BREVILLE GROUP LIMITED
Annual Report
2020
Breville Group Limited Annual report 2020 Contents:Chairman’s review1CEO’s review3Strategy and brands5Financial report13Shareholder information114Company information116Annual general meeting:Thursday 12 November 2020 at 10amVirtual AGM.(this page and outside covers)the 3X Bluicer™ Pro Chairman’s review
“The Group successfully navigated an unprecedented
FY20 and has come out even stronger”
In the 2020 Financial year the Group continued up
the curve of our acceleration program with double-
digit sales and EBIT growth, on a normalised1
basis, in the face of a series of challenging events
including the global pandemic.
The Board increased the full year dividend for
the year by 10.8% to 41.0 cents from 37.0 cents in
the prior year, with a fully underwritten Dividend
Reinvestment Plan (DRP) activated to preserve
cash and to allow future flexibility.
The Group delivered total sales revenue of $952.2m,
a 25.3% growth on prior year with the core Global
Product segment growing by 24.9%, or 20.1%
on a constant currency basis, to $764.4m. The
Distribution segment revenue for the year also grew
26.9% to $187.8m.
Normalised1 Group EBIT for the year of $113.1m,
represented a 16.2% increase on the prior year (or
14.3% excluding the benefit from adopting AASB
16). Normalised1 Net profit after tax increased by
11.2% to $75.0m.
In May and June we moved to strengthen our
balance sheet with a net capital raise of $101m and
the extension of our available debt facilities. We
were delighted with the support that we received
from both institutional and retail shareholders, as
well as our banking partners. The overall refinance
allowed us to continue investing in the growth of
the Group whilst building a cushion against any
future turbulence.
Under the leadership of our CEO Jim Clayton,
the Group continued to successfully innovate and
geographically expand, launching the Sage® brand
into Spain, France and the Middle East.
The Group’s business trajectory is healthy, and the
balance sheet is strengthened to provide resilience
against near term turbulence as well as funds for
growth.
On behalf of the Board, I would like to take this
opportunity to express our gratitude to Jim Clayton
and to his talented, motivated and passionate team
members who have shown exceptional nimbleness,
and resilience, in these unprecedented times. We
are privileged to have such an exceptional group on
the Breville team.
Finally, I would like to express my appreciation to
my fellow Board colleagues and our shareholders,
customers and suppliers for their continued
support.
I encourage all shareholders to attend our virtual
annual general meeting (AGM) in November.
With thanks,
Steven Fisher
Non-executive chairman
1 EBIT and NPAT have been normalised for the impact of abnormal
expenses (doubtful debt provisioning and IoT platform write down) and
abnormal cost savings (compensation and marketing). Net impact on
EBIT of $12.2m; NPAT $8.8m.
Breville Group Limited annual report 2020
1
the Creatista™ Pro
CEO’s review
“Another good year for Breville in the face of many challenges,
including Brexit uncertainty, exchange rate volatility, US tariffs and
COVID-19. We emerge from FY20 with momentum and a hardened
foundation to build upon over the next five years.”
Operationally we faced, and navigated, a number
of challenges in 2020 while continuing to grow
strongly and to reinvest in innovation and our
brands. We took the Sage® brand into Spain, France
and the Middle East; we integrated our ChefSteps
acquisition; we mitigated the impact of US-Sino
tariffs; we continued to invest in new product
development (NPD); and, we began the roll out of
our Global IT 2.0 Platform.
Overall, I am encouraged by the way our team
and processes have responded, how our strategic
projects have progressed, and by how we have
strengthened our balance sheet against any future
shocks. We go into FY21 and beyond with good
momentum and a hardened foundation to build
upon over the next five years.
I thank the Breville | Sage team for their
professionalism, spirit, and sheer hard work during
these trying times. Finally, I would like to express
my appreciation to the Board for their ongoing
support and counsel.
Jim Clayton
Chief executive officer
1 EBIT has been normalised for impact of abnormal expenses (doubtful
debt provisioning and IoT platform write down) and abnormal cost
savings (compensation and marketing). Net impact on EBIT $12.2m.
In FY20, Breville Group delivered strong revenue
growth of 25.3% against a turbulent backdrop of US
tariffs, Brexit uncertainty, exchange rate volatility,
and COVID-19. Our top line growth included the
successful expansion into Spain and France as well
as the continued translation impact of a stronger
US Dollar.
The Global Product segment revenue grew by
24.9%, or 20.1% in constant currency, with solid
growth across all geographies. On a constant
currency basis, North America grew by 11.3%,
ANZ by 18.3%, Europe by 54.8%, and ROW by 25.6%.
Our Global Product segment revenue delivered
20% constant currency growth in both the first and
second half of the financial year.
Once COVID hit in March, our products proved
relevant to the new working-from-home reality
facing many of our consumers, and we saw the
expected migration to online purchasing. Our sales
by geography varied region to region depending
on the nature of government action, as well as
individual retailer behaviors. Our sell-out, or sales
to end consumers, remained resilient across all
markets.
The Distribution segment revenues of $187.8m were
26.9% higher than the previous financial year, driven
by strong Breville local sales in ANZ, including the
successful launch and performance of the Breville
Air™ range.
After factoring out significant abnormal expenses
and sizable abnormal cost savings, normalised1
Group EBIT continued to accelerate, growing by
16.2% against the 2019 financial year (or 14.3% after
excluding the one-year benefit of adopting AASB
16), compared with an EBIT growth of 12.0% in the
prior year. The Distribution segment continued
to fulfil its strategic role and grew EBIT by $4.4m,
which was reinvested in the Global Product
segment marketing and R&D. The overall Group
EBIT margin reduced to 11.9% from 12.8% primarily
because of the strong US dollar translation, and
partially by the impact of US tariffs.
Breville Group Limited annual report 2020
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the Combi Wave™ 3 in 1
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 is
focused on the design, development and sale of
Breville-branded and Sage-branded products
supplied in currently 80 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 segment may be
sold under a brand owned by Breville® (Breville®,
Kambrook®, Aquaport®, Cli-mate®), Sage®, 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 and the Middle East.
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.
Breville Group Limited annual report 2020
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the Sear & Press™ Grill
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”; and
• 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
The Group focuses 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,
the United Kingdom and the Middle East.
Additionally, since 2017, the Group also works
with distribution partners who have decided to
take advantage of the Group’s investment in 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.
Breville Group Limited annual report 2020
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the Smart Oven™ Air Fyer
Strategy and brands continued
PolyScience®
The PolyScience® brand (culinary division) is
distributed around the world under one of 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.
ChefSteps.com
In July 2019, the Group completed the acquisition
of ChefSteps, incorporating both the connected
IoT Joule sous vide immersion circulator, as well
as taking over the ChefSteps.com web property.
The Joule immersion circulator has been fully
incorporated into the Breville brand through the
introduction of a new version 1.5 of the product, and
the website property has been re-invigorated, and
a new editorial product placed behind a paywall,
Studio Pass, was successfully introduced by the
team.
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.
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 2020 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.
Processes built 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,
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 continued to build off its
initial impact and success, most recently with the
successful global introductions of the 3X Bluicer™
series, the Smart Oven™ Air Fryer, and the Combi-
wave™ 3 in 1 Microwave oven (with air frying
functionality).
Breville Group Limited annual report 2020
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the Luxe Collection in Damson Blue
the Luxe Collection in Damson Blue
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
2020 BJB815 the 3x Bluicer Pro
2016 BEM825 the Bakery Boss
2020 BNE900 the Creatista Pro
IDSA Design Award – USA
IDEA International Design
Excellence Awards
Silver Award
2019 BES878 the Barista Pro
2015 BMO700 Quick Touch
2020 CSV750/700 Hydro Pro
2017 BES990 the Oracle Touch
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
2013 BES900 Dual Boiler 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
Good Design Award Chicago Anthenaeum
2019 BOV860the Smart Oven Air Fryer
2019 BES878 the Barista Pro
2019 BTM700 the Tea Maker Compact
2019 BBL920 the Super Q Blender
2019 BPZ800 the Smart Oven Pizzaiolo
Microwave
2015 BCP600 Citrus Press
2015 BBL405 the Kinetix Twist
2014 BES980 the Oracle Espresso
2013 BSG1974 the Original ‘74
Immersion Circulator
2020 BMO870/850 3 in 1 Combi
Wave / Smooth Wave
2019 BES500 the Bambino Plus
2019 BES878 the Barista Pro
2012 BDC600 You-Brew Drip Coffee
2019 BTM700 the Tea Maker Compact
Machine
2019 BBL920 the Super Q
2011
BFP800 Food Processor
2019 BPZ800 the Smart Oven
BEST IN CATEGORY - Domestic
Appliances
2016 BSM600 the Smoking Gun
2019 BPZ800 the Smart Oven
Pizzaiolo
2019 BES878 the Barista Pro
2019 BES500 the Bambino Plus
2018 BDC450 the Precision Brewer
Thermal
Pizzaiolo
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 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
2018 BJE830 the Juice Fountain Cold
2017 BKE735 the Soft Top Luxe
XL
2018 BNE500 Creatista Uno
2017 BOV900 the Smart Oven Air
2017 BTA735 the Toast Select Luxe
2017 BNE800 Creatista Plus
2016 CMC800 Control Freak Cooker
2016 BEM825 the Bakery Boss
2016 Thermal Pro Cookware
2016 BPB620 Boss To Go Personal
Blender
2016 BPB620 Boss To Go Personal
2015 BMO700 Quick Touch
Blender
Microwave
2014 BBL910 the Boss Superblender
2015 BCP600 Citrus Press
2013 BRC600 the Multi Chef
2014 BES980 the Oracle Espresso
2013 BEF100 the Thermal Pro Grill
2014 BMO734 the Quick Touch
2012 BCI600 Smart Scoop Ice Cream
2014 BTA720/730 the Lift and Look
Maker
Pro
2012 BES900 Dual Boiler Espresso
2014 BWM640 the Smart Waffle
Machine
2011
2011
BCG800 Smart Grinder
BTM800 Tea Maker
2013 BEF100 the Thermal Grill Pro
2013 BRC600 the Multi Chef
2012 BDC600XL You-Brew Drip
Coffee Machine
2012 BFP800 Kitchen Wizz Pro
Honourable Mention
2013 BBL605 Kinetix Control Blender
2011
BKE820 Kettle Honourable
Mention
12
Breville Group Limited annual report 2020
Breville Group Limited Financial report 2020
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
14
50
56
57
58
59
60
61
106
107
113
Breville Group Limited annual report 2020
13
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 2020.
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
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.
During the last three years he has not served as a
director of any other listed company.
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 companies:
• VGI Partners Global Investments Limited #
• VGI Partners Asian Investments Limited #
# denotes current directorship
14
Breville Group Limited annual report 2020
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, performance, remuneration and nominations
committee (PPR&NC).
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 20
years’ experience as a practising chartered accountant
and in senior finance roles.
Craig Robinson
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;
• A 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, continued the execution of its
acceleration program, and strengthened its balance
sheet through a capital raise with net proceeds of
$101m and the securing of increased, and longer
tenure, bank debt facilities.
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 80 countries). Products
included in this segment may be sold directly
or through third parties, and may be branded
Breville®, Sage®, 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 the Group (e.g.
Breville®, Kambrook®), or they may be distributed
under a third party brand (e.g. Nespresso®).
Breville Group Limited annual report 2020
15
Directors’ report
continued
Operating and financial review continued
Company overview and principal activities
continued
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 also distributes products under a
machine partnership with Nespresso® and Nestlé®
Dolce Gusto®.
In North America, the Group markets and distributes
Breville® and Polyscience® branded products and
distributes Nespresso® products, under a machine
partnership.
In Europe, the Group markets and distributes
Breville® designed products 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 Breville® designed products
to distributors outside of the Group’s principal markets
including the Asia Pacific region, the Middle East and
South America.
Group operating results
AUDm1
Revenue
EBITDA
EBIT
NPAT
Normalised EBIT2
Normalised EBIT2
growth (excluding
AASB16 impact)
Normalised NPAT2
Normalised EPS2
(cents)
Dividend per share -
ordinary (cents)
Franked (%)
Net cash ($m)
FY20
952.2
126.5
100.9
66.2
113.1
FY19
%
Growth
760.0
25.3%
114.0
11.0%
97.3
67.4
97.3
3.7%
(1.8)%
16.2%
14.3%3
75.0
67.4
11.3%
57.3
51.8
10.6%
10.8%
41.0
60%
128.5
37.0
60%
9.8
1 Minor differences may arise due to rounding.
2 EBIT, NPAT and EPS shown normalised for impact of
abnormal expenses (doubtful debt provisioning and
IoT platform write down) and abnormal cost reductions
(compensation and marketing). Net impact on EBIT $12.2m;
NPAT $8.8m; EPS 6.8c.
