129,995,322
139,938
(i) During the year 100,000 options were exercised (2011: 480,000) resulting in the issue of ordinary shares. The average value
placed on these issues was $1.12 per share (2011: $1.75). Details are provided in note 27.
Breville Group Limited annual report 2012
59
Notes to the financial statements
for the year ended 30 June 2012
30 June 2012
30 June 2011
Note
Number of
shares
$’000
Number of
shares
$’000
Note 19. Issued capital continued
(b) Movements in ordinary
shares held by the Breville Group
Performance Share Plan Trust:
Beginning of the year
Movements during the year
Transferred to participants of the Breville
Group Limited Performance Rights Plan
Ordinary shares acquired by the Breville
Group Performance Share Plan Trust
during the year - cash
End of the year
(1,282,000)
(4,296)
(i)
1,282,000
4,296
-
-
-
-
(ii)
(303,000)
(303,000)
(1,290)
(1,282,000)
(1,290)
(1,282,000)
(4,296)
(4,296)
(i) During the year the Trustee of the Breville Group Performance Share Plan Trust transferred 1,282,000 ordinary company shares
(2011: nil) to participants in order to fulfil its obligations under the Breville Group Limited Performance Rights Plan.
30 June 2012
30 June 2011
Note
Number of
shares
$’000
Number of
shares
$’000
(c) Movements in ordinary
reserved shares:
Beginning of the year
Movements during the year
Ordinary reserved share loans repaid
during the year - cash
(i)
End of the year
-
-
-
-
-
-
(777,000)
(1,443)
777,000
-
1,443
-
(i) There were no loans outstanding in relation to ordinary reserved shares. (2011: loans relating to 777,000 ordinary reserved shares
were repaid). The average value placed on these original issues was $nil (2011: $1.85). The average amount repaid equalled $nil
(2011: $1.85).
(d) Options and performance rights over ordinary shares:
The company has a share-based payment option scheme and performance rights scheme under which options and
rights to subscribe for the company’s shares have been granted to certain executives and other employees (refer
note 27). At the end of the year there were 727,000 (2011: 1,139,000) potential unissued ordinary shares in respect
of performance rights that were outstanding (2011: options and performance rights).
60
Breville Group Limited annual report 2012
Note 20. Reserves
Foreign currency translation reserve
Employee equity benefits reserve
Cash flow hedge reserve
Total reserves
(a) Movement in foreign currency translation reserve
Balance at beginning of year
Currency translation differences
Tax effect of foreign currency translation reserve
Balance at end of year
(b) Movement in employee equity benefits reserve
Balance at beginning of year
Share-based payments expense
Transferred to participants of the performance rights plan
Tax effect of employee equity benefits reserve
Balance at end of year
(c) Movement in cash flow hedge reserve
Balance at beginning of year
Net gains/(losses) on cash flow hedges
Tax effect of net (gains)/losses on cash flow hedges
Balance at end of year
Nature and purpose of reserves
Foreign currency translation reserve
Note
30 June 2012
$’000
30 June 2011
$’000
(a)
(b)
(c)
(14,893)
(147)
257
(14,783)
(16,046)
956
197
(14,893)
3,050
823
(4,296)
276
(147)
(1,890)
3,236
(1,089)
257
(16,046)
3,050
(1,890)
(14,886)
(10,408)
(5,122)
(516)
(16,046)
1,154
1,068
-
828
3,050
1,948
(5,345)
1,507
(1,890)
This reserve is used to record exchange differences arising from the translation of the financial statements of foreign
subsidiaries.
Employee equity benefits reserve
This reserve is used to record the value of equity benefits provided to employees as part of their remuneration. Refer
to note 27 for further details of these plans.
Cash flow hedge reserve
This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined
to be an effective hedge.
Breville Group Limited annual report 2012
61
Notes to the financial statements
for the year ended 30 June 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Note 21. Retained earnings
Balance at beginning of the year
32,822
19,876
Net profit for the year attributable to members of Breville Group
Limited
Dividends
Balance at end of the year
Note 22. Operating segments
5(a)
45,982
(25,369)
53,435
31,735
(18,789)
32,822
The group has identified its operating segments based on the internal reports that are reviewed by the chief operating
decision makers (group chief executive officer and board of directors) in assessing performance and in determining
the allocation of resources.
The Australia Distribution, North America Distribution and New Zealand Distribution operating segments distribute
primarily small electrical appliances to retail customers in their geographical locations. The International Distributors
operating segment distributes primarily small electrical appliances to retail customers in international locations.
Other is not an operating segment and comprises the short term incentive plan and group functions including
product development and supply chain.
The accounting policies of the operating segments are the same as those described in note 1.
Transfer prices between operating segments are set at arms length basis in a manner similar to transactions with
third parties. The segment revenue and segment result include certain transfers between operating segments. Those
transfers are eliminated on consolidation.
Segment profit before income tax excludes certain transfer prices and includes an allocation of head office costs.
The following tables present the revenue and profit information regarding operating segments for the years ended 30
June 2012 and 30 June 2011.
