Annual report 2019
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Breville Group Limited
Annual report 2019
Contents:
Chairman’s review
CEO’s review
Strategy and brands
Financial report
Shareholder information
Company information
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Annual general meeting:
Wednesday 13 November 2019 at 10am
Ground Floor, Suite 2, 170-180 Bourke Rd,
Alexandria NSW 2015.
(this page and outside covers)
the Smart Oven® Pizzaiolo
Chairman’s review
“Another strong year of growth, geographic expansion and
execution of our acceleration program.”
The Board increased the full year dividend to 37.0
cents from 33.0 cents in the prior year, in line with
the ongoing commitment to providing strong
returns to shareholders.
On behalf of the Board, I would like to take this
opportunity to thank Jim Clayton and his team of
talented, motivated and passionate team members
around the world for their continued hard work
and enthusiasm.
Finally, I would like to thank my Board colleagues
and our shareholders, customers and suppliers
for their continued support. I encourage all
shareholders to attend our annual general
meeting in November.
Steven Fisher
Non-executive chairman
The 2019 financial year was a significant year for
the Breville Group with continued double-digit
sales and profit growth, European expansion
and ongoing implementation of the Group’s
acceleration program.
The Group delivered a 17.5% increase in revenue
with the core Global Product segment growing
by 17.2%, or 12.0% in constant currency terms, to
$612.0m. The Distribution segment revenue grew
18.8% to $148.0m.
Group EBIT of $97.3m, represented a 12.0% increase
on the prior year. Group EBIT margins of 12.8% were
slightly lower compared to 13.4% in the prior year
due to the strong USD. Net profit after tax increased
by 15.2% to $67.4m.
Net cash flow generated from operating activities
of $30.3m was lower than the $88.7m in the prior
year primarily due to an investment in inventory
to support growth. The group tactically increased
stock in the USA by bringing forward seasonal
stock, in the UK as an insurance against potential
Brexit disruption and in Europe to support
accelerated expansion. Net cash at 30 June 2019
decreased to $9.8m.
Under the leadership of CEO Jim Clayton, we also
made significant progress in our business model
transformation, increasing our marketing and
R&D spend to 11.0% of revenue and expanding into
Benelux and Switzerland whilst still accelerating
earnings growth.
1
Breville Group Limited annual report 2019 the Bambino™ Plus
CEO’s review
“The Group delivered another strong year in FY19 with double
digit EBIT growth, robust revenue growth, increased investment in
Marketing/R&D, and successful European expansion.”
Financial summary
REVENUE
EBIT
$ Millions except where indicated
Global Product segment
Constant currency growth
Distribution segment
TOTAL
FY19
612.0
148.0
760.0
FY18 % Change
522.2
124.6
646.8
17.2%
12.0%
18.8%
17.5%
FY19
78.3
18.5
97.3
FY18 % Change
73.3
7.5%
13.6
86.9
36.0%
12.0%
Minor differences may arise due to rounding
In FY19 Breville Group delivered robust revenue
growth of 17.5% driven by successful European
expansion and a strong year of growth in the USA
as well as translation gains from a strong US dollar.
Global Product segment revenue increased by
17.2%, or 12.0% in constant currency, with North
America growing by 12.8%, ANZ by 7.0% and Europe
by 35.1% with the first full year of German sales
and expansion into Benelux and Switzerland. Our
Rest of World (ROW) segment, which is lumpy in
nature, saw a decline caused by reduced purchases
from our Russian partner in the face of a weaker
Ruble. Excluding Russian export sales, our Global
Segment revenue grew by 14.2% on a constant
currency basis.
Our growth was balanced across product
categories, with Beverage, Cooking, and Food
Preparation all posting positive growth in FY19,
benefiting from new product launches and
geographic expansion.
Distribution segment revenues of $148.0m were
18.8% higher than the 2018 financial year, driven
by strong Nespresso® growth in North America
and improved performances for Breville Local and
Kambrook® in ANZ.
Group EBIT for the year finished at $97.3m, with
EBIT growth accelerating to 12.0% from 10% in the
prior year. The Distribution segment fulfilled its
strategic role and grew EBIT by $4.9m, which was
reinvested in the Global segment marketing and
NPD. The overall Group EBIT margin reduced to
12.9% from 13.4% primarily because of the strong
US dollar. In constant currency our EBIT margin
was unchanged.
The 2019 financial year saw continued progress
on the Group’s acceleration journey, with notable
achievements including launching the Sage®
brand direct into Switzerland and Benelux;
the development of a product information
management (PIM) system to centralise all product
related data; a middleware platform improving
flexibility and scalability; and a point of sale
(POS) module giving access to sell-out data for
better decision making. The Group also acquired
ChefSteps in early FY20 to further category-based
innovation in the sous vide cooking space.
On a personal note, I am encouraged by the
progress we have made during the year, and I
thank the Breville | Sage team for their spirit
and collaborative efforts in the execution of the
transformation. I also would like to thank the Board
for their ongoing support and counsel.
Jim Clayton
Chief executive officer
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Breville Group Limited annual report 2019 the Barista Pro ™
Strategy and brands
Breville Group’s primary strategy is the design
and development of the world’s best kitchen
appliances together with expanding distribution
and dynamic marketing on a global scale.
The Breville and Sage brands are at the core of this
strategy, representing the majority of the Group’s
revenues and marketing activities. There are,
however a number of additional company owned
brands and brand partners in different geographies
that assist in the delivery of the business strategy.
In line with its global strategy, the Group’s is
focused on the design, development and sale
of Breville branded and Sage branded products
supplied in currently 69 countries to the premium
kitchen segment of the market (‘Global Product’).
The Distribution segment sells products that are
distributed pursuant to a license or distribution
agreement, or they are sourced directly from
manufacturers. Products in this business unit may
be sold under a brand owned by Breville® (Breville®,
Kambrook®, Aquaport®, Cli-mate®) or they may be
distributed under a third-party brand (Nespresso®).
North America
In North America, the Group distributes its range
of internally designed and developed kitchen
products under the Breville brand through
premium channels and its own direct-to-consumer
e-commerce platform. From the second half of the
2018 financial year, the Breville brand included
a range of Breville co-branded Nespresso coffee
machines as one of Nespresso’s machine partners
in North America.
North American revenues also include a USA based
culinary division - PolyScience, one of the world’s
market leaders in premier sous vide cooking in
both the commercial and professional markets.
Australia and New Zealand
In Australia and New Zealand, the Group primarily
trades under its company owned brands, Breville®,
Kambrook®, Aquaport® and Cli-mate®).
The Kambrook brand extends to categories
beyond the kitchen; offering not just a full range
of kitchen appliances, but also irons, vacuums,
heating and cooling products, all at an affordable
price point without any compromise on quality and
performance.
Europe
In the United Kingdom and Europe, the Group
markets and distributes its premium designed
and developed global kitchen products under the
company owned brand, Sage®. It is also a supplier
for Sage® branded goods to certain distributors
located throughout Europe.
In Europe the Breville brand is not owned or
operated by the Breville Group.
Rest of the World
In the Asia Pacific region and the Middle East,
the Group markets its premium designed and
developed kitchen products under the Breville
brand as well as selected products under the
Kambrook brand in parts of Asia and Africa.
Distribution in these regions is managed using
local third party distributors supplied via the
Group’s Hong Kong office.
A History of Innovation
On Melbourne Cup day in 1932, two Australian
entrepreneurs, Bill O’Brien and Harry Norville,
combined their surnames together to form
the name ‘Breville’ and founded a company
manufacturing radios out of Sydney.
During the 1960’s, Bill’s son John focused the
organisation on solving common kitchen problems
and founded the Breville small appliance research
and development centre, which led to the invention
of the now iconic Breville toasted sandwich maker.
The toasted sandwich maker kick-started a long
list of award-winning innovative Breville products
developed in Australia and distributed throughout
the world. From the original Kitchen Wizz™ food
processor and High-Wall Wok, to the launch of
the world’s first wide feed chute Juicer, Breville
has become synonymous with ground-breaking
innovation in the kitchen.
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Breville Group Limited annual report 2019 the Super Q ™
Strategy and brands continued
Growth of the Brand
In 2000, Breville embarked on a project to expand
its design and innovation capabilities, building a
much larger internal team that has today become
Australia’s leading product development team. This
investment culminated in the 2003 launch of its
premium range of products into the United States
and other international markets.
In 2009, Breville combined its design and
development capabilities with a more focused
marketing, recruitment and cultural initiative
entitled “Food Thinking”. As a part of this strategy,
internal teams work closely with professional
chefs and consumers to develop insight and an
integrated approach to product development
• Deeper understanding of food, friction points,
and the challenges consumers face;
• Innovation to solve these challenges,
protectable as IP; marketed as “Simple
Moments of Brilliance”
• Superior quality and engaging design
Breville’s ethos of ‘Food Thinking’ and creativity
remains as relevant today as it did then and
continues to gain momentum and win over a new
generation of consumers, driving accelerated
innovation and increased product development.
Furthermore, the Group’s appreciation for food
science and culinary trends has led to the fostering
of relationships with high profile food thinkers,
including world renowned baristas and chefs,
some of whom have directly helped the Group in a
product development capacity.
The Consumer at the Core of the
Business
More recently, the Group has increased focus
on driving consumer understanding of, and
engagement with, the Group’s product and
proposition. The Group believes that consumers
should be able to produce and enjoy a perfect result
every time, and that they should never have to
settle or compromise just because they are making
it at home. Through “Food Thinking”, the Group
provides consumers with “Mastery in a Box” -
innovative products which simplify and make the
process of creation more of a pleasure, and the end
result more perfect, each and every time.
At the heart of this proposition lies a passionately-
held belief that consumers should feel empowered
to share these results with those who are most
important to them; their family and friends. After
all, the opportunities to make everyday moments an
occasion exist in the tens of thousands, and Breville
believes that use of its products will help consumers
“Master Every Moment” and enjoy life to the fullest
extent.
Sage®
In the United Kingdom and Europe, the Group
distributes its premium designed and developed
products under the Group owned brand, Sage®. The
brand identity and positioning of Sage® is aligned
closely to the global Breville brand identity, ”Food
Thinking” approach, and “Master Every Moment”
empowerment strategy.
The Sage® distribution strategy is also very
similar to that of Breville in North America, with
distribution limited primarily to premium retailers
and its own direct to consumer e-commerce
platform. The Group continues to invest in
engaging marketing activity for the Sage® brand to
drive targeted expansion and accelerate the brand’s
presence in the premium channel across Europe
and the United Kingdom.
Additionally, since 2017, distribution partners
have decided to take advantage of the Group’s
investment in the Sage® brand and have set
aside their own brand names and adopted the
Sage® brand in their territories. Countries such
as Denmark, Sweden, Norway, Finland, Estonia,
Lithuania, Latvia, Czech Republic and Slovakia,
amongst others, were the first to transition.
Kambrook®
Kambrook® has become known for quality,
durable products at an affordable price point.
The ever-expanding product range encompasses
appliances for the kitchen, living room, laundry
and bedroom. Kambrook® continues to highlight
the durability of its appliances and the rigorous
testing process that each new product undergoes.
Products are subjected to extensive laboratory and
quality testing before receiving the Kambrook®
seal of approval. To help emphasise that aspect of
the brand, a new logo incorporating the “infinity
symbol” in place of the two letter “o”s in the
Kambrook® name was introduced during FY17 and
continues to find some success and recognition in
the marketplace as a mark for quality assurance.
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Breville Group Limited annual report 2019 the Juice Fountain® Cold Plus
Strategy and brands continued
Strongly committed to its core values of
creativity, simplicity, insight and excellence in
all departments, Breville recruits, trains, assesses
and rewards employees on this basis. With a
team anchored around these common values,
the business is able to foster a workplace that
stimulates idea generation, a passion for learning,
and the continuous search for new and better
solutions.
During the 2019 financial year, the Group continued
to grow its highly talented and experienced team,
bringing on board additional experience and
expertise, particularly in the areas of marketing,
product design, research and development, IT and
logistics.
Process and mindset change for the
future
With an aligned calendar setting process, within
both Breville itself and its external manufacturing
and retail channel partners, the Group seeks to
fully leverage an increasing number of new product
introductions to continue to drive its business and
iconic brands forward.
By ensuring that the ‘go-to-market’ process is
aligned functionally, regionally and with its external
partners, the Group launches product, with impact,
at a single moment in time, across a number of
markets under the global distribution footprint,
in order to ensure that the Group will reap the full
potential of its innovation and design excellence.
The Group has established this process in the
2019 financial year, and has begun to see benefit,
as shown through the successful launch of the
Pizzaiolo™ concept during the fiscal year.
PolyScience®
The PolyScience® brand (culinary division) is
distributed around the world under one the
following two names as locally relevant;
1) Breville | Polyscience and 2) Sage | Polyscience.
The PolyScience culinary division includes the
world’s premier immersion cooking circulators
(for sous vide cooking), as well as various specialty
cooking accessories such as the Smoking Gun™
(for rapid food smoking), the Control Freak™ (for
precision cooktop applications) vacuum sealers,
cold plates and vacuum evaporations systems.
Innovation and product
development
The core driving the Group’s growth continues
to be investment in product development and a
focus on design and innovation. Breville has further
deepened 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 actively protects this customer value
through increased investment in intellectual
property protection and via the development of a
portfolio of patented innovative products for future
sustainable growth.
People – creative food thinkers
Breville enjoys the benefits of highly experienced
talent across all departments and geographies.
Integrated throughout its food thinking culture,
the passion, creativity and insight of staff has
helped to consistently bring world class innovative
products to consumers around the world. The team
continues to be awarded both domestically and
internationally, with multiple design awards, and
recognition through mainstream media.
Breville Group invests in the training and education
of its team; building strong, collaborative links with
world experts in food thinking and technology. The
Group is also involved in several consumer facing
and chef liaison activities.
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Breville Group Limited annual report 2019 Accolades
2019 BTM700 the Tea Maker Compact
2019 BBL920 the Super Q
2018 BES880 the Barista Touch
2017 BES990 the Oracle Touch
2017 BFS800 the Steam Zone
2016 CMC800 Control Freak Cooker
Red Dot Design Award - Best of the
Best
2017 BNE800 Creatista Plus
Red Dot Design Award
2019 BES500 the Bambino Plus
2016 BEM825 the Bakery Boss
2019 BES878 the Barista Pro
IDSA Design Award – USA
IDEA International Design
Excellence Awards
Silver Award
2019 BES878 the Barista Pro
2015 BMO700 Quick Touch
2019 BTM700 the Tea Maker Compact
2017 BES990 the Oracle Touch
2018 BFP820 the Kitchen Wizz Peel
2013 BES900 Dual Boiler Espresso
Microwave
2015 BCP600 Citrus Press
2015 BBL405 the Kinetix Twist
2019 BBL920 the Super Q
2019 BPZ800 the Smart Oven
Pizzaiolo
2014 BES980 the Oracle Espresso
2018 BES880 the Barista Touch
2013 BSG1974 the Original ‘74
2018 BDC450 the Precision Brewer
2012 BDC600 You-Brew Drip Coffee
Thermal
Machine
2018 BJE830 the Juice Fountain Cold
2011
BFP800 Food Processor
2010 BGR820 Smart Grill
BEST IN CATEGORY - Domestic
Appliances
2016 BSM600 the Smoking Gun
XL
and Dice
2017 BES990 the Oracle Touch
2017 BSG600 the Perfect Press
2017 BFS800 the Steam Zone
2017 BSM600 the Smoking Gun
2017 BOV900 the Smart Oven Air
2017 BTA735 the Toast Select Luxe
2017 BKE735 the Soft Top Luxe
2019 BPZ800 the Smart Oven
2016 CMC800 Control Freak Cooker
Pizzaiolo
2019 BES878 the Barista Pro
2019 BES500 the Bambino Plus
2016 BEM825 the Bakery Boss
2016 Thermal Pro Cookware
2016 BPB620 Boss To Go Personal
2018 BDC450 the Precision Brewer
Blender
Thermal
2015 BMO700 Quick Touch
2018 BJE830 the Juice Fountain Cold
Microwave
XL
2018 BNE500 Creatista Uno
2017 BOV900 the Smart Oven Air
2017 BTA735 the Toast Select Luxe
2017 BNE800 Creatista Plus
2015 BCP600 Citrus Press
2014 BES980 the Oracle Espresso
2014 BMO734 the Quick Touch
2014 BTA720/730 the Lift and Look
Pro
2016 BPB620 Boss To Go Personal
2014 BWM640 the Smart Waffle
Blender
2014 BBL910 the Boss Superblender
2013 BRC600 the Multi Chef
2013 BEF100 the Thermal Grill Pro
2013 BRC600 the Multi Chef
2012 BDC600XL You-Brew Drip
2013 BEF100 the Thermal Pro Grill
Coffee Machine
2012 BCI600 Smart Scoop Ice Cream
2012 BFP800 Kitchen Wizz Pro
Maker
2012 BES900 Dual Boiler Espresso
Machine
2011
2011
BCG800 Smart Grinder
BTM800 Tea Maker
2010 BEM800 Wizz Planetary Mixer
2010 BOV800 Smart Oven
2010 BES820 Variable Temperature
Kettle
2010 BES860 Fresca Espresso Machine
Honourable Mention
2013 BBL605 Kinetix Control Blender
2011
BKE820 Kettle Honourable
Mention
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Bronze Award
2019 BTM700 the Tea Maker Compact
2019 BOV860the Smart Oven Air Fryer
2017 BES990 the Oracle Touch
2017 BNE800 Creatista Plus
2017 BSM600 the Smoking Gun
2014 BES980 the Oracle Espresso
Finalists
2019 BPZ800 the Smart Oven Pizzaiolo
2019 BES500 the Bambino Plus
2018 BES880 the Barista Touch
2018 BDC450 the Precision Brewer
Thermal
2018 BJE830 the Juice Fountain Cold XL
2018 BFP820 the Kitchen Wizz Peel and
Dice
2017 BOV900 the Smart Oven Air
2014 BWM640 the Smart Waffle
2014 BTA720/730 the Lift and Look Pro
2013 BFP800 Kitchen Wizz Food
Processor
2013 BBL 605 Kinetix Control Blender
2013 BDC600 You-Brew Drip Coffee
Machine
iF Design Award
2016 Thermal Pro Cookware
2016 BPB620 Boss To Go Personal
Blender
Gold iF Design Selection
2016 Thermal Pro Cookware
2015 BES980 the Oracle Espresso
2015 BWM640 the Smart Waffle
Breville Group Limited annual report 2019 Breville Group Limited Financial report 2019
Contents:
Directors’ report
Corporate governance statement
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated cash flow statement
Notes to the financial statements
Directors’ declaration
Independent auditor’s report
Auditor’s independence declaration
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48
49
50
51
52
53
92
93
99
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Breville Group Limited annual report 2019 Directors’ report
The Board of Directors of Breville Group Limited
(company) has pleasure in submitting its report in
respect of the Group for the year ended 30 June 2019.
During the last three years he has not served as a
director of any other listed company.
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. Unless indicated otherwise, directors were in
office for this entire period.
Steven Fisher
Non-executive chairperson
B.ACC, CA(SA)
Mr Fisher has more than 30 years’ experience in general
management positions in the wholesale consumer
goods industry and was the former chief executive of
the Voyager Group. Prior to entering into the consumer
goods industry Mr Fisher was a practising chartered
accountant having qualified in South Africa with a
Bachelor of Accounting degree.
During the last three years he has served as a director
of the following other listed company:
• Reject Shop Limited #
# denotes current directorship
Timothy Antonie
Non-executive director
BEcon
Mr Antonie has more than 20 years’ experience in
investment banking and formerly held positions of
Managing Director from 2004 to 2008 and Senior
Advisor in 2009 at UBS Investment Banking, with
particular focus on large scale mergers and acquisitions
and capital raisings in the Australian retail, consumer,
media and entertainment sectors. Mr Antonie is
currently a principal of Stratford Advisory Group. He
holds a Bachelor of Economics degree from Monash
University and qualified as a Chartered Accountant with
Price Waterhouse.
During the last three years he has served as a
non-executive director of the following other listed
companies:
• Premier Investments Limited #
• Village Roadshow Limited #
• Netwealth Group Limited #
# denotes current directorship
Peter Cowan – appointed 1st September 2018
Non-executive director
Mr Cowan has more than 30 years’ experience in
leading and building globally respected organisations
and brands in the FMCG sector. He served as both
Chairperson of the Board and CEO in key developing
markets for Unilever and has held Managing Director
roles at Lion Nathan and New Zealand Dairy Board
(Fonterra). Mr Cowan also held Regional Vice President
positions at Alberto Culver and Johnson & Johnson.
Sally Herman
Non-executive director
BA, GAICD
Ms Herman is an experienced non-executive director
sitting on both public and private company Boards
in financial services, retailing, property and consumer
goods. She had a long career in financial services in
both Australia and the United States, including 16 years
with the Westpac Group, running business units in most
operating divisions of the Group. Ms Herman is based
in Sydney and is actively involved in the community, with
a particular interest in education, the arts and social
justice. She is a member of Chief Executive Women.
During the last three years she has served as a
non-executive director of the following other listed
companies:
• Suncorp Group Limited #
• Premier Investments Limited #
• Evans Dixon Limited #
•
Investec Property Limited (the responsible entity of
listed trust Investec Australia Property Fund) #
# denotes current directorship
Dean Howell
Non-executive director
FCA, CTA
Mr Howell has had an extensive career in accounting,
spanning over 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 also a director of Peter
MacCallum Cancer Foundation Ltd.
During the last three years he has not served as a
director of any other listed company.
Lawrence Myers
Non-executive director
B.Acct, CA, CTA
Mr Myers has over 20 years’ experience as a practising
Chartered Accountant. He is the Managing Director
and founder of MBP Advisory Pty Limited, a high end
Sydney firm of Chartered Accountants. Mr Myers sits on
numerous private company and not-for-profit Boards,
including the Foundation Board of the Art Gallery of
New South Wales and acts as a trusted advisor and
mentor on business and financial matters. He is a
registered auditor and his specialist areas of practice
include business and corporate advisory as well as
mergers and acquisitions. Mr Myers is Chairperson
of the audit and risk committee (A&RC) and is the
company’s lead independent director.