3 Adoption of AASB16 in FY20 benefited EBIT by $2.0m over
FY19. Growth is shown on a like-for-like basis, on a reported
basis EBIT growth is 16.2%. Net benefit at NPAT level
minimal at $254k.
Results Highlights
• A strong year of delivery, in line with initial
expectations, but delivered against a turbulent
backdrop of US tariffs, Brexit uncertainty and latterly
COVID-19.
• Group revenue increased by +25.3% (FY19
+17.5%) with strong growth in both the Global
Product and Distribution segments, partly boosted
by the strength of the USD (contributed ~5% to
reported growth).
• 1H20 and 2H20 saw similar revenue growth with
the second half boosted by the relevance of our
products to the “working from home” environment
faced by many of our consumers.
•
•
In constant currency, the Global Product segment
delivered a +20.1% increase in revenue (FY19
+12.0%) driven by continued European expansion
and strong ANZ sales, especially in the second half.
In 2H20 the Group incurred two sizable abnormal
expenses and equally, made some sizable cost
savings. We have looked through both these pluses
and minuses to normalise profit for the basis of
dividend declaration for FY20 and setting budgets
for FY21. Furthermore reported FY20 EBIT benefited
from the adoption of AASB16 which has been
stripped out when reporting like-for-like EBIT growth
of +14.3%.
• Normalised Group EBIT2 growth accelerated to
+14.3% (FY19 +12.0%) whilst EBIT margin at
11.9% was lower than FY19 at 12.8%. This year-
over-year margin decrease reflects the translation
impact of the strengthening USD and impact of US
tariffs on products from China. Statutory EBIT grew
by +3.7%.
• Normalised NPAT2 grew +11.3% year-on-year,
whereas statutory NPAT declined by (1.8)%.
• Total dividends for the year increased by +10.8%
to 41.0 cents per share, 60% franked. A fully
underwritten DRP has been activated to preserve
cash and balance sheet strength and flexibility.
• Net cash strengthened during the year to $128.5m
due to the net proceeds of the capital raise
($100.7m) completed in June and a temporary
reduction in working capital. The unwind of tactical
inventory positions held in FY19 and the impact
of COVID-19 on supply, and demand, temporarily
reduced inventory and working capital below
equilibrium.
• Good progress was made in the implementation
of our Acceleration Strategy with a first full year of
Benelux and Switzerland sales and entry into Spain
and France.
16
Breville Group Limited annual report 2020
Operating and financial review continued
Results Highlights continued
• COVID-19: The pandemic temporarily slowed
the normal ramp up of production from suppliers
after Chinese New Year (CNY), but tactically high
inventories held in the northern hemisphere provided
some buffer. Our products proved relevant to
consumers “working from home” and sell-out held
up well. Sell-in across different geographies was
impacted by different lock-down implementations
and individual retailer reactions, but across the
portfolio sell-in remained robust. Faced with the
uncertainty of the trading outlook in April the
Group pulled back hard on all expenses including
employee compensation and marketing investment.
The Group strengthened its balance sheet via a
capital raise and the refinancing of its debt facilities.
• The combination of expense control, a resilient sales
demand and balance sheet strengthening means
the Group enters FY21 with momentum and in a
good position to invest in sustained growth and to
navigate future turbulence.
Segment results
REVENUE
EBIT
EBIT MARGIN (%)
AUDm1
Global Product
Distribution
TOTAL
FY20
764.4
187.8
952.2
FY19 % Change
612.0
148.0
760.0
24.9%
26.9%
25.3%
Global Product segment revenue
Normalised
FY20 2
90.2
22.9
113.1
FY19 % Change
78.8
18.5
97.3
14.5%
23.8%
16.2%
Normalised
FY20 2
11.8%
12.3%
11.9%
FY19
12.9%
12.5%
12.8%
AUDm1
North America
Australia and New Zealand (ANZ)
Europe
Rest of World (ROW)
TOTAL
1 Minor differences may arise due to rounding.
GLOBAL PRODUCT SEGMENT REVENUE
FY20
420.4
157.4
143.3
43.3
764.4
FY19
357.4
132.9
89.6
32.1
612.0
% Change
AUD
% Change
Constant
Currency
17.6%
18.4%
60.1%
34.8%
24.9%
11.3%
18.3%
54.8%
25.6%
20.1%
2 EBIT and EBIT Margin % shown normalised for impact of abnormal expenses (doubtful debt provisioning and IoT platform write
down) and abnormal cost reductions (compensation and marketing). Net impact on EBIT $12.2m.
Global Product Segment
The Global Product segment revenue grew by +24.9%
to $764.4m (FY19: $612.0m). In constant currency,
revenue grew +20.1% driven by European expansion
and the relevance of our products to a working-from-
home environment in 2H20. Our ”sell-out” performance
remained solid across all geographies whereas our
reported “sell-in” patterns reflected local lock down
patterns and retailer behaviours.
In North America, the Group achieved +11.3%
constant currency revenue growth with 2H20 sell-
in impacted by retailer lock downs and the delay of
Amazon Prime Day, which shifted some orders to 1H21.
In ANZ, the Group saw strong growth in 2H20 with
increasing online adoption and delivered +18.3%
constant currency full year growth despite some stock
shortages late in the year, again shifting some orders
into early 1H21.
In Europe, the Group delivered +54.8% constant
currency revenue growth with strong performance in
existing markets and a further roll out to Spain and
France. The fast-growing region finished the year at
91% of the size of the Global segment in ANZ.
The ROW segment is by nature lumpy, and this year
revenue grew strongly against a weaker FY19 baseline.
The Global Product segment normalised EBIT2 for
the year was $90.2m (FY19: $78.8m), representing
a +14.5% increase. The segment’s normalised EBIT
margin2 of 11.8% compares to 12.9% in FY19 with a
strong USD accounting for two thirds of the decline and
the impact of US tariffs also moderating the % margin.
Breville Group Limited annual report 2020
17
Directors’ report
continued
Operating and financial review continued
Segment results continued
Distribution Product Segment
The Distribution segment grew revenue strongly
increasing sales by +26.9% (against a FY19 +18.8%)
driven by strong Breville local sales in ANZ, including
the successful launch of the Breville Air™ range.
Importantly, the segment fulfilled its strategic role by
delivering an incremental $4.4m in EBIT which was
reinvested into Global segment marketing and R&D.
Normalised EBIT and NPAT
In 2H20 the Group incurred two sizable abnormal
expenses and equally, made some sizable cost
savings. As the Group decided its dividend payout
for FY20, and set budgets for FY21, it looked through
both these pluses and minuses to base its decisions
off a normalised FY20 EBIT of $113.1m. In terms of
specifics:
• Since COVID-19 impacted our markets, credit risk
has heightened with some retailers at the same
•
•
time as global insurers are reducing coverage limits.
This combination led to the judgement to recognise
a step change in the doubtful debt provision of
$13.6m in 2H20.
In 2H20 the Group made the strategic decision
to consolidate onto a single, standards-based
platform, triggering the write down of our proprietary
IoT platform, developed over three years, at a cost
of $9.6m.
In the face of COVID-19 uncertainty, the Group
aggressively cut back expenses in Q420 to create
an expense buffer, and explicitly to protect jobs. The
cuts included temporary base salary, and directors’
fees, reductions (ranging from 40% to 10%) and
the suspension of the FY20 short-term incentive
program. Neither of these savings, together worth
$7.7m, are planned to repeat in FY21.
• The Group cut back on marketing spend below
normal levels in Q420 by $3.3m.
All four impacts are regarded as abnormal and are
added back to calculate the Group’s normalised profit
performance.
FY19
FY20 % Growth
Normalisation
FY20 % Growth
Statutory Statutory
Statutory
760.0
271.2
952.2
320.6
25.3%
18.2%
Doubtful
debt
provision 1
IoT
impair-
ment 2
Compens-
ation
reduction 3
Reduced
marketing
spend 4
Normal-
ised
952.2
320.6
Normal-
ised
25.3%
18.2%
(32.2)
(35.1)
8.9%
(3.3)
(38.4)
19.1%
AUD $m
Revenue
Gross Profit
Mktg
Expenses
Other
Expenses
EBITDA
(125.0)
(159.0)
27.2%
114.0
126.5
11.0%
13.6
13.6
Depn/Amort
(16.6)
(25.6)
54.1%
EBIT
Finance Costs
Tax Expenses
NPAT
Basic EPS
(cents)
97.3
(3.0)
(26.9)
67.4
100.9
3.7%
13.6
(8.2) 173.3%
(26.6)
(1.3%)
66.2
(1.8%)
(3.9)
9.7
51.8
50.5
(2.5%)
9.6
9.6
9.6
(2.8)
6.9
(7.7)
(7.7)
(143.4)
(3.3)
138.8
(25.6)
14.8% Growth
excluding
21.7%
AASB 16
impact 5
54.1%
(7.7)
(3.3)
113.1
16.2%
14.3%
2.2
(5.5)
0.9
(2.4)
(8.2)
173.3%
(30.1)
75.0
11.8%
11.2%
57.3
10.6%
Minor differences may arise due to rounding
1 Step change in doubtful debt provision to reflect heightened
credit risk with retailers weakened by changes in consumer
patterns and physical lock downs.
2 One off impairment charge arising as a result of strategic
decision to move to a standards-based IoT platform and to
write off development work on our proprietary IoT platform.
3 Temporary compensation reductions. Base salary cut by an
average of 20% in May and June 2020. Cuts ranged from
40% for directors’ fees and 30% to 10% of base salary.
The FY20 STI scheme was suspended. These savings are
considered abnormal with salaries reverting to normal levels
as of July 2020 and a STI scheme planned for FY21.
4 In response to uncertainty in the COVID-19 environment,
marketing spend was reduced across April-June. Spend
would normally grow at least in line with gross profit. The
$3.3m add back reflects specific abnormal cuts made in
April-June. After adding this amount, growth in marketing
spend is at a more normal level.
5 FY20 benefited by $2m at EBIT level from adoption of AASB
16 but is stripped out for a like-for-like comparison to FY19.
Net benefit to NPAT is minimal at $254k.
18
Breville Group Limited annual report 2020
Operating and financial review continued
Dividends
Financial Position
The Group’s total working capital decreased in FY20
by $22.3m primarily driven by an unwind in previous
tactical investments in inventory, with strong demand in
2H20 reducing stock balances, and the take up of the
doubtful debt provision. With the business growing at
+25% pa, this decrease was larger than planned with
working capital below equilibrium.
In FY19, tactical inventory builds were made in the
USA (timing of tariff price increases), the UK (a buffer
against Brexit disruption), and in Europe where we ran
an unconstrained stock position to support aggressive
growth. In FY20, these were planned to unwind, and
they did; however, a slower ramp up of supply post
Chinese New Year, combined with unexpectedly strong
sell-in in some markets, has driven inventory below
equilibrium with replenishment expected throughout
FY21.
Reported receivables were flat on prior year despite
+25% sales growth partly because of the take up of the
doubtful debt provision and partly due to the pattern of
sales late in 2H20 with some orders being pushed into
1H21 given inventory supply constraints and the delay
of Amazon Prime day from July to October.
Flat inventory and receivable balances combined with
payables growing in line with the business resulted in
reduction in working capital below an equilibrium level.
The growth in intangibles to $160.2m (or 17% of sales)
an increase of $37m, reflects the recognition of goodwill
associated with the ChefSteps acquisition ($28m) and
the ongoing investment in new product development as
well as the Group IT platform.
Net Cash
Net cash at 30 June 2020 was $128.5m compared to
$9.8m at 30 June 2019 including the net proceeds of
the capital raise completed in June 2020 of $100.7m.
A final dividend of 20.5 cents per share (60% franked)
has been declared (FY19: 18.5 cents, 60% franked)
bringing the total dividends for the year to 41.0 cents
per share.
The Group has established a new Dividend
Reinvestment Plan (“DRP”) for its shareholders,
replacing its previous inactive DRP. The DRP will
apply to the final dividend for the year ending 30 June
2020 and will remain in place until further notice.
Participation in the DRP is optional and available to
eligible shareholders of fully paid ordinary shares in BRG
with a registered address in Australia or New Zealand
as at the record date of 15 September 2020. Eligible
shareholders may participate for all or part of their
shareholding, however a holder must elect a minimum
of 150 shares to participate. To participate in the DRP
for the FY20 final dividend, shareholders will need to
ensure their election is made by 5:00pm (AEST) on
16 September 2020.
Shareholders who successfully elect to participate in the
DRP will be able to reinvest all or part of their dividends
to obtain additional fully paid ordinary shares in BRG,
without having to pay brokerage, commission or other
transaction costs in respect of the shares acquired.