Year ended 30 June 2012
Revenue
Sale of goods
Commission income
Inter-segment revenue
Australia
Distribution
$’000
North
America
Distribution
$’000
New
Zealand
Distribution
$’000
International
Distributors
$’000
201,726
132,705
26,768
47,277
-
231
19,464
-
-
-
-
5,980
53,257
Total segment revenue
201,957
152,169
26,768
Other
$’000
Total
$’000
-
-
19,987
19,987
408,476
19,464
26,198
454,138
(26,198)
427,940
Inter-segment elimination
Total consolidated revenues
Results
EBITDA
Depreciation & amortisation
EBIT
Finance revenue
Finance costs
21,325
(1,195)
20,130
831
(909)
34,702
3,579
13,745
(884)
72,467
(439)
(20)
(11)
34,263
3,559
13,734
67
(763)
85
(175)
3,469
1
(151)
(5,222)
(6,106)
101
-
(6,887)
65,580
1,085
(1,998)
Profit before income tax
20,052
33,567
13,584
(6,005)
64,667
Other segment information
Capital expenditure
387
77
3
9
978
1,454
62
Breville Group Limited annual report 2012
Note 22. Operating segments continued
Year ended 30 June 2011
Revenue
Sale of goods
Commission income
Inter-segment revenue
Australia
Distribution
$’000
North
America
Distribution
$’000
New Zealand
Distribution
$’000
International
Distributors
$’000
201,311
114,435
23,721
44,198
-
240
9,924
-
-
-
-
5,326
49,524
Total segment revenue
201,551
124,359
23,721
Inter-segment elimination
Total consolidated revenues
Results
EBITDA
21,539
19,710
2,685
13,520
Depreciation & amortisation
(1,342)
(597)
(24)
(17)
Other
$’000
Total
$’000
-
-
17,106
17,106
383,665
9,924
22,672
416,261
(22,672)
393,589
(5,446)
(4,725)
52,008
(6,705)
EBIT
Finance revenue
Finance costs
20,197
19,113
2,661
13,503
(10,171)
45,303
504
11
(1,374)
(1,006)
65
(182)
2
(143)
429
-
1,011
(2,705)
Profit before income tax
19,327
18,118
2,544
13,362
(9,742)
43,609
Other segment information
Capital expenditure
121
15
12
9
532
689
Breville Group Limited annual report 2012
63
Notes to the financial statements
for the year ended 30 June 2012
Note 23. Financial risk management objectives and policies
The group’s principal financial instruments, other than derivatives, comprises cash advances, bank overdrafts, cash
at bank and short-term deposits.
The main purpose of these financial instruments is to raise finance for the group’s operations. The group has
various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from
its operations. The group also enters into derivative transactions, including interest rate swaps, forward exchange
contracts and at times foreign exchange option contracts. The purpose is to manage the interest rate and currency
risks arising from the group’s business operations and its sources of finance. It is the group’s policy that no
speculative trading in derivatives shall be undertaken. The main risks arising from the group’s financial instruments are
cash flow interest rate risk, foreign currency risk and credit risk. The board reviews and agrees policies for managing
each of these risks and they are summarised below.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis
of measurement and the basis on which income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.
The fair value of the interest rate swap and forward exchange contracts is estimated using market observable inputs.
The fair values of these financial instruments are disclosed in notes 9 and 18.
Interest rate risk
The group is exposed to interest rate risk on its borrowings, cash balances and derivative financial instruments. The
group’s policy is to manage its interest rate risk using a mix of fixed and variable rate debt. Historically, fixed rate debt
was achieved through the use of interest rate swaps in which the group agrees to exchange, at specified intervals,
the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional
principal amount. Cash advance facilities have short term fixed interest rates with maturities ranging between 1 and 3
months, therefore within the financial year they are exposed to interest rate risk.
At 30 June 2012, the group has the following exposure to interest rate risk:
Cash at bank
Bank overdraft – on demand
Cash advance facilities
Term loan
Net exposure
30 June 2012
$’000
30 June 2011
$’000
53,095
27,768
(13)
(5,859)
(204)
47,019
(204)
-
(232)
27,332
At 30 June 2012, 0% of the group’s borrowings (2011: 0%) are at a fixed rate of interest. The remaining 100% (2011:
100%) is exposed to floating rates. On a principal net receivable of $47,019,000 (2011: $27,332,000), at an average
payable rate including margin of 2.1% (2011: 1.4%) and average receivable rate of 2.1% (2011: 2.1%), an increment
of 0.5% in the market rates would result in a decrease in finance costs of $247,000 (2011: $135,000), conversely a
decrement of 0.5% in the market rates would result in an increase in finance costs of $296,000 (2011: $114,000).
The group’s net exposure to interest rate risk calculated as at 30 June 2012 is not representative of its exposure
during the financial year due to seasonality in the volume of sales such that financial performance is historically
weighted in favour of the half to 31 December. This seasonality results in a higher level of receivable and inventory
balances and a consequent increase in working capital requirements. All of the group’s borrowings during the year
(2011 average borrowings: 92%) are at a floating rate of interest. On an average principal net receivable during the
year of $41,002,000 (2011: $11,826,000), at an average payable rate including margin of 2.1% (2011: 1.4%) and
average receivable rate of 2.1% (2011: 2.1%), an increment of 0.5% in the market rates would result in a decrease
in finance costs of $205,000 (2011: $59,000), conversely a decrement of 0.5% in the market rates would result in a
decrease in finance costs of $164,000 (2011: $24,000).
Interest rate swap contracts outlined in note 18, with a group fair value liability of $nil (2011: $100,000), are exposed
to fair value movements if interest rates change. The group classifies interest rate swaps as held for trading. An
increment of 0.5% in the market rate would result in a decrease in non-trading items – finance costs of $nil (2011:
$31,000). A decrement of 0.5% in the market rate would result in an increase in non-trading items – finance costs of
$nil (2011: $31,000).