During the last three years he has served as a director
of the following other listed company:
• VGI Partners Global Investments Limited #
# denotes current directorship
14
Breville Group Limited annual report 2019 Board of directors continued
Operating and financial review
Kate Wright
Non-executive director
BA
Ms Wright has more than 30 years’ experience in the
consumer industry across Australia, the South Pacific
and the USA. Her career has spanned manufacturing
operations, sales, marketing, human resources and
general management within the consumer sector.
Ms Wright has held the positions of Managing Director,
Australia and South Pacific region at Philip Morris
from 2001 to 2004 and Head of Korn Ferry Australia’s
Consumer and Retail Practice from 2005 to 2016.
Ms Wright holds a Bachelor of Arts degree from the
University of New South Wales. Ms Wright is chair of the
people and performance committee (P&PC).
During the last three years she has not served as a
director of any other listed company.
Company secretaries
The names and details of the company secretaries in
office during the year and until the date of this report
are as below. Unless indicated otherwise, the company
secretaries were in office for this entire period.
Sasha Kitto
LLB, FCA
Ms Kitto is a chartered accountant and has over 15
years’ experience as a practising chartered accountant
and in senior finance roles.
Craig Robinson – appointed 26th June 2019
BA, ACMA
Mr Robinson is a Chartered Management Accountant
with over 20 years’ commercial finance experience. He
has worked in FMCG, Medical Diagnostics and Sales
Service industries in the UK, Australia, Switzerland and
the USA.
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 Corporations
(Rounding in Financial/Directors Reports) Instrument
2016/191. The company is an entity to which the
instrument applies.
Performance indicators
Management and the Board monitor the financial
performance of the Group by measuring actual results
against expectations as developed through an annual
business planning and budgeting process.
Appropriate key performance indicators (KPI’s) are used
to monitor operating performance and management
effectiveness.
The operating and financial review has been designed
to enhance the periodic financial reporting and provide
shareholders with additional information regarding
the Group’s operations, financial position, business
strategies and prospects. This review complements the
financial report and has been prepared in accordance
with the guidance set out in ASIC Regulatory
Guide 247.
Company overview and principal activities
The Group’s principal activities, and underlying strategy,
is the design and development of innovative world
class, small electrical kitchen appliances and the
effective marketing of these products across multiple
geographies to drive growth in sales and profits.
In line with this strategy, the Group has:
• A strong, competitive and growing product portfolio
with proven success across the globe;
• An innovative, committed, high-quality team;
• An R&D culture that focuses on consumer value
and emerging food and beverage technologies
when developing new products, enabling the
Group to maintain its premium product and market
positioning;
• A track record of successfully expanding into new
geographies;
• A strong balance sheet which provides a platform to
take advantage of future opportunities.
During the year, the Group has continued to refine its
strategic direction and has continued the execution
of its acceleration program, further detail of which is
provided on page 19.
The Group operates a global centralised business
structure with two business segments and geographic
sales regions as described below:
• The Global Product segment sells premium
products designed and developed by Breville, which
are sold globally (currently 69 countries). Products
included in this segment may be sold directly
or through third parties, and may be branded
Breville®, Sage®, Polyscience® or other Group
owned brands
• The Distribution segment sells products that are
designed and developed by a third party. Products
are distributed pursuant to a license or distribution
agreement, or they are sourced directly from
manufacturers. Products in this business unit may
be sold under a brand owned by Breville® (e.g.
Breville®, Kambrook®), or they may be distributed
under a third party brand (e.g. Nespresso®).
15
Breville Group Limited annual report 2019 Directors’ report
continued
Operating and financial review continued
Company overview and principal activities
continued
2 ROE is calculated based on NPAT for the 12 months
ended 30 June 2019 (FY18: 12 months ended 30 June
2018) divided by the average of shareholders’ equity at the
beginning and the end of the financial year
For both business segments, the geographic
regions execute the sales and distribution functions,
supported by centralised functions (including product
development, marketing, operations, IT, Finance and
HR). The centralised functions, specifically marketing
and product development are part of the global,
innovation driven product business and thus form part
of the Global Product segment.
In Australia and New Zealand, the Group principally
trades under its company owned brands, Breville®,
Kambrook® and Aquaport® and also distributes
products under a machine partnership with Nespresso®
and Nestlé® Dolce Gusto®.
In North America, the Group distributes Breville® and
Polyscience® branded products through premium
channels and Nespresso® products, under a machine
partnership.
In Europe the marketing and distribution of Breville®
designed products to premium retailers is under the
company owned brand, Sage®. The region also
supplies Sage® branded goods to certain distributors
located in Europe.
The Group’s Hong Kong office performs the functions
of a group procurement and quality assurance centre
and is also, a supplier of primarily Breville® designed
products to distributors globally (excluding the Sage®
European distributors). These distributors are located
outside of the Group’s principal markets and include the
Asia Pacific region, the Middle East and South America.
Group operating results
AUDm1
Revenue
EBITDA
EBIT
FY19
760.0
114.0
97.3
FY18
646.83
100.2
86.9
%
Change
17.5%
13.7%
12.0%
EBIT margin (%)
12.8% 13.4%
NPAT
Basic EPS (cents)
ROE2 (%)
Div per share -
ordinary (cents)
Franked (%)
Net cash ($m)
Marketing and R&D4
(% of revenue)
67.4
51.8
58.5
45.0
15.2%
15.2%
22.7% 21.5%
37.0
33.0
12.1%
60.0% 60.0%
9.8
58.0
83.1%
11.0% 10.5%
0.5%
1 Minor differences may arise due to rounding.
3 FY18 Revenue restated to a comparable basis with FY19
after adoption of IFRS15
4 Marketing and R&D related spend included in the income
statement is comprised of the following:
Group Marketing and R&D spend
AUDm1
Advertising & marketing
expenses
Marketing operational
expenses5
R&D operational expenses5
R&D development cost
amortisation
Total Marketing and R&D
FY19
FY18
32.2
26.2
16.1
25.9
9.1
83.3
10.9
23.7
7.9
68.7
% Revenue
11.0% 10.5%
5 Including overhead allocation and plant and equipment
depreciation
Results Highlights
• Group revenue increased by +17.5% (FY18 +7.7%)
with strong growth in both the Global Product and
Distribution segments partly boosted by the strength
of the USD
•
In constant currency, the Global Product segment
delivered a +12.0% increase in revenue (FY18
+13.4%) driven by European expansion and a
strong performance in the USA offset partially by
weaker export sales to Russia
• Group EBIT growth accelerated to +12.0% (FY18
+10.0%) however EBIT margin at 12.8% was lower
than FY18 at 13.4%. This year-over-year decrease
primarily reflects the strengthening US dollar, as well
as our sustained increase in marketing and product
development investment. A strong US dollar boosts
top line via translation, but reduces our EBIT margin
because our hedged position effectively shields
EBIT from foreign exchange effects
• NPAT grew +15.2% with FY18 being impacted
by one-off tax adjustments arising from the US
corporate tax rate change
• Total dividends for the year increased by 12.1% to
37.0 cents per share, 60% franked
16
Breville Group Limited annual report 2019 Operating and financial review continued
Results Highlights continued
• Working capital investments were made during the
year. The continued growth of the business, as well
as some specific tactical inventory holdings, saw
an increased investment in stock. Strong Q4 sales
growth, partly driven by the buy up for Amazon
Prime Day in July, and partly by a weak prior year
comparator naturally increased receivables. The
move to an onshore Europe model rather than a
cash-on-shipment export model also impacted the
level of year end receivables. Both core debtor days
and core inventory stock turns remained in line with
prior year
• As a result of these investments in working capital
Net Cash declined to $9.8m (FY18 $58.0m)
• Good progress was made in the implementation
of our Acceleration Strategy with a first full year of
German sales, entry into Benelux and Switzerland
and an increase in investment in marketing and R&D
to 11% of revenue.
Segment results
REVENUE
EBIT
EBIT MARGIN (%)
AUDm1
Global Product
Distribution
TOTAL
FY19
612.0
148.0
760.0
FY18 % Change
FY19
FY18 % Change
522.2
124.6
646.8
17.2%
18.8%
17.5%
78.8
18.5
97.3
73.3
13.6
86.9
7.5%
36.0%
12.0%
FY19
12.9%
12.5%
12.8%
FY18
14.0%
10.8%
13.4%
1 Minor differences may arise due to rounding.
Global Product segment revenue
AUDm1
North America
Australia and New Zealand (ANZ)
Europe
Rest of World (ROW)
TOTAL
GLOBAL PRODUCT SEGMENT REVENUE
% Change
AUD
% Change
Constant
Currency
19.6%
12.8%
7.2%
7.0%
42.1%
35.1%
(11.4)% (17.7)%
FY18
298.9
123.9
63.0
36.4
FY19
357.4
132.9
89.6
32.1
612.0
522.2
17.2%
12.0%
1 Minor differences may arise due to rounding.
The Global Product segment revenue for the year
increased by +17.2% to $612.0m (FY18: $522.2m) and
+12.0% in constant currency.
In North America, the Group achieved strong mid-
teens growth in the key US market driven by a strong
performance across both Beverages and Juicing.
Overall, strong USA growth was partially moderated by
a “reset” year in Canada with retailer rationalisation and
some major retailers reducing inventories. Pleasingly sell
out continued at historic levels.
In ANZ the Group saw resilient growth in Australia
offsetting lower growth in New Zealand where our
business was realigned to a less-promoted business
model, in turn improving margins.
In Europe the Group delivered 35.1% constant
currency revenue growth with the UK again posting
double digit growth, a strong first full year for Germany,
and successful expansion into Benelux and Switzerland.
The fast-growing European region is now over two
thirds the size of the Global segment in our ANZ
business.
The ROW segment is by nature lumpy and this year
saw a decline in revenue, caused by a Russian partner
reducing purchases in the face of a much weaker
Ruble. However, the sell-out trend in Russia remained
double digit. Excluding this Russia effect, Global
segment constant currency growth was 14.2% with all
key regions performing well.
The Global Product segment EBIT for the year was
$78.8m (FY18: $73.3m), representing a 7.5% increase.
The segment’s EBIT margin of 12.9% compares to
14.0% in FY18 with the decline driven by the strength
of USD and the increased investment in marketing and
R&D.
The Distribution segment also grew revenue strongly
increasing sales by +18.8% (against a FY18 decline
(7.3%)) with strong Nespresso growth in the US.
Importantly the segment fulfilled its strategic role by
delivering an incremental $4.9m in EBIT supported by
Nespresso growth and improved Kambrook and Breville
local performance in ANZ. This incremental EBIT was
reinvested into Global segment marketing and R&D.
17
Breville Group Limited annual report 2019 Directors’ report
continued
Operating and financial review continued
Financial position
The Group’s total investment in working capital
increased in FY19 by $64.7m at 30 June 2019
compared to 30 June 2018 primarily driven by an
increase in inventory. Debtors and creditors movements
largely offset each other with the exception of a $10.0m
increase in receivables arising from the transition from
a Hong Kong cash-on-despatch model to an onshore
normal retail receivable model for our European
customers.
Inventory balances of $152.3m at 30 June 2019 were
$52.6m higher than prior year (30 June 2018: $99.7m),
primarily driven by the continued growth of the business
as well as some specific tactical inventory holdings. In
the USA $8.0m of seasonal stock build was purchased
earlier than in FY18 to smooth growing demands on our
supplier base. $11.0m, or 20 weeks of inventory, has
been built in the UK as a buffer against Brexit disruption.
Also, approximately $14.0m of extra stock holding has
been built in Europe as we run an unconstrained stock
position in Europe until expansion normalises and a
predictable demand curve emerges. These three tactical
stock investments added $33.0m inventory to the
$19.0m arising from core growth in the business.
Receivables grew $50.2m over FY18 and payables by
$38.1m with the excess in receivables growth largely
driven by the switch of revenue from a Hong Kong
export model to onshore European retail model.
Net cash at 30 June 2019 was $9.8m compared to
$58.0m at 30 June 2018.
Dividends
A final dividend of 18.5 cents per share (60% franked)
has been declared (FY18: 16.50 cents, 60% franked)
bringing the total dividends to 37.0 cents per share,
60% franked. This final dividend has a record date of
13 September 2019 and is payable on 27 September
2019.
The Directors have resolved to continue to suspend the
operation of the Dividend Reinvestment Plan.
The ongoing expected increase in relative contribution
of the businesses outside of Australia will impact
the extent to which the Group is able to frank future
dividends.
Material business risks
The material business risks that may impact the
achievement of the Group’s strategy and its future
financial prospects are summarised below, together with
key actions intended to mitigate these risks:
Risk
Nature of risk
Key actions to mitigate risk
Product
development
and innovation
Insufficient investment in product
development and innovation
may result in loss of competitive
advantage.
Margin risk
The competitive nature of the small
domestic appliance market together
with changes in manufacturing
costs, including commodity prices,
will have an impact on the Group’s
financial results.
Adverse global
economic and
geopolitical
conditions
Adverse changes to the general
global economic and geopolitical
conditions and the retail landscape
as well as consumer sentiment
in the principal markets in which
the Group operates will impact its
financial results.
Geopolitical tension such as Sino-
American tariff esclation and threat
of Brexit may specifically impact
consumer demand as well as our
ability to supply markets.
Strategic reallocation of funds to increase investment in
product development and marketing functions and their
associated resources and technology. Securing of world
class leadership for product development and go to
market functions.
Annual investment has doubled over 4 years from FY15 to
FY19 with spend increasing from 8% of revenue to 11%.
Active protection and management of the Group’s
intellectual property arising from Product development
protects uniqueness of range.
Focused brand building initiatives enhancing strength of
brand awareness and desirability.
On going variabilisation of key elements of cost structure
and strengthening of long term supplier relationships helps
to buffer cost increases.
Focus on communication with consumers to gain ever
greater insight into the changing world of food and
beverage trends. As well as monitoring global economic
and consumer data and key industry trends.
Increasingly broad regional foot print mitigates impact of
any specific market on Group results.
With regard to specific Brexit risk extra inventory holdings
have been built in the UK to mitigate against disruption to
borders and supply.
With regard to tariff tensions, specific negotiations with
suppliers are in play alongside communications and
strategies with retailers to protect consumer demand.
18
Breville Group Limited annual report 2019 Operating and financial review continued
Material business risks continued
Foreign
exchange
exposures
Transactional exposure as product
purchases are primarily paid for in
US dollars.
The transactional and translational USD exposures are
considered to result in a partial natural hedge from a
Group perspective.
Translational exposure as
international earnings contains
a large portion denominated in
US dollars and Euros, which are
translated into Australian dollars for
reporting purposes.
A weak Australian dollar is likely to have an adverse impact
on ANZ earnings (as a result of higher landed costs) but a
positive impact on the translation of non-Australian dollar
denominated results.
Treasury policy requires hedging of a portion of expected
purchases up to 12 months in advance.
Group strategic acceleration program
update
During FY19, the Group has continued to progress its
Acceleration program, the impacts of which have helped
drive the FY19 operational and financial performance.
Product
The Group is widening its aperture from specific
new product development innovation to the
commercialisation of a range within a category. We are
expanding our thinking to account for differing customer
requirements, thereby extending the applicability of
innovations and ultimately improving our return on
investment, while simultaneously growing the end
market.
We now have the ability to deliver a range with a
common look and feel, offering retailers a more
compelling range presentation opportunity and allowing
customers to have a truly coordinated kitchen.
The Group is now leveraging innovations through the
product range. For example, the ThermoJet™ heating
system, already available in three products, was added
into a further two products released in FY19: the Barista
Express™ Pro and the Bambino™ Plus. In addition, the
core technology in our oven range, Element IQ®, was
applied to a pizza oven, the Smart Oven™ Pizzaiolo,
launched in the USA in 1H19 .
Further category based innovations in Sous Vide
cooking, supported by the ChefSteps acquisition in
early FY20, a combined blender and juicer juicing range
the 3x Bluicer™ and the Creatista Pro™, delivering the
world’s fastest flat white, are planned for FY20.
Market
The Group’s brand platform, a fundamental building
block in our go-to-market process, has been completed
with updated vision, mission, and guiding principles.
The Smart Oven™ Pizzaiolo represented the Group’s
first ever “Brand Launch” in FY19. The 3x Bluicer™ a
combined blender and juicer will be the second in FY20.
In terms of geographic expansion we launched the
Sage® brand into Germany and Austria on 1 April 2018
and in April 2019 expanded into Belgium, Luxembourg,
the Netherlands and Switzerland. We also introduced
the Creatista® range in 2H19 to our European
customers. We plan to enter Spain in 1H20 and France
by the end of FY20. As the Group continues to make
progress on its strategy of unifying Europe under the
Sage® brand existing European Sage® Distributors
are now buying product directly from our European
warehouse instead of Hong Kong.
Scalable, global platform
The Group has made signification progress during FY19
in delivering a centralised scalable global platform, and
in FY20 this will be enhanced to include:
• A third party logistics model in all geographies
• A product information management (PIM) system to
centralize all product related data
• A middle ware platform improving flexibility and
scalability
• and a point of sale module giving access to sell-out
data for better decision making.
Acceleration program performance
The Acceleration program has now been in place for
four years, and is delivering on plan:
• Revenue and EBIT have grown ~40.0% compared
to FY15
• EBIT growth rate pa of 12.0% in FY19 compares to
10.0% in FY18, 7.2% in FY17, 5.9% in FY16 and
(1.2%) in FY15;
• Marketing and R&D spend as a percentage of net
sales represents 11.0% in FY19 compared to 8.0%
in FY15
• ROE% has improved to 22.7% from 21.0% in FY15.
19
Breville Group Limited annual report 2019 Directors’ report
continued
Operating and financial review continued
Our commitment to sustainability and
social responsibility
• Global Policies and Practices: Noting the changing
demographics above, Breville consistently reviews
its policies to ensure that they are applicable in
every country where we operate.
The Group is committed to ethical,
responsible and sustainable conduct
across the entire business and
acknowledges the importance of
respecting our stakeholders, including
employees, shareholders, customers
and suppliers. In order to ensure
this commitment is being met, the
Group has a sustainability committee
and a sustainability co-ordinator
to drive initiatives. This committee is
comprised of representatives from each area
of the business to ensure sustainability issues
company-wide are addressed. The role of this
committee is to discuss all matters relating
to sustainability and make strategic
decisions regarding the Group’s
approach to sustainability.
People
Attracting Talent
The Group enjoys the benefits of a
highly experienced and talented team
across all departments and geographies.
Underpinning Breville’s food thinking culture,
the passion, creativity and insight of employees
is critical to consistently delivering world-
class innovative products to consumers.
The Breville team continues to be
acknowledged both domestically and
internationally, with multiple design
awards, and recognition through
mainstream media. Breville remains
one of the largest employers of
industrial designers in Australia. To
ensure that we continue to attract
these and other key professionals, we
offer career development opportunities
within a nurturing yet challenging work
environment.
People
Attracting Talent
Diversity
Reward and recognition
Workplace safety
Training & Development
Recognising the many business benefits that
a diverse workforce can deliver, Breville
continues to seek out ways to further
increase our diversity and to this end;
• a Diversity Committee has been
established with the aim of ensuring
that our business represents our
diverse customer base and the
communities in which we operate and
encourages all our people irrespective
of race, language, ethnic origin or ability to
contribute to our success
• Policies have been reviewed with a focus
on identifying more flexible employment
practices sympathetic to work-life balance
Community
Charitable donations
Community
engagement
Intensive anti-discrimination and
•
anti-bullying training was conducted
during FY19 to ensure that our values
are always consistently translated into
appropriate working behaviours.
Reward & Recognition
Breville’s reward philosophy aims to
attract, motivate and retain staff through
monetary and non-monetary means. This
includes establishing competitive salary and
benefit levels and the design of variable pay
Environment
Energy and emissions
Packaging stewardship
Waste and recycling
plans for relevant employee groups. During
FY19, the Group embarked on a design
review of global recognition and reward
policies and practices with the intent of
embedding a strong performance and
reward culture across the Group.
Currently 50% of all Breville employees
participate in some form of incentive
program and our intention is to ensure
that all our people are recognised
through the appropriate monetary and/
or non-monetary means. Recognition is
encouraged across the Group and, as an
example, our Global Product Department
hosts a formal Annual Awards event
aimed at recognising contributions
and achievements within the Global
Product Team.
Workplace Safety
Ensuring a safe workplace is another
key area of focus and the Group
strives for continuous improvement and
consistency in safety practices across all
departments and geographies. During this
year, all safety-related policies were updated and
are now available on a common SharePoint site for all
our employees to access.
Diversity
Our diversity is represented in many
ways including gender, age, origin,
race, cultural heritage, language and
location. Some examples include;
• Gender: Our Board has 29%
female representation. At the
senior management level, the
percentage of females is currently
29%.
Business
Ethical sourcing principles
and policies
Modern slavery
Vendor audits
Product responsibility
Anti-bribery and
corruption
• Global Diversity: Our 520 employees
are spread across 9 countries speaking a
variety of languages. 47% of our people live outside
of Australia and 50% of our senior leadership now
reside outside of Australia.
20
Breville Group Limited annual report 2019 Operating and financial review continued
Our commitment to sustainability and
social responsibility continued
The Work Health & Safety Consultation Group has
also partnered with the Sustainability Team to ensure
environmental initiatives are aligned within Breville.
The objective of the Consultation Group is to reduce
employee injuries and as such appropriate targets
have been set supported by staff communication and
awareness campaigns that will continue through FY20.
Training & Development
The Group invests in the training and education of its
team, building strong, collaborative links with world
experts in food thinking and technology.