Once a shareholder elects to participate, either in part or
in full, that election will continue to apply to subsequent
dividends where the DRP is active, unless a shareholder
advises otherwise. Elections under the previous inactive
DRP will be disregarded. Shareholders who successfully
participate in the DRP for the final FY20 dividend
will be issued shares at a share price determined in
accordance with the DRP Rules based on the average
daily volume weighted average price (“VWAP”) during
the period of ten trading days, commencing on
17 September 2020. Shares issued under the DRP will
rank equally with existing fully paid ordinary BRG shares.
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.
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%. Marketing spend was temporarily held back in
2H20 but the Group retains the target of investing at least
12% of Group revenue in marketing and new product
development.
Breville Group Limited annual report 2020
19
Directors’ report
continued
Operating and financial review continued
Material business risks continued
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
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.
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.
The impact of COVID-19 pandemic
may continue to impact supply ex-
China, demand from key retailers,
and in key consumer markets, and
heighten credit risk
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 footprint 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.
With regard to COVID-19 supply risks, inventory buffers
in key markets are being rebuilt to provide resilience in the
face of supply interruptions.
With regard to COVID-19 retailer demand risk, digital
marketing to consumers is used to stimulate pull through
or sell-out from retailers. Furthermore, by supplying to
a wide range of premium retailers, as well as a growing
direct to consumer channel, the consumer has freedom to
find our products in alternative channels when stock runs
low in a particular retailer.
With regard to COVID-19 end consumer demand,
during the pandemic our products have proved relevant
to the working-from-home experience of many of our
consumers. Digital marketing, direct to the consumer, is
used to sustain this demand. Sell out trends and weekly
data are monitored to predict future consumer demand.
With regard to COVID-19 credit risk the Group works with
insurers to sustain receivable insurance. Where this is not
possible the Group has lessened credit risk by shortening
trading terms with certain customers and taking up an
appropriate doubtful debt provision as at 30 June 2020.
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 giving forward
visibility of the effective exchange rate for 12 months
allowing the business to manage costs and pricing.
20
Breville Group Limited annual report 2020
Operating and financial review continued
Group strategic acceleration program
update
flexibility and scalability; an ERP and a point of sale
module giving access to sell-out data for better decision
making.
During FY20, the Group has continued to
progress its acceleration program, the
impacts of which have helped drive
the FY20 operational and financial
performance.
Through FY17-19 the Group
moved from specific new product
development innovation to the
commercialisation of a range within a
category. During FY20 the Group has
moved up the curve to Solution Thinking,
providing not only a product, but a product,
connected via a standards-based IoT platform
to specific content designed to make the
product deliver excellent results for the
consumer – recipes, instructional videos
and machine instructions. The user will
be able to execute a recipe through an
app on their phone or via smart home
devices to deliver outstanding results.
Our commitment to sustainability
People
and social responsibility
Talent attraction and
retention
Diversity and inclusion
Reward and recognition
Workplace health and safety
Training and
development
The Group is committed to ethical,
responsible and sustainable conduct
across the entire business and
acknowledges the importance of
respecting all 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 important
initiatives. The Group’s overall goal is to embed
an Environmental, Social and Governance
(ESG) framework into the business
agenda incorporating key ESG risks and
opportunities.
Community
Community engagement
People
The Joule Sous Vide, acquired as part
of the ChefSteps acquisition, is the
Group’s first integrated solution offering.
Leveraging the outstanding content, also
acquired with ChefSteps, combined with
Breville content, the Joule Oven Air Fryer Pro will
be the next solution offering – to be launched
in FY21. Because the products are
connected the customers will continue to
be served added content and features
throughout the lifetime of the product.
A real solution.
In terms of geographic expansion
we launched the Sage® brand into
Spain in September 2019 and in
May 2020 expanded into France. As
the Group continues to make progress
on its strategy of unifying Europe under
the Sage® brand, existing European Sage®
Distributors have been buying product directly
from our European warehouse instead
of Hong Kong since FY19. Continuing
this strategy the Middle East will now
transition from the Breville® brand
to the Sage® brand allowing the
distributor to draw from the UK
warehouse rather than Hong Kong.
Healthy nutrition
Talent attraction and retention
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.
Environment
Energy and emissions
Packaging stewardship
Waste and recycling
Life cycle analysis
Business
Ethical sourcing
Modern slavery
Vendor audits
Product responsibility
Anti-bribery and
corruption
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.
During FY20, Breville introduced an online
employee survey tool which allows for
real-time tracking of our employees’
level of engagement across several
engagement metrics. The tool also
allows for comparisons against
industry benchmarks and during
FY20 Breville exceeded the industry
benchmark in each of the engagement
metrics. Tracking employee
engagement allows the company and
individual managers to target the specific
The Group has made significant
progress, and investment, during
FY20 in delivering a centralised scalable
global IT platform to allow accelerated
growth. The platform is live in Europe and
will next be rolled out to the USA. The platform
includes a third party logistics model; a product
information management (PIM) system to centralise all
product related data; a middle-ware platform improving
areas of focus for future initiatives which
will improve the engagement and ultimately the
performance of our employees and our company.
Breville Group Limited annual report 2020
21
Directors’ report
continued
Operating and financial review continued
Our commitment to sustainability and
social responsibility continued
People continued
Diversity
Our diversity is represented in many ways including
gender, age, origin, race, cultural heritage, language and
location. Some examples include;
• Gender: Breville complies with the (Australian)
Workplace Gender Equality Act which requires the
submission of an annual report on gender diversity
practices and metrics. In FY20 our Board remained
at 29% female representation and the percentage
of women across the organisation remained at
45%. The percentage of women in managerial roles
increased from 30% in FY19 to 32% in FY20 and
within senior and executive roles, the percentage
of women increased from 25% in FY19 to 30% in
FY20.
• Global Diversity: Our 610 employees are spread
across 9 countries and speak a variety of
languages. Over half of our employees and half of
our executive leadership team are located outside of
Australia.
• 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.
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;
• Our Diversity Committee has undertaken various
activities recognising our employee diversity and
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 were reviewed with a focus on identifying
more flexible employment practices sympathetic to
work-life balance. To this point, during the impact
of COVID-19, our businesses in each geography
successfully adopted working-from-home
arrangements in order to meet Breville’s needs
and the personal safety of our employees and their
families.
• Anti-discrimination and anti-bullying training is
conducted every 2 years to ensure that our values
are consistently translated into appropriate working
behaviours.
Reward and 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 plans
for relevant employee groups. During FY20, the Group
reviewed key performance management practices and
introduced changes with the intention to strengthen the
alignment between performance and reward across the
Group.
Currently over 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 throughout
the year both informally and formally acknowledging
individuals’ and teams’ behaviours and contributions.
Workplace health and safety
Ensuring a safe workplace is a key area of focus and
the Group strives for continuous improvement and
consistency in safety practices across all geographies.
As an indication of Breville’s commitment to ensuring
the safety of all employees, in FY20 a Group Health,
Safety and Environment (HSE) Manager was appointed
to assist in further embedding our global HSE systems,
procedures and compliance activities. All safety policies
are now available on a common SharePoint site
accessible to all Breville employees.
The Workplace Health & Safety Committee (WHSC)
worked closely with the Sustainability Committee
to ensure environmental initiatives were aligned
within Breville. The WHSC is focussed on ensuring
employees’ health and safety at work and does this
by developing standards, rules and procedures. In
FY21 the Committee will continue to raise awareness
on health and safety via targeted campaigns and staff
communication initiatives.
During FY20, Breville took pre-emptive steps to manage
the potential risks associated with the COVID-19
epidemic. These were co-ordinated globally and
included temporary office closures, regular employee
communication, the establishment of a company
COVID-19 SharePoint page, work-from-home
guidelines, temperature-testing and deep-cleaning of
offices. In addition, the company ran several global
activities focussed on employees’ mental and physical
health including online yoga, mental-health sessions,
team trivia events and music evenings.
Training and development
The Group invests in the training and education of its
people, building strong, collaborative links with world
experts in food thinking and technology.
Strongly committed to our core values of creativity,
simplicity, insight and excellence across our business,
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
in FY19 and continued through FY20.
22
Breville Group Limited annual report 2020
Operating and financial review continued
Our commitment to sustainability and
social responsibility continued
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 Organisation for over 9
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.
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 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.
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.
The Group expects that its supply partners will not be a
party to any violation of basic Human Rights including:
Vendor audits
•
•
•
•
•
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 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. This year the Group has engaged
the services of a collaborative platform designed for the
sharing of responsible ethical sourcing data, on supply
chains. The Group in still in the process of completing
the onboarding of all our current vendors into the
platform. Once this is complete, we will have access
to a larger number of vendor audits as well as being
able to assess the inherent risk of each of our vendors
to ensure vendors are selected for audit in accordance
with the Group’s internal risk assessment framework.
Breville Group Limited annual report 2020
23
Directors’ report
continued
Operating and financial review continued
Our commitment to sustainability and
social responsibility continued
Vendor audits continued
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
2020
30 June
2019
Target for
June 2023
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 remedial 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.
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.
Annual vendor
audits completed
8
6
10
Anti-bribery and corruption
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
conducted and received audits on 8 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
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.
24
Breville Group Limited annual report 2020
Risk management
The company’s risk management is discussed in the
corporate governance statement on page 54.
Dividends
The following dividends have been paid, declared or
recommended since the end of the preceding year.
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.
Annual General Meeting (AGM) and
Director Nominations
Cents per
ordinary
share
$’000
The Group will hold its Annual General Meeting (AGM)
virtually on 12th November 2020.
Final FY20 dividend
recommended:
Dividends paid in the year:
Interim FY20 dividend paid
Final FY19 dividend paid
20.5
27,992
20.5
18.5
26,728
24,121
In accordance with our constitution and ASX
requirements, the closing date for the receipt of Director
Nominations from persons wishing to be considered for
election is 16th September 2020 (40 business days prior
to AGM). Should the nomination of a person for election
be made by a Director, the closing date for the receipt
of nomination is 21st October 2020 (15 business days
prior to AGM).
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
127,764
43,791
10,968
42,484
139,264
100,000
21,764
The Group has established a new Dividend
Reinvestment Plan (“DRP”) for its shareholders,
replacing its previous inactive DRP. The DRP will
apply to the final dividend for the year ending
30 June 2020 and will remain in place until further
notice. Participation in the DRP is optional and available
to eligible shareholders of fully paid ordinary shares
in BRG with a registered address in Australia or New
Zealand as at the record date of 15 September 2020.
Eligible shareholders may participate for all or part
of their shareholding, however a holder must elect a
minimum of 150 shares to participate. To participate in
the DRP for the FY20 final dividend, shareholders will
need to ensure their election is made by 5:00pm (AEST)
on 16 September 2020.
Shareholders who successfully elect to participate in the
DRP will be able to reinvest all or part of their dividends
to obtain additional fully paid ordinary shares in BRG,
without having to pay brokerage, commission or other
transaction costs in respect of the shares acquired.
Once a shareholder elects to participate, either in part or
in full, that election will continue to apply to subsequent
dividends where the DRP is active, unless a shareholder
advises otherwise. Elections under the previous inactive
DRP will be disregarded. Shareholders who successfully
participate in the DRP for the final FY20 dividend
will be issued shares at a share price determined in
accordance with the DRP Rules based on the average
daily volume weighted average price (“VWAP”) during
the period of ten trading days, commencing on
17 September 2020. Shares issued under the DRP will
rank equally with existing fully paid ordinary BRG shares.
The DRP for the final FY20 dividend will be fully
underwritten.
Breville Group Limited annual report 2020
25
Directors’ report
continued
Remuneration report (audited)
Section 1 Introduction
Section 2 Overview of Remuneration Approach and FY20 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
Fixed Deferred Remuneration Included in Remuneration tables 6 & 7
Table 5
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 FY20 and FY19
Table 8
KMP STI Cash Bonuses and LTI Performance Rights Vesting
Table 9
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
Section 9 Peer Group Appendix
Table 13 ASX200 Consumer Staples, Consumer Discretionary and Industrials Peer Group used for
Relative TSR Measurement
1. Introduction
The Directors are pleased to present the Group’s remuneration report for the financial year ended 30 June 2020
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 FY20.
This report is made in the context of a strong FY20 performance delivered against a turbulent backdrop of Brexit
uncertainty, US-Sino tariffs and latterly COVID-19.