64
Breville Group Limited annual report 2012
Note 23. Financial risk management objectives and policies continued
Foreign currency risk
The group undertakes certain transactions denominated in foreign currently and is exposed to foreign exchange rate
fluctuations. Such exposure arises primarily from purchases of inventory by an operating unit in currencies other
than the unit’s functional currency (purchases are predominately US dollar denominated). Other foreign exchange risk
only arises when future commercial transactions and recognised assets and liabilities are denominated in a currency
that is not the entity’s functional currency.
To hedge exposure arising from the purchase of inventories or payments in currencies other than the business
unit’s functional currency, a combination of forward exchange contracts and foreign exchange option contracts may
be utilised. At inception these hedge contracts are designated as cash flow hedges to hedge the exposure to the
variability in cash flows arising as a result of movements in exchange rates below contracted exchange rates for
options and for movements above or below a contracted exchange rate for forward exchange contracts.
Also, as a result of the group’s investment in its overseas operations, the group’s balance sheet can be affected
significantly by movements in the exchange rates of the jurisdictions it operates within.
At 30 June 2012, the group has the following financial assets and liabilities exposed to foreign currency risk:
Cash at bank
Trade and other receivables
Trade and other payables
Highly probable forecast purchases
Forward exchange contracts
Net exposure
30 June 2012
$’000
30 June 2011
$’000
66
1,022
(449)
(41,400)
41,400
639
47
-
(773)
(48,770)
48,770
(726)
At 30 June 2012, the group had hedged 57% (2011: 59%) of its foreign currency purchases and payments that are
highly probable extending to November 2012 (2011: June 2012). The remaining 43% (2011: 41%) is exposed to
foreign exchange risk.
Of the total net exposure above, an increment of 10% in the foreign exchange rates would result in a decrease in
other expenses of $58,000 (2011: $66,000). A decrement of 10% in the foreign exchange rates would result in an
increase in other expenses of $71,000 (2011: $81,000).
Capital management
The board’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 seeks to maintain a balance between the higher returns that might be possible with higher levels of
borrowings and the advantages and security afforded by a sound capital position. The board monitors the group’s
gearing ratio and compliance with debt covenants on a regular basis. The group’s gearing ratio at 30 June 2012
and 30 June 2011 is nil due to the group being in a net cash position. The gearing ratio is defined as group net
borrowings divided by capital employed (net borrowings plus shareholders’ equity).
Breville Group Limited annual report 2012
65
Notes to the financial statements
for the year ended 30 June 2012
Note 23. Financial risk management objectives and policies continued
Credit risk
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The credit
risk on financial assets, excluding investments, of the group that has been recognised on the balance sheet is the
carrying value amount, net of any uncollectible receivables.
The group trades only with recognised, creditworthy third parties. It is the group’s policy that all customers who
wish to trade on credit terms are subject to credit verification procedures. In certain instances, where deemed
appropriate, receivable insurance is acquired to offset the group’s exposure to credit risk.
In addition, receivable balances are monitored on an ongoing basis with the result that the group’s exposure to bad
debts is not significant. There are no significant concentrations of credit risk across the group.
With respect to credit risk arising from the other financial assets of the group, which comprise cash and cash
equivalents and certain derivative instruments, the group’s exposure to credit risk arises from default of the counter
party with a maximum exposure equal to the carrying amount of these instruments. These counter parties are large
multi-national banks.
Since the group trades only with recognised third parties, there is no requirement for collateral.
Liquidity risk
The group’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash
advances and bank overdrafts. The group’s bank facilities carry between a one and two year term in Australia, USA
and Canada. As at 30 June 2012, 99% of the group’s borrowings will mature in greater than one year (2011: 44%)
and 1% (2011: 56%) in less than one year.
Management monitors rolling forecasts of the group’s liquidity reserve on the basis of expected cash flows. See note
16 for details of available facilities.
At 30 June 2012, the remaining contractual maturities of the group’s financial liabilities are:
Less than 1 year
Between 1 and 5 years
Total financial liabilities
30 June 2012
$’000
30 June 2011
$’000
63,852
6,043
69,895
62,238
241
62,479
The table below analyses the group’s remaining contractual maturities by the type of financial liability. The amounts
disclosed are the contractual undiscounted cash flows.
30 June 2012
Less than
1 year
$’000
Between 1
and 5 years
$’000
Trade and other payables
63,679
Borrowings
Other financial liabilities
156
17
-
6,043
-
Total
$’000
63,679
6,199
17
30 June 2011
Less than
1 year
$’000
Between 1
and 5 years
$’000
59,084
258
2,896
-
241
-
241
Total
$’000
59,084
499
2,896
62,479
Total
63,852
6,043
69,895
62,238
Contractual maturities disclosed in the tables above include contracted interest payments. Total borrowings disclosed
in note 16 exclude such contracted interest payments.
66
Breville Group Limited annual report 2012
Note 24. Commitments and contingencies
Operating lease commitments – group as lessee
Operating leases are entered into mainly as a means of acquiring access to commercial property and storage facilities
and the use of minor items of plant and equipment. Rental payments are generally fixed; however certain property
leases contain a rental inflation escalation clause, an agreed rental percentage increase clause, a market rental review
clause or a mix of these clauses over the term of the operating lease.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
Within one year
After one year but not later than five years
More than five years
Total future minimum rentals payable
30 June 2012
$’000
30 June 2011
$’000
10,186
25,097
2,745
38,028
10,352
23,906
5,590
39,848
Contingent rentals are determined with reference to known existing rental payments and known rental increases
during the existing term of each operating lease.