Strongly committed to our core values of creativity,
simplicity, insight and excellence in all departments, the
Group recruits, trains, assesses and rewards employees
on this basis. With a team anchored around these
common values, the business strives to foster a learning
culture that stimulates idea generation, a passion for
learning, and the continuous search for new and better
solutions.
To further support Breville’s training and development
initiatives, a new online learning channel was introduced
during FY19 which will continue to be developed in
FY20.
Environment
Energy, packaging and waste are our key environmental
impact areas. The Group is striving to incorporate
sustainable decisions into operational facilities and
has a number of energy efficient features to reduce
energy usage including movement and light sensors to
minimise use of lighting, limitations/timers on plant use
(air conditioning, heating) and measurement of power
usage.
The Group has been a committed signatory to the
Australian Packaging Covenant for over 8 years, a
voluntary agreement between government and industry
which provides a framework for the reduction of the
potential impact of products, packaging and warehouse
operations on the environment. The Group integrates
actions and goals into existing business systems so that
sustainable packaging considerations become ‘just how
we do business’. Success is being achieved via cross
functional teams working together to implement the
Group’s Sustainability Policy.
The Group has implemented improved waste reduction
and recycling practices including enhanced recycling
of cardboard, paper, plastics, electronics, appliances,
expanded polystyrene (EPS) and organic waste.
Employing the use of streamlined bins, each waste
stream now has its own disposal outlet, ensuring
minimal contamination of recyclable waste and
increasing the recovery yield. This year we identified
electronic waste, organic waste and EPS as 3 critical
waste products, which we were able to remove from
general waste and divert away from landfill. This has
resulted in approximately 4.8 tonnes of waste being
diverted from landfill from these 3 areas.
Business
Ethical sourcing
The Group is committed to conducting business in a
socially responsible manner and managing its business
to reflect high ethical and moral values. The Group
expects its supply partners to uphold and respect the
same core values and commitment in the operation and
management of their businesses.
The Group expects that its supply partners will not be a
party to any violation of basic Human Rights including:
•
•
•
•
•
freedom from discrimination
freedom from slavery or servitude
freedom of movement
freedom of expression
freedom of thought.
The Group will not do business with vendors that do
not share and demonstrate commitment to compliance
with local and internationally accepted labour and
employment laws.
The Group has an ethical sourcing policy which includes
an ethical sourcing requirements code (‘code’) which
sets out the minimum requirements and expectations
that all vendors, including sub-contractors engaged
by vendors, must comply with. The code specifies
compliance in areas such as:
• wages, benefit policies (including transparent record
keeping)
• child labour
• working hours
•
forced and bonded labour
• discrimination
• harassment and abuse
•
freedom of association
• health and safety
• environmental practices
• business integrity.
The company has zero tolerance for the use of child
labour, prison labour or forced labour in the manufacture
of its products.
Suppliers are required to contractually recognise
the code and acknowledge their acceptance of its
requirements. New key suppliers are required to
undergo an independent audit to verify that they are in
compliance with local laws and safety conditions.
The Group recognises the difficulties in dealing with
a large and complex supply chain and therefore is
dedicated to integrating ethics into its core business
practices and continuously investing in its ethical
sourcing program.
21
Breville Group Limited annual report 2019 Directors’ report
continued
Operating and financial review continued
Our commitment to sustainability and
social responsibility continued
Modern slavery and human trafficking
We respect universal principles regarding human rights
and labour practices worldwide, including the Universal
Declaration of Human Rights, through sound business
activities. We are taking steps during the financial year
to ensure that modern slavery and human trafficking is
not taking place in any of our supply chains or in any
part of our business. We are updating our corporate
policies, including our ethical sourcing policy, employee
handbooks and codes of conduct. We require our
suppliers to be bound by our ethical sourcing policy
and we are working with our main suppliers to mitigate
supply chain risks and ensure their compliance with
applicable laws and our policy.
Vendor Audits
The Group conducts factory visits to vendors by senior
management on a regular basis, as well as using
internationally recognised independent audit firms to
verify compliance with local laws and safety conditions
as well as the Breville Group ethical sourcing policy.
When an independent audit firm is engaged, an ethical
trade audit report is issued, which is to an industry
recognised standard.
The audits which are performed by independent audit
firms are 4-pillar audits and assess the following areas;
• Labour Standards
• Health and Safety
• Environment
• Business Ethics.
The scope of the vendor audits provides coverage
(using a sample-based method) of all workers at each
site, including direct employees, agency workers and
workers employed by service providers or provided by
other contractors, in order to determine compliance by
the vendor.
Vendor compliance is assessed and determined
according to the following compliance metrics:
•
•
the Ethical Trading Initiative (ETI) Base Code
the Group’s ethical sourcing policy
• assessment of management systems
• assessment of entitlement to work and immigration
• assessment of sub-contracting
• assessment of environment and;
• assessment of business ethics.
30 June
2018
30 June
2019
Target for
June 2023
5
6
10
Vendor
audits
completed
The Group has a target to increase vendor audits from
5 to 10 per annum over a 5-year period to June 2023
starting in June 2018. This financial year, the Group
performed audits on 6 individual vendors. Each year, the
vendors selected for audit will be based on the Group’s
internal risk assessment framework which takes into
consideration the size of the vendor, levels of purchases
made and results from previous audits conducted.
Vendors are audited on a rotational basis over a multi-
year period taking these factors into consideration.
For those vendors which have been audited, a rating
system has been applied and based on the results of
the audit, each vendor is given a vendor audit rating.
Based on the vendor compliance metrics above, the
Group has defined an internal ‘baseline’ standard which
defines the minimum level of compliance expected
from any vendor. This baseline is subsequently used to
benchmark the results of vendor audits to determine
the outcome of the rating awarded. Vendors who meet,
exceed or greatly exceed the Group’s internal ‘baseline’
standard can be rated bronze, silver or gold (gold being
the highest rating). Higher ratings are awarded as a
direct result of lower occurrences and severity of non-
compliances found in the audit.
Gold
Silver
Bronze
Below standard
BASELINE
The severity of each non-compliance, and hence
the rating of the vendor, is decided by the Group’s
sustainability committee. Vendors who do not meet the
Group’s internal ‘baseline’ standard are categorised into
a ‘below standard’ category and are actively monitored
to ensure all remediate action is taken against identified
non-compliance in the most effective and efficient
method possible. Evidence of corrective action to
remediate non-compliance is collated through inquiry,
inspection and follow-up observation. Where the Group
requires zero tolerance or where the vendor or factory
does not demonstrate a willingness to comply, the
Group will discontinue doing business with the
vendor/factory.
22
Breville Group Limited annual report 2019 Operating and financial review continued
Our commitment to sustainability and
social responsibility continued
Product responsibility
The Group takes pride in the quality of its products. The
Group has extensive compliance processes in place
to ensure that its products are safe and compliant with
labelling and safety requirements in relevant markets.
Anti-bribery and corruption
The Group is committed to operating in a manner
consistent with the laws of the jurisdictions in which its
businesses operate, including those relating to anti-
bribery and corruption. Honesty, integrity and trust
are considered integral to the ethos of the Group, its
products and its brands. Conduct associated with
bribery and corruption is inconsistent with these values.
Accordingly, the Group adopts a “zero tolerance”
approach in relation to these matters.
The Group has an anti-bribery policy which,
in conjunction with the code of conduct and
whistleblowing policy, sets out the responsibilities of
all the Group’s employees (including contractors) and
directors with regard to dealing with outside parties
and prohibits all Group personnel in all jurisdictions in
which the company operates or conducts commercial
activities, from engaging in any activity that constitutes
bribery or corruption and other improper inducements
and/or payments.
In order to ensure that these values and the policy
are properly adhered to, the Group has appointed an
Anti-Bribery Compliance Officer who is responsible for
monitoring the application of this policy.
Risk management
The company’s risk management is discussed in the
corporate governance statement on page 46.
Dividends
The following dividends have been paid, declared or
recommended since the end of the preceding year.
Cents per
ordinary
share
$’000
18.5
24,068
18.5
16.5
24,068
21,466
Final dividend
recommended:
Dividends paid in the year:
Interim FY19 dividend paid
Final FY18 dividend paid
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:
S. Fisher
T. Antonie
P. Cowan
S. Herman
D. Howell
L. Myers
K. Wright
Ordinary
shares
118,000
36,349
5,000
36,000
127,500
250,000
20,000
23
Breville Group Limited annual report 2019 Directors’ report
continued
Remuneration report (audited)
Section 1 Introduction
Section 2 Overview of Remuneration Approach and FY19 Outcomes
Section 3 Key Management Personnel
Table 1
KMP details
Section 4 Remuneration Framework
Table 2
Target Remuneration mix
Section 5 Linking Remuneration to Performance
Table 3
Five Year Group Performance
Section 6 Executive Remuneration – detailed elements
Table 4
Table 5
Fixed Deferred Remuneration Included in Remuneration tables 6 & 7
LTI plans Included in the Remuneration tables 6 & 7
Section 7 Non-Executive Director Remuneration
Section 8 Statutory Remuneration Tables
Table 6 & 7 KMP Remuneration FY19 and FY18
Table 8
Table 9
KMP STI Cash Bonuses and LTI Performance Rights Vesting
KMP Shareholdings
Table 10
KMP Performance Rights Granted and Fair Value
Table 11
KMP Fixed Deferred Remuneration Rights Granted and Fair value
Table 12
KMP Performance Rights Held
1. Introduction
The Directors are pleased to present the Group’s remuneration report for the financial year ended 30 June 2019
which has been prepared in accordance with section 300A of the Corporations Act 2001 and has been audited by
PricewaterhouseCoopers as required by section 308(3c) of the Corporations Act 2001.
The report sets out the Group’s remuneration strategy, framework and compensation arrangements in place for
the Key Management Personnel (KMP), defined as those persons having authority and responsibility for planning,
directing and controlling the major activities of the Group. The report also sets out the link between performance and
remuneration outcomes for FY19.
This report is made in the context of another strong result for the Group in FY19, arising from the continued execution
of our acceleration strategy including the ongoing implementation of our European expansion.
Specifically for FY19: -
• Sales increased to $760.0m or
• EBIT increased to $97.3m or
• NPAT increased to $67.4m or
+ 17.5% growth
+ 12.0% growth
+ 15.2% growth
• DPS increased to 37.0 cents or
+ 12.1% growth
• Share price1 increased to $16.36 or
+ 41.0% growth
• One-year TSR1 was
+ 43.8%
• STI was awarded at
76% of maximum potential
• LTI (second tranche of FY16 scheme
and first tranche FY17 scheme) vested at
100% of maximum potential
1 30th June, 2019 compared to 30th June, 2018
24
Breville Group Limited annual report 2019 Remuneration report (audited) continued
2. Overview Remuneration Approach and FY19 Outcomes
In FY19 the below remuneration arrangements were approved for the year. The arrangements are designed to
reward, motivate and retain a high performing international CEO and a global team of executives by aligning their
reward structure with sustained business performance and superior shareholder return.
Remuneration
Component
Fixed Cash
Remuneration
Fixed Deferred
Remuneration
Purpose & Execution
FY19 Outcomes
Aims to provide competitive salary, including
superannuation and non-monetary benefits, to
attract and retain a high performing team.
Fixed cash remuneration is reviewed annually,
with outside assistance where needed, and set
with reference to: -
• Size and complexity of role
• Market benchmarks (relevant international
and domestic peers)
• Experience, skills and competencies.
Aims to deliver fixed deferred remuneration to
the executive, competitively rewarding KMPs,
via a mechanism that aligns interests with
shareholders and supports the retention of high
performing executives by increasing individual
potential shareholdings in the Group.
As part of the fixed deferred remuneration the
executive receives a grant of deferred share
rights exercisable in 3 years at no cost.
The rights are surrendered if the executive
resigns before the vesting date, unless agreed
otherwise by the Board. The rights will vest on
a pro-rata basis if the executive is dismissed
without cause. The rights will lapse if the
executive is dismissed with cause.
• CEO, Jim Clayton, received an increase
in his fixed cash remuneration of 5.6%,
or $50,000, effective from September 1st,
2018 increasing his fixed cash remuneration
to $950,000 per annum. This is considered
in line with the domestic peer Group but at
the low end of international peers.
• Benchmarking of fixed cash remuneration
for KMPs will again be undertaken in FY20.
• A grant of 60,0001 rights was made to Jim
Clayton in FY18 and remains in place as
fixed deferred remuneration. This forms
part of the CEO’s short term employment
benefits shown in tables 6 and 7.
• No fixed deferred remuneration grant was
made to Jim Clayton in FY19.
• To ensure total fixed remuneration
packages remain competitive, a further
fixed deferred remuneration grant of rights
will be issued in FY20.
Short term
incentives
(STI)
Aims to reward and incentivise executives for
over achieving stretch company targets and is
paid in cash each year.
• The FY19 base pre-bonus EBIT target
was $97.3m representing a +12.0% EBIT
growth over FY18.
A maximum Group bonus pool is calculated as
the sum of maximum STI % opportunities of
fixed cash remuneration for each participant.
The CEO has a maximum STI opportunity of
50%, other KMPs 35% and other staff in a
range of 5-35%.
A stretch EBIT target is set by the Board in
advance of the financial year. No bonus pool is
awarded until this pre-bonus EBIT is exceeded.
As pre-bonus EBIT exceeds the pre-bonus
target the STI bonus pool is funded until the
maximum is reached.
The pool is distributed based on each
individual’s maximum opportunity % and the
achievement of targets which include Group
EBIT, divisional performance, and, in some
cases, personal targets.
•
•
In FY19 the Group pre-bonus EBIT target
was exceeded, and a bonus pool was
funded. In FY19 76% of the maximum
potential pool was awarded (FY18 78%).
In FY19 Jim Clayton received an STI
award of $357,991 representing 76% of
his maximum opportunity of 50% of fixed
cash remuneration. This represents a 2%
increase from the FY18 award $350,865
when 78% of the maximum opportunity
was achieved.
• Details of other KMP awards are shown in
section 8 in tables 6,7 and 8.
1 In FY18 Remuneration Report this fixed deferred remuneration share grant was shown as an LTI grant, but it is in fact fixed
deferred remuneration and has been shown as such and is separately reported in the FY19 Remuneration Report.
25
Breville Group Limited annual report 2019 Directors’ report
continued
Remuneration report (audited) continued
2. Overview Remuneration Approach and FY19 Outcomes continued
Remuneration
Component
Long term
incentives
(LTI)
Purpose & Execution
FY19 Outcomes
Aims to reward and incentivise executives to
deliver sustained shareholder value.
Annual performance right grants are made to
the CEO, KMPs and other managers based on
a % of fixed cash remuneration. The number
of rights issued is based on the value of shares
in the company using a 20 trading day trailing
volume weighted average price (VWAP) up to
date of financial year end. Percent of fixed cash
remuneration ranges from 20% up to 125% for
the CEO.
An average performance period of 3 years
is used with three equal tranches of rights
vesting after 2,3 and 4 years. This incentivises
sustained shareholder value creation over
multiple periods.
A gate of absolute positive TSR must be
met for rights to vest. If this gate is met then
the % vesting is determined on relative TSR
achieved vs a peer Group of approximately
60 companies within the ASX200 Consumer
Staples, Consumer Discretionary and Industrials
indices.
• 0% vests at 50% TSR percentile
• 50% at above 50% TSR percentile
In Year grants
•
In FY19 Jim Clayton received an LTI
performance rights grant of 125% of fixed
cash remuneration. This an increase from
87.5% in FY18 in order to enhance the
CEO’s total fixed remuneration in line with
comparable peers in a manner directly
aligned to sustained shareholder return.
• Other KMPs received a grant of 50%
of fixed cash remuneration with other
managers in a range from 20-50%
In Year LTI Vesting
•
•
In FY19 71,400 rights vested in Jim
Clayton’s favour under the below schemes.
In FY19 86,210 rights vested in favour of
the other KMPs.
2016 Performance Rights
• 10,000 shares vested to Jim Clayton and
17,760 to other KMPs as part of second
tranche of the 2016 performance-based
grant. 100% of the potential rights in the
tranche vested, and 0% lapsed, based on
3-year positive TSR of 105% which was
above the 75th percentile of the peer Group
• Rising in a straight line to 100% at 75%
• 74,450 shares vested (30,100 to Jim
Clayton and 44,350 to other KMPs) based
on continuing employment as part of a
2016-time bound grant.
2017 Performance Rights
• 31,300 shares vested to Jim Clayton and
24,100 to other KMPs as part of the first
tranche of the 2017 performance-based
grant. 100% of the potential rights in the
tranche vested, and 0% lapsed, based
on 2-year positive TSR of 70% which was
above the 75th percentile of the peer Group.
• There was no increase in Non-Executive
Director remuneration in FY19.
• The total fees paid of $1,050,416 represent
75.0% of the approved fee cap.
TSR percentile.
After vesting shares are subject to a two-year
trading lock which may be waived at Board
discretion in exceptional circumstances.
• Historically (2016 and earlier) the Group also
issued time bound rights to foster retention.
This practice is no longer a part of the
Group’s target remuneration framework and
KMP packages.
Non-Executive
Director Fees
Aims to attract, reward and retain high
calibre Directors suitable for a fast-growing
international business.
Each Director receives a fee or base
remuneration as a Director of the Group with
an additional fee for acting as Chairperson or
Chairperson of a Board committee recognising
the additional time commitment required.
• Non-Executive Director remuneration is
reviewed annually within the aggregate
compensation pool of $1,400,000 per
annum approved by the AGM held in
November 2016.
26
Breville Group Limited annual report 2019 Remuneration report (audited) continued
3. Key Management Personnel
KMPs are the persons with authority and responsibility for planning, directing and controlling the activities of the
Group and comprises the Directors of the Group and the Executives listed below.
All KMPs served for a full year with the exception of Peter Cowan, who joined as a Non-Executive Director on 1st
September, 2018 and Martin Nicholas who joined as Group CFO on 10th September, 2018.
Table 1 Key Management Personnel (KMP)
Name
Position
Non-Executive Directors
Steven Fisher
Non-Executive Chairperson
Tim Antonie
Non-Executive Director
Term as KMP
Full Year
Full Year
Peter Cowan
Non-Executive Director
Appointed 01/09/2018
Sally Herman
Non-Executive Director
Dean Howell
Non-Executive Director (a),(b)
Lawrence Myers
Non-Executive Director (c),(b)
Kate Wright
Non-Executive Director (a),(d)
Executives
Jim Clayton
Group Chief Executive Officer
Scott Brady
Global Product Officer
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Martin Nicholas
Group Chief Financial Officer
Appointed 10/09/2018
Mark Payne
Chief Operating Officer
Cliff Torng
Global Go-to-Market Officer
Full Year
Full Year
(a) Member of Audit and Risk Committee
(b) Member of People and Performance Committee
(c) Chair of Audit and Risk Committee
(d) Chair of People and Performance Committee
4. Remuneration Framework
The People and Performance Committee of the Board reviews and recommends executive and employee
remuneration arrangements within an annually reviewed framework that is designed to support the achievement of
strategic goals, sustainable financial performance and sustained growth in shareholder value. From time to time the
committee may also engage external remuneration consultants to assist with this review.
Key principles that guide the remuneration framework include:
• Fair and Competitive Provide appropriate rewards to attract and retain high calibre employees for an
• Simple
international and growing business. Market benchmarks are used and may include
domestic and international peers depending on the role being evaluated and location
of the role
Clear, visible and calculable reward linked to sustained company performance and
shareholder value creation. Wherever possible executives will be aware of the status of
their incentive achievement mid-period
• Aligned to Strategy
Reward linked to achievement of strategic goals and sustainable performance of the
company
• Shareholder aligned
Reward explicitly linked to short and long-term shareholder value creation
• Sustained delivery
Reward balanced to optimise long, medium and short term, performance.
27
Breville Group Limited annual report 2019 Directors’ report
continued
Remuneration report (audited) continued
4. Remuneration Framework continued
In implementing its remuneration framework and ensuring proper oversight the committee:
• Designs compensation to motivate and retain a high performing CEO and executive team in
line with shareholder interests
• Encourages increasing level of executive shareholdings
• Aligns interest of shareholders and executives via increasing payments in equity
• Grants equity rights based on value
• Retrospectively discloses performance hurdles and calculation of award and payments made
to ensure transparency
• Encourages increased variabilisation of pay linked to short and long-term performance
• Limits executive termination packages to less than 12 months’ pay plus accrued leave
• Rewards sustained long term performance, not just single year peak performance
• Utilises measurable, shareholder relevant targets
• Retains Board discretion over level of award.
In establishing the remuneration arrangements each year the Board specifically reviews the proportion of the fixed
compensation and variable compensation (potential short term and long term incentives). The Board aims to steadily
increase the proportion of variable, and specifically share based and longer term performance related, remuneration.
The target remuneration mix for FY19 is shown in table 2 below. It reflects the maximum STI opportunity for the
current year that would be available if the performance conditions were satisfied in full at target date, and the value of
the LTI performance rights granted during the year, as determined at full value as of the grant date.
Table 2: Target Remuneration Mix for FY19
0%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
CEO FY19
34%
8%
17%
42%
Other Execs FY19
54%
0%
19%
27%
Fixed Cash Remuneration
Fixed Deferred Remuneration
STI cash
LTI Shares
• Contracts – Employment contracts are entered into with executives designed to attract and retain the
employees whilst safeguarding the Group’s interests. None of the KMPs have fixed terms contracts. Amounts
payable on termination vary from a minimum statutory entitlement to a maximum of 12 months of fixed pay plus
accrued leave balances. In accordance with the terms of the LTI performance rights plan any performance rights
not vested at the date of termination will be forfeited and will lapse, unless otherwise determined by the Board.
Rights under the fixed deferred remuneration scheme will lapse on resignation but will be pro-rated for time
served in the case of termination without cause.
• Hedging Prohibited – The Group has a policy that prohibits KMPs and their closely related parties from entering
into an arrangement that has the effect of limiting the exposure to risk relating to an element of that member’s
compensation. The policy complies with the requirements of s.206J of the Corporations Act 2001.