FY20 Performance Highlights
• Sales increased to $952.2m
+ 25.3% growth
• Statutory EBIT increased to $100.9m
+ 3.7% growth
• Normalised EBIT increased to $113.1m + 14.3% growth
• Normalised NPAT increased to $75.0m + 11.3% growth
• DPS increased to 41.0 cents
+ 10.8% growth
• Share price1 increased to $22.76
+ 39.3% growth
• One-year TSR1 was
+ 41.5%
1 30th June 2020 compared to 30th June 2019
26
Breville Group Limited annual report 2020
Remuneration report (audited) continued
1. Introduction continued
The Board is pleased with how management has executed against a difficult backdrop, but, recognising that
significant future uncertainty remains, the Board chose to take a prudent approach to remuneration for the year and
specifically:
• Suspended the FY20 STI scheme
•
Implemented an all employees compensation, and directors’ fees, reduction in May and June 2020
between 10% - 40%
•
Issued deferred share rights to the CEO as part of Deferred Base Remuneration
• Maintained the LTI incentive scheme to reward sustained shareholder value creation
During FY21 the Board will review and decide if a discretionary short-term bonus recognising delivery over an
18-month period should be awarded. This will be gauged against a longer period of trading under COVID-19
conditions than the current 4 months currently available to judge performance. The parameters of the FY21 scheme
will also be reviewed to ensure that they continue to incentivise executives to deliver superior shareholder outcomes
in the current unusual and volatile market conditions.
2. Overview Remuneration Approach and FY20 Outcomes
FY20 special circumstances
When the potential economic impact of COVID-19 started to emerge in March and April 2020, with a resulting
uncertainty over future trading, the business introduced broad based cost cutting measures designed to protect
performance and employment. These cost cuts impacted employee remuneration.
• Base cash salaries and directors’ fees were reduced by between 10% and 40% on a progressive basis with the
highest cuts for the Board of Directors. These reductions were implemented for May and June 2020. The salary
reductions were then suspended in July 2020 due to stronger trading. Future reductions remain under review.
• The FY20 STI was suspended. Sales and gross profit performed strongly both before, and after the pandemic
arose, however two large abnormal expenses (doubtful debt provision and the impairment of a proprietary IoT
platform) reduced statutory EBIT. With increased trading uncertainty the Board prudently decided to suspend the
STI scheme for FY20.
• The Board considers that management has performed strongly during the COVID crisis, but only 4 months have
passed under these unusual trading conditions. In FY21 the Board may review management performance over a
longer period and may issue a discretionary bonus to reward performance since COVID impacted the business.
• The LTI scheme for FY21 has been reviewed, and revised, to increase the chance that it continues to effectively
reward and incentivise superior performance, aligned to shareholder interests. Given the current turbulence in
the majority of consumer and industrial ASX 200 share prices, the scheme will adopt an absolute, rather than
a relative, TSR target, calculated over a three year performance period from 30th June 2020 to June 30th 2023.
50% of the performance rights will vest on achieving a minimum three year TSR target, and 100% will vest on
achieving a stretch TSR target. No lock up period will apply after vesting. TSR targets are set in light of current
market conditions and will be disclosed in the remuneration report for FY23. The Board is aware that it may need
to exercise its discretion to equitably reward management’s performance given the expected turbulence in the
upcoming 3-year performance period.
Breville Group Limited annual report 2020
27
Directors’ report
continued
Remuneration report (audited) continued
2. Overview Remuneration Approach and FY20 Outcomes continued
FY20 special circumstances continued
CEO: The CEO’s remuneration package is designed to reward, motivate and retain a high performing international
CEO, whilst maximising alignment with shareholder interest. Jim Clayton has been with the Group for 5 years as CEO
and has delivered sustained strong business growth and shareholder returns.
The CEO’s package has steadily moved towards more variable, share based and longer-term remuneration rather
than fixed short-term cash-based rewards. This trend continued in FY20.
In FY20 the CEO’s short term cash remuneration was reduced by the temporary salary reduction in May and June
(30% reduction for the CEO) and the suspension of the FY20 STI scheme. The LTI scheme and award level was
left unchanged at FY19 levels. The CEO’s overall package was enhanced by an expansion of the fixed deferred
remuneration scheme. This remuneration rewards share price appreciation and tenure. Deferred remuneration
grants for the FY20 service period (equivalent to $275,000 of Fixed Cash Salary for FY20) were made. Grants
relating to future service periods, FY21-24, were also made. These grants will only vest when the specified period of
employment has been delivered. The CEO’s reported total remuneration for FY20 increased by 13% or $267k over
FY19 to $2.31m.
The Board considers this appropriate to reward and retain a high performing international CEO for the globally
expanding Group. The Board is also conscious that over the last few years the weakness of the USD has continued
to diminish the value of AUD based remuneration packages in an international context. The Board has moved to
ensure that Jim Clayton’s package is comparable to those offered by both similar, and larger, international groups.
The CEO reports to the Board and is not a Director of the Group. This delineation of responsibilities and reporting
lines has been chosen deliberately and works well with a clear split between executive and non-executive roles.
In line with this choice, the Board continues to choose not to take the CEO’s package to the AGM for separate
shareholder approval. The CEO’s remuneration package is put up for shareholder scrutiny, alongside other key
executives’ remuneration details, as part of the Group’s remuneration report.
KMPs: KMP executives also experienced a fixed salary cut in May and June (30%) and a zero STI award for FY20.
LTI performance right grants were made to KMP’s for FY20 based on 65% of base salary, an increase from 50% in
FY19. This increases the weighting of share based, longer term incentives in KMP packages in line with the desired
alignment of KMP and shareholder interests.
Against this backdrop the following remuneration arrangements were approved and implemented for the year.
Remuneration
Component
Fixed Cash
Remuneration
Purpose & Execution
FY20 Outcomes
Aims to provide competitive salary, including
superannuation and non-monetary benefits, to
attract and retain a high performing team.
• No base cash salary increases were
awarded to the CEO in FY20
• Temporary reductions in base salaries
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.
were implemented in May and June on a
progressive basis ranging from 40% to 10%
with an average reduction of ~20%. Total
salary saving across all staff was $1.5m per
month across May and June
• Based on positive trading, 1H21 salaries
have been restored to normal levels as of
July 2020
28
Breville Group Limited annual report 2020
Remuneration report (audited) continued
2. Overview Remuneration Approach and FY20 Outcomes continued
Remuneration
Component
Fixed Deferred
Remuneration
Purpose & Execution
FY20 Outcomes
Delivers fixed deferred remuneration to the
executive in the form of SBP that aligns
the executive’s interests with shareholders’
by increasing individual potential future
shareholdings in the Group. Supports the
retention of high performing international
executives.
As part of their fixed remuneration the executive
may receive grants of deferred share rights
vesting, and exercisable, when employment
services for a specific period have been
provided.
• One share right entitles the executive to
one fully paid ordinary share on vesting and
exercise
• No consideration is payable by the
executive on granting or exercise of the
share rights as the rights satisfy part of the
executive’s base remuneration
• All unvested rights lapse if the specific
service period is not commenced by the
executive
• No disposal restrictions apply to the shares
received when the rights have vested
The number of rights granted is calculated as
a base salary amount divided by the relevant
share price at the time that the grant is agreed.
This aligns the executive’s and shareholders’
interest in sustained share price appreciation.
The Board believes that this instrument may
prove particularly attractive as an incentive
and retention tool in times of uncertainty and
increased share price volatility.
The following grants have been made to the
CEO for FY20, and beyond, in lieu of a base
salary:
• FY20 Grant: 16,467 share rights which will
vest and be exercisable when, and if, the
service period 26 Aug 2019 – 25 Aug 2020
is completed.
• FY21 Grant: 29,940 share rights which will
vest and be exercisable when, and if, the
service period 26 Aug 2020 – 25 Aug 2021
is completed.
• FY22 Grant: 29,940 share rights which will
vest and be exercisable when, and if, the
service period 26 Aug 2021 – 25 Aug 2022
is completed.
• FY23 Grant: 29,940 share rights which will
vest and be exercisable when, and if, the
service period 26 Aug 2022 – 25 Aug 2023
is completed.
• FY24 Grant: 29,940 share rights which will
vest and be exercisable when, and if, the
service period 26 Aug 2023 – 25 Aug 2024
is completed
The number of rights issued was calculated
to give an equivalent base salary increase of
$275,000 for the FY20 grant based on a fair
value of $16.70 per share which was was in
line with the YTD VWAP when the grants were
agreed in January 2020.
The grants for subsequent years were
increased to account for existing rights that
vest, and expire, in August 2020 and if not
replaced would constitute a base remuneration
reduction for the CEO.
These grants form part of the CEO’s short-term
employment benefits shown in table 6 with the
value shown calculated according to AASB
2 which attribute some of the value of future
service periods to the current year even though
the grant lapses if the future employment period
is not completed.
Breville Group Limited annual report 2020
29
Directors’ report
continued
Remuneration report (audited) continued
2. Overview Remuneration Approach and FY20 Outcomes continued
Remuneration
Component
Purpose & Execution
FY20 Outcomes
Short term
incentives
(STI)
Aims to reward and incentivise executives for
over achieving stretch company targets and is
paid in cash each year.
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.
• The FY20 base pre-bonus EBIT target
was $110.2m (on a pre AASB16 basis
or $112.2m on a post AASB16 basis)
representing a +13.2% EBIT growth over
FY19.
•
In FY20 the STI scheme was suspended as
part of cost cutting measures introduced
to protect the business during a period of
increased uncertainty.
In FY21 the Board may review management
performance over a longer period and
may issue a discretionary bonus to reward
performance since COVID-19 impacted the
trading environment.
30
Breville Group Limited annual report 2020
Remuneration report (audited) continued
2. Overview Remuneration Approach and FY20 Outcomes continued
Remuneration
Component
Long term
incentives
(LTI)
Purpose & Execution
FY20 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 their fixed 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.
The percent of fixed cash remuneration ranges
from 20% up to 125% for the CEO.
Vesting
• 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
against a peer Group of approximately 60
companies within the ASX200 Consumer
Staples, Consumer Discretionary and
Industrials indices (the peer group appendix
is shown in Table 13).
• Grants vest on the following scale
- 0% vests below 50% TSR relative
percentile
- 50% vests at 50% TSR relative percentile
In Year grants
•
In FY20 the CEO received an LTI
performance rights grant of 125% of fixed
remuneration in line with FY19.
• Other KMP’s received a grant of 65% of
fixed remuneration (an increase from 50% in
FY19 ) with other managers in a range from
20-50%.
In Year LTI Vesting
• During FY20 72,800 rights vested in the
CEO’s favour under the below schemes and
102,910 rights vested in favour of the other
KMPs.
2016 Performance Rights
• 10,000 shares vested to the CEO and
17,760 to other KMPs as part of third
tranche of the 2016 performance-based
grant. 100% of the potential rights in the
tranche vested based on 4-year positive
TSR of 194% which was above the 75th
percentile of the peer Group.
2016 Performance Rights (time bound)
• 44,350 shares vested to other KMPs based
on continuing employment as part of a
2016-time bound grant.
- Rising in a straight line to 100% at 75%
2017 Performance Rights
• 31,100 shares vested to the CEO and
24,000 to other KMPs as part of the
second tranche of the 2017 performance-
based grant. 100% of the potential rights in
the tranche vested based on 3-year positive
TSR of 143% which was above the 75th
percentile of the peer Group.
2018 Performance Rights
• 31,700 shares vested to the CEO and
16,800 to other KMPs as part of the
second tranche of the 2017 performance-
based grant.100% of the potential rights in
the tranche vested based on 2-year positive
TSR of 65% which was above the 75th
percentile of the peer Group.
relative TSR percentile.
The performance period for the LTI is an
average of 3 years with the grants are split
into 3 equal tranches with 2, 3 and 4-years
performance periods to give a three-year
average, three tranches are used to to smooth
volatility and maintain incentive whilst still
yielding a three year average.
After vesting shares are subject to a two-year
trading lock which may be waived at Board
discretion in exceptional circumstances.
• The features of the LTI scheme for FY21
have been reviewed and revised to ensure
that they continue to provide a proper
reward and incentive framework during
the expected upcoming period of potential
trading and stock market volatility. The
process for granting performance rights
will remain unchanged, but performance
will be judged against an absolute, rather
than a relative, TSR target with a minimum
and stretch hurdle. The Board is aware
that it may need to exercise its discretion
to equitably reward management’s
performance given the expected turbulence
in the upcoming 3-year performance period.
Breville Group Limited annual report 2020
31
Directors’ report
continued
Remuneration report (audited) continued
2. Overview Remuneration Approach and FY20 Outcomes continued
Remuneration
Component
Non-Executive
Director Fees
Purpose & Execution
FY20 Outcomes
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.
• The fees received by Kate Wright
and Lawrence Myers for chairing the
People, Performance Remuneration and
Nominations Committee (PPR&NC), and
the Audit and Risk Committee (A&RC),
respectively was increased from $15,000pa
to $30,000pa in August 2019 to reflect
the increased complexity and workload for
the rapidly growing and internationalising
Group.