No purchase options exist in relation to operating leases and no operating lease contains restrictions on financing or
other leasing activities. Certain property leases contain renewal option clauses.
Operating lease commitments receivable – group as lessor
The group has entered into commercial property leases for certain surplus office and warehouse space. Rental
charges under operating leases with sub lease tenants are generally fixed; however certain property leases contain a
rental inflation escalation clause, an agreed rental percentage increase clause, a market rental review clause or a mix
of these clauses over the term of the operating lease.
Future minimum rentals receivable under non-cancellable operating leases as at 30 June are as follows:
Within one year
After one year but not later than five years
More than five years
Total future minimum rentals receivable
Contingencies
30 June 2012
$’000
30 June 2011
$’000
1,718
6,083
50
7,851
1,780
4,071
653
6,504
Indemnity agreements have been entered into with certain officers of the group in respect of expenses and liabilities
they incur in their official capacities. No monetary limit applies to these agreements and no known obligations have
emerged as a result of these agreements.
Cross guarantees given by Breville Group Limited, Thebe International Pty Limited, Breville Holdings Pty Limited and
Breville Pty Limited are described in note 25(a).
Breville Group Limited has issued a corporate guarantee in favour of the local bank (HSBC) which provides the day to
day US transactional banking facilities.
Breville Group Limited annual report 2012
67
Notes to the financial statements
for the year ended 30 June 2012
Note 25. Related party disclosure
The consolidated financial statements include the financial statements of Breville Group Limited and the subsidiaries
listed in the following table.
Legal entity
Thebe International Pty Limited
Investments not held directly by Breville Group Limited:
Breville Holdings Pty Limited
Breville Pty Limited
Breville R&D Pty Limited
Breville Group Performance Share Plan Trust
Breville New Zealand Limited
HWI International Limited
Gannet Holdings Limited
HWI Export Limited
Breville Holdings USA, Inc. (formerly Thebe
International, Inc.)
Breville USA, Inc. (from 22 July 2011, formerly Metro/
Thebe, Inc.)
Holding HWI Canada, Inc
HWI Canada, Inc
Anglo-Canadian Housewares, L.P.
Country of
incorporation Note
30 June 2012
%
30 June 2011
%
Equity interest
(a)
(a)
(a)
(b)
Australia
Australia
Australia
Australia
Australia
New Zealand
Hong Kong
Hong Kong
Hong Kong
USA
USA
Canada
Canada
Canada
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
Breville Group Limited, a company incorporated in Australia is the ultimate parent of the group.
(a) Entities subject to class order relief
Pursuant to class order 98/1418, relief has been granted to Thebe International Pty Limited, Breville Pty Limited and
Breville Holdings Pty Limited from the Corporations Act 2001 requirements for preparation, audit and lodgement of
their financial reports.
As a condition of the class order, Breville Group Limited and Thebe International Pty Limited entered into a Deed of
Cross Guarantee on 4 November 1999. This deed was subsequently assumed by Breville Pty Limited and Breville
Holdings Pty Limited under an assumption deed dated 19 December 2001. The effect of the deed is that Breville
Group Limited has guaranteed to pay any deficiency in the event of winding up of either controlled entity or if they do
not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee. The
controlled entities have also given a similar guarantee in the event that Breville Group Limited is wound up or if it does
not meet its obligation under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee.
The entities comprising the class order “closed group” are Breville Group Limited, Thebe International Pty Limited,
Breville Pty Limited and Breville Holdings Pty Limited. The consolidated statement of financial position and income
statement of the entities that are members of the “closed group” are detailed in notes 25(i) and 25(ii).
(b) Breville Group Performance Share Plan Trust
A trust fund has been established with the appointment of an independent Trustee. The trust will be funded by funds
irretrievably contributed to it by the company and the Trustee will then use these funds to either subscribe for a new
issue of shares in the company or purchase shares on the ASX in order to fulfil its obligations under the Breville Group
Limited Performance Rights Plan.
The trust does not form part of the Breville Group Limited Australian tax consolidation group.
During the financial year ended 30 June 2012, the Trustee acquired 303,000 company shares (2011: 1,282,000). The
average value placed on these acquisitions was $4.26 per share (2011: $3.35).
68
Breville Group Limited annual report 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Note 25. Related party disclosure continued
(i) Consolidated statement of financial position
for class order closed group
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Total current assets
Non-current assets
Other financial assets
Plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Other financial liabilities
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
21,867
47,990
37,095
241
243
15,771
40,860
40,537
-
788
107,436
97,956
32,750
2,762
55,650
8,458
99,620
207,056
39,020
13
5,550
-
4,732
49,315
6,251
7,141
13,392
62,707
32,753
3,762
55,617
9,053
101,185
199,141
36,277
29
5,612
1,848
4,258
48,024
6,372
7,924
14,296
62,320
144,349
136,821
25(ii)
138,760
(5,094)
10,683
144,349
135,642
(2,943)
4,122
136,821
Breville Group Limited annual report 2012
69
Notes to the financial statements
for the year ended 30 June 2012
Note
30 June 2012
$’000
30 June 2011
$’000
Note 25. Related party disclosure continued
(ii) Consolidated income statement for class order
closed group
Profit from ordinary activities before income tax expense
Income tax expense relating to ordinary activities
Net profit
Accumulated profits/(losses) at the beginning of the year
Dividends paid or reinvested
Accumulated profits at the end of the year
25(i)
(a) Ultimate controlling entity
The ultimate controlling entity of the group in Australia is Breville Group Limited.