• Measurement – The people and performance committee is responsible for assessing performance against KPIs
and determining the STI and LTI to be awarded. To assist in this assessment, the committee receives detailed
reports on performance from management which are based on independently verifiable data. From time to
time the committee may also engage external remuneration consultants to assist with this review. An external
specialist is always used to calculate and report on TSR and relative TSR performance against a peer group for
use in LTI evaluation. In the event of fraudulent or dishonest misconduct, the Board reserves the right to deem
any unvested rights to have lapsed.
28
Breville Group Limited annual report 2019 Remuneration report (audited) continued
5. Linking Remuneration to Performance
The Group’s remuneration principles and framework aim to align executive remuneration to the Group’s strategic and
business objectives, sustained business performance and the creation of sustainable shareholder value.
The key measures that are applied to Executive KMP incentive plans – EBIT and relative TSR – are both measurable,
verifiable and well aligned to shareholder value creation.
• EBIT – Earnings before interest and tax (EBIT) is a well-recognised measure of the Group’s performance and
ability to generate cash to fund growth and distribute dividends. It is well defined and measurable.
The EBIT measure used by the Group is on a reported statutory basis and NOT on an “adjusted” or “underlying
basis”. EBIT is preferred to EBITDA given the strategic importance of investment in new product development
and associated amortisation costs.
Also, importantly, no STI pool is earned until a stretch EBIT target, set by the Board at the beginning of the year,
is delivered, thus protecting sustained core financial performance for shareholders.
• Relative TSR – Total Shareholder Return (TSR) is a measure of share price appreciation, and dividends
paid, expressed as a % of the opening share price. The Group measures its relative TSR against an index of
approximately 60 peers within the S&P/ASX200 Consumer Staples, Consumer Discretionary and Industrials
indices and rewards executives for outperforming the peer group. 50% vesting is achieved if the Group’s TSR is
in top half of the peer group, rising to 100% vesting if a 75th percentile performance is achieved.
The Group uses an average 3-year performance period. To incentivise sustained shareholder value delivery over
multiple periods, rather than a single point, the LTI grant is split into three tranches and TSR performance is
measured over a 2, 3 and 4-year period with an average performance period of 3 years.
No vesting occurs unless absolute TSR is positive in a particular performance period. TSR performance is
calculated by an independent specialist at the end of each performance period.
Table 3 below shows the Group’s sales, profit and share price performance over the last 5 years.
The measures shown are consistent with the measures used in determining the variable amounts of remuneration to
be awarded to executives. There is a strong alignment between Executive reward and shareholder return as seen in
the below table.
Table 3: Five Year Group Performance ($m)
Year ended
Group Revenue
Revenue Growth
Group EBIT
EBIT Growth
NPAT
Earnings per share (cents)
EPS Growth
Total dividends per share (cents)
Share price at 30 June ($)
Share Price Change
One Year TSR
Average STI as % Maximum Opportunity
Percentage of Executive LTI
performance rights that vested
related to schemes maturing in the year
30 June
2015
30 June
2016
30 June
2017
30 June
2018
30 June
2019
527.0
(2.7)%
69.6
(1.2)%
46.7
35.9
(4.3)%
27.0
6.21
(22.7)%
(20.1)%
0%
576.6
605.7
9.4%
73.7
5.9%
50.2
38.6
7.5%
28.5
7.49
20.6%
25.0%
39.6%
5.0%
79.0
7.2%
53.8
41.4
7.2%
30.5
10.45
39.5%
43.5%
39.7%
646.8
6.8%
86.9
10.0%
58.5
45.0
8.7%
33.0
11.62
11.2%
14.2%
78.0%
760.0
17.5%
97.3
12.0%
67.4
51.8
15.2%
37.0
16.36
40.8%
43.8%
76.0%
0%
0%
100%
100%
100%
• The Group’s annual FY20 STI plan has a stretch financial target based on Group EBIT which will be
retrospectively disclosed as a part of the FY20 remuneration report.
• Since FY16 the LTI performance rights awarded have used relative TSR as the performance measure. TSR
performance and associated rights vesting in FY20 will be retrospectively disclosed as part of the FY20
remuneration report.
•
In 2016 a limited number of time based / continuing performance LTI rights were also issued to KMPs. This
mechanism has not been used since 2016 with the Group issuing only performance-based rights after FY16.
29
Breville Group Limited annual report 2019 Directors’ report
continued
Remuneration report (audited) continued
6. Executive Remuneration - detailed elements
There are four key components in Executive Remuneration:
i) Fixed Cash Remuneration
ii)
Fixed Deferred Remuneration
iii) Short Term Performance Incentive
iv) Long Term Performance Incentive
i) Fixed Cash Remuneration
Executives receive their fixed cash remuneration in cash or other non-cash benefits. Fixed cash remuneration is
reviewed annually by the People and Performance Committee, or on role change. The committee reviews company
and individual performance, relevant comparative market compensation, considers internal relativities and, where
appropriate, external advice on policies and practices. Breville increasingly competes in a global market for talent and
employs both Australian and international managers, thus the Group increasingly benchmarks both domestically, and
internationally, when reviewing suitability of remuneration.
Details of fixed cash remuneration by KMP is shown in the remuneration tables 6 and 7.
ii) Fixed Deferred Remuneration in Rights
Fixed remuneration may also be delivered by way of a deferred grant of share rights. These rights will vest, and are
exercisable, in 3 years at no cost to the executive as long as the executive is still employed at the vesting date. The
rights automatically lapse if the executive resigns before the vesting date, or is terminated with cause, and vest, on a
pro rata basis, if the executive is terminated without cause.
Details of fixed deferred remuneration grants for which compensation has been included in the remuneration tables
4,6 and 7. All grants are shown in table 11.
Table 4: Fixed Deferred Remuneration included in Remuneration tables 6 and 7
Fixed Deferred
Remuneration –
share rights year
of issue
FY18 1
Conditions
•
Issued for nil consideration
• Exercise price is $0.
• Participant (Jim Clayton) must be
employed by the company on
30 June 2020.
• 0% vested at 30 June 2019.
Number
outstanding
30 June
2019
Number
outstanding
30 June
2018
Issue Price
/ Fair value
$10.12
60,000
60,000
1 This grant was reported as an LTI performance grant in FY18 remuneration report. Now separately shown as Fixed Deferred
Remuneration.
iii) Short term performance incentives (STI)
The Group operates an annual STI program available to executives and other employees and awards a cash
incentive subject to the attainment of clearly defined business targets.
Who participates?
Executives and other employees
How is STI
delivered?
Cash
What is the STI
opportunity?
Executives and other employees are eligible for an annual maximum incentive of between
5% and 50% of fixed cash remuneration.
What are the
performance
conditions for each
financial year?
The STI rewards executives and other employees for their contribution to achievement of
Group financial outcomes.
The total Group incentive payment is based on the achievement of a stretch target
pre-bonus EBIT set by the Board. No bonus pool is awarded or bonus payable to any
employee until this pre-bonus EBIT is exceeded. As pre-bonus EBIT exceeds the target,
the pool is funded until the maximum is reached.
Actual STI payments are awarded to each executive or employee depending on the
extent to which the bonus pool is funded, their maximum % achievable and the delivery of
divisional and individual targets.
30
Breville Group Limited annual report 2019 Remuneration report (audited) continued
6. Executive Remuneration - detailed elements continued
iii) Short term performance incentives (STI) continued
How is performance
assessed?
After measurement and audit of Group EBIT
•
•
the People and Performance Committee recommends the amount of STI to be paid to
the Group Chief Executive Officer for Board approval; and
for the other executives and employees, the people and performance committee will
seek recommendations on total and individual pay outs from the Group Chief Executive
Officer based on Group EBIT, divisional profits and, in some cases, personal targets.
iv) Long term performance incentives (LTI)
The Group operates an LTI scheme with an annual grant of LTI share rights that vest in the future reliant on sustained
shareholder value creation. The objective of the LTI plan is to reward and incentivise executives in a manner that
aligns with sustainable long-term value creation.
Who participates?
How is LTI
delivered?
What is the LTI
opportunity?
What are the
performance
hurdles for the FY19
LTI grant?
The LTI plan is made available to executives who are able to influence the generation of
shareholder value and have a direct impact on the company’s performance against long-
term performance hurdles.
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 an LTI grant to the Group Chief Executive Officer, is then put to the Board
for approval.
Upon satisfaction of the performance hurdles, the performance rights will vest and convert
into fully paid ordinary shares in the company.
Depending upon their position and seniority in the organisation, executives and other
employees are eligible for an annual LTI award of between 10% - 125% of their fixed cash
remuneration.
The Group uses TSR as the performance measure for the LTI plan, applying both an
absolute and relative test.
The absolute test requires that over the testing period, the TSR needs to be positive.
If the TSR is negative over the testing period, then the performance rights lapse. If the
TSR is positive, the Group then uses a relative TSR compared to a defined peer group of
approximately 60 companies (in the S&P/ASX200 in the Consumer Staples, Consumer
Discretionary and Industrials sectors) with percentile ranking to determine the percentage
of rights that vest.
The grant is split into three equal tranches with a 2, 3 and 4 year vesting period
respectively with an average performance period of 3 years.
The vesting schedule is as follows:
The Group (BRG) TSR performance
ranking relative to peer group
Proportion of performance rights that
will vest
Below 50th percentile
Above 50th percentile
Between 51st and 75th percentile
0%
50%
Pro rata between 50% and 100%, based
on the relative TSR performance
75th percentile and above
100%
Each of the three tranches will vest and are measured independently. If any tranche does
not achieve its vesting conditions, that tranche lapses but this shall not preclude the other
tranches from vesting if their respective performance conditions are met.
How is performance
assessed?
TSR performance is calculated by an independent external adviser at the end of each
performance period. Table 12 provides details of the KMP performance rights granted
under the FY19 plan.
31
Breville Group Limited annual report 2019 Directors’ report
continued
Remuneration report (audited) continued
6. Executive Remuneration - detailed elements continued
iv) Long term incentives (LTI) continued
When does the FY19
LTI vest?
The performance rights will vest over a period of four years, with an average performance
period of 3 years.
Each tranche, which comprises 33% of the total award is required to meet its performance
measures applying both an absolute test and a relative test as follows:
Tranche 1: TSR from 30 June 2018 to 30 June 2020
Tranche 2: TSR from 30 June 2018 to 30 June 2021
Tranche 3: TSR from 30 June 2018 to 30 June 2022
If the performance hurdle is not met, any unvested performance rights will lapse unless
otherwise determined by the Board.
All outstanding unvested performance rights automatically lapse upon an executive
ceasing to be employed by the Group unless otherwise determined by the Board.
The participant cannot sell, dispose, encumber or trade in performance shares without the
prior written consent of the Board until the earlier of:
a) 2 years after the date of issue, transfer or allocation;
b) 12 months after the date of cessation of employment; or
c) Such other date as the Board determines.
Notwithstanding the foregoing, any trading in performance shares is at all times subject to
the company’s share trading policy.
Participants do not receive distributions or dividends on unvested performance rights.
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.
How are grants
treated on
termination?
Are there
restrictions
on disposal of
performance shares
following the vesting
and exercise of FY19
performance rights?
Do participants
receive dividends
on unvested
performance rights?
What happens if
there is a change of
control?
Table 5: LTI plans for which compensation is included in the remuneration tables 6 & 7
LTI Plan for
the year
ended
FY16
Performance
based LTI
rights
June 2016
Performance hurdles/conditions
Issued for nil consideration.
- Exercise price is $0.
- Term of two to four years with vesting as follows, each
representing 33% of the total number of performance rights:
(a) Total shareholder return (TSR) from
Fair value per
performance
right at Grant
date $
Number
outstanding
30 June 2019
(Executive
only)
Number
outstanding
30 June 2018
(Executive
only)
27,760
55,520
30 June 2015 to 30 June 2017 applying
both an Absolute Test and a Relative Test.
(b) Total shareholder return (TSR) from
30 June 2015 to 30 June 2018 applying
both an Absolute Test and a Relative Test.
(c) Total shareholder return (TSR) from
30 June 2015 to 30 June 2019 applying
both an Absolute Test and a Relative Test.
66% vested (64,080 shares) as at 30 June 2019 (16,860 lapsed1)
$1.90
$2.07
$2.15
32
Breville Group Limited annual report 2019 Remuneration report (audited) continued
6. Executive Remuneration - detailed elements continued
iv) Long term incentives (LTI) continued
Table 5: LTI plans for which compensation is included in the remuneration tables 6 & 7 continued
LTI Plan for
the year
ended
FY16
Time based
rights
June 2016
FY17
Performance
based LTI
rights
June 2017
FY18
Performance
based LTI
rights
June 2018
Performance hurdles/conditions
(a) Issued for nil consideration to Jim Clayton
- Exercise price is $0.
- Participant must be employed by the company on
31 December 2018.
100% vested at 30 June 2019.
(b) Issued for nil consideration to other KMPs
-
- Exercise price is $0.
- Participant must be employed by the company on
25 January 2019.
100% vested at 30 June 2019.
(c) Issued for nil consideration to other KMPs
-
- Exercise price is $0.
- Participant must be employed by the company on
25 January 2020.
0% vested at 30 June 2019.
-
Issued for nil consideration.
- Exercise price is $0.
- Term of two to four years with vesting as follows, each
representing 33% of the total number of performance rights:
(a) Total shareholder return (TSR) from 30 June 2016 to
30 June 2018 applying both an Absolute Test and a
Relative Test.
(b) Total shareholder return (TSR) from 30 June 2016 to
30 June 2019 applying both an Absolute Test and a
Relative Test.
(c) Total shareholder return (TSR) from 30 June 2016 to
30 June 2020 applying both an Absolute Test and a
Relative Test.
33% vested (55,400 shares) as at 30 June 2019 (22,500 lapsed1)
Issued for nil consideration.
- Exercise price is $0.
- Term of two to four years with vesting as follows, each
representing 33% of the total number of performance rights:
(a) Total shareholder return (TSR) from 30 June 2017 to
30 June 2019 applying both an Absolute Test and a
Relative Test.
(b) Total shareholder return (TSR) from 30 June 2017 to
30 June 2020 applying both an Absolute Test and a
Relative Test.
(c) Total shareholder return (TSR) from 30 June 2017 to
30 June 2021 applying both an Absolute Test and a
Relative Test.
0% vested as at 30 June 2019 (nil lapsed).
Fair value per
performance
right at Grant
date $
Number
outstanding
30 June 2019
(Executive
only)
Number
outstanding
30 June 2018
(Executive
only)
$4.56
$4.56
-
-
30,100
44,350
$4.35
44,350
44,350
110,200
165,600
$3.43
$3.49
$3.51
$7.05
$6.81
$6.68
144,900
144,900
33
Breville Group Limited annual report 2019 Directors’ report
continued
Remuneration report (audited) continued
6. Executive Remuneration - detailed elements continued
iv) Long term incentives (LTI) continued
Table 5: LTI plans for which compensation is included in the remuneration tables 6 & 7 continued
LTI Plan for
the year
ended
FY19
Performance
based LTI
rights
June 2019
Performance hurdles/conditions
Issued for nil consideration.
- Exercise price is $0.
- Term of two to four years with vesting as follows, each
representing 33% of the total number of performance rights:
(a) Total shareholder return (TSR) from 30 June 2018 to
30 June 2020 applying both an Absolute Test and a
Relative Test.
(b) Total shareholder return (TSR) from 30 June 2018 to
30 June 2021 applying both an Absolute Test and a
Relative Test.
(c) Total shareholder return (TSR) from 30 June 2018 to
30 June 2022 applying both an Absolute Test and a
Relative Test.
0% vested as at 30 June 2019 (nil lapsed).
Fair value per
performance
right at Grant
date $
Number
outstanding
30 June 2019
(Executive
only)
Number
outstanding
30 June 2018
(Executive
only)
197,700
-
$7.07
$6.81
$6.58
1 Performance-based LTI rights lapsed for June 2016 and June 2017 relate to resignation of M. Cohen on 17 November 2017.
7. Non-Executive Director Remuneration
In accordance with best practice corporate governance, the structure of non-executive director and executive
compensation is separate and distinct. The Board seeks to set non-executive director compensation at a suitable
level to attract and retain directors of high calibre whilst being commensurate with growing international companies of
a similar size and type.
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 chairperson of a Board committee
recognising the additional time commitment required by the director to facilitate the running of the committee.
The Group’s 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 $1,400,000 per
year was approved by shareholders at the annual general meeting held in November 2016. The compensation of
non-executive directors for the year ended 30 June 2019 is detailed in Table 6 on page 35 with the total fees paid of
$1,050,416 representing 75.0% of the approved fee cap.
34
Breville Group Limited annual report 2019 Remuneration report (audited) continued
8. Statutory Remuneration Tables
Table 6: KMP Remuneration for the year ended 30 June 2019 (FY19)
The following tables 6 and 7 set out the statutory KMP remuneration disclosures, prepared in accordance with the
Corporations Act 2001 and Australian Accounting Standards. No termination benefits were paid in FY19
Short-term employee benefits
Long-
term
em-
ployee
bene-
fits
Post
employ-
ment
benefits
Salary &
fees
Cash
bonus-
es Other
Fixed
deferred
remu-
nera-
tion in
shares
Total
short
term em-
ployee
benefits
Super-
annua-
tion
Long
service
leave
Share-
based
pay-
ment
LTI
Perfor-
mance
rights
Fixed
remu-
nera-
tion
Total
Performance
related
$
$
$
$
$
$
$
$
$
%
STI
%
LTI
%
Non-
executive
directors
S. Fisher –
Chairperson
T. Antonie
P. Cowan (a)
S. Herman
D. Howell
L. Myers
K. Wright
Sub-total
non-
executive
directors
Other key
management
personnel
J. Clayton
S. Brady
M. Payne
C. Torng
Sub-total
executive
KMP
273,972
112,785
93,987
112,785
112,785
126,484
126,484
959,282
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
273,972
26,028
112,785
10,715
93,987
8,929
112,785
10,715
112,785
10,715
126,484
12,016
126,484
12,016
-
959,282
91,134
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
100%
123,500
100%
102,916
100%
123,500
100%
123,500
100%
138,500
100%
138,500
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,050,416
915,385 357,991
-
214,036 1,487,412
25,000
17,676
511,532
2,041,620
57.4% 17.5% 25.1%
522,235 156,167 30,000
M. Nicholas (b)
433,654
96,911
-
538,273 128,729 45,482
479,951 128,069
-
-
-
-
-
708,402
51,797
40,613
120,377
921,189
70.0% 17.0% 13.1%
530,565
20,236
7,359
44,022
602,182
76.6% 16.1%
7.3%
712,484
-
-
116,389
828,873
70.5% 15.5% 14.0%
608,020
20,531
7,842
190,473
826,866
61.5% 15.5% 23.0%
2,889,498 867,867 75,482
214,036 4,046,883
117,564
73,490
982,793 5,220,730
Totals
3,848,780 867,867 75,482
214,036 5,006,165 208,698
73,490
982,793 6,271,146
(a) P. Cowan joined the Board on 1st September, 2018.
(b) M. Nicholas joined on 10th September, 2018.
35
Breville Group Limited annual report 2019
Directors’ report
continued
Remuneration report (audited) continued
8. Statutory Remuneration Tables continued
Table 7: KMP Remuneration for the year ended 30 June 2018 (FY18)
Short-term employee benefits
Post em-
ployment
benefits
Long-
term em-
ployee
benefits
Share-
based
pay-
ment (c)
Fixed
remu-
neration
(c)
Total
Performance
related
Salary &
fees
Cash
bonuses Other
Total
short
term em-
ployee
benefits
Superan-
nuation
Long
service
leave
Perfor-
mance
rights
$
$
$
$
$
$
$
$
%
STI
%
LTI
%
273,971
112,784
112,784
112,784
45,619
126,484
126,484
910,910
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
273,971
26,027
112,784
10,715
112,784
10,715
112,784
10,715
45,619
-
126,484
12,016
126,484
12,016
910,910
82,204
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
299,998
123,499
123,499
123,499
45,619
138,500
138,500
993,114
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
875,000
350,865
- 1,225,865
25,000
18,532
423,180 1,692,577
54.27% 20.73% 25.00%
Non-execu-
tive directors
S. Fisher –
chairman
T. Antonie
S. Herman
D. Howell
S. Klein (a)
L. Myers
K. Wright
Sub-total
non-executive
directors
Other key
management
personnel
J. Clayton (c)
S. Brady
426,621
116,955
30,000
573,576
42,714
7,343
68,936
692,569
73.16% 16.89%
9.95%
M. Cohen (b)
M. Payne
C. Torng
Sub-total
executive
KMP
Totals
829,954
-
12,115
842,069
10,096
517,853
139,927
38,617
696,397
-
-
-
(43,498)
808,667
105.38%
-
(5.38%)
69,381
765,778
72.67% 18.27%
9.06%
479,951
136,448
-
616,399
20,049
8,243
178,735
823,426
61.72% 16.57% 21.71%
3,129,379
744,195
80,732 3,954,306
97,859
34,118
696,734 4,783,017
4,040,289
744,195
80,732 4,865,216
180,063
34,118
696,734 5,776,131
(a) S. Klein resigned on 13 November 2017. S. Klein is a principal of the legal firm SBA Law. His director’s fees (which are subject to
GST) were paid to SBA Law and are shown above net of GST, up to the date of resignation.
(b) M. Cohen resigned on 17 November 2017 and ceased to be key management personnel on that date. Salary and fees include
an ex-gratia payment paid to him on his resignation. Share-based payment for M. Cohen includes the write-back of unvested
performance rights following the cessation of employment and the forfeiture and lapse of those rights.
(c) SBP LTI Performance rights reported in FY18 included $142,691 attributable to fixed deferred remuneration payable in share
rights to Jim Clayton. Adjusting for these, Fixed Remuneration would be shown as 62.7% of total remuneration and LTI as 16.6%.