• All Directors took a 40% fee cut in the
months of May and June 2020 as part
of the company wide salary reduction
programme.
• The total fees paid of $1,015,730 represent
72.6% of the approved fee cap.
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.
Table 1: Key Management Personnel (KMP)
Name
Position
Term as KMP
Non-Executive Directors
Steven Fisher
Tim Antonie
Peter Cowan
Sally Herman
Dean Howell
Non-Executive Chairperson
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (a),(b)
Lawrence Myers
Non-Executive Director (c),(b)
Kate Wright
Executives
Jim Clayton
Scott Brady
Non-Executive Director (a),(d)
Group Chief Executive Officer
Global Product Officer
Martin Nicholas
Group Chief Financial Officer
Mark Payne
Cliff Torng
Chief Operating Officer
Global Go-to-Market Officer
(a) Member of Audit and Risk Committee
(b) Member of People, Performance, Remuneration and Nominations Committee
(c) Chair of Audit and Risk Committee
(d) Chair of People, Performance, Remuneration and Nominations Committee
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
32
Breville Group Limited annual report 2020
Remuneration report (audited) continued
4. Remuneration Framework
The People, Performance, Remuneration and Nominations Committee (PPR&NC) 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 engage external remuneration consultants to assist with this review and
in FY20 engaged Godfrey Remuneration Group Pty Limited to assist with the design of the Fixed Deferred
Remuneration scheme.
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.
In implementing its remuneration framework and ensuring proper oversight the committee:
• Designs compensation to motivate and retain a high performing global 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 FY20 is shown in table 2 below. The percentages are distorted by the suspension
of FY20 STI scheme, but the year-on-year comparison clearly shows an increase in the weight of variable, share-
based, LTI as well as the expansion of the Fixed Deferred Remuneration scheme for the CEO. The value of the LTI
performance rights granted are shown as the full value as of the grant date.
Table 2: Target Remuneration Mix of CEO and other KMPs for FY20 compared to FY19
0%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
CEO FY20
CEO FY19
Other KMPs FY20
Other KMPs FY19
29%
34%
60%
54%
24%
0%
48%
8%
17%
0%
0%
42%
40%
0%
19%
27%
Fixed Cash Remuneration
Fixed Deferred Remuneration
STI cash
LTI Shares
Breville Group Limited annual report 2020
33
Directors’ report
continued
Remuneration report (audited) continued
4. Remuneration Framework continued
• Contracts – Employment contracts are entered with executives designed to attract and retain the employees
whilst safeguarding the Group’s interests. None of the KMPs have fixed term 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 PPR&NC 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.
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 STI pool is only funded when a stretch EBIT target, set by the Board at the beginning of the year, is
delivered
• The FY20 target was $110.2m (before AASB16 (representing 13.2% growth over FY19))
• EBIT is preferred to EBITDA given the strategic importance of investment in new product development and
associated amortisation costs
• Normalised EBIT, after removing significant abnormal costs and savings, will be used for declaring the FY20
dividend and to set budgets for FY21.
• Relative TSR – Total Shareholder Return (TSR) is a measure of share price appreciation, and dividends
paid, expressed as a % of the opening share price. The Group measures its relative TSR against an index of
approximately 60 peers within the S&P/ASX200 Consumer Staples, Consumer Discretionary and Industrials
indices and rewards executives for outperforming the peer group.
• 50% vesting is achieved if the Group’s TSR is in top half of the peer group, rising to 100% vesting if a 75th
percentile performance is achieved.
• The Group uses an average 3-year performance period. To incentivise sustained shareholder value delivery
over multiple periods, rather than a single point, the LTI grant is split into three tranches and TSR performance
is measured over a 2, 3 and 4-year period with an average performance period of 3 years.
• No vesting occurs unless absolute TSR is positive in a performance period. TSR performance is calculated by
an independent specialist at the end of each performance period
• Relative TSR will be replaced by an absolute target for TSR in the FY21 LTI plan.
Table 3 below shows the Group’s sales, profit and share price performance over the last 5 years.
The measures shown are consistent with the measures used in determining the variable amounts of remuneration to
be awarded to executives. There is a strong alignment between executive reward and shareholder return as seen in
the below table.
34
Breville Group Limited annual report 2020
Remuneration report (audited) continued
5. Linking Remuneration to Performance continued
Table 3: Five Year Group Performance ($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
2016
30 June
2017
30 June
2018
30 June
2019
30 June
2020
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%
952.2
25.3%
100.9
3.7%
66.2
50.5
(2.5)%
41.0
22.76
39.3%
41.5%
0%
0%
100%
100%
100%
100%
• The Group’s annual FY21 STI plan has a stretch financial EBIT target based on growth on normalised Group EBIT
for FY20 which will be retrospectively disclosed as a part of the FY21 remuneration report.
• Since FY16 the LTI performance rights awarded have used relative TSR as the performance measure. TSR
performance and associated rights vesting in FY21 will be retrospectively disclosed as part of the FY21
remuneration report.
6. Executive Remuneration - detailed elements
There are four key components in Executive Remuneration:
i) Fixed Cash Remuneration
ii)
Fixed Deferred Remuneration in Rights
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 PPR&NC, 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 Share Rights
Fixed remuneration may also be delivered by way of a deferred grant of share rights. These rights will vest, and
are exercisable, at the completion of a specific period of employment service. 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. Under AASB 2 accounting, although the rights relate to future specific
periods of employment some of the cost is recognised in the current period.
Breville Group Limited annual report 2020
35
Directors’ report
continued
Remuneration report (audited) continued
6. Executive Remuneration - detailed elements continued
ii) Fixed Deferred Remuneration in Share Rights continued
Table 4: Fixed Deferred Remuneration included in Remuneration tables 6 and 7
Fixed Deferred
Remuneration –
share rights year
of issue
FY18
FY20*
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 2020 as vesting
date is 31 August 2020.
•
Issued for nil consideration
• Exercise price is $0.
• Participant (Jim Clayton) must complete
the service period between:
16,467 rights: 26 August 2019 –
25 August 2020.
29,940 rights: 26 August 2020 –
25 August 2021
29,940 rights: 26 August 2021 –
25 August 2022.
29,940 rights: 26 August 2022 –
25 August 2023.
29,940 rights: 26 August 2023 –
25 August 2024.
• 0% vested at 30 June 2020.
Number
outstanding
30 June
2020
Number
outstanding
30 June
2019
Issue Price
/ Fair value
$10.12
60,000
60,000
$16.70
136,227
-
* material terms and conditions of the grant were agreed in January 2020. In line with AASB2, fair value was based on VWAP for
H1 FY20.
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.
36
Breville Group Limited annual report 2020
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 PPR&NC recommends the amount of STI to be paid to the Group Chief Executive
Officer for Board approval; and
for the other executives and employees, PPR&NC 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 FY20
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 CEO) are recommended by the CEO to the
PPR&NC. This recommendation, together with a recommendation by the PPR&NC of an
LTI grant to the CEO, 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.
As detailed above the proposed FY21 scheme has been redesigned to reflect expected
turbulence in the upcoming performance period and will adopt an absolute, rather than a
relative, TSR target.
Breville Group Limited annual report 2020
37
Directors’ report
continued
Remuneration report (audited) continued
6. Executive Remuneration - detailed elements continued
iv) Long term performance incentives (LTI) continued
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 FY20 plan.
Please refer to Section 9: Appendix (table 13) for Peer Group of S&P/ASX200 in the
Consumer Staples, Consumer Discretionary and Industrials sectors.
When does the FY20
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 one third 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 2019 to 30 June 2021
Tranche 2: TSR from 30 June 2019 to 30 June 2022
Tranche 3: TSR from 30 June 2019 to 30 June 2023
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 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 FY20
performance rights?
Do participants
receive dividends
on unvested
performance rights?
What happens if
there is a change of
control?
38
Breville Group Limited annual report 2020
Remuneration report (audited) continued
6. Executive Remuneration - detailed elements continued
iv) Long term performance incentives (LTI) continued
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
FY16
Time based
rights
June 2016
FY17
Performance
based LTI
rights
June 2017
FY18
Performance
based LTI
rights
June 2018
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 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.
100% vested (91,840 shares) as at 30 June 2020 (16,860
lapsed1).
(a) Issued for nil consideration to other KMPs
- Exercise price is $0.
- Participant must be employed by the company on 25
January 2020.
100% vested (44,350 shares) as at 30 June 2020 (nil lapsed).
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.
66% vested (110,500 shares) as at 30 June 2020 (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.
33% vested (48,500 shares) as at 30 June 2020 (nil lapsed).
Fair value per
performance
right at Grant
date $
Number
outstanding
30 June 2020
(Executive
only)
Number
outstanding
30 June 2019
(Executive
only)
-
27,760
$1.90
$2.07
$2.15
$4.35
-
44,350
55,100
110,200
$3.43
$3.49
$3.51
$7.05
$6.81
$6.68
96,400
144,900
Breville Group Limited annual report 2020
39
Directors’ report
continued
Remuneration report (audited) continued
6. Executive Remuneration - detailed elements continued
iv) Long term performance 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
FY20
Performance
based LTI
rights
June 2020
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 2020 (nil lapsed).
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 2019 to
30 June 2021 applying both an Absolute Test and a
Relative Test.
(b) Total shareholder return (TSR) from 30 June 2019 to
30 June 2022 applying both an Absolute Test and a
Relative Test.
(c) Total shareholder return (TSR) from 30 June 2019 to
30 June 2023 applying both an Absolute Test and a
Relative Test.
0% vested as at 30 June 2020 (nil lapsed).
Fair value per
performance
right at Grant
date $
Number
outstanding
30 June 2020
(Executive
only)
Number
outstanding
30 June 2019
(Executive
only)
197,700
197,700
$7.07
$6.81
$6.58
$6.51
$6.81
$7.06
193,500
-
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. In
August 2019 the fee for chairing the People, Performance, Remuneration and Nominations Committee and the Audit
and Risk committee were increased from $15,000 to $30,000pa to reflect the growing complexity and international
nature of the Group.
Directors’ fees were reduced by 40% during the months of May and June 2020 as part of the Group wide temporary
salary reduction programme.
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 2020 is detailed in Table 6 on page 41 with the total fees paid of
$1,015,730 representing 72.6% of the approved fee cap.
40
Breville Group Limited annual report 2020
Remuneration report (audited) continued
8. Statutory Remuneration Tables
Table 6: KMP Remuneration for the year ended 30 June 2020 (FY20)
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 FY20.
Short-term employee benefits
Long-
term
em-
ployee
bene-
fits
Post
employ-
ment
benefits
Share-
based
payment
Total
Fixed
remu-
nera-
tion
Performance
related
Fixed
deferred
remu-
nera-
tion in
shares
(b)
Total
short
term em-
ployee
benefits
Super-
annua-
tion
Long
service
leave
LTI
Perfor-
mance
rights
Salary &
fees
Cash
bonus-
es STI Other
$
$
$
$
$
$
$
$
$
%
Non-
executive
directors
S. Fisher –
Chairperson
T. Antonie
P. Cowan
S. Herman
D. Howell
L. Myers
K. Wright
Sub-total
non-
executive
directors
Other key
management
personnel
J. Clayton
S. Brady
M. Nicholas
M. Payne (a)
C. Torng
Sub-total
executive
KMP
Totals
252,897
104,110
104,110
104,110
104,110
129,136
129,136
927,609
889,293
513,431
525,498
596,137
488,263
3,012,622
3,940,231
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
252,897
24,025
104,110
104,110
9,890
9,890
104,110
9,890
104,110
9,890
129,136
12,268
129,136
12,268
927,609
88,121
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
276,922
100.0%
114,000
100.0%
114,000
100.0%
114,000
100.0%
114,000
100.0%
141,404
100.0%
141,404
100.0%
-
1,015,730
-
757,707 1,647,000
25,000
10,519
625,691
2,308,210
72.9%
28,269
-
43,515
-
-
-
-
-
541,700
25,000
5,837
143,341
715,878
80.0%
525,498
25,000
8,016
108,256
666,770
83.8%
639,652
-
-
133,983
773,635
82.7%
488,263
24,141
10,906
166,442
689,752
75.9%
71,784
757,707 3,842,113
99,141
35,278
1,177,713
5,154,245
71,784
757,707 4,769,722
187,262
35,278
1,177,713
6,169,975
STI
%
LTI
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27.1%
20.0%
16.2%
17.3%
24.1%
(a) M Payne salary is denominated in USD so reported numbers in AUD are subject to exchange rate fluctuations.
(b) Fixed Deferred Remuneration in shares, under AASB2, includes $490k relating to the FY20 service period and $268k relating to
future service periods. The FY20 charge represents an increase of $276k over the $214k charge recognised in FY19.