(b) Wholly owned group transactions
45,453
(13,523)
31,930
4,122
(25,369)
10,683
35,941
(10,770)
25,171
(2,260)
(18,789)
4,122
During the financial period, loans were advanced and repayments received on inter-group accounts with subsidiaries
in the wholly owned group. These transactions were undertaken on commercial terms and conditions.
(c) Key management personnel
Details relating to key management personnel, including remuneration paid, are included in note 29.
30 June 2012
$’000
30 June 2011
$’000
Note 26. Parent entity information
As at and throughout the financial year ended 30 June 2012 the parent
company of the group was Breville Group Limited.
Results of the parent entity
Profit of the parent entity
Total comprehensive income of the parent entity
Financial position of the parent entity
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Equity attributable to the equity holders of the parent
Issued capital
Employee equity benefits reserve
Retained earnings
Total shareholders’ equity
25,756
25,756
68,379
145,037
(5,552)
(5,552)
139,485
19,358
19,358
74,450
144,860
(5,683)
(5,683)
139,177
138,759
135,642
(147)
873
3,050
485
139,485
139,177
70
Breville Group Limited annual report 2012
Note 26. Parent entity information continued
Contingencies
The parent company has guaranteed under the terms of an ASIC class order any deficiency of funds if Thebe
International Pty Limited, Breville Pty Limited and Breville Holdings Pty Limited are wound up. No such deficiency
currently exists.
The parent company has issued a corporate guarantee in favour of the local bank (HSBC) which provides the day to
day US transactional banking facilities.
Note 27. Share-based payment plans
Second senior executive option plan
An option plan exists where executives and other employees of the group (collectively “participants”) are issued with
options over the ordinary shares of Breville Group Limited. The options, issued for nil consideration, are issued in
accordance with performance hurdles approved by the directors of Breville Group Limited. The options are issued
for a term of four years and are exercisable in equal tranches on the first three anniversaries of the date of issue as
follows:
• 1/3 of the options issued, any time during the one year period commencing one year after the issue date;
• 1/3 of the options issued, any time during the one year period commencing two years after the issue date;
• 1/3 of the options issued, any time during the one year period commencing three years after the issue date.
The exercise price of the options is generally based on the volume weighted average price of all the company’s
shares traded on the ASX on the five trading days up to and including the issue date plus a premium of 11%.
The options vest if and when the group’s underlying EPS increases by at least 10% per annum compounded annually
over the term. If the EPS growth condition is not achieved in any financial year, the EPS growth for that financial
year will be carried forward and recalculated at the end of each following financial year until the end of the term of
the options. As a result, options may still vest and become exercisable where the vesting conditions are satisfied
in a subsequent financial year. If this increase is not met within three years from the date of grant, the options are
forfeited. The contractual life of each option granted is four years. There are no cash alternatives. The options cannot
be transferred and are not quoted on the ASX.
At 30 June 2012 there are nil (2011: 100,000) options outstanding under this plan. No further options are intended to
be granted under this plan.
Performance rights plan
Under the performance rights plan participants are issued with performance rights over the ordinary shares of Breville
Group Limited issued in accordance with the Breville Group Limited Performance Rights Plan (PRP).
An offer under the PRP grants a participant the right to a certain number of fully paid ordinary shares in the company.
Upon satisfaction of the performance hurdle, the right will vest and be convertible into shares. The company uses
time-based and financial-based hurdles. Earnings per share (EPS) is the financial-based performance hurdle for the
LTI plan. EPS represents the earnings per share from operations adjusted for non trading items. The use of EPS
ensures an alignment between shareholder return and reward for participants.
In addition to the grant of performance rights awards which are subject to an EPS performance hurdle, performance
rights awards also may be granted in accordance with the PRP as a retention award where the performance
condition is continued employment with the company to vesting date.
If the performance hurdle is not met or if the participant ceases to be employed by the company, any unvested
performance rights will lapse unless otherwise determined by the board. There are no cash alternatives. The
performance rights cannot be transferred and are not quoted on the ASX. Holders of performance rights are not
entitled to notice of, or attend, a meeting of shareholders of the company, or receive any dividends declared by the
company, until the rights have vested and then converted into shares.
Once allocated, disposal of shares is subject to restrictions whereby board approval is required to sell the shares
granted within three years of the shares being allocated to the participant or; if the participant ceases to be employed
by the company, within twelve months of the date employment ceases; or such other date as the board determines.
In the event of a takeover bid where the bidder and its associates become entitled to at least 50% of the voting
shares of the company, any performance rights granted will vest where the board, in its absolute discretion, is
satisfied that pro rata performance is in line with any performance condition applicable to those performance rights.
Any performance rights which do not vest will immediately lapse, unless otherwise determined by the board.
At 30 June 2012 there are 1,030,000 (2011: 2,321,000) performance rights outstanding under this plan.
Breville Group Limited annual report 2012
71
Notes to the financial statements
for the year ended 30 June 2012
Note 27. Share-based payment plans continued
Options and performance rights granted under the second senior executive option plan
and the performance rights plan
The expense recognised in the income statement in relation to share-based payments is disclosed in note 2(f).