36
Breville Group Limited annual report 2019 Remuneration report (audited) continued
8. Statutory Remuneration Tables continued
Table 8: KMP STI cash bonuses awards in FY19 and FY18 and LTI Performance rights vesting in FY19
Name
J. Clayton
S. Brady
M. Nicholas
M. Payne
C. Torng
STI Cash bonuses
% Earned % Forfeited
Share-based LTI performance base
compensation vesting in FY19
Year
granted
% Vested % Forfeited
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
76.0%
78.0%
76.5%
78.0%
60.8%
-
64.6%
74.1%
73.2%
78.0%
24.0%
22.0%
23.5%
22.0%
39.2%
-
35.4%
25.9%
26.8%
22.0%
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
100%
100%
100%
100%
-
-
100%
100%
100%
100%
0%
0%
0%
0%
-
-
0%
0%
0%
0%
Table 9: KMP shareholdings
Ordinary shares held* in Breville Group Limited (number)
30 June 2019
Directors
S. Fisher
P Cowan(b)
T. Antonie
S. Herman
D. Howell
L. Myers
K. Wright
Other key management
personnel
J. Clayton
S. Brady
M. Nicholas(c)
M. Payne
C. Torng
Total (d)
Balance at
1 July 2018
On exercise of
performance rights
Net change other (a)
Balance at
30 June 2019
100,288
-
28,286
30,000
120,000
200,000
15,000
170,100
359,502
-
16,655
3,670
1,043,501
-
-
-
-
-
-
-
71,400
16,565
-
13,830
55,815
157,610
17,712
5,000
8,063
6,000
7,500
50,000
5,000
19,200
22,000
20,578
-
-
118,000
5,000
36,349
36,000
127,500
250,000
20,000
260,700
398,067
20,578
30,485
59,485
161,053
1,362,163
* Held directly, indirectly or beneficially.
(a) All equity transactions with key management personnel 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) P Cowan joined on 1 September 2018.
(c) M. Nicholas joined on 10 September 2018.
(d) 1% of total share capital is owned by KMPs up from 0.8% in FY18
37
Breville Group Limited annual report 2019 Directors’ report
continued
Remuneration report (audited) continued
8. Statutory Remuneration Tables continued
Table 9: KMP shareholdings continued
Ordinary shares held* in Breville Group Limited (number)
30 June 2018
Directors
S. Fisher
T. Antonie
S. Herman
D. Howell
S. Klein (f)
L. Myers
K. Wright
Other key management
personnel
J. Clayton
S. Brady
M. Cohen (g)
M. Payne
C. Torng
Total
Balance at
1 July 2017
On exercise of
performance rights
Net change other (e)
Balance at
30 June 2018
92,288
20,753
25,000
120,000
147,189
200,000
5,000
160,000
350,732
168,000
-
-
1,288,962
-
-
-
-
-
-
-
10,100
8,770
8,440
5,340
3,670
36,320
8,000
7,533
5,000
-
(147,189)
-
10,000
-
-
(176,440)
11,315
-
(281,781)
100,288
28,286
30,000
120,000
-
200,000
15,000
170,100
359,502
-
16,655
3,670
1,043,501
* Held directly, indirectly or beneficially.
(e) All equity transactions with key management personnel have been entered into under terms and conditions no more favourable
than those the Group would have adopted if dealing at arm’s length.
(f) S. Klein resigned on 13 November 2017 and Net Change Other column reflects the impact of ceasing to be a KMP
(g) M. Cohen resigned on 17 November 2017 and Net Change Other column reflects the impact of ceasing to be a KMP
Table 10: KMP 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:
FY16 Performance based
FY16 time based
FY16 time based
FY16 time based
FY17 Performance based
FY17 Performance based
FY18 Performance based
FY18 Performance based
FY18 Performance based
FY19 Performance based
FY19 Performance based
FY19 Performance based
Grant Date
12 Feb 16 (a)*
12 Feb 16 (b)
12 Feb 16 (b)
12 Feb 16 (b)
9 Aug 16 (c)*
9 Aug 16 (c)*
13 Nov 17 (d)*
13 Nov 17 (d)*
13 Nov 17 (d)*
11 Sep 18 (e)*
11 Sep 18 (e)*
11 Sep 18 (e)*
First
exercise
date
Last
exercise
date
Expiry
Date
Exercise
price
Fair value per
performance
right at grant
date ($) (Note 18)
Vested and
exercised
30 June
2019
Number
of Rights
29 Aug 19
3 Oct 19
3 Oct 19
31 Dec 18
31 Mar 19
31 Mar 19
25 Jan 19
31 Mar 19
31 Mar 19
25 Jan 20
31 Mar 20
31 Mar 20
29 Aug 19
3 Oct 19
3 Oct 19
31 Aug 20
2 Oct 20
2 Oct 20
29 Aug 19
1 Oct 19
1 Oct 19
28 Aug 20
1 Oct 20
1 Oct 20
27 Aug 21
1 Oct 21
1 Oct 21
28 Aug 20
1 Oct 20
1 Oct 20
27 Aug 21
1 Oct 21
1 Oct 21
29 Aug 22
1 Oct 22
1 Oct 22
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2.15
4.56
4.56
4.35
3.49
3.51
7.05
6.81
6.68
7.07
6.81
6.58
Y
Y
27,760
30,100
44,350
44,350
55,100
55,100
48,500
48,200
48,200
66,100
65,900
65,700
* In addition to the TSR performance hurdle, the participant must be employed by the company on the vesting date.
(a) There were three equal tranches to be tested at 30 June 2017, 30 June 2018 and 30 June 2019 all with a total shareholder
return hurdle (TSR) applying an absolute test and a relative test. The last tranche is to be tested at 30 June 2019
38
Breville Group Limited annual report 2019 Remuneration report (audited) continued
8. Statutory Remuneration Tables continued
Table 10: KMP Performance rights granted continued
(b) There are three grants impacting FY19 with two vesting in FY19 and one remaining to impact FY20. For the three grants the
affected executive needed to be employed on 31/12/18, 25/01/19 and 25/01/20 respectively
(c) There are three equal tranches to be tested at 30 June 2018, 30 June 2019 and 30 June 2020 all with a total shareholder return
hurdle (TSR) applying an absolute test and a relative test. Two tranches remain to be tested at 30 June 2019 and 30 June 2020
respectively.
(d) There are three equal tranches to be tested at 30 June 2019, 30 June 2020 and 30 June 2021 all with a total shareholder return
hurdle (TSR) applying an absolute test and a relative test.
(e) There are three equal tranches to be tested at 30 June 2020, 30 June 2021 and 30 June 2022 all with a total shareholder return
hurdle (TSR) applying an absolute test and a relative test.
Table 11: Fixed Deferred Remuneration rights holding of KMPs
The terms and conditions of each grant of share rights issues as fixed deferred remuneration affecting remuneration
of key management personnel in this financial year or future reporting years are as follows:
First
exercise
date
Last
exercise
date
Expiry
Date
Exercise
price
Fair value at
grant date ($)
(Note 18)
Number of
rights
Vested and
exercised
30 June
2019
Vested and
exercised
30 June
2018
31 Aug 20
1 Oct 20
1 Oct 20
0.00
10.12
60,000
-
-
Grant Date
13 Nov 17 (f)
(f) Participant, in this case Jim Clayton, must be employed by the company on 30 June 2020 for the rights to vest.
Table 12: Performance rights holdings of KMP
30 June 2019
Other key
management
personnel
J. Clayton
S. Brady
M. Nicholas (c)
M. Payne
C. Torng
30 June 2018
Other key
management
personnel
J. Clayton
S. Brady
M. Cohen (d)
M. Payne
C. Torng
Balance
30 June 2018 (e)
Granted as
remuneration (a)
Vested and
exercised
Other (b)
Balance
30 June 2019
238,700
57,230
-
53,160
135,730
484,820
102,400
25,900
24,800
23,000
21,600
197,700
(71,400)
(16,565)
-
(13,830)
(55,815)
(157,610)
-
-
-
-
-
-
269,700
66,565
24,800
62,330
101,515
584,910
Balance
30 June 2017
Granted as
remuneration (a)
Vested and
exercised
Other (b)
Balance
30 June 2018 (e)
153,700
64,700
65,800
41,300
123,100
448,600
155,100
16,300
-
17,200
16,300
204,900
(10,100)
(8,770)
(8,440)
(5,340)
(3,670)
(36,320)
-
(15,000)
(57,360)
-
-
(72,360)
298,700
57,230
-
53,160
135,730
544,820
(a) Performance awards granted during the year are subject to TSR performance hurdles and/or remaining in employment until date
of vesting.
(b) Includes forfeitures and lapses.
(c) M. Nicholas joined on 10 September 2018.
(d) M Cohen resigned on 17 November 2017 and ceased to be key management personnel on that date.
(e) 60,000 Fixed Deferred Remuneration shown in closing balance in FY18, now shown separately so not included in FY19 opening
balance. Refer to Table 11
39
Breville Group Limited annual report 2019 Directors’ report
continued
Directors’ meetings
Indemnification of auditors
The number of meetings of directors (including meetings
of committees of directors) held during the year and the
number of Board meetings attended by each director
or by each committee member, in the case of the
audit and risk committee (A&RC) and the people and
performance committee (P&PC), was as follows:
Full board
Audit & risk
(A&RC)
People and
performance
(P&PC)
To the extent permitted by law, the company has agreed
to indemnify its auditors, PricewaterhouseCoopers, as
part of the terms of its audit engagement agreement,
against certain liabilities to third parties arising from the
audit engagement, except to the extent that any losses
are due to PricewaterhouseCoopers negligent, wrongful
or wilful acts or omissions. No payments have been
made to indemnify PricewaterhouseCoopers during or
since the financial year.
Number of
meetings
S. Fisher
T. Antonie
P. Cowan (b)
S. Herman
D. Howell
L. Myers
K. Wright
Notes
12
12 (c)
12
9 (b)
12
12
12
12
4
(a)
(a)
(a)
(a)
4
4 (c)
4
3
(a)
(a)
(a)
(a)
3
3
3 (c)
(a) Not a member of the relevant committee.
(b) P. Cowan was appointed on 1 September 2018.
(c) Designates the current chairperson of the Board or
committee.
Committee membership
As at the date of this report, the company had an audit
and risk committee and a people and performance
committee. The details of the functions and
memberships of the committees are presented
in the corporate governance statement.
The current members, as at the date of this report, of
the A&RC are L. Myers (chairperson), D. Howell and
K. Wright.
The current members, as at the date of this report, of
the P&PC are K. Wright (chairperson), D. Howell and
L. Myers.
All Chairs and members of the above committees
are independent.
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 and
officers 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.
Corporate governance
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 42.
Performance rights
Unissued shares
As at the date of this report there were 1,106,255
potential unissued shares under the performance
rights and fixed deferred remuneration schemes (2018:
978,440). Refer to note 18 of the financial report for
further details of the performance rights outstanding.
Performance right holders do not have any right, by
virtue of the performance right, to participate in any
share issue of the company.
Lapse of unvested performance rights
During the year, 15,165 unvested performance rights
lapsed following the cessation of employment of
employees or executives and no unvested performance
rights lapsed as a result of performance hurdles not
being met. (2018: 66,360 unvested performance
rights lapsed following the cessation of employment
of employees or executives and 139,500 unvested
performance rights lapsed as performance hurdles were
not met).
40
Breville Group Limited annual report 2019 Auditor’s declaration of independence
Attached on page 99 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 2019. This auditor’s declaration
forms part of this directors’ report.
Non-audit services
During the financial year ended 30 June 2019 the
company’s auditor, PricewaterhouseCoopers,
provided non-audit services to Breville Group
entities. Details of the amounts paid to the auditor
PricewaterhouseCoopers, for the provision of non-audit
services during the year ended 30 June 2019 are set
out in Note 20. These services primarily relate to tax
compliance and advisory services.
In accordance with the recommendation from the audit
and risk committee of the company, the directors are
satisfied that the provision of the non-audit services
during the year is compatible with the general standard
of independence imposed by the Corporations Act.
Also, in accordance with the recommendation from
the audit and risk committee, the directors are satisfied
that the nature and scope of each type of non-audit
service provided means that auditor independence was
not compromised. The auditors have also provided the
audit and risk committee with a report confirming that,
in their professional judgement, they have maintained
their independence in accordance with the firm’s
requirements, the provisions of APES 110 Code of
Ethics for Professional Accountants and the applicable
provisions of the Corporations Act.
Significant events after year end
The assets of ChefSteps, a US-based business was
acquired on 16 July 2019, which will be included within
the Global Product segment. The acquisition is not
expected to have any material impact on the business
of the Group.
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.
Steven Fisher
Non-executive Chairperson
Sydney
15 August 2019
41
Breville Group Limited annual report 2019 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 Securities
Exchange (‘ASX’) Corporate Governance Council
(‘council’) ‘Corporate Governance Principles and
Recommendations (3rd Edition)’.
The ASX principles that have been adopted are
outlined below.
The company’s corporate governance practices
throughout the year ended 30 June 2019 were
compliant with the council’s principles and
recommendations, except for those differences
disclosed and explained in this statement.
The following documents are available in the corporate
governance section of the company’s website
brevillegroup.com
• Audit and risk committee charter
• Board charter
• Anti-bribery and corruption
• Diversity policy
• Share trading policy
• Code of conduct
• People and performance committee charter
• Continuous disclosure policy
• Selection and appointment of directors
• Criteria for assessing independence of directors
• Shareholder communications policy
• Workplace gender equality agency report
• Ethical sourcing policy.
Board skills matrix
The skills, diversity and term in office of the current directors as at the date of this annual report are as follows:
Director
Appointed Term in office Qualifications Non-executive Independent Last elected
Steven Fisher
(Chairperson)
Timothy Antonie
Peter Cowan
Sally Herman
Dean Howell
Lawrence Myers
Kate Wright
2004
2013
2018
2013
2008
2013
2016
15 years
B.ACC, CA (SA)
5 years
1 year
6 years
11 years
BEcon
Other
BA, GAICD
FCA, CTA
5 years
B.Acct, CA, CTA
3 years
BA
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
2018
2017
2018
2016
2017
2018
2016
The Board has a wide range of skills which are
necessary for the effective management of the business
including in the following areas:
Principle 1: Lay solid foundations for
management and oversight
• Corporate strategy and executive leadership
• Multinational businesses
• Marketing
• Consumer goods
• Risk management
• Banking
• Compliance and governance
• Accounting, tax, reporting, and financial analysis
• Mergers, acquisitions and capital raisings
• Human resources and executive remuneration
•
Investor relations.
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. The respective roles
and responsibilities of the Board and management are
outlined further in the Board charter.
42
Breville Group Limited annual report 2019 Principle 1: Lay solid foundations for
management and oversight continued
The proportion of women employees in the company at
30 June 2019 is shown in the below table
Appointment of Board members
A detailed process is undertaken for the appointment
of new Board members, including appropriate checks
as to background, history and any potential conflicts of
interest.
As at the date of this annual report, all directors
have a written agreement outlining their roles and
responsibilities.
New directors receive a comprehensive briefing
package prior to their appointment.
Company secretaries
The company secretaries are directly accountable to the
Board on all matters relating to the proper functioning of
the Board.
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 corporate,
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.
Diversity policy objectives
Women on the Board 1
Women in senior executive roles 2
Women in senior roles 2
Women in company
30 June
2019
30 June
2018
29%
27%
29%
45%
33%
29%
32%
46%
1 Peter Cowan joined the Board on 1st September 2018. The
number of women on the Board remained at 2.
2 The number of women in senior executive roles increased
from 14 to 15 and the number of women in senior roles
from 18 to 19.
Senior executives are direct reports to the CEO or a
functional head. Senior roles include senior executives
and direct reports to senior executives or other
employees with a strategically important role.
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
The objectives set by the Board in accordance with the
diversity policy and progress towards achieving them
are:
workplace.
Workplace equality
• Representation of women trained in recruitment
and selection panels: Ongoing progress was made
during the year with further women being trained;
•
Issuing the company equal opportunity statement to
recruiting agencies: This continued during the year;
• Explicit requirement of recruiting agencies to provide
a gender balance of suitable, qualified, shortlisted
candidates for interview: This initiative continued to
progress during the year;
• 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 during the year;
• Enhancing the gender balance in career
development in senior and managerial roles; and
• Continue flexible working arrangements where
operationally appropriate.
In accordance with the requirements of the Workplace
Gender Equality Act 2012 (Act), Breville Pty Limited
lodged its annual compliance report with the Workplace
Gender Equality Agency. This report is available on
the company’s website at the corporate, corporate
governance section.
Evaluating the performance of the Board
The Chairperson is responsible for evaluating the
Board’s performance by way of an annual internal
assessment. Each director provides written feedback in
relation to the performance of the Board and directors
against a set of agreed criteria. This feedback is
reported by the Chairperson to the Board following
the assessment. This performance assessment was
completed by the Chairperson during the year.
43
Breville Group Limited annual report 2019 Corporate governance statement
continued
Principle 1: Lay solid foundations for
management and oversight continued
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 an annual
performance review with their direct manager during the
reporting period.
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 seven non-executive directors.
The directors’ report, on pages 14 and 15, outlines the
relevant skills, experience and expertise held by each
director in office at the date of this report.
In accordance with good corporate governance, where
the Chairperson of the Board is not an independent
director, the Board considers it to be useful and
appropriate to designate an independent director to
serve in a lead capacity to co-ordinate the activities of
the other independent directors, including acting as
principal liaison between the independent directors and
the Chairperson and representing the Board as the lead
independent director when the Chairperson is unable to
do so because of his non-independent status.
As Mr Fisher is not an independent director, the Board
has appointed Mr Myers as its lead independent
director.
Director independence
In considering whether a director is independent, the
Board refers to the company’s “Criteria for assessing
independence of directors” at the corporate governance
section of the company’s website, 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 Peter
Cowan, Mr Dean Howell, Mr Lawrence Myers and Ms
Kate Wright are independent directors. The following
directors are not independent directors:
• Mr Steven Fisher (non-executive Chairperson) was
employed by an entity associated with a substantial
shareholder of the company during the year;
• Mr Timothy Antonie (non-executive director) is a
non-executive director of Premier Investments Ltd, a
substantial shareholder of the company; and
• Ms Sally Herman (non-executive director) is a non-
executive director of Premier Investments Ltd, a
substantial shareholder of the company.
Regardless of whether directors are defined as
independent, all directors are expected to bring
independent views and judgement to Board
deliberations.
Since the appointment of Mr Peter Cowan on 1st
September 2018, the majority of the Board members
are independent directors.
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 Chairperson 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. The composition of
these committees is shown on page 40 and comprises
only independent directors.
44
Breville Group Limited annual report 2019 Principle 2: Structure the board to
add value continued
Nomination committee
During the year ended 30 June 2019, 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 2.1
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.
The Board brings independent judgement to decisions
regarding the composition of the Board. The process
of recruiting a new director includes the evaluation of
relevant skills, knowledge, experience, independence
and diversity. The Board endeavours to ensure
appropriate succession planning, both at a Board and
senior executive level.
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.
Principle 4: Safeguard integrity in
financial reporting
Audit and risk committee
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 monitoring and maintaining the
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;
• monitors and assesses the systems for internal
compliance and control, legal compliance and risk
management including operational and strategic
risks; and
•
reviews and carries out an annual assessment of the
company’s risk management framework.
Composition of committee
The members of the A&RC as at the date of this report
are:
• Mr Lawrence Myers (chairperson)
• Mr Dean Howell
• Ms Kate Wright
The directors’ report, on page 40, outlines the number
of A&RC meetings held during the year and the
member’s attendance at those meetings. It also outlines
the qualifications of A&RC members on pages 14
and 15.
Board members, group chief executive officer; company
secretaries; 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;
•
is chaired by an independent chair, who is not chair
of the Board; and
• has at least three members, in Breville’s case, all of
whom are independent directors.
In accordance with the council’s recommendation
4.2 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.
45
Breville Group Limited annual report 2019 Corporate governance statement
continued
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 corporate,
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 corporate, corporate
governance section.
Electronic communication
The company’s website displays recent ASX
announcements and contains information about
the company.
Shareholders can elect to receive communications from
the company’s share registry electronically which also
gives shareholders the opportunity to manage their
account details and holdings electronically. Shareholders
are also able to send communications to the company
and receive responses to these communications
electronically.
Briefings
The company keeps a record of 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:
• 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.
The company does not have an internal audit function
and 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.
During the year ended 30 June 2019, the company did
not have a separately established risk committee. All
duties and responsibilities typically delegated to such a
committee are the responsibility of the full Board, with
assistance from the A&RC.
The Group’s exposure to economic, environmental
and social sustainability risks, together with how these
risks are managed, are detailed in the Operating and
Financial Review section of the Directors’ report.
Principle 8: Remunerate fairly and
responsibly
People and performance committee
The Board has a people and performance committee
(P&PC), comprising the following directors as at the
date of this report:
• Ms Kate Wright (chairperson)
• Mr Dean Howell
• Mr Lawrence Myers
In accordance with the council’s recommendation 8.1,
the P&PC comprises:
• an independent chairperson; and
• at least three members, in Breville’s case all of
whom are indepenedent.
The P&PC is considered to be independent as at the
date of this report.
For details on the number of meetings of the P&PC held
during the year and the members attendance at those
meetings, refer to the directors’ report on page 40.
• guidelines and limits for approval of capital
Remuneration disclosure
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;
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 24 to 39.