Breville Group Limited annual report 2020
41
Directors’ report
continued
Remuneration report (audited) continued
8. Statutory Remuneration Tables continued
Table 7: KMP Remuneration for the year ended 30 June 2019 (FY19)
Short-term employee benefits
Long-
term
em-
ployee
bene-
fits
Post
employ-
ment
benefits
Salary &
fees
Cash
bonus-
es STI 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
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
100.0%
123,500
100.0%
102,916
100.0%
123,500
100.0%
123,500
100.0%
138,500
100.0%
138,500
100.0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 1,050,416
J. Clayton
915,385 357,991
-
214,036 1,487,412
25,000
17,676
511,532
2,041,620
57.4% 17.5% 25.1%
S. Brady
522,235 156,167 30,000
M. Nicholas (b)
433,654
96,911
-
M. Payne (c)
538,273 128,729 45,482
C. Torng
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%
Sub-total
executive
KMP
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.
(c) M Payne salary is denominated in USD so reported numbers in AUD are subject to exchange rate fluctuations.
42
Breville Group Limited annual report 2020
Remuneration report (audited) continued
8. Statutory Remuneration Tables continued
Table 8: KMP STI cash bonuses awards in FY20 and FY19 and LTI Performance rights vesting in FY20
Name
J. Clayton
S. Brady
M. Nicholas
M. Payne
C. Torng
STI Cash bonuses
Financial Year
% Earned % Forfeited
Share-based LTI performance base
compensation vesting in FY20
Financial Year
Granted
% Vested % Forfeited
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
0.0%
76.0%
0.0%
76.5%
0.0%
60.8%
0.0%
64.6%
0.0%
73.2%
100.0%
24.0%
100.0%
23.5%
100.0%
39.2%
100.0%
35.4%
100.0%
26.8%
2018
2017
2016
2018
2017
2016
2018
2017
2016
2018
2017
2016
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Table 9: KMP shareholdings
Ordinary shares held* in Breville Group Limited (number)
30 June 2020
Balance at
1 July 2019
On exercise of
performance rights
Net change other (a)
Balance at
30 June 2020
Directors
S. Fisher
P. Cowan
T. Antonie
S. Herman
D. Howell
L. Myers
K. Wright
Other KMP
J. Clayton
S. Brady
M. Nicholas
M. Payne
C. Torng
Total (b)
118,000
5,000
36,349
36,000
127,500
250,000
20,000
260,700
398,067
20,578
30,485
59,485
1,362,164
-
-
-
-
-
-
-
72,800
22,065
-
19,530
61,315
175,710
9,764
5,968
7,442
6,484
11,764
(150,000)
1,764
1,764
(93,781)
12,257
-
-
127,764
10,968
43,791
42,484
139,264
100,000
21,764
335,264
326,351
32,835
50,015
120,800
(186,574)
1,351,300
* 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) 1% of total share capital is owned by KMPs (1% in FY19)
Breville Group Limited annual report 2020
43
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 2019
Directors
S. Fisher
P. Cowan (c)
T. Antonie
S. Herman
D. Howell
L. Myers
K. Wright
Other KMP
J. Clayton
S. Brady
M. Nicholas (d)
M. Payne
C. Torng
Total
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
118,000
5,000
8,063
6,000
7,500
50,000
5,000
19,200
22,000
20,578
-
-
5,000
36,349
36,000
127,500
250,000
20,000
260,700
398,067
20,578
30,485
59,485
161,053
1,362,164
(c) P Cowan joined the Board on 1st September 2018.
(d) M. Nicholas joined on 10th September 2018.
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
FY17 Performance based
FY17 Performance based
FY18 Performance based
FY18 Performance based
FY18 Performance based
FY19 Performance based
FY19 Performance based
FY19 Performance based
FY20 Performance based
FY20 Performance based
FY20 Performance based
Grant Date
12 Feb 16 (a)*
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)*
11 Oct 19 (f)*
11 Oct 19 (f)*
11 Oct 19 (f)*
First
exercise
date
Last
exercise
date
Expiry
Date
Exercise
price
Fair value per
performance
right at grant
date ($) (Note 18)
Vested and
exercised
in FY20
Number
of Rights
29 Aug 19
3 Oct 19
3 Oct 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
3 Oct 22
3 Oct 22
28 Aug 20
1 Oct 21
1 Oct 21
27 Aug 21
3 Oct 22
3 Oct 22
29 Aug 22
2 Oct 23
2 Oct 23
0.00
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
4.35
3.49
3.51
7.05
6.81
6.68
7.07
6.81
6.58
6.51
6.81
7.06
Y
Y
Y
Y
27,760
44,350
55,100
55,100
48,500
48,200
48,200
66,100
65,900
65,700
64,600
64,450
64,450
* In addition to the TSR performance hurdle, the participant must be employed by the company on the vesting date.
44
Breville Group Limited annual report 2020
Remuneration report (audited) continued
8. Statutory Remuneration Tables continued
Table 10: KMP Performance rights granted continued
(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.
(b) For this grant the affected executive needed to be employed on 25 January 2020.
(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. One tranche remains to be tested at 30 June 2020.
(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. Two tranches remain to be tested at 30 June 2020 and 30 June 2021
respectively.
(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.
(f) There are three equal tranches to be tested at 30 June 2021, 30 June 2022 and 30 June 2023 all with a total shareholder return
hurdle (TSR) applying an absolute test and a relative test.
Table 11: Fixed Deferred Remuneration share 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:
Grant Date
13 Nov 17 (g)
29 Jan 20 (h)*
29 Jan 20 (i)*
29 Jan 20 (j)*
29 Jan 20 (k)*
29 Jan 20 (l)*
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 2020
Vested and
exercised 30
June 2019
31-Aug-20
1-Oct-20
1-Oct-20
25-Aug-20
1-Oct-20
1-Oct-20
25-Aug-21
1-Oct-21
1-Oct-21
25-Aug-22
3-Oct-22
3-Oct-22
25-Aug-23
2-Oct-23
2-Oct-23
25-Aug-24
1-Oct-24
1-Oct-24
0.00
0.00
0.00
0.00
0.00
0.00
10.12
60,000
16.70
16,467
16.70
29,940
16.70
29,940
16.70
29,940
16.70
29,940
-
-
-
-
-
-
-
-
-
-
-
-
* material terms and conditions of the grant were agreed in January 2020. In line with AASB2, fair value was based on VWAP for H1 FY20.
(g) Participant, in this case the CEO must be employed by the company on 30 June 2020 for the rights to vest. Not vested yet as first
exercise date is 31 Aug 20.
(h) Participant, in this case the CEO, must complete the service period between 26 August 2019 – 25 August 2020 for the rights to vest.
(i) Participant, in this case the CEO, must complete the service period between 26 August 2020 – 25 August 2021 for the rights to vest.
(j) Participant, in this case the CEO, must complete the service period between 26 August 2021 – 25 August 2022 for the rights to vest.
(k) Participant, in this case the CEO, must complete the service period between 26 August 2022 – 25 August 2023 for the rights to vest.
(l) Participant, in this case the CEO, must complete the service period between 26 August 2023 – 25 August 2024 for the rights to vest.
Breville Group Limited annual report 2020
45
Directors’ report
continued
Remuneration report (audited) continued
8. Statutory Remuneration Tables continued
Table 12: Performance rights holdings of KMP
30 June 2020
Other key
management
personnel
J. Clayton
S. Brady
M. Nicholas
M. Payne
C. Torng
Balance
30 June 2019
Granted as
remuneration (a)
Vested and
exercised
Other (b)
Balance
30 June 2020
269,700
66,565
24,800
62,330
101,515
524,910
104,800
23,400
22,400
21,300
21,600
193,500
(72,800)
(22,065)
-
(19,530)
(61,315)
(175,710)
-
-
-
-
-
-
301,700
67,900
47,200
64,100
61,800
542,700
(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.
30 June 2019
Other key
management
personnel
J. Clayton
S. Brady
M. Nicholas (c)
M. Payne
C. Torng
Balance
30 June 2018 (d)
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
524,910
(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) 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
46
Breville Group Limited annual report 2020
Remuneration report (audited) continued
9. Peer Group Appendix
Table 13: ASX200 Consumer Staples, Consumer Discretionary and Industrials Peer Group used for
Relative TSR Measurement
Code
Company
Sector
Code
Company
Sector
The a2 Milk Company
Consumer Staples
Inghams Group
Consumer Staples
Bingo Industries Limited
Industrials
OML
Ooh!Media Limited
PMV
Premier Investments
A2M
ALG
ALQ
ALX
ARB
ASB
AZJ
BAL
BAP
BGA
BIN
BKL
BRG
BXB
CCL
CGC
CIM
COL
CTD
Ardentleisuregrpltd
ALL
Aristocrat Leisure
Als Limited
Atlas Arteria
ARB Corporation
Austal Limited
Consumer
Discretionary
Consumer
Discretionary
Industrials
Industrials
Consumer
Discretionary
Industrials
Aurizon Holdings Limited Industrials
Bellamy’s Australia
Consumer Staples
Bapcor Limited
Consumer
Discretionary
Bega Cheese Limited
Consumer Staples
Blackmores Limited
Consumer Staples
Breville Group Limited
Consumer
Discretionary
Brambles Limited
Industrials
Coca-Cola Amatil
Consumer Staples
Costa Group Holdings
Consumer Staples
Cimic Group Limited
Industrials
Coles Group
Consumer Staples
Corp Travel Limited
CWN
Crown Resorts Limited
CWY
Cleanaway Waste
Limited
DMP
Domino PIZZA Enterpr
DOW
Downer Edi Limited
EHL
ELD
FLT
Emeco Holdings
Elders Limited
Flight Centre Travel
GEM
G8 Education Limited
Consumer
Discretionary
Consumer
Discretionary
Industrials
Consumer
Discretionary
Industrials
Industrials
Consumer Staples
Consumer
Discretionary
Consumer
Discretionary
GNC
Graincorp Limited Class
A
Consumer Staples
GUD
G.U.D. Holdings
Consumer
Discretionary
GWA
HVN
Harvey Norman
GWA Group Limited
Industrials
IEL
Idp Education Limited
ING
IPH
IVC
MMS
MND
MTS
NEA
NEC
NWH
NWS
QAN
QUB
RWC
SEK
SGR
SIQ
SKC
SSM
SUL
SVW
SXL
SYD
TAH
TCL
TGR
TWE
WEB
IPH Limited
Invocare Limited
JBH
JB Hi-Fi Limited
Industrials
Consumer
Discretionary
Consumer
Discretionary
Mcmillan Shakespeare
Industrials
Monadelphous Group
Industrials
Metcash Limited
Consumer Staples
Nearmap Limited
Industrials
Nine Entertainment
Consumer
Discretionary
NRW Holdings Limited
Industrials
News Corp
Consumer
Discretionary
Consumer
Discretionary
Consumer
Discretionary
Industrials
Qantas Airways
QUBE Holdings Limited
Industrials
Reliance Worldwide
Seek Limited
The Star Ent Group
Industrials
Industrials
Consumer
Discretionary
Smartgrp Corporation
Industrials
Skycity Ent Group
Limited
Service Stream
Super Ret Rep Limited
Consumer
Discretionary
Industrials
Consumer
Discretionary
Seven Group Holdings
Industrials
STHN Cross Media
SYD Airport
Consumer
Discretionary
Industrials
Tabcorp Holdings Limited Consumer
Discretionary
Transurban Group
Industrials
Tassal Group Limited
Consumer Staples
Treasury Wine Estate
Consumer Staples
Webjet Limited
Consumer
Discretionary
Consumer
Discretionary
WES
Wesfarmers Limited
Consumer
Discretionary
Consumer
Discretionary
WOW
Woolworths Group
Limited
Consumer Staples
Breville Group Limited annual report 2020
47
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 future developments and
expected results
Disclosure of information as to likely future
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 50.
Directors’ report
continued
Directors’ meetings
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,
performance, remuneration and nominations committee
(PPR&NC), was as follows:
People,
performance,
remuneration
&
nominations
(PPR&NC)
Full board
Audit & risk
(A&RC)
Number of
meetings
S. Fisher
T. Antonie
P. Cowan
S. Herman
D. Howell
L. Myers
K. Wright
19
19 (b)
18
19
19
19
19
19
4
(a)
(a)
(a)
(a)
4
4 (b)
4
3
(a)
(a)
(a)
(a)
3
3
3 (b)
During FY20, an additional 7 Board Meetings were held
during April to June 2020 to manage the COVID-19
crisis and subsequently to review and approve the
Capital Raise and Bank Debt Refinance.
Notes
(a) Not a member of the relevant committee.