The following table illustrates the number and weighted average exercise prices (“WAEP”) of and movements in share
options and performance rights issued during the year:
30 June 2012
30 June 2011
Number of
options /
performance
rights
Note
Number of
options /
performance
rights
WAEP
WAEP
Outstanding at the beginning of the year
2,421,000
0.0463
1,902,000
0.5396
Performance rights granted during
the year
Performance rights and options
exercised during the year
Performance rights forfeited during
the year
Outstanding at the end of the year
(a)
1,030,000
Exercisable at the end of the year
-
Notes
(a) The outstanding balance as at 30 June 2012 is represented by:
589,000
0.0000
1,039,000
0.0000
(1,382,000)
0.0810
(480,000)
1.7533
(598,000)
0.0000
0.0000
-
(40,000)
2,421,000
-
1.8200
0.0463
-
Number of
performance rights Note *
Grant date
Vesting date
Expiry date
WAEP $
Fair value at
grant date ($)
153,000
150,000
138,000
132,000
47,000
175,000
166,000
34,500
34,500
1,030,000
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
22 Dec 10
22 Dec 10
22 Dec 10
22 Dec 10
20 Apr 11
3 Sep 12
3 Sep 12
2 Sep 13
2 Sep 13
2 Sep 13
5 Oct 12
5 Oct 12
4 Oct 13
4 Oct 13
4 Oct 13
12-Oct-11
1-Sep-14
3-Oct-14
12-Oct-11
1-Sep-14
3-Oct-14
23-Dec-11
3-Dec-12
4-Jan-13
23-Dec-11
2-Dec-13
3-Jan-14
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
2.64
2.64
2.54
2.54
3.32
2.41
2.41
2.47
2.33
(i) These performance rights vest if the group’s underlying EPS for the year ending 30 June 2012 is at least 26.50 cents per share.
(ii) These performance rights vest if the group’s underlying EPS for the year ending 30 June 2012 is at least 29.00 cents per share.
(iii) These performance rights vest if the group’s underlying EPS for the year ending 30 June 2013 is at least 30.00 cents per share.
(iv) These performance rights vest if the group’s underlying EPS for the year ending 30 June 2013 is at least 33.00 cents per share.
(v) These performance rights vest if the group’s underlying EPS for the year ending 30 June 2013 is at least 37.00 cents per share.
(vi) These performance rights vest if the group’s underlying EPS for the year ending 30 June 2014 is at least 33.50 cents per share.
(vii) These performance rights vest if the group’s underlying EPS for the year ending 30 June 2014 is at least 36.50 cents per share.
(viii) Performance condition is that the participants must be employed by the company on 3 December 2012.
(ix) Performance condition is that the participants must be employed by the company on 2 December 2013.
*
In addition to the EPS performance hurdle, the participant must be employed by the company on the vesting date.
72
Breville Group Limited annual report 2012
Note 27. Share-based payment plans continued
The average remaining contractual life for the performance rights outstanding at 30 June 2012 is between 1 and
3 years (2011: 1 and 3 years).
The exercise price for performance rights outstanding at the end of the year was $0.00. There were no options
outstanding. (2011: exercise price for performance rights and options outstanding range of $0.00 to $1.12).
The weighted average fair value of performance rights granted during the year was $2.41 (2011: $2.66).
The fair value of the equity-settled share options and performance rights granted under the second senior executive
option plan and the performance rights plan respectively, is estimated as at the date of grant using either a binomial
or Black-Scholes option-pricing model, taking into account the terms and conditions upon which the options and
performance rights were granted.
The following table lists the inputs to the model used for the grants during the year ended 30 June 2012 and
30 June 2011:
30 June 2012
30 June 2011
(Black-
Scholes)
(Black-
Scholes)
(Black-
Scholes)
(Black-
Scholes)
(Black-
Scholes)
(Black-
Scholes)
12 Oct 11
23 Dec 11
23 Dec 11
22 Dec 10
22 Dec 10
20 Apr 11
30 Jun 14
30 Jun 13
30 Jun 14
30 Jun 12
30 Jun 13
30 Jun 13
5.00
35.00
35.00
3.68
6.00
35.00
35.00
3.54
6.00
35.00
35.00
3.35
4.00
35.00
35.00
5.02
4.00
35.00
35.00
5.22
4.00
35.00
35.00
4.95
2.9 years
1.0 year
2.0 years
1.8 years
2.8 years
2.4 years
0.00
2.77
0.00
2.75
0.00
2.75
0.00
2.82
0.00
2.82
0.00
3.64
Grant date
Year ending
Dividend yield (%)
Expected volatility (%)
Historical volatility (%)
Risk-free interest rate (%)
Expected life of
performance right (years)
Performance right exercise
price ($)
Weighted average share
price at grant date ($)
The expected life of the performance rights is based on historical data and is not necessarily indicative of exercise
patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of
future trends, which may also not necessarily be the actual outcome. No other features of performance rights granted
were incorporated into the measurement of fair value.
Note 28. Employee benefits
The aggregate employee benefit liability is comprised of:
Trade and other payables (current)
Provisions – long service (current)
Provisions – long service (non-current)
Total employee benefits
Note
30 June 2012
$’000
30 June 2011
$’000
15
17
17
3,750
1,597
880
6,227
3,409
1,374
972
5,755
Breville Group Limited annual report 2012
73
Notes to the financial statements
for the year ended 30 June 2012
Note 29. Key management personnel
(a) Compensation of key management personnel
Compensation by category: key management personnel
Short-term
Post employment
Other long-term
Share-based payment
Total
Note
30 June 2012
$’000
30 June 2011
$’000
(i)
2,739
152
30
459
3,380
3,512
224
38
733
4,507
(i) This includes defined contribution plans expense of $152,000 (2011: $224,000).