46
Breville Group Limited annual report 2019 [This page is left deliberately blank]
47
Breville Group Limited annual report 2019 Consolidated income statement
for the year ended 30 June 2019
Revenue
Cost of sales
Gross profit
Other income
Employee benefits expenses
Premises, lease & utilities expenses
Advertising and marketing expenses
Other expenses
Earnings before interest, tax, depreciation & amortisation
(EBITDA)
Depreciation & amortisation expense
Earnings before interest & tax (EBIT)
Finance costs
Finance income
Profit before income tax
Income tax expense
Net profit after income tax for the year attributable to
members of Breville Group Limited
Earnings per share for profit attributable to the ordinary
equity holders of Breville Group Limited:
- basic earnings per share
- diluted earnings per share
Consolidated
30 June 2019
$’000
30 June 2018
$’000
759,967
(488,767)
271,200
287
(82,402)
(15,686)
(32,221)
(27,217)
646,765
(414,505)
232,260
689
(68,417)
(14,108)
(26,177)
(24,036)
113,961
100,211
(16,616)
97,345
(3,483)
449
94,311
(13,302)
86,909
(3,580)
1,044
84,373
(26,926)
(25,854)
67,385
58,519
Cents
Cents
51.8
51.8
45.0
45.0
Note
3(a)
3(b)
3(e)
3(c)
3(f)
3(f)
4
12
12
The accompanying notes form an integral part of this consolidated income statement.
48
Breville Group Limited annual report 2019 Consolidated statement of comprehensive
income for the year ended 30 June 2019
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
Net profit after income tax for the year
67,385
58,519
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Foreign currency translation differences
Net change in fair value of cash flow hedges
Income tax on other comprehensive income/(loss)
4
Other comprehensive income/(loss) for the year,
net of income tax
6,391
(1,878)
2,326
6,839
1,789
4,846
(823)
5,812
Total comprehensive income for the year attributable to
members of Breville Group Limited
74,224
64,331
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
49
Breville Group Limited annual report 2019 Consolidated statement of financial
position as at 30 June 2019
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Current tax assets
Total current assets
Non-current assets
Plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Other payables
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
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
5
6
7
15
4
8
4
9
6
4
6
15
6
14
4
6
13
13
57,129
154,595
152,325
2,016
1,923
367,988
12,043
6,322
123,414
141,779
509,767
122,700
6,276
13,960
464
143,400
3,395
47,283
4,346
1,008
56,032
199,432
310,335
140,050
4,553
165,732
310,335
103,316
104,420
99,669
3,721
4,579
315,705
11,379
5,677
112,588
129,644
445,349
84,585
10,180
13,745
291
108,801
3,690
45,324
3,422
877
53,313
162,114
283,235
140,050
(695)
143,880
283,235
The accompanying notes form an integral part of this consolidated statement of financial position.
50
Breville Group Limited annual report 2019 Consolidated statement of changes in
equity for the year ended 30 June 2019
Consolidated
2019
At 1 July 2018
Foreign
currency
trans-
lation
reserve
$’000
Employee
equity
benefits
reserve
$’000
Cash
flow
hedge
reserve
$’000
Issued
capital
$’000
Note
Retained
earnings
$’000
Total
equity
$’000
140,050
(1,124)
(1,972)
2,401
143,880
283,235
Foreign currency translation
reserve
Cash flow hedges
Income tax on items taken
directly to equity
Total other comprehensive
income for the year
Profit for the year
Total comprehensive income
for the year
4
Dividends paid
11
-
-
-
-
-
-
-
13(b)
(3,767)
13(b)
3,767
-
6,391
-
-
-
-
-
(1,878)
1,763
563
6,391
1,763
(1,315)
-
-
-
-
6,391
(1,878)
2,326
6,839
-
-
-
67,385
67,385
6,391
1,763
(1,315)
67,385
74,224
-
-
-
-
-
-
(3,767)
2,176
-
-
-
-
(45,533)
(45,533)
-
-
-
(3,767)
-
2,176
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 2019
2018
At 1 July 2017
Foreign currency translation
reserve
Cash flow hedges
Income tax on items taken
directly to equity
Total other comprehensive
income for the year
Profit for the year
Total comprehensive
income for the year
Dividends paid
11
Ordinary shares acquired by the
Trustee of the Breville Group
Performance Share Plan Trust
13(b)
(956)
Transferred to participants of the
performance rights plan
13(b)
Share-based payments
At 30 June 2018
956
-
140,050
5,267
(1,800)
1,086
165,732
310,335
140,050
(2,913)
(2,878)
(991)
126,341
259,609
4
-
-
-
-
-
-
-
1,789
-
-
-
-
-
4,846
631
(1,454)
1,789
631
3,392
-
-
-
-
1,789
4,846
(823)
5,812
-
-
-
58,519
58,519
1,789
631
3,392
58,519
64,331
-
-
-
-
-
-
(956)
1,231
-
-
-
-
(40,980)
(40,980)
-
-
-
(956)
-
1,231
140,050
(1,124)
(1,972)
2,401
143,880
283,235
The accompanying notes form an integral part of this consolidated statement of changes in equity.
51
Breville Group Limited annual report 2019 Consolidated cash flow statement
for the year ended 30 June 2019
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’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
5(b)
Cash flows used in investing activities
Purchase of plant and equipment
Proceeds from sale of plant and equipment
Purchase of intangible assets
Purchase of business
Net cash flows used in investing activities
Cash flows used in financing activities
Proceeds from borrowings
Repayment of borrowings
Irretrievable cash contributions paid to the Trustee of the Breville
Group Performance Share Plan Trust to acquire ordinary shares
Equity dividends paid
Net cash flows used in financing activities
13(b)
11(a)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Net foreign exchange difference
775,992
(717,668)
(2,996)
(25,436)
449
30,341
(5,473)
95
(23,003)
-
(28,381)
99,577
(99,603)
(3,767)
(45,533)
(49,326)
(47,366)
103,316
1,179
692,023
(579,185)
(2,904)
(22,326)
1,044
88,652
(4,295)
-
(15,170)
(9,071)
(28,536)
76,630
(68,576)
(956)
(40,980)
(33,882)
26,234
77,124
(42)
Cash and cash equivalents at end of the year
5(a)
57,129
103,316
The accompanying notes form an integral part of this consolidated cash flow statement.
52
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Key numbers
1 Summary of significant accounting policies
2 Operating segments
3 Revenue and expenses
4
Income tax
5 Cash and cash equivalents
6 Receivables, payables and provisions
7
Inventories
8 Non-current assets – plant and equipment
9 Non-current assets – intangible assets
10
Impairment testing of goodwill and intangibles with indefinite lives
Capital management
11 Dividends
12 Earnings per share
13
Issued capital and reserves
14 Borrowings
15
Financial risk management
Group structure
16
Interests in other entities
17 Parent entity information
Other
18 Share-based payments
19 Related party transactions
20 Auditor’s remuneration
21 Commitments and contingencies
22 Significant events after year end
23 Other accounting policies
53
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Key numbers
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 Securities
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 operating and
financial review in the directors’ report on pages 15 to
23. 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 Corporations
(Rounding in Financial/Directors Reports) Instrument
2016/191. The company is an entity to which the class
order applies.
Where necessary, comparatives have been reclassified
and repositioned for consistency with current year
disclosures.
(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.
(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 control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability
to affect those returns through its power to direct
the activities of the entity. 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 10.
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 Monte-Carlo
option pricing model, using the assumptions detailed in
note 18.
54
Breville Group Limited annual report 2019 Note 2. Operating segments
Operating segments
The Group has identified its operating segments in line
with AASB 8 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 Group’s external reporting segments are ‘Global
Product’ and ‘Distribution’.
‘Global Product’ sells premium products designed and
developed by Breville, which are sold globally. Products
may be sold directly or through 3rd parties, and may be
branded Breville®, Sage® or carry a 3rd party brand.
‘Distribution’ sells products that are designed and
developed by a 3rd party. Breville distributes these
products pursuant to a license or distribution
agreement, or they are sourced directly from
manufacturers. Products in this business unit may be
sold under a brand owned by the Group (e.g. Breville®,
Kambrook®), or they may be distributed under a 3rd
party brand.
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.
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 6.
(e) Notes to the financial statements
Notes relating to individual line items in the financial
statements include accounting policy information where
it is considered relevant to an understanding of these
items. Details of the impact of new accounting policies
and all other accounting policy information are disclosed
in note 23 of the financial report.
55
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 2. Operating segments continued
Consolidated
Note
30 June 2019
30 June 2018
Global
Product
$’000
Distribu-
tion
$’000
Total
$’000
Global
Product
$’000
Distribu-
tion
$’000
Total
$’000
Segment revenue
(a)
611,960
148,007
759,967
522,185
124,580
646,765
Segment results
EBITDA
Depreciation and
amortisation
EBIT
Finance income
Finance costs
Profit before income tax
Other segment
information
Capital expenditure -
plant and equipment
Capital expenditure -
intangibles
94,754
19,207
113,961
86,051
14,160
100,211
(15,932)
(684)
(16,616)
(12,758)
(544)
(13,302)
78,822
18,523
97,345
73,293
13,616
86,909
449
(3,483)
94,311
1,044
(3,580)
84,373
4,513
859
5,372
3,254
754
4,008
22,771
-
22,771
14,904
-
14,904
(a) Segment revenue
Global Product
North America
ANZ
Europe
Rest of World
Total Global Product revenue
Distribution
Revenue generated from ANZ and North America
Consolidated
30 June 2019
$’000
30 June 2018
$’000
357,429
132,860
89,580
32,091
611,960
298,953
123,897
63,049
36,286
522,185
56
Breville Group Limited annual report 2019
Note 3. Revenue and expenses
(a) Revenue
Sale of goods
Total revenue
(b) Cost of sales
Costs of inventories recognised as an expense (includes write-
down of inventory to net realisable value (note 7))
Costs of delivering goods to customers
Warranty expense
Total cost of sales
(c) Depreciation and amortisation expense
Depreciation – plant and equipment
Amortisation – computer software
Amortisation – development costs
Amortisation – customer relationships
Total depreciation and amortisation expense
(d) Lease payments and other expenses included
in consolidated income statement
Included in premises, lease & utilities expenses:
• Minimum lease payments – operating lease
Included in other income/expenses:
• Net foreign exchange (gain)/loss
• Other product related costs
• Impairment charge
(e) Employee benefits expenses
Wages & salaries, leave and other employee related benefits
Defined contribution plan expense
Share-based payments expense
Total employee benefits expenses
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
759,967
759,967
646,765
646,765
8
9
9
9
9
431,373
31,665
25,729
488,767
4,633
2,750
9,054
179
16,616
8,635
(616)
4,365
-
76,867
3,359
2,176
82,402
368,541
24,106
21,858
414,505
3,398
1,835
7,891
178
13,302
7,636
522
4,026
554
64,358
2,828
1,231
68,417
57
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 3. Revenue and expenses continued
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
(f) Finance costs/(income)
Finance costs paid or payable on borrowings and bank overdrafts:
• interest
• other borrowing costs
Interest on other payables – non current
Finance costs
Finance income
Total net finance costs
(g) Research and development costs
Amortisation of previously capitalised development costs included
in amortisation expense
3(c)
Research and development costs charged directly to the income
statement
Total research and development costs
Recognition and measurement
(i) Sale of goods
1,047
1,949
487
3,483
(449)
3,034
9,054
21,464
30,518
1,465
1,439
676
3,580
(1,044)
2,536
7,891
19,826
27,717
In accordance with AASB 15, Revenue from Contracts with Customers is recognised at a point in time when the
performance obligation of transferring goods to the buyer has been satisfied and the transaction price can be
measured. Goods are considered transferred to the buyer when the buyer obtains control of those goods, which is
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) Finance costs/income
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. Borrowing costs are recognised as an expense
when incurred.
58
Breville Group Limited annual report 2019 Note 4. 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
Deferred income tax related to items charged or credited directly to
other comprehensive income
Employee equity benefits reserve
Net (loss)/gain on revaluation of cash flow hedges
Income tax (benefit)/expense reported in other comprehensive
income
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% (2018: 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
• one-off adjustment to deferred taxes for change in US federal tax rate
• other
Income tax expense reported in the income statement
Consolidated
30 June 2019
$’000
30 June 2018
$’000
25,438
(434)
1,922
26,926
(1,763)
(563)
(2,326)
94,311
28,293
(436)
(559)
1,139
-
(1,511)
26,926
23,852
(743)
2,745
25,854
(631)
1,454
823
84,373
25,312
(743)
(139)
850
1,571
(997)
25,854
59
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 4. Income tax continued
Consolidated
Consolidated
Statement of financial position
Income statement
30 June 2019
$’000
30 June 2018
$’000
30 June 2019
$’000
30 June 2018
$’000
Deferred income tax
Deferred income tax at 30 June relates to
the following:
Deferred tax liabilities
Brand names
Development costs
Intangibles
Cash flow hedge reserve
Accelerated depreciation for tax purposes
1,875
11,806
281
466
482
1,875
8,613
335
1,029
45
Gross deferred income tax liabilities
14,910
11,897
Deferred tax assets
Losses available for offset against future
taxable income
Provisions and accruals
Other long term payables
Employee benefits
Revaluation of inventories
Employee equity benefits reserve
Other
Gross deferred income tax assets
Net deferred income tax assets
Deferred tax expense
Current income tax
Current tax asset
Current tax liabilities
311
6,636
859
3,608
1,051
3,160
1,261
16,886
1,976
586
6,007
950
3,244
519
1,874
972
14,152
2,255
30 June 2019
$’000
30 June 2018
$’000
1,923
6,276
4,579
10,180
-
(3,193)
54
563
(437)
(275)
410
(91)
355
492
384
(184)
-
(1,254)
54
-
(21)
586
(1,068)
(192)
572
(18)
316
(1,720)
(1,922)
(2,745)
At 30 June 2019, there is no recognised or unrecognised deferred income tax liability (2018: $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.
60
Breville Group Limited annual report 2019 Note 4. Income tax continued
Recognition and measurement
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.
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.
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.
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.
Breville Group Limited is the head entity of the tax consolidated Group. For further information, refer to note 17.
61
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 5. Cash and cash equivalents
Cash at bank and on hand
Notes:
- Cash at bank earns interest at floating rates based on daily
bank deposit rates.
- At 30 June 2019, the Group had available $35,109,000 (2018:
$30,715,000) of undrawn committed borrowing facilities in
respect of which all conditions precedent had been met.
- The fair value of cash and cash equivalents is $57,129,000
(2018: $103,316,000).
Cash and cash equivalents
Non-current borrowings
Net cash
(a) 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
Impairment charge
Share-based payments
Foreign exchange (gains)/losses
Changes in assets and liabilities:
Decrease/(increase) in:
Trade receivables, prepayments and other receivables
Inventories
Other current assets
Non-current assets
(Decrease)/increase in:
Current liabilities
Non-current liabilities
Net cash flows from operating activities
(b) Net debt reconciliation
Consolidated
30 June 2019
$’000
30 June 2018
$’000
57,129
103,316
Note
(a)
(a)
14
(b)
57,129
(47,283)
9,846
103,316
(45,324)
57,992
67,385
58,519
16,616
-
2,176
(616)
(28,758)
(49,004)
3,135
1,203
18,240
(36)
30,341
13,302
554
1,231
522
2,657
20,856
(4,776)
2,797
(7,865)
855
88,652
Consolidated
Cash $’000 Borrowings $’000
Total $’000
Net cash at 30 June 2017
Cash flows
FX adjustments
Net cash at 30 June 2018
Cash flows
FX adjustments
Net cash at 30 June 2019
62
77,124
26,234
(42)
103,316
(47,366)
1,179
57,129
(35,841)
(8,054)
(1,429)
(45,324)
26
(1,985)
(47,283)
41,283
18,180
(1,471)
57,992
(47,340)
(806)
9,846
Breville Group Limited annual report 2019 Note 5. Cash and cash equivalents continued
(c) Disclosure of financing facilities
Refer to note 14.
Recognition and measurement
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.
For the purposes of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts.
Note 6. Receivables, payables and provisions
Trade and other receivables
Current
Trade receivables
Allowance for uncollectible receivables
Trade receivables, net
Prepayments
Other receivables
Total current trade receivables,
prepayments and other receivables
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
(a)
(b)
152,325
(457)
151,868
1,750
977
101,787
(247)
101,540
1,349
1,531
154,595
104,420
Notes:
(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 charge of $312,000 (2018: $133,000) has been recognised by the Group as an expense in ‘other expenses’
for the current year for specific debtors for which such evidence exists.
At 30 June 2019 an ageing analysis of those trade receivables are as follows:
Current
31 – 60 days overdue
61+ days overdue
Trade receivables
Consolidated
30 June 2019
$’000
30 June 2018
$’000
143,608
4,402
4,315
152,325
101,229
210
348
101,787
Trade receivables past due but not impaired amount to $8,717,000 (2018: $558,000). Of this balance, $4,281,000
(2018: $88,000) is covered by insurance in the event of default of payment. Insurance is taken up based on an
assessment of the riskiness of customer collections and the financial standing of each customer. 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.
63
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 6. Receivables, payables and provisions continued
Trade and other receivables continued
Recognition and measurement
Trade receivables 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. 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 15.
Trade and other payables
Current
Trade and other payables – unsecured
Total current trade and other payables
Non current
Other payables
Notes:
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
122,700
122,700
3,395
3,395
84,585
84,585
3,690
3,690
(a)
(a) Relates to an earn-out in relation to the acquisition of PolyScience.
Recognition and measurement
Trade and other payables are carried at amortised cost. Trade payables 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, non-
interest bearing and are usually 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 15.
Provisions
Current
Warranty and faulty goods
Employee benefits – annual leave
Employee benefits – long service
Other provisions
Total current provisions
Non current
Employee benefits – long service
Total non-current provisions
64
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
(a)
(a)
(a)
(a)
(a)
(a)
(a)
7,630
3,942
2,338
50
13,960
1,008
1,008
7,773
3,529
2,273
170
13,745
877
877
Breville Group Limited annual report 2019 Note 6. Receivables, payables and provisions continued
Provisions continued
Consolidated
Warranty
and faulty
goods
$’000
Employee
benefits -
annual
leave
$’000
Employee
benefits -
long
service
$’000
Other
Provisions
$’000
Total
$’000
(a) Movement in provisions
Carrying amount at the beginning of the year:
Current
Non-current
Total
Movement in provisions during the year:
Additional provisions made in the year
Amounts utilised during the year
Net exchange differences
Net movement
Carrying amount at the end of the year:
Current
Non-current
Total
Recognition and measurement
7,773
-
7,773
25,582
(26,031)
306
(143)
7,630
-
7,630
3,529
-
3,529
3,299
(2,947)
61
413
3,942
-
3,942
2,273
877
3,150
478
(290)
8
196
2,338
1,008
3,346
170
-
170
50
(170)
-
(120)
50
-
50
13,745
877
14,622
29,409
(29,438)
375
346
13,960
1,008
14,968
Provisions are recognised when the Group has a present legal or constructive obligation 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.
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.
Warranties and faulty goods
Provisions for warranty and faulty goods are recognised at the date of sale of the relevant products. 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.
Employee benefits - annual 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 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.
65
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 6. Receivables, payables and provisions continued
Provisions continued
Recognition and measurement 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.
Note 7. Inventories
Finished goods (at lower of cost and net realisable value)
Stock in transit (at cost)
Total inventories
Note
(a)
Consolidated
30 June 2019
$’000
30 June 2018
$’000
123,255
29,070
152,325
87,687
11,982
99,669
Notes:
(a) Total net finished goods provision movements recognised in the income statement totalled a $326,000 debit
(2018: $42,000 credit) for the Group. This net debit/credit is included in the cost of inventories line in the cost of
sales.
Recognition and measurement
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.
66
Breville Group Limited annual report 2019 Note 8. Non-current assets - plant and equipment
At the beginning of the year
At cost (gross carrying amount)
Accumulated depreciation and impairment
Net carrying amount
Reconciliation of the carrying amount:
Carrying amount at the beginning of year
Additions
Disposals
Reclassifications
Depreciation
Net exchange difference
Carrying amount at the end of year
At the end of the year
At cost (gross carrying amount)
Accumulated depreciation and impairment
Net carrying amount
Recognition and measurement
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
39,696
(28,317)
11,379
11,379
5,372
(180)
(10)
(4,633)
115
12,043
44,628
(32,585)
12,043
35,556
(24,850)
10,706
10,706
4,008
-
-
(3,398)
63
11,379
39,696
(28,317)
11,379
3(c)
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.
Note 9. Non-current assets - intangible assets
Development costs
Computer software
Brand names
Customer relationships
Goodwill
Total intangible assets (net carrying amount)
Consolidated
30 June 2019
$’000
30 June 2018
$’000
39,352
12,946
31,575
938
38,603
123,414
28,710
12,609
31,575
1,117
38,577
112,588
67
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 9. Non-current assets - intangible assets continued
Consolidated 2019
At the beginning of the year
At cost (gross carrying
amount)
Accumulated amortisation
and impairment
Develop-
ment
costs
$’000
Computer
software
$’000
Brand
names
$’000
Customer
relation-
ships
$’000
Note
Goodwill
$’000
Total
$’000
79,680
18,010
31,575
1,835
38,577
169,677
(50,970)
(5,401)
-
(718)
-
(57,089)
Net carrying amount
28,710
12,609
31,575
1,117
38,577
112,588
Reconciliation of the carrying amount:
Carrying amount at the
beginning of year
Additions
Reclassifications
Amortisation
Net exchange difference
Carrying amount at the
end of year
At the end of the year
At cost (gross carrying
amount)
Accumulated amortisation
and impairment
28,710
19,696
-
12,609
3,075
10
3(c)
(9,054)
(2,750)
-
2
31,575
1,117
38,577
112,588
-
-
-
-
-
-
(179)
-
26
22,797
-
-
-
10
(11,983)
2
39,352
12,946
31,575
938
38,603
123,414
99,376
21,098
31,575
1,835
38,603
192,487
Net carrying amount
39,352
12,946
31,575
(60,024)
(8,152)
-
(897)
938
-
(69,073)
38,603
123,414
Consolidated 2018
At the beginning of the year
At cost (gross carrying
amount)
Accumulated amortisation
and impairment
Net carrying amount
Reconciliation of the carrying amount:
Carrying amount at the
beginning of year
3(c)
Additions
Amortisation
Impairment
Net exchange difference
Carrying amount at the
end of year
At the end of the year
At cost (gross carrying
amount)
Accumulated amortisation
and impairment
Net carrying amount
67,609
15,990
31,575
1,835
30,494
147,503
(43,079)
(3,824)
-
(540)
-
(47,443)
24,530
12,166
31,575
1,295
30,494
100,060
24,530
12,071
(7,891)
-
-
12,166
31,575
1,295
30,494
100,060
2,833
(1,835)
(554)
(1)
-
-
-
-
-
(178)
-
-
8,083
-
-
-
22,987
(9,904)
(554)
(1)
28,710
12,609
31,575
1,117
38,577
112,588
79,680
18,010
31,575
1,835
38,577
169,677
(50,970)
(5,401)
-
(718)
-
(57,089)
28,710
12,609
31,575
1,117
38,577
112,588
68
Breville Group Limited annual report 2019 Note 9. Non-current assets - intangible assets continued
A summary of the policies applied to the Group’s intangible assets is as follows:
(a) Development costs
Internally generated or
Acquired
Recognition
Useful lives
Amortisation method
Impairment test
(b) Computer software
Internally generated or
Acquired
Recognition
Useful lives
Amortisation method
Impairment test
(c) Brand names
Internally generated or
Acquired
Recognition
Internally generated
Capitalised at cost and 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. Research costs are expensed as
incurred.