(b) 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, performance,
remuneration and nominations 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 PPR&NC are K. Wright (chairperson), D. Howell and
L. Myers.
All Chairs and members of the above committees are
independent.
All Board Members may attend A&RC and PPR&NC
meetings by invitation.
48
Breville Group Limited annual report 2020
Performance rights
Non-audit services
Unissued shares
As at the date of this report there were 1,380,127
potential unissued shares under the performance
rights and fixed deferred remuneration schemes (2019:
1,106,255). Refer to note 18 of the financial report for
further details of the performance rights outstanding and
fixed deferred remuneration rights. Neither performance
right holders, nor fixed deferred remuneration rights
holders, 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 7,600 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. (2019: 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).
Auditor’s declaration of independence
Attached on page 113 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 2020. This auditor’s declaration
forms part of this directors’ report.
During the financial year ended 30 June 2020 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 2020 are set
out in Note 20. These services primarily relate to tax
compliance and advisory services.
The increase in the Group’s audit fee between FY19
to FY20 is largely reflective of additional procedures
and audit effort required over the expanded European
geographies. For FY20, the ratio between audit and
non-audit fees is 1.4 to 1.0. A portion of the non-audit
fees associated with taxation and accounting advisory
services in FY20 are non-recurring in nature, relating to
ATO Top 1000 review, ChefSteps acquisition, impact of
US tariffs and tax compliance in Europe. Refer to Note
20 on page 99.
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
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
13 August 2020
Breville Group Limited annual report 2020
49
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 2020 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, performance, remuneration and
nominations 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
16 years
B.ACC, CA (SA)
6 years
2 years
7 years
12 years
BEcon
Other
BA, GAICD
FCA, CTA
6 years
B.Acct, CA, CTA
4 years
BA
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
2018
2017
2018
2019
2017
2018
2019
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.
50
Breville Group Limited annual report 2020
Principle 1: Lay solid foundations for
management and oversight continued
The proportion of women employees in the company at
30 June 2020 is shown in the below table:
Women on the Board 1
Women in senior executive roles 2
Women in managerial roles 3
Women in company
30 June
2020
30 June
2019
29%
30%
32%
45%
29%
25%
30%
45%
1 The number of women on the Board remained at 2.
2 Senior and executive roles is comprised of all executive staff
reporting to the CEO and their direct reports.
3 Managerial roles include all executive, senior and
management roles.
To assist the Board in fulfilling its responsibilities in
relation to diversity, the implementation of these
objectives is overseen by the people, performance,
remuneration and nominations committee. The
committee shall:
•
•
report to the Board at least annually, on the
company’s progress in achieving the objectives set
for achieving gender diversity;
regularly oversee a review of the relative proportion
of women across the company and their relative
positions; and
• consider other initiatives to promote diversity in the
workplace.
Workplace equality
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.
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
The objectives set by the Board in accordance with the
diversity policy and progress towards achieving them
are:
• Representation of women trained in recruitment
and selection panels: 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.
Breville Group Limited annual report 2020
51
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.
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. Mr Dean Howell’s
independence was explicitly reviewed in light of his
tenure with the Group and was reconfirmed.
The following directors are not classified independent
directors:
• Mr Steven Fisher (non-executive Chairperson)
ceased his employment by an entity associated with
a substantial shareholder of the company during
FY19.
• Mr Timothy Antonie (non-executive director) is a
non-executive director of Premier Investments Ltd, a
substantial shareholder of the company; and
Principle 2: Structure the Board to add
value
• Ms Sally Herman (non-executive director) is a non-
executive director of Premier Investments Ltd, a
substantial shareholder of the company.
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 currently not classified as 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
Regardless of whether directors are defined as
independent, all directors are expected to bring
independent views and judgement to Board
deliberations.
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, performance, remuneration and
nominations 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 48 and comprises only independent directors.
52
Breville Group Limited annual report 2020
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 48, 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.
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.
Breville Group Limited annual report 2020
53
Corporate governance statement
continued
Principle 6: Respect the rights of
shareholders continued
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 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 2020, 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.
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 8: Remunerate fairly and
responsibly
Principle 7: Recognise and manage risk
The company is committed to the identification,
monitoring and management of risks associated with
its business activities including financial, operational,
compliance, ethical conduct, brand and product quality
risks. The company has embedded in its management
and reporting systems a number of risk management
controls.
These include:
• guidelines and limits for approval of capital
expenditure;
• policies and procedures for the management of
financial risk and treasury operations including
exposures to foreign currencies and movements in
interest rates;
• annual budgeting and monthly reporting systems
for all businesses which enable the monitoring
of progress against performance targets and the
evaluation of trends;
• policies and procedures which enable management
of the company’s material business risks;
•
formal strategic planning sessions; and
• presentation of periodic reports to the Board and
the A&RC identifying items that represent a potential
risk and the manner in which these are being
managed and responded to.
People, performance, remuneration and
nominations committee
During the year, the people & performance committee
(P&PC) expanded its remit and updated its charter to
explicitly include the remuneration and nomination of
both key executive, and non-executive Board roles.
The people, performance, remuneration and
nominations committee (PPR&NC), comprises 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 PPR&NC comprises:
• an independent chairperson; and
• at least three members, in Breville’s case all of
whom are independent
The PPR&NC is considered to be independent as at the
date of this report.
For details on the number of meetings of the PPR&NC
held during the year and the members attendance at
those meetings, refer to the directors’ report on
page 48.
Remuneration disclosure
For details of the company’s remuneration philosophy
and framework, and the remuneration received by
directors and executives in the current period, please
refer to the remuneration report contained in the
directors’ report on pages 26 to 47.
54
Breville Group Limited annual report 2020
[This page is left deliberately blank]
Breville Group Limited annual report 2020
55
Consolidated income statement
for the year ended 30 June 2020
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 2020
$’000
30 June 2019
$’000
952,244
(631,684)
320,560
294
(89,213)
(12,646)
(35,053)
(57,421)
759,967
(488,767)
271,200
287
(82,402)
(15,686)
(32,221)
(27,217)
126,521
113,961
(25,582)
100,939
(8,368)
192
92,763
(16,616)
97,345
(3,483)
449
94,311
(26,562)
(26,926)
66,201
67,385
Cents
Cents
50.5
50.5
51.8
51.8
Note
3(a)
3(b)
3(e)
3(d)
3(d)
3(c)
3(f)
3(f)
4
12
12
The accompanying notes form an integral part of this consolidated income statement.
56
Breville Group Limited annual report 2020
Consolidated statement of comprehensive
income for the year ended 30 June 2020
Consolidated
Note
30 June 2020
$’000
30 June 2019
$’000
Net profit after income tax for the year
66,201
67,385
Other comprehensive income
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
4
Other comprehensive income for the year,
net of income tax
(2,346)
(325)
2,733
62
6,391
(1,878)
2,326
6,839
Total comprehensive income for the year attributable to
members of Breville Group Limited
66,263
74,224
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
Breville Group Limited annual report 2020
57
Consolidated statement of financial
position as at 30 June 2020
Consolidated
Note
30 June 2020
$’000
30 June 2019
$’000
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
Right-of-use assets (adoption of AASB 16)
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities (adoption of AASB 16)
Current tax liabilities
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Other payables
Borrowings
Lease liabilities (adoption of AASB 16)
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
5
6
7
15
4
8
4
22
9
6
22
4
6
15
6
14
22
4
6
13
13
128,457
156,106
153,734
2,243
2,788
57,129
154,595
152,325
2,016
1,923
443,328
367,988
13,541
9,918
17,198
160,179
200,836
644,164
147,891
7,382
5,014
20,214
1,016
181,517
15,499
-
16,964
2,724
1,060
36,247
217,764
426,400
246,445
2,059
177,896
426,400
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
The accompanying notes form an integral part of this consolidated statement of financial position.
58
Breville Group Limited annual report 2020
Consolidated statement of changes in
equity for the year ended 30 June 2020
Consolidated
2020
At 1 July 2019 (original)
Adjustment due to change in
accounting standard (AASB 16)
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
5,267
(1,800)
1,086
165,732
310,335
22(d)
-
-
-
-
(3,188)
(3,188)
At 1 July 2019 (restated)
140,050
5,267
(1,800)
1,086
162,544
307,147
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
(loss)/income for the year
Dividends paid
Ordinary shares issued, net of
transaction costs and tax
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 2020
2019
At 1 July 2018
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
(loss)/income for the year
Dividends paid
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
-
-
-
-
-
-
-
4
11
13(a)
106,395
13(b)
(5,496)
13(b)
5,496
-
-
-
-
-
-
-
-
4
11
13(b)
(3,767)
13(b)
3,767
-
(2,346)
-
-
-
-
-
(325)
2,635
98
(2,346)
2,635
(227)
-
-
-
-
(2,346)
(325)
2,733
62
-
-
-
66,201
66,201
(2,346)
2,635
(227)
66,201
66,263
-
-
-
(5,496)
2,940
(1,721)
-
-
-
-
-
(50,849)
(50,849)
-
-
-
-
106,395
(5,496)
-
2,940
859
177,896
426,400
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
(1,800)
-
-
-
-
(45,533)
(45,533)
-
-
-
(3,767)
-
2,176
1,086
165,732
310,335
-
-
-
-
-
-
-
-
-
246,445
2,921
140,050
(1,124)
(1,972)
2,401
143,880
283,235
140,050
5,267
The accompanying notes form an integral part of this consolidated statement of changes in equity.
Breville Group Limited annual report 2020
59
Consolidated cash flow statement
for the year ended 30 June 2020
Consolidated
Note
30 June 2020
$’000
30 June 2019
$’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(a)
Cash flows used in investing activities
Purchase of plant and equipment
Proceeds from sale of plant and equipment
Development of intangible assets
Cash consideration paid on acquisition of business
Net cash flows used in investing activities
Cash flows used in financing activities
Proceeds from issue of shares net of transaction costs
13(a)
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
Principal elements of lease payments (adoption of AASB 16)
Equity dividends paid
Net cash flows used in financing activities
13(b)
22(b)
11(a)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Net foreign exchange difference
1,004,785
(836,779)
(6,973)
(28,930)
192
132,295
(7,004)
126
(31,372)
(14,289)
(52,539)
100,722
202,604
(253,704)
-
(7,325)
(50,849)
(8,552)
71,204
57,129
124
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
Cash and cash equivalents at end of the year
5(a)
128,457
57,129
The accompanying notes form an integral part of this consolidated cash flow statement.
60
Breville Group Limited annual report 2020
Notes to the financial statements
for the year ended 30 June 2020
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 Contingencies
22 AASB 16 Leases
23 Significant events after year end
24 Other accounting policies
Breville Group Limited annual report 2020
61
Notes to the financial statements
for the year ended 30 June 2020
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 24. 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.
62
Breville Group Limited annual report 2020
Note 1. Summary of significant accounting policies continued
(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.
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 24 of the financial report.
Breville Group Limited annual report 2020
63
Notes to the financial statements
for the year ended 30 June 2020
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.
Consolidated
Note
30 June 2020
30 June 2019
Global
Product
$’000
Distribu-
tion
$’000
Total
$’000
Global
Product
$’000
Distribu-
tion
$’000
Total
$’000
Segment revenue
(a)
764,409
187,835
952,244
611,960
148,007
759,967
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
(a) Segment revenue
Global Product
North America
ANZ
Europe
Rest of World
99,752
26,769
126,521
94,754
19,207
113,961
(24,372)
(1,210)
(25,582)
(15,932)
(684)
(16,616)
75,380
25,559
100,939
78,822
18,523
97,345
192
(8,368)
92,763
449
(3,483)
94,311
5,559
1,612
7,171
4,513
859
5,372
31,388
-
31,388
22,771
-
22,771
Consolidated
30 June 2020
$’000
30 June 2019
$’000
420,397
157,390
143,331
43,291
764,409
357,429
132,860
89,580
32,091
611,960
Total Global Product revenue
Distribution
Revenue generated from ANZ and North America
64
Breville Group Limited annual report 2020
Note 3. Revenue and expenses
(a) Revenue
Sale of goods
Total revenue
(b) Cost of sales
Consolidated
Note
30 June 2020
$’000
30 June 2019
$’000
952,244
952,244
759,967
759,967
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 – right-of-use assets (adoption of AASB 16)
22(b)
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
From 1 July 2019, the Group adopted the new accounting
standard AASB 16 Leases and has recognised right-of-use
assets for these leases, except for short-term and low-value
leases. Refer to Note 22
Included in other expenses:
• Net foreign exchange (gain)/loss
• Other product related costs
• Impairment charge – IoT platform
• Doubtful debt expense
(e) Employee benefits expenses
Wages & salaries, leave and other employee related benefits
Defined contribution plan expense
Share-based payments expense
Total employee benefits expenses
8
9
9
9
9
6
556,990
38,910
35,784
631,684
6,377
5,574
3,307
10,145
179
25,582
431,373
31,665
25,729
488,767
-
4,633
2,750
9,054
179
16,616
-
8,635
(307)
5,819
9,644
13,570
82,143
4,130
2,940
89,213
(616)
4,365
-
-
76,867
3,359
2,176
82,402
Breville Group Limited annual report 2020
65
Notes to the financial statements
for the year ended 30 June 2020
Note 3. Revenue and expenses continued
Consolidated
Note
30 June 2020
$’000
30 June 2019
$’000
(f) Finance costs/income
Finance costs paid or payable on borrowings and bank overdrafts:
• interest
• other borrowing costs (line fees and bank charges)
Interest on other payables – non current (deferred consideration)
Interest on lease liabilities (adoption of AASB 16)
22(b)
Finance costs
Finance income
Total net finance costs
2,195
3,190
1,395
1,588
8,368
(192)
8,176
1,047
1,949
487
-
3,483
(449)
3,034
(g) Research and development costs
Amortisation of previously capitalised development costs included
in amortisation expense
Research and development costs charged directly to the income
statement (including employment costs and impairment charge
for IoT)
Total research and development costs
3(c)
10,145
9,054
34,430
44,575
21,464
30,518
Recognition and measurement
(i) Sale of goods
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.