(b) Performance rights and options holdings of key management personnel
30 June 2012
Executives
S. Audsley (d)
S. Brady
M. Cohen
C. Dais (e)
J. Lord
Total
30 June 2011
Executives
S. Audsley
S. Brady
M. Cohen
J. Lord
M. Melis
H. Silver (f)
Total
Balance
30 June 2011
Granted as
remuneration (a)
Vested and
exercised
Other (b)
Balance
30 June 2012
506,000
245,000
391,000
-
233,000
1,375,000
81,000
35,000
56,000
31,000
99,000
(274,000)
(163,000)
(279,000)
-
(94,000)
(313,000)
-
-
-
-
302,000
(810,000)
(313,000)
-
117,000
168,000
31,000
238,000
554,000
Balance
30 June 2010
Granted as
remuneration (c)
Vested and
exercised
Other (b)
Balance
30 June 2011
274,000
163,000
579,000
94,000
160,000
147,000
1,417,000
232,000
82,000
112,000
139,000
81,000
75,000
721,000
-
-
(300,000)
-
-
-
(300,000)
-
-
-
-
-
(222,000)
(222,000)
506,000
245,000
391,000
233,000
241,000
-
1,616,000
(a) Save for a tranche of performance rights granted to J. Lord (52,000) and M. Cohen (17,000) where the performance hurdle is
time-based, all performance awards granted during the year are subject to EPS performance hurdles.
(b) Includes lapses and forfeitures.
(c) Performance rights granted during the year are subject to EPS performance hurdles and remaining in employment until date of
vesting.
(d) S. Audsley did not meet the definition of key management personnel after 9 November 2011.
(e) C. Dais did not meet the definition of key management personnel for the 2011 financial year but became key management
personnel on 28 November 2011.
(f) H. Silver ceased to meet the definition of key management personnel during the year.
Refer note 27 and remuneration report (contained within the directors’ report designated as audited) for details on the
above options and performance rights.
74
Breville Group Limited annual report 2012
Note 29. Key management personnel continued
(c) Shareholdings of key management personnel
Ordinary shares held* in Breville Group Limited (number)
30 June 2012
Directors
J. Schmoll
S. Fisher
D. Howell
S. Klein
S. Weiss
Executives
S. Audsley (b)
S. Brady
M. Cohen
J. Lord
Total
Balance at
1 July 2011
Granted as
remuneration
On exercise
of options/
performance
rights
Net change
other (a)
Balance at
30 June 2012
82,294
50,288
85,000
117,189
80,775
102,133
137,645
30,000
40,000
725,324
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
274,000
163,000
279,000
94,000
810,000
17,706
-
15,000
-
41,000
(376,133)
-
(30,000)
-
100,000
50,288
100,000
117,189
121,775
-
300,645
279,000
134,000
(332,427)
1,202,897
Ordinary shares held* in Breville Group Limited (number)
30 June 2011
Balance at
1 July 2010
Granted as
remuneration
On exercise of
options
Net change other
(a)
Balance at
30 June 2011
Directors
J. Schmoll
S. Fisher
D. Howell
S. Klein
S. Weiss
Executives
S. Audsley
S. Brady
M. Cohen
J. Lord
M. Melis
Total
82,294
50,288
85,000
117,189
80,775
102,133
137,645
-
40,000
20,000
715,324
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
(270,000)
-
-
-
-
82,294
50,288
85,000
117,189
80,775
102,133
137,645
30,000
40,000
20,000
300,000
(270,000)
745,324
* Held directly, indirectly or beneficially.
(a) All equity transactions with key management personnel other than those arising from the exercise of remuneration options have
been entered into under terms and conditions no more favourable than those the group would have adopted if dealing at arm’s
length.
(b) S. Audsley did not meet the definition of key management personnel after 9 November 2011.
Breville Group Limited annual report 2012
75
Notes to the financial statements
for the year ended 30 June 2012
Note 29. Key management personnel continued
(d) Other transactions and balances with key management personnel and their related
parties
Services
Mr Klein was a principal of the legal firm SBA Law from 1 August 2011. Up until 30 June 2011, Mr Klein was partner
of a legal firm Arnold Bloch Leibler. His directors fees from 1 August 2011 were paid to SBA Law and prior to that, to
Arnold Bloch Leibler. These fees are subject to GST.
Fees totalling $184,138 (inclusive of GST), including litigation related legal fees and Mr Klein’s directors fees were
invoiced by SBA Law during the current year and by Arnold Bloch Leibler during the prior year (2011: $353,899
inclusive of GST). These fees were all on arms length terms. In addition, other recharges from non-related third-
parties, such as Counsel’s fees and other costs, were billed during the year totalling $22,170 (2011: $58,510).
Total amounts recognised at the reporting date in relation to other transactions and balances with key management
personnel:
Liabilities
Current liabilities
Total liabilities
Revenues & expenses
Employee expenses (directors fees)
Other expenses
- Litigation related
- Non-litigation related
Total expenses
The amounts shown above are GST exclusive.
(i) Amounts exclude recharges of non-related third-party costs.
Note
30 June 2012
$’000
30 June 2011
$’000
21
21
97
-
71
168
9
9
104
29
189
322
(i)
76
Breville Group Limited annual report 2012
Note 30. Auditor’s remuneration
Amounts received or due and receivable from the entity
and any other entity in the consolidated entity:
Ernst & Young Australia – primary auditors
- an audit or review of the financial report
Ernst & Young Australia’s affiliates – primary auditors
30 June 2012
$’000
30 June 2011
$’000
319,000
339,000
- an audit or review of the financial report
205,000
120,000
RSM Richter LLP – other auditors (Canada only)
- an audit or review of the financial report
- other services
- non-audit related
-
-
109,000
6,000
Total auditor’s remuneration
524,000
574,000
Note 31. Significant events after year end
No matters or circumstances have arisen since the end of the year which significantly affected or may affect the
operations of the consolidated entity.