Finite
Amortised straight line over the period 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. An impairment loss
is recognised to the extent that the recoverable amount is lower than the carrying amount.
The amortisation method is reviewed at each year end.
Internally generated and acquired
Capitalised at cost
Finite
Amortised over the useful life, not exceeding 7 years, on a straight line basis.
When an indication of impairment exists. The amortisation method is reviewed at each
year end.
Acquired
Capitalised at cost or if acquired as part of a business combination at fair value at the
date of acquisition.
Indefinite
No amortisation.
Annually and more frequently when an indication of impairment exists.
Useful lives
Amortisation method
Impairment test
(d) Customer relationships
Internally generated or
Acquired
Recognition
Acquired
Useful lives
Amortisation method
Impairment test
(e) Goodwill
Internally generated or
Acquired
Recognition
Useful lives
Amortisation method
Impairment test
Capitalised at cost or if acquired as part of a business combination at fair value at the
date of acquisition.
Finite
Amortised over the useful life, not exceeding 10 years, on a straight line basis.
Annually and more frequently when an indication of impairment exists. The amortisation
method is reviewed at each year end.
Acquired
Initially capitalised 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.
Indefinite
No amortisation.
Annually and more frequently when an indication of impairment exists.
69
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 9. Non-current assets - intangible assets continued
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.
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.
Note 10. Impairment testing of goodwill and intangibles with indefinite lives
On a consistent basis, goodwill and brand names acquired through business combinations have been allocated to
these cash generating units or Groups of cash generating units for impairment testing as follows:
• Global Product ANZ
• Global Product North America
• Global Product Europe & Rest of World
• Distribution
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 the Board.
The pre-tax discount rates applied to cash flow projections are in the range of 7.2% to 11.7% (2018: 8.2% to 11.1%),
depending on the CGU. This discount rate has been determined using the weighted average cost of capital which
incorporates both the cost of debt and the cost of capital. Cash flows beyond the approved 30 June 2020 budgets
are extrapolated using a 3% growth rate (2018: 3.0%), which is considered a reasonable estimate of the long-term
average growth rate for the wholesale consumer products industry.
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 or brand names exceeding
the recoverable amount.
Key assumptions used in value in use calculations for the cash generating units for
30 June 2019 and 30 June 2018
The key assumptions on which management has based its cash flow projections when determining the value in
use of the cash generating units are budgeted revenue and gross margins. The basis used to determine the value
assigned to the budgeted revenue and gross margins are based on past performance and expectations for the
future.
70
Breville Group Limited annual report 2019 Note 10. Impairment testing of goodwill and intangibles with indefinite lives
continued
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
Carrying amount of goodwill and brand names
are allocated as follows:
Breville Group
- brand names with indefinite useful lives
Global Product ANZ
- goodwill
Global Product North America
- goodwill
Global Product Europe & Rest of World
- goodwill
Distribution
- goodwill
- brand names with indefinite useful lives
All cash generating units
- goodwill
- brand names with indefinite useful lives
Total carrying amount of goodwill and brand names
9
9
Recognition and measurement
Intangible assets – goodwill
13,800
20,553
7,700
2,241
8,109
17,775
70,178
38,603
31,575
70,178
13,800
20,553
7,700
2,241
8,083
17,775
70,152
38,577
31,575
70,152
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.
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.
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.
71
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Capital management
Note 11. Dividends
(a) Dividends on ordinary shares declared and paid during the year:
Final partially franked dividend for the year ending 30 June 2018
of 16.5 cents per share, 9.9 cents (60%) franked (2018: final partially
franked dividend for 2017 of 15.0 cents per share, 9.0 cents (60%) franked)
• Paid in cash
Final dividend
Partially franked interim dividend for the year ending 30 June 2019
of 18.5 cents per share, 11.1 cents (60%) franked (2018: interim
partially franked dividend for 2018 of 16.5 cents per share, 9.9 cents (60%)
franked))
• Paid in cash
Interim dividend
Total partially franked dividends declared and paid during the year
of 35.0 cents per share, 21.0 cents (60%) franked (2018: 31.5 cents
per share (18.9 cents (60%) franked))
• Paid in cash
Total dividends
(b) Dividends on ordinary shares proposed and not recognised as a
liability:
Final partially franked dividend for 2019 of 18.5 cents per share,
11.1 cents (60%) franked (2018: final partially franked dividend of
16.5 cents per share, 9.9 cents (60%) franked)
(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% (2018: 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% (2018: 30%).
Consolidated
30 June 2019
$’000
30 June 2018
$’000
21,466
21,466
19,514
19,514
24,068
24,068
21,466
21,466
45,533
45,533
40,980
40,980
24,068
21,466
8,089
2,932
11,021
1,464
6,564
8,028
(6,189)
4,832
(5,520)
2,508
72
Breville Group Limited annual report 2019 Note 12. Earnings per share
The following reflects the income and share data used in the basic and diluted earnings per share computations:
Consolidated
30 June 2019
$’000
30 June 2018
$’000
Earnings used in calculating basic and diluted earnings per share:
Net profit attributable to ordinary equity holders of Breville Group
Limited
67,385
58,519
Thousands
Thousands
Weighted average number of shares:
Weighted average number of ordinary shares for basic and diluted
earnings per share
130,095
130,095
Weighted average number of exercised, forfeited or expired
potential ordinary shares included in diluted earnings per share
-
-
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.
Recognition and measurement
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.
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;
• other non-discretionary changes in revenue or expenses during the period that would result from the dilution of
potential ordinary shares; and
• divided by the weighted average number of ordinary shares and dilutive potential ordinary shares.
73
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 13. Issued capital and reserves
Issued capital
Ordinary shares – authorised, issued and fully paid
Ordinary shares – held by the Breville Group Performance Share
Plan Trust
Total contributed equity
Ordinary shares
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
(a)
(b)
140,050
140,050
-
-
140,050
140,050
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.
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.
The ordinary shares held by the Breville Group Performance Share Plan Trust, if any, 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, if any, 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, if any, entitle their holder to one vote, either in person or by proxy, at a meeting
of the company. Details are provided in note 16(b) and note 18.
Consolidated
30 June 2019
Consolidated
30 June 2018
Note
Number of
shares
$’000
Number of
shares
$’000
(a) Movements in ordinary
issued shares:
Beginning and end of the year
130,095,322
140,050
130,095,322
140,050
(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
(i)
(ii)
268,720
3,767
94,000
956
(268,720)
(3,767)
(94,000)
-
-
-
(956)
-
(i) During the year the Trustee of the Breville Group Performance Share Plan Trust transferred 268,720 ordinary company shares
(2018: 94,000) to participants in order to fulfil its obligations under the Breville Group Limited Performance Rights Plan.
(ii) During the year the Trustee of the Breville Group Performance Share Plan Trust acquired 268,720 ordinary shares (2018:
94,000) in order to fulfil its obligations under the Breville Group Limited Performance Rights Plan. The average value placed on
these acquisitions was $14.02 per share (2018: $10.15). Details are provided in note 16(b) and note 18.
74
Breville Group Limited annual report 2019 Note 13. Issued capital and reserves continued
Issued capital continued
(c) Performance rights over ordinary shares:
The company has a share-based payment performance rights scheme under which rights to subscribe for the
company’s shares have been granted to certain executives and other employees (refer note 18). At the end of the
year there were 1,106,255 (2018: 978,400) potential unissued ordinary shares in respect of performance rights that
were outstanding.
Reserves
Foreign currency translation reserve
Employee equity benefits reserve
Cash flow hedge reserve
Total reserves
Nature and purpose of reserves
Consolidated
30 June 2019
$’000
30 June 2018
$’000
5,267
(1,800)
1,086
4,553
(1,124)
(1,972)
2,401
(695)
Foreign currency translation reserve - 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 18 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.
Note 14. Borrowings
Non-current
Other loans:
- Cash advance facilities
Total non-current borrowings
Terms and conditions
Consolidated
30 June 2019
$’000
30 June 2018
$’000
47,283
47,283
45,324
45,324
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 2019 and 30 June 2018.
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. A security agreement in favour of ANZ is in existence over the
assets and undertakings of Breville USA, Inc. Breville Group Limited has issued corporate guarantees in favour of
the local bank (HSBC) which provides the day to day US, Canadian, UK and German transactional banking facilities.
Borrowings may include Australian dollar, US dollar, Canadian dollar, British pounds, Euro and New Zealand dollar
denominated amounts.
75
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 14. Borrowings continued
Fair value
The carrying value and estimated net fair values of the borrowings held with banks (determined under Level 2, as
described in note 15) approximates their fair value. Fair values of the company’s interest-bearing loans are determined
by using a discounted cash flow method using a discount rate that reflects the issuer’s borrowing rate as at the
end of the reporting period. The non-performance risk as at 30 June 2019 was assessed to be insignificant (2018:
insignificant). Details regarding interest rate, foreign exchange and liquidity risk are disclosed in note 15.
Consolidated
Note
30 June 2019
$’000
30 June 2018
$’000
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)
(b)
(c)
(a) Facilities used at the reporting date:
- Non-current cash advance facilities – committed
- Non-current cash advance facilities – uncommitted
- 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 – committed
- Non-current cash advance facilities – uncommitted
- 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 – committed
- Non-current cash advance facilities – uncommitted
- Overdraft facilities
- Business transactions facilities
- Indemnity/guarantee facilities
- Documentary credit facilities
Total facilities
52,057
66,518
118,575
47,283
-
-
698
4,076
-
52,057
23,222
30,000
11,887
698
-
711
66,518
70,505
30,000
11,887
1,396
4,076
711
118,575
49,587
53,036
102,623
45,324
-
-
496
3,767
-
49,587
20,750
20,747
9,965
495
-
1,079
53,036
66,074
20,747
9,965
991
3,767
1,079
102,623
76
Breville Group Limited annual report 2019 Note 14. Borrowings continued
Seasonal facility
Under the primary facility with ANZ, the Group also has a committed seasonal facility available between August 2019
and December 2019 which ranges from $42,682,000 up to $71,137,000 and a committed seasonal facility available
between September 2019 and January 2020 which ranges from $9,710,000 up to $18,401,000 (2018: $26,987,000
to $48,576,000 available between August 2018 and January 2019 and $7,187,000 available between September
2018 and December 2018). The Group also has an uncommitted seasonal facility available from July 2019 to June
2020 of $30,000,000 (2018: $6,747,000 available between February 2018 to January 2019. These facilities are
under the same terms and conditions as described above.
Borrowings may include Australian dollar, US dollar, Canadian dollar, British pounds, Euro and New Zealand dollar
denominated amounts.
Recognition and measurement
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.
Non-current borrowings at 30 June 2019 fall due in July 2020.
Note 15. Financial risk management
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, primarily forward exchange contracts. The purpose
is to manage the 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 foreign currency risk and credit risk. The Board reviews and agrees policies for managing
each of these risks and they are summarised below.
Recognition and measurement
Derivative financial instruments and hedging
The Group may use derivative financial instruments such as forward exchange contracts to hedge its risks associated
with foreign currency 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. The fair value of the
forward exchange contracts is estimated using market observable inputs. 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 are calculated by reference to current forward exchange rates for
contracts with similar maturity profiles and where applicable, exercise prices.
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.
77
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 15. Financial risk management continued
Recognition and measurement continued
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.
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 where appropriate. 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 2019, the group has the following exposure to interest rate risk:
Cash at bank
Cash advance facilities
Net exposure
Consolidated
30 June 2019
$’000
30 June 2018
$’000
57,129
(47,283)
9,846
103,316
(45,324)
57,992
At 30 June 2019, 100% of the Groups borrowings (2018: 100%) are exposed to floating rates. On a principal net
cash receivable of $9,846,000 (2018: $57,992,000), at an average payable rate including line fee and margin of 2.5%
(2018: 2.5%) and average receivable rate of 0.6% (2018: 1.1%), an increment of 0.5% in the market rates would
result in a decrease in finance costs of $49,000 (2018: $310,000), conversely a decrement of 0.5% in the market
rates would result in an increase in finance costs of $81,000 (2018: $227,000).
The Group’s net exposure to interest rate risk calculated as at 30 June 2019 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
(2018 average borrowings: 100%) are at a floating rate of interest. On an average principal net cash receivable during
the year of $6,546,000 (2018: $23,699,000), at an average payable rate including margin of 2.5% (2018: 2.5%) and
average receivable rate of 0.6% (2018: 1.1%), an increment of 0.5% in the market rates would result in a decrease
in finance costs of $33,000 (2018: $85,000), conversely a decrement of 0.5% in the market rates would result in an
increase in finance costs of $60,000 (2018: $41,000).
78
Breville Group Limited annual report 2019 Note 15. Financial risk management continued
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign exchange rate
fluctuations. Such exposure arises primarily from purchases of inventory by a business 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, forward exchange 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 2019, 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
Other financial assets –
derivative assets – forward exchange contracts
Other financial liabilities –
derivative liabilities – forward exchange contracts
Net exposure
Consolidated
30 June 2019
$’000
30 June 2018
$’000
9,873
4,404
(15,826)
2,016
(464)
3
10,000
2,065
(9,070)
3,721
(291)
6,425
Of the total net exposure above, an increment of 10% in the foreign exchange rates would result in a decrease in
other expenses of $145,000 (2018: increase $272,000). A decrement of 10% in the foreign exchange rates would
result in an increase in other expenses of $167,000 (2018: decrease $333,000).
Instruments used by the group
Derivative financial instruments are used by the Group in the normal course of business in order to hedge exposures
to fluctuations in interest and foreign exchange rates.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on
observable market data.
The fair value of all derivative assets and liabilities have been determined under Level 2.
79
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 15. Financial risk management continued
Instruments used by the group continued
(i) Forward exchange contracts – cash flow hedges
The majority of the Group’s inventory purchases from suppliers are denominated in US dollars (US$). In order
to manage exchange rate movements and to manage the inventory costing process, the Group has entered
into forward exchange contracts to purchase USD, Euro and CHF. 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. All forward exchange contracts have 0-12 months maturity
(2018: 0-12 months).
The cash flows are expected to occur between 0-12 months from 1 July 2019 (2018: 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:
Buy USD
Buy Euro
Buy CHF
Consolidated
30 June 2019
A$’000
30 June 2018
A$’000
107,844
15,779
15,432
97,220
3,027
8,572
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 or the risk is assumed, 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 $4,289,000 was credited to inventory (2018: $2,447,000 debited) and $2,411,000 was credited
(2018: $2,398,000 credited) to equity in respect of the Group.
At 30 June 2019, the Group had hedged 50% (2018: 44%) of its foreign currency purchases extending to June 2020
(2018: June 2019). The remaining 50% (2018: 56%) is exposed to foreign exchange risk.
In respect of net derivative assets and liabilities above, being the fair value of forward exchange contracts designated
as cash flow hedges, a decrease of 10% in the US dollar exchange rate against local currencies, all other variables
held constant, would result in an increase in equity of $9,702,000 (2018: $10,243,000). Conversely, an increase
of 10% in the US dollar exchange rate against local currencies, all other variables held constant, would result in a
decrease in equity of $7,608,000 (2018: $7,089,000).
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 2019
and 30 June 2018 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).
80
Breville Group Limited annual report 2019 Note 15. Financial risk management 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 (including trade receivables), excluding investments, of the Group that has been recognised on
the balance sheet is the carrying value amount, net of any uncollectible receivables (measured on a collective basis).
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk
characteristics and the days past due. The Group appropriately provides for expected credit losses on a timely
basis, and in calculating the expected credit loss rates, the Group considers historic loss rates for each category of
customers, adjusting for forward looking macroeconomic data.
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 a thirteen-month term in Australia, New Zealand,
USA, Canada, UK and Germany. As at 30 June 2019, 100% of the Group’s borrowings will mature in greater than
one year (2018: 100%) and nil (2018: nil) in less than one year.
Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flows. See note
14 for details of available facilities.
At 30 June 2019, the remaining contractual maturities of the Group’s financial liabilities are:
Less than 1 year
Between 1 and 5 years
Consolidated
30 June 2019
$’000
30 June 2018
$’000
123,164
50,678
173,842
84,876
49,014
133,890
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.
Consolidated
30 June 2019
Consolidated
30 June 2018
Less than
1 year
$’000
Between 1
and 5 years
$’000
Total
$’000
Less than
1 year
$’000
Between 1
and 5 years
$’000
Trade and other payables
122,700
Borrowings
Other financial liabilities
-
464
3,395
47,283
-
126,095
84,585
47,283
464
-
291
3,690
45,324
-
Total
$’000
88,275
45,324
291
123,164
50,678
173,842
84,876
49,014
133,890
Contractual maturities disclosed in the tables above include contracted interest payments. Total borrowings disclosed
in note 14 exclude such contracted interest payments.
81
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Group structure
Note 16. Interests in other entities
The consolidated financial statements include the financial statements of Breville Group Limited and the subsidiaries
listed in the following table.
Legal entity
Country of
incorporation
30 June 2019
%
30 June 2018
%
Note
Equity interest
(a)
(a)
(a)
(b)
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
Breville Services (Shenzhen) Company Limited
Breville Holdings USA, Inc.
Breville USA, Inc.
Holding HWI Canada, Inc.
HWI Canada, Inc.
Breville Canada, L.P.
BRG Appliances Limited
Sage Appliances GmbH
Australia
Australia
Australia
Australia
Australia
New Zealand
Hong Kong
China
USA
USA
Canada
Canada
Canada
UK
Germany
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
100
100
Breville Group Limited, a company incorporated in Australia is the ultimate parent of the group.
(a) Entities subject to reporting relief
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, 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 instrument, 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 “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 19(i) and 19(ii).
(b) Breville Group Performance Share Plan Trust
A trust fund has been established with the appointment of an independent Trustee. The trust is funded by funds
irretrievably contributed to it by the company and the Trustee uses 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 2019, the Trustee acquired 269,000 company shares (2018: 94,000). The
average value placed on these acquisitions was $14.02 per share (2018: $10.15).
82
Breville Group Limited annual report 2019 Note 17. Parent entity information
As at and throughout the financial year ended 30 June 2019 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
Contingencies
30 June 2019
$’000
30 June 2018
$’000
47,220
47,220
40,467
40,467
66,862
147,376
(2,774)
(2,774)
144,602
140,050
(1,800)
6,352
144,602
73,753
148,875
(6,132)
(6,132)
142,743
140,050
(1,972)
4,665
142,743
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 corporate guarantees in favour of the HSBC local banks in the US, Canada and the
UK which provides the day to day US, Canadian and UK transactional banking facilities.
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.
83
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Other
Note 18. Share-based payments
Performance rights plan and fixed deferred remuneration plan
Under the performance rights plan and fixed deferred remuneration 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). See pages 25 and 26 of the Remuneration report for details of the two plans.
At 30 June 2019 there were 1,106,255 (2018: 978,440) performance rights outstanding under both plans. The
expense recognised in the income statement in relation to share-based payments is disclosed in note 3(e).
Recognition and measurement
Performance rights issued to employees (including key management personnel) are accounted for as share-
based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled
transactions). 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 Monte-Carlo model, further details of which are given below.
Market based performance conditions are reflected within the fair value at grant date. Service and non-market
performance conditions are not taken into account when determining the grant date fair value of the awards. The
likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity
instruments that will ultimately vest.
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. 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.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service
conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated
as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance
and/or service conditions are satisfied.