The financial report of Breville Group Limited for the year ended 30 June 2012 was authorised for issue in accordance
with a resolution of the directors on 23 August 2012.
Breville Group Limited annual report 2012
77
Directors’ declaration
In accordance with a resolution of the directors of Breville Group Limited, I state that:
1. In the opinion of the directors:
(a) the financial report and the additional disclosures included in the directors’ report designated as audited, of
the consolidated entity are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its
performance for the year ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the directors in
accordance with sections 295A of the Corporations Act 2001 for the year ended 30 June 2012.
3. In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the
members of the closed group identified in note 25(a) will be able to meet any obligations or liabilities to which they
are or may become subject, by virtue of the Deed of Cross Guarantee.
4. The financial report complies with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
On behalf of the board
John Schmoll
Non-executive chairman
Sydney
23 August 2012
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Breville Group Limited annual report 2012
Independent audit report
Independent auditor’s report to the members of Breville Group Limited
Report on the financial report
We have audited the accompanying financial report of Breville Group Limited (the “Company”), which
comprises the consolidated statement of financial position as at 30 June 2012, the consolidated income
statement, the consolidated statement of comprehensive income, the consolidated statement of changes
in equity and the consolidated cash flow statement for the year then ended, notes comprising a summary
of significant accounting policies and other explanatory information, and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from time to
time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal controls as the directors determine are necessary to enable the preparation of the financial report
that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in
accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor’s judgment, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation
of the financial report in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy
of which is included in the directors’ report.
Liability limited by a scheme approved
under Professional Standards Legislation
Breville Group Limited annual report 2012
79
Independent audit report
continued
Opinion
In our opinion:
a. the financial report of Breville Group Limited is in accordance with the Corporations Act 2001,
including:
i giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its
performance for the year ended on that date; and
ii
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1.
Report on the remuneration report
We have audited the Remuneration Report included in pages 14 to 22 of the directors’ report for the year
ended 30 June 2012. The directors of the company are responsible for the preparation and presentation
of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Breville Group Limited for the year ended 30 June 2012,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Colleen Hosking
Partner
Sydney
23 August 2012
80
Breville Group Limited annual report 2012
Auditor’s independence declaration
Auditor’s Independence Declaration to the Directors of Breville Group Limited
In relation to our audit of the financial report of Breville Group Limited for the financial year ended
30 June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
Colleen Hosking
Partner
23 August 2012
Liability limited by a scheme approved
under Professional Standards Legislation
Breville Group Limited annual report 2012
81
Shareholder information
Substantial shareholders as at 4 September 2012
The following information is extracted from the company’s register of substantial shareholder notices:
Name
S. Lew Custodians Pty Limited
Perpetual Limited and subsidiaries
National Australia Bank Limited and its associated entities
Commonwealth Bank of Australia and its subsidiaries
Number of
ordinary shares
% of issued
ordinary shares
39,297,151
9,663,775
8,546,273
7,964,737
30.21%
7.43%
6.57%
6.12%
Distribution of shareholdings as at 4 September 2012
Size of holding
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total shareholders
Number of ordinary shareholders with less than a marketable parcel
Voting rights
All ordinary shares issued by Breville Group Limited carry one vote per share without restriction.
Ordinary
shareholders
577
1,045
370
310
50
2,352
77
82
Breville Group Limited annual report 2012
Twenty largest shareholders as at 4 September 2012
Name
Premier Investments Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
RBC Investor Services Australia Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Dancetown Pty Ltd
Citicorp Nominees Pty Limited
JP Morgan Nominees Australia Limited
Lew Family Investments Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
Lew Family Investments Ltd
Leonar Equities Ltd
Josseck Pty Limited
Bond Street Custodians Limited
S L Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
Nofusa Pty Limited
BNP Paribas Noms Pty Ltd
Total
Shares
33,452,910
16,598,014
% IC
25.71%
12.76%
9,214,668
8,809,070
8,414,459
7,907,411
7,515,211
3,000,000
2,163,028
2,060,205
1,891,461
1,694,630
1,535,718
1,248,681
775,567
735,000
711,667
655,311
650,000
594,500
7.08%
6.77%
6.47%
6.08%
5.78%
2.31%
1.66%
1.58%
1.45%
1.30%
1.18%
0.96%
0.60%
0.56%
0.55%
0.50%
0.50%
0.46%
109,627,511
84.27%
Breville Group Limited annual report 2012
83
Company information
ABN
Breville Group Limited ABN 90 086 933 431
Share register
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Enquiries within Australia: (02) 8280 7111
Enquiries outside Australia: (+61 2) 8280 7111
Website: linkmarketservices.com.au
Auditors
Ernst & Young
680 George Street
Sydney NSW 2000
Bankers
Australia and New Zealand Banking Group Limited
20 Martin Place
Sydney NSW 2000
Directors
John Schmoll
Non-executive chairman
Steven Fisher
Non-executive director
Dean Howell
Non-executive director
Steven Klein
Non-executive director
Samuel Weiss
Non-executive director
Company secretary
Michelle Waters
Registered office and principal place of
business
Building 2
Port Air Industrial Estate
1A Hale Street
Botany NSW 2019
Telephone (+61 2) 9384 8100
Company websites
brevillegroup.com
breville.com
kambrook.com.au
84
Breville Group Limited annual report 2012
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