Rights granted and outstanding under the performance rights and Fixed Deferred
Remuneration plan
The following table illustrates the number and weighted average exercise prices (“WAEP”) of and movements in
performance rights issued during the year:
30 June 2019
30 June 2018
Number of
performance
rights
Note
Number of
performance
rights
WAEP
WAEP
Outstanding at the beginning of the year
978,440
0.0000
914,400
0.0000
Performance rights granted during
the year
Performance rights exercised
during the year
Performance rights lapsed during
the year
Outstanding at the end of the year
(a)
1,106,255
Exercisable at the end of the year
-
84
411,700
0.0000
363,900
0.0000
(268,720)
0.0000
(94,000)
0.0000
(15,165)
0.0000
0.0000
-
(205,860)
978,440
-
0.0000
0.0000
-
Breville Group Limited annual report 2019 Note 18. Share-based payments continued
Rights granted and outstanding under the performance rights and Fixed Deferred
Remuneration plan continued
Notes
(a) The outstanding balance as at 30 June 2019 is represented by:
Number of
performance rights
Note *
Grant date
Vesting date
Expiry date
WAEP $
Fair value at
grant date ($)
76,605
44,350
1,100
109,700
109,700
60,000
2,500
96,900
98,000
97,300
118,400
117,600
116,400
19,200
19,300
19,200
1,106,255
(i)
(ii)
(i)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(x)
(xi)
(xii)
12-Feb-16
29-Aug-19
3-Oct-19
12-Feb-16
25-Jan-20
31-Mar-20
16-Mar-16
29-Aug-19
3-Oct-19
9-Aug-16
29-Aug-19
9-Aug-16
31-Aug-20
13-Nov-17
31-Aug-20
13-Nov-17
29-Aug-19
13-Nov-17
29-Aug-19
13-Nov-17
28-Aug-20
13-Nov-17
27-Aug-21
11-Sep-18
28-Aug-20
11-Sep-18
27-Aug-21
3-Oct-19
2-Oct-20
1-Oct-20
1-Oct-19
1-Oct-19
1-Oct-20
1-Oct-21
1-Oct-20
1-Oct-21
11-Sep-18
29-Aug-22
3-Oct-22
16-Nov-18
28-Aug-20
1-Oct-20
16-Nov-18
27-Aug-21
16-Nov-18
29-Aug-22
1-Oct-21
3-Oct-22
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
2.15
4.35
2.15
3.49
3.51
10.12
10.56
7.05
6.81
6.68
7.07
6.81
6.58
7.07
6.81
6.58
(i) These performance rights vest based on the Group’s total shareholder return (TSR) from 30 June 2015 to 30 June 2019
applying both an absolute test and a relative test measured against a TSR peer Group.
(ii) Performance condition being that the participant must be employed by the company on 25 January 2020.
(iii) These performance rights vest based on the Group’s total shareholder return (TSR) from 30 June 2016 to 30 June 2019
applying both an absolute test and a relative test measured against a TSR peer Group.
(iv) These performance rights vest based on the Group’s total shareholder return (TSR) from 30 June 2016 to 30 June 2020
applying both an absolute test and a relative test measured against a TSR peer Group.
(v) Rights granted as fixed deferred remuneration with vesting condition that the participant must still be employed by the company
on 30 June 2020.
(vi) Non market based performance condition being that the participant must meet an internal KPI measure.
(vii) These performance rights vest based on the Group’s total shareholder return (TSR) from 30 June 2017 to 30 June 2019
applying both an absolute test and a relative test measured against a TSR peer Group.
(viii) These performance rights vest based on the Group’s total shareholder return (TSR) from 30 June 2017 to 30 June 2020
applying both an absolute test and a relative test measured against a TSR peer Group.
(ix) These performance rights vest based on the Group’s total shareholder return (TSR) from 30 June 2017 to 30 June 2021
applying both an absolute test and a relative test measured against a TSR peer Group.
(x) These performance rights vest based on the Group’s total shareholder return (TSR) from 30 June 2018 to 30 June 2020
applying both an absolute test and a relative test measured against a TSR peer Group.
(xi) These performance rights vest based on the Group’s total shareholder return (TSR) from 30 June 2018 to 30 June 2021
applying both an absolute test and a relative test measured against a TSR peer Group.
(xii) These performance rights vest based on the Group’s total shareholder return (TSR) from 30 June 2018 to 30 June 2022
applying both an absolute test and a relative test measured against a TSR peer Group.
*
Excluding (ii) and (v), in addition to the TSR or internal KPI measure performance hurdle, the participant must be employed by
the company on the vesting date.
85
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 18. Share-based payments continued
Rights granted and outstanding under the performance rights and Fixed Deferred
Remuneration plan continued
The average remaining contractual life for the performance rights outstanding at 30 June 2019 is between 1 and 4
years (2018: 1 and 4 years).
The exercise price for performance rights outstanding at the end of the year was $nil (2018: $nil).
The weighted average fair value of performance rights granted during the year was $6.82 (2018: $7.41).
The fair value of the equity-settled performance rights granted under the performance rights plan or fixed deferred
remuneration plan, is estimated as at the date of grant using a Black-Scholes or Monte-Carlo option-pricing model,
taking into account the terms and conditions upon which the options and performance rights were granted.
The following table lists the inputs to the model used for the grants during the year ended 30 June 2019 and
30 June 2018:
30 June
2019
(Monte-
Carlo)
30 June
2019
(Monte-
Carlo)
30 June
2019
(Monte-
Carlo)
30 June
2018
30 June
2018
(Black-
Scholes)
(Black-
Scholes)
30 June
2018
(Monte-
Carlo)
30 June
2018
(Monte-
Carlo)
30 June
2018
(Monte-
Carlo)
11 Sept 18/
16 Nov 18
11 Sept 18/
16 Nov 18
11 Sept 18/
16 Nov 18
13 Nov 17
13 Nov 17
13 Nov 17
13 Nov 17
13 Nov 17
28 Aug 20
27 Aug 21
29 Aug 22
31 Aug 20
29 Aug 19
29 Aug 19
28 Aug 20
27 Aug 21
3.50
3.50
3.50
3.50
3.50
3.50
3.50
3.50
25.00
25.00
25.00
32.00
32.00
32.00
32.00
32.00
25.00
25.00
25.00
32.00
32.00
32.00
32.00
32.00
2.00
2.00
2.00
1.80
1.80
1.80
1.80
1.80
1.8 years
2.8 years
3.8 years
2.8 years
1.8 years
1.8 years
2.8 years
3.8 years
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
10.75
10.75
10.75
12.64
12.64
12.64
12.64
12.64
7.07
6.81
6.58
10.12
10.56
7.05
6.81
6.68
Grant date
Vesting date
Dividend
yield (%)
Expected
volatility (%)
Historical
volatility (%)
Risk-free
interest rate (%)
Expected life of
performance right
Performance right
exercise price ($)
Weighted average
share price ($)1
Weighted average
fair value ($)1
1 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.
86
Breville Group Limited annual report 2019 Note 19. Related party transactions
(i) Consolidated statement of financial position for
class order closed group
30 June 2019
$’000
30 June 2018
$’000
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Total current assets
Non-current assets
Other financial assets
Plant and equipment
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Other payables
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
24,059
47,401
34,286
2,016
107,762
70,028
8,867
109,336
188,231
295,993
57,689
2,932
6,540
463
67,624
2,862
4,307
864
8,033
75,657
220,336
140,050
(713)
80,999
220,336
79,957
40,405
26,813
3,721
150,896
22,714
9,410
98,511
130,635
281,531
51,432
6,132
6,608
291
64,463
3,167
3,809
742
7,718
72,181
209,350
140,050
428
68,872
209,350
87
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 19. Related party transactions 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 at the beginning of the year
Dividends paid or reinvested
Accumulated profits at the end of the year
(a) Ultimate controlling entity
30 June 2019
$’000
30 June 2018
$’000
80,910
(23,250)
57,660
68,872
(45,533)
80,999
76,099
(21,075)
55,024
54,828
(40,980)
68,872
The ultimate controlling entity of the group in Australia is Breville Group Limited.
(b) Wholly owned group transactions
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 the Remuneration Report
and below:
Compensation by category: key management personnel
Short-term
Post-employment
Other long-term
LTI Share-based payment
Total
Consolidated
Note
30 June 2019
$
30 June 2018
$
(i)
5,006,165
4,865,216
208,698
73,490
982,792
180,063
34,118
696,734
6,271,146
5,776,131
(i) This comprises defined contribution plans expense of $208,698 (2018: $180,063).
88
Breville Group Limited annual report 2019 Note 20. Auditor’s remuneration
Amounts received or due and receivable from the entity
and any other entity in the consolidated entity:
PricewaterhouseCoopers Australia – primary auditors
Parent entity
Audit or review services
Taxation and accounting advisory services
Network Firms of PricewaterhouseCoopers Australia
Controlled entities
Audit or review services
Taxation and accounting advisory services
Total auditor’s remuneration
Note 21. Commitments and contingencies
Operating lease commitments – group as lessee
Consolidated
30 June 2019
$
30 June 2018
$
431,424
138,740
416,099
208,604
139,701
521,416
136,576
333,266
1,231,281
1,094,545
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
Consolidated
30 June 2019
$’000
30 June 2018
$’000
8,203
22,081
1,182
31,466
7,787
23,817
3,808
35,412
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.
Contingencies
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 16(a).
Breville Group Limited has issued corporate guarantees in favour of the local bank (HSBC) which provides the day to
day US, Canadian, UK and German transactional banking facilities.
89
Breville Group Limited annual report 2019 Notes to the financial statements
for the year ended 30 June 2019
Note 22. Significant events after
year end
The assets of ChefSteps, a US-based business were
acquired on 16 July 2019, which will be included within
the Global Product segment. The acquisition is not
expected to have any material impact on the business of
the Group.
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 2019 was authorised for issue in
accordance with a resolution of the directors on
15 August 2019.
Note 23. Other accounting policies
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.
The functional currency of the foreign subsidiaries is either:
• USD - United States dollar (Breville Holdings USA, Inc.
and Breville USA, Inc.);
• HKD - Hong Kong dollar (HWI International Limited);
• CAD - Canadian dollar (HWI Canada, Inc., Holding
HWI Canada, Inc. and Breville Canada, L.P.);
• NZD - New Zealand dollar (Breville New Zealand
Limited);
• GBP - British pound (BRG Appliances Limited);
• RMB - Chinese Renminbi (Breville Services
(Shenzhen) Company Limited); and
• EUR – Euro (Sage Appliances GmbH).
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.
(iii) Disposal of foreign operations
In some instances companies in the Breville Group
provide intra Group funding to other Group entities by
way of permanent equity loans. In these instances any
foreign exchange movements are recognised in equity
(foreign currency translation reserve) as these equity loans
are considered to form part of the net investment in the
subsidiary.
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) 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.
(ii) 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.
90
Breville Group Limited annual report 2019 Note 23. Other accounting policies
continued
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.
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.
Other Taxes
Revenue, 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.
New accounting standards and
interpretations
(i) Changes to accounting policy and disclosures
The accounting policies adopted are consistent with those
of the previous financial year.
The Group adopted all new and amended Australian
Accounting Standards and Interpretations that became
applicable during the current financial year.
The adoption of these Standards and Interpretations did
not have a significant impact on the Group’s financial
results or statement of financial position.
AASB 9: Financial Instruments:
The Group adopted this new standard from 1 July
2018 after completing an impact assessment of this
standard, including review of its current classification and
measurement of financial assets and liabilities, as well as
review of hedge accounting documentation. The adoption
of this new standard did not have a material impact on the
Group.
AASB 15: Revenue from Contracts with Customers:
The Group adopted this new standard from 1 July
2018 after completing an impact assessment of this
standard, including review of its revenue recognition
policy, customer contracts and internal documents. The
adoption of this new standard did not have a material
impact on the Group, however FY18 revenue was
restated to a comparible basis with FY19 after adoption.
(ii) Accounting Standards and Interpretations
issued but not yet effective
Relevant accounting standards that have been issued but
are not yet effective are outlined as follows:
AASB 16: Leases (applicable for reporting periods
beginning on or after 1 January 2019):
The new standard will replace AASB 117 Leases. Once
effective, the new requirements will apply to new and pre-
existing lease arrangements. The key changes have been
outlined below:
• Lessees will recognise a lease liability reflecting future
lease payments and a ‘right-of-use’ asset for virtually
all lease contracts (optional exemption available for
short-term leases and leases of low-value assets);
• Lessees will have to present interest expense on the
lease liability and depreciation on the right-of-use
asset in their income statement;
• Lease payments that reflect interest on the lease
liability can be presented as an operating cash flow.
Cash payments for the principal portion of the lease
liability should be classified within financing activities.
Payments for short-term leases and for leases of low-
value assets should be presented within operating
activities.
The Group has completed an internal process of
accessing the impact of AASB 16 on 1 July 2019 for
the Statement of Financial Position and estimated the
impact to EBIT for the FY20 financial year. The Group will
be implementing the new standard using the modified
retrospective approach which does not require restating
the previous financial years. The impact on key areas of
the financial statements are summarised below:
• A right of use asset will be recognised on 1 July 2019
valued between $20.0m to $25.0m.
• A lease liability will be recognised on 1 July 2019
valued between $25.0m to $30.0m.
• The impact to EBIT for the FY20 financial year from
reclassifying operating expenses under AASB 117
to depreciation and interest expense under AASB
16 is expected to be an increase to EBIT of $2.0m
to $3.0m.
• The impact to Net Profit after income tax for the FY20
financial year is expected to be an increase to NPAT
of $0.5m to $1.0m.
91
Breville Group Limited annual report 2019 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 statements and notes 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 2019 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed
in note 1;
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable; and
(d) as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed
Group identified in note 16(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.
2. This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2019.
On behalf of the board
Steven Fisher
Non-executive chairman
Sydney
15 August 2019
92
Breville Group Limited annual report 2019 Independent auditor’s report
Independent auditor’s report
To the members of Breville Group Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Breville Group Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
a. giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial
performance for the year then ended
b. complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2019
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated cash flow statement for the year then ended
the consolidated income statement for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial report section
of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of
the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
93
Breville Group Limited annual report 2019 Independent auditor’s report continued
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial report as a whole, taking into account the geographic and management structure of the
Group, its accounting processes and controls and the industry in which it operates.
Materiality
• For the purpose of our audit we used overall Group materiality of $4.7 million, which represents
approximately 5% of the Group’s profit before tax.
• We chose Group profit before tax because, in our view, it is the benchmark against which the
performance of the Group is most commonly measured. We utilised a 5% threshold based on our
professional judgement, noting it is within the range of commonly acceptable thresholds.
• We applied this threshold, together with qualitative considerations, to determine the scope of
our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
94
Breville Group Limited annual report 2019 Audit scope
• Our audit focused on where the Group made subjective judgements; for example, significant
accounting estimates involving assumptions and inherently uncertain future events.
•
•
•
•
•
The Group comprises entities located in Australia/New Zealand, North America, and the ‘Rest of
World’ comprising its entities in Hong Kong, United Kingdom, Germany and China, with the most
financially significant operations being Breville Australia and Breville United States. Accordingly, we
structured our audit as follows:
The Group audit was led by our team from the Australian PwC firm (“Group audit team”). The Group
audit team conducted an audit of the special purpose financial information of Breville Australia and
Breville United States used to prepare the consolidated financial statements.
Component auditors in Canada and Hong Kong, under instructions from the Group audit team,
performed specified audit procedures over targeted financial statement items within the respective
special purpose financial information for those locations used to prepare the consolidated financial
statements.
The Group audit team undertook the remaining audit procedures, including over significant financial
statement items controlled at the Group level, the Group consolidation and the audit of the financial
report and remuneration report.
The Group audit team decided on their level of involvement needed in the work performed by the
component auditors, to be satisfied that sufficient appropriate evidence had been obtained for the
purpose of our opinion. Review of the work undertaken by the component teams and regular dialogue
between the teams up to the reporting date supplemented the specific direct written instruction
provided by PwC Australia and augmented the reporting provided by the component auditors.
The combination of all these procedures provided us with sufficient and appropriate audit evidence to
express an opinion on the Group’s financial report as a whole.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular
audit procedure is made in that context. We communicated the key audit matters to the Audit and Risk
Committee.
95
Breville Group Limited annual report 2019 Independent auditor’s report continued
Key audit matter
Estimated recoverable amount of goodwill and
indefinite life intangibles
(Refer to note 9) – $70.2m
The Group recognises assets for goodwill and indefinite
life intangibles in respect of its brand names.
Under Australian Accounting Standards, the Group
is required to test the goodwill and indefinite lived
intangible assets annually for impairment, irrespective
of whether there are indications of impairment. This
assessment is inherently complex and judgemental,
and requires judgement by the Group in forecasting the
operational cash flows of the cash generating units of
the Group, and determining discount rates and terminal
value growth rates used in the discounted cash flow
models used to assess impairment (the models).
The recoverable amount of goodwill and other indefinite
life intangible assets was a key audit matter given the:
- financial significance of the intangible assets to the
statement of financial position; and
-
judgement applied by the Group in completing the
impairment assessment.
Estimated recoverable amount of capitalised
development costs
(Refer to note 9) $39.4m
The Group recognises assets for development costs
which meet the recognition criteria required by
Australian Accounting Standards.
Development costs capitalised in respect of projects
that have not yet been completed are referred to in the
Australian Accounting Standards as ‘intangible assets
not yet available for use’ and are required to be tested
annually for impairment, irrespective of whether there
are indicators of impairment.
This assessment is inherently complex and judgemental,
and requires judgement by the Group in forecasting the
total costs, economic returns and operational cash flows
of these projects and in determining discount rates and
terminal value growth rates used in the discounted cash
flow models used to assess impairment (the models).
The recoverable amount of development costs was a key
audit matter given the:
- financial significance of these assets to the statement
of financial position; and
-
judgement applied by the Group in completing the
impairment assessment.
How our audit addressed the key audit
matter
We focused our efforts on developing an
understanding and testing the overall calculation and
methodology of the Group’s impairment assessment,
including identification of the cash generating units
of the Group for the purposes of impairment testing,
and the attribution of net assets, revenues and costs
to those components.
In obtaining sufficient audit evidence, our procedures
included, amongst others:
- assessing the cash flow forecasts included in
the models with reference to actual historical
earnings
-
testing the mathematical calculations within the
models
- assessing the terminal value growth rates and
discount rates applied in the models
- performing sensitivity analyses over the key
assumptions used in the models; and
- evaluating the related financial statement
disclosures for consistency with Australian
Accounting Standards requirements.
We focused our efforts on developing an
understanding and testing the overall calculation and
methodology of the Group’s impairment assessment,
including identifying the projects with the highest
magnitudes of capitalised costs and those with
significant deviations when compared to the original
business cases.
In obtaining sufficient audit evidence, our procedures
included, amongst others:
- assessing the cash flow forecasts included in
the models with reference to actual historical
accuracy in forecasting costs and economic
returns for past projects;
-
testing the mathematical calculations within the
models;
- assessing the terminal value growth rates and
discount rates applied in the models;
- performing sensitivity analyses over the key
assumptions used in the models; and
- evaluating the related financial statement
disclosures for consistency with Australian
Accounting Standards requirements.
96
Breville Group Limited annual report 2019 Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report for the year ended 30 June 2019, but does not include the financial report and
our auditor’s report thereon. Prior to the date of this auditor’s report, the other information we obtained
included the Company information, Directors’ report and Corporate governance statement. We expect the
remaining other information to be made available to us after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not express
an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to the directors and use our professional judgement to
determine the appropriate action to take.
Responsibilities of the directors 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 control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with the Australian Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our auditor’s report.
97
Breville Group Limited annual report 2019 Independent auditor’s report continued
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 24 to 39 of the directors’ report for the year
ended 30 June 2019.
In our opinion, the remuneration report of Breville Group Limited for the year ended 30 June 2019
complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
PricewaterhouseCoopers
Mark Dow
Partner
Sydney
15 August 2019
98
Breville Group Limited annual report 2019 Auditor’s independence declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Breville Group Limited for the year ended 30 June 2019, I declare that to the
best of my knowledge and belief, there have been:
a.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b.
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Breville Group Limited and the entities it controlled during the period.
Mark Dow
Partner
PricewaterhouseCoopers
Sydney
15 August 2019
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
99
Breville Group Limited annual report 2019 Shareholder information
Substantial shareholders as at 2 September 2019
The following information is extracted from the company’s register of substantial shareholder notices:
Name
S. Lew Custodians Pty Limited
Matthews International Capital Management, LLC
Bennelong Australian Equity Partners Ltd
Number of
ordinary shares
% of issued
ordinary shares
43,429,879
9,318,737
7,262,595
33.40%
7.16%
5.58%
Distribution of shareholdings as at 2 September 2019
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
1,673
1,286
275
209
44
3,487
131
100
Breville Group Limited annual report 2019 Twenty largest shareholders as at 2 September 2019
Name
Premier Investments Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
SL Superannuation No1 Pty Ltd
BNP Paribas Noms Pty Ltd
Lew Family Investments Pty Ltd
Lew Family Investments Ltd
BNP Paribas Nominees Pty Ltd
S L Nominees Pty Ltd
Mirrabooka Investments Limited
National Nominees Limited
Nofusa Pty Ltd
Citicorp Nominees Pty Limited
McNeil Nominees Pty Limited
AMP Life Limited
HSBC Custody Nominees (Australia) Limited
Mr Scott Laurence Brady
HSBC Custody Nominees (Australia) Limited-GSCO ECA
Shares
35,761,415
34,306,683
13,268,280
11,239,126
5,406,120
3,000,000
2,291,218
1,891,461
1,535,718
1,242,016
711,667
565,000
503,000
500,000
490,844
431,181
368,004
366,788
360,157
335,694
% IC
27.49%
26.37%
10.20%
8.64%
4.16%
2.31%
1.76%
1.45%
1.18%
0.95%
0.55%
0.43%
0.39%
0.38%
0.38%
0.33%
0.28%
0.28%
0.28%
0.26%
Total
114,574,372
88.07%
Unquoted equity securities as at 2 September 2019
Performance rights issued under the Breville Group Performance Rights Plan
and Fixed Deferred Remuneration Plan to take up ordinary shares
* Number of unissued ordinary shares under the performance rights plans.
Number
on issue
Number
of holders
1,106,255*
33
101
Breville Group Limited annual report 2019 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
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay
Barangaroo NSW 2000
Australia
Bankers
Australia and New Zealand Banking Group Limited
242 Pitt Street
Sydney NSW 2000
Company information
Directors
Steven Fisher
Non-executive chairman
Timothy Antonie
Non-executive director
Peter Cowan (appointed 01/09/2018)
Non-executive director
Sally Herman
Non-executive director
Dean Howell
Non-executive director
Lawrence Myers
Non-executive director
Lead independent director
Kate Wright
Non-executive director
Company secretaries
Sasha Kitto
Craig Robinson (appointed 26/06/2019)
Registered office and principal place of
business
Ground Floor, Suite 2
170-180 Bourke Road
Alexandria NSW 2015
Telephone (+61 2) 9384 8100
Company websites
brevillegroup.com
breville.com
kambrook.com.au
sageappliances.com
102
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