66
Breville Group Limited annual report 2020
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% (2019: 30%)
• adjustments in respect of current income tax of previous years
• effect of different rates of tax on overseas income
• expenditure not allowable for income tax purposes
• other
Income tax expense reported in the income statement
Consolidated
30 June 2020
$’000
30 June 2019
$’000
28,063
(238)
(1,263)
26,562
(2,635)
(98)
(2,733)
92,763
27,829
(238)
(527)
1,389
(1,891)
26,562
25,438
(434)
1,922
26,926
(1,763)
(563)
(2,326)
94,311
28,293
(436)
(559)
1,139
(1,511)
26,926
Breville Group Limited annual report 2020
67
Notes to the financial statements
for the year ended 30 June 2020
Note 4. Income tax continued
Consolidated
Consolidated
Statement of financial position
Income statement
30 June 2020
$’000
30 June 2019
$’000
30 June 2020
$’000
30 June 2019
$’000
Deferred income tax
Deferred income tax at 30 June relates to
the following:
Deferred tax liabilities
Brand names
Development costs
Other intangibles
Cash flow hedge reserve
Accelerated depreciation for tax purposes
1,875
13,285
760
368
505
1,875
11,806
281
466
482
Gross deferred income tax liabilities
16,793
14,910
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
Net liability arising from adoption of
AASB 16
Other
Gross deferred income tax assets
Net deferred income tax assets
Deferred tax expense
Current income tax
Current tax asset
Current tax liabilities
193
12,665
743
2,406
777
5,028
1,326
849
23,987
7,194
311
6,636
859
3,608
1,051
3,160
-
1,261
16,886
1,976
30 June 2020
$’000
30 June 2019
$’000
2,788
5,014
1,923
6,276
-
(1,280)
(479)
-
(23)
(118)
5,374
(116)
(1,202)
(274)
446
(418)
(647)
-
(3,193)
54
-
(437)
(275)
410
(91)
355
492
384
-
379
1,263
(1,922)
At 30 June 2020, there is no recognised or unrecognised deferred income tax liability (2019: $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.
68
Breville Group Limited annual report 2020
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.
Breville Group Limited annual report 2020
69
Notes to the financial statements
for the year ended 30 June 2020
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 2020, the Group had available $272,429,000
(2019: $35,109,000) of undrawn committed borrowing
facilities in respect of which all conditions precedent had been
met. This does not include the three year committed seasonal
facility which is drawable between August and January (see
note 14).
- The fair value of cash and cash equivalents is $128,457,000
(2019: $57,129,000).
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 (including AASB16)
Impairment charge
Share-based payments
Foreign exchange (gains)/losses
Doubtful debt expense
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
Consolidated
30 June 2020
$’000
30 June 2019
$’000
128,457
57,129
Note
(a)
(a)
14
(b)
128,457
-
128,457
57,129
(47,283)
9,846
66,201
67,385
25,582
9,644
2,940
(307)
13,570
(4,664)
(382)
(82)
(1,485)
22,492
(1,214)
132,295
16,616
-
2,176
(616)
-
(28,758)
(49,004)
3,135
1,203
18,240
(36)
30,341
70
Breville Group Limited annual report 2020
Note 5. Cash and cash equivalents continued
(b) Net debt reconciliation
Consolidated
Cash $’000 Borrowings $’000
Total $’000
Net cash at 30 June 2018
Cash flows
FX adjustments
Net cash at 30 June 2019
Cash flows
FX adjustments
Net cash at 30 June 2020
(c) Disclosure of financing facilities
Refer to note 14.
Recognition and measurement
103,316
(47,366)
1,179
57,129
71,204
124
128,457
(45,324)
26
(1,985)
(47,283)
51,100
(3,817)
-
57,992
(47,340)
(806)
9,846
122,304
(3,693)
128,457
Cash and cash equivalents in the balance sheet comprise cash at bank and on 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 2020
$’000
30 June 2019
$’000
(a)
(b)
166,133
(14,101)
152,032
2,487
1,587
152,325
(457)
151,868
1,750
977
156,106
154,595
Notes:
(a) Trade receivables are non-interest bearing and are generally on 30-60 day terms. In 2H20 the trading
environment has seen some lengthening of credit terms, and a withdrawal of some insurance credit limits, which
has heightened the credit risk environment. An allowance for uncollectible, or doubtful, receivables is made when
there is objective evidence on a case by case basis that a trade receivable is partially or fully impaired. A charge
of $13,570,000 (2019: $312,000) has been recognised by the Group as an expense in ‘other expenses’ for the
current year for specific debtors for which such evidence exists.
Breville Group Limited annual report 2020
71
Notes to the financial statements
for the year ended 30 June 2020
Note 6. Receivables, payables and provisions continued
Trade and other receivables continued
At 30 June 2020 an ageing analysis of those trade receivables (net of allowance for uncollected receivables) are as
follows:
Current
31 – 60 days overdue
61+ days overdue
Trade receivables, net
Consolidated
30 June 2020
$’000
30 June 2019
$’000
149,168
143,608
1,747
1,117
4,402
3,858
152,032
151,868
Trade receivables (net) past due, but not impaired, amount to $2,864,000 (2019: $8,260,000). Of the remaining
balance, 70% is covered by insurance, 23% is considered very low risk for collection default and 7% is uninsured.
In all instances each operating unit has been in contact with the relevant debtor and is satisfied that payment will be
received in full or has been provided for.
(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.
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 may 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 2020
$’000
30 June 2019
$’000
147,891
147,891
15,499
15,499
122,700
122,700
3,395
3,395
(a)
(a) Relates to earn-outs in relation to the acquisitions of PolyScience and ChefSteps.
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, including customer rebates, 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.
72
Breville Group Limited annual report 2020
Note 6. Receivables, payables and provisions continued
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
Consolidated
Consolidated
Note
30 June 2020
$’000
30 June 2019
$’000
(a)
(a)
(a)
(a)
(a)
(a)
(a)
12,562
5,058
2,544
50
20,214
1,060
1,060
7,630
3,942
2,338
50
13,960
1,008
1,008
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:
Amounts utilised during the year
Additional provisions made in the year
Net exchange differences
Net movement
Carrying amount at the end of the year:
Current
Non-current
Total
Recognition and measurement
7,630
-
7,630
(30,903)
35,871
(36)
4,932
12,562
-
12,562
3,942
-
3,942
(2,634)
3,762
(12)
1,116
5,058
-
5,058
2,338
1,008
3,346
(337)
591
4
258
2,544
1,060
3,604
50
-
50
-
-
-
-
50
-
50
13,960
1,008
14,968
(33,874)
40,224
(44)
6,306
20,214
1,060
21,274
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.
Breville Group Limited annual report 2020
73
Notes to the financial statements
for the year ended 30 June 2020
Note 6. Receivables, payables and provisions continued
Provisions continued
(a) Movement in provisions continued
Recognition and measurement continured
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. During COVID-19 related lock downs in various
markets, the ability of consumers to make returns has been inhibited so the Group has prudently increased its
provision in a number of territories.
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. During COVID-19 employees have not chosen to take leave at normal levels.
Contributions to the defined contribution fund are recognised as an expense as they become payable.
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 2020
$’000
30 June 2019
$’000
126,995
26,739
153,734
123,255
29,070
152,325
Notes:
(a) Total net finished goods provision movements recognised in the income statement totalled a $19,000 debit
(2019: $326,000 debit) for the Group. This net debit/credit is included in the cost of inventories line in the cost of
sales. The nature of the Group’s finished products make obsolescence and deterioration in storage unlikely.
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.
74
Breville Group Limited annual report 2020
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
Additions from acquisition of ChefSteps
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 2020
$’000
30 June 2019
$’000
44,628
(32,585)
12,043
12,043
7,171
168
(271)
-
(5,574)
4
13,541
50,807
(37,266)
13,541
39,696
(28,317)
11,379
11,379
5,372
-
(180)
(10)
(4,633)
115
12,043
44,628
(32,585)
12,043
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.
Breville Group Limited annual report 2020
75
Notes to the financial statements
for the year ended 30 June 2020
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 2020
$’000
30 June 2019
$’000
44,248
16,980
31,575
759
66,617
160,179
39,352
12,946
31,575
938
38,603
123,414
Consolidated 2020
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
99,376
21,098
31,575
1,835
38,603
192,487
Net carrying amount
39,352
12,946
31,575
Reconciliation of the carrying amount:
(60,024)
(8,152)
-
(897)
938
-
(69,073)
38,603
123,414
Carrying amount at the
beginning of year
Additions
Additions from acquisition
of ChefSteps
Impairment charge – IoT
platform
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
(i)
(ii)
(iii)
3(c)
39,352
24,047
12,946
7,341
717
(9,644)
(10,145)
(79)
-
-
(3,307)
-
31,575
938
38,603
123,414
-
-
-
-
-
-
-
-
(179)
-
-
31,388
28,014
28,731
-
-
-
(9,644)
(13,631)
(79)
44,248
16,980
31,575
759
66,617
160,179
124,047
28,439
31,575
1,835
66,617
252,513
(79,799)
(11,459)
-
(1,076)
-
(92,334)
Net carrying amount
44,248
16,980
31,575
759
66,617
160,179
Notes:
(i)
Investment in new product development and upgrade of Global IT 2.0 platform including D365 ERP, PIM and
middleware.
(ii) Acquisition of ChefSteps – Goodwill of $28,014,000 and $717,000 of Development Costs were recognised
arising from the acquisition of Chefsteps Inc., a US-based business on 16 July 2019. Cash consideration was
paid on acquisition with a further deferred consideration payable as an earn out based on future performance
of the acquired assets. The assets have been included within the Global Product segment cash generating unit
(CGU).
(iii) One-off impairment charge to IoT platform assets arising as a result of strategic decision to move to a standards-
based IoT platform and to write-off development work on a range of proprietary IoT platforms.
76
Breville Group Limited annual report 2020
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
Net carrying amount
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)
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
Breville Group Limited annual report 2020
77
Notes to the financial statements
for the year ended 30 June 2020
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 /
Acquired
Recognition
Useful lives
Amortisation method
Impairment test
(b) Computer software
Internally generated /
Acquired
Recognition
Useful lives
Amortisation method
Impairment test
(c) Brand names
Internally generated /
Acquired
Recognition
Useful lives
Amortisation method
Impairment test
(d) Customer relationships
Internally generated /
Acquired
Recognition
Internally generated and acquired products and product platforms
Capitalised at cost and recognised only after the Group can demonstrate the technical
feasibility and commercial viability of 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 software
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 Brand names
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.
Acquired Customer Relationships
Useful lives
Amortisation method
Impairment test
(e) Goodwill
Internally generated /
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 Goodwill
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.
78
Breville Group Limited annual report 2020
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 8.0% to 11.5% (2019: 7.2% to 11.7%),
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 2021 budgets
are extrapolated using a 3.0% growth rate (2019: 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 2020 and
30 June 2019
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.
Breville Group Limited annual report 2020
79
Notes to the financial statements
for the year ended 30 June 2020
Note 10. Impairment testing of goodwill and intangibles with indefinite lives
continued
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
Recognition and measurement
Intangible assets – goodwill
Consolidated
Note
30 June 2020
$’000
30 June 2019
$’000
13,800
20,553
35,714
2,241
8,109
17,775
98,192
66,617
31,575
98,192
13,800
20,553
7,700
2,241
8,109
17,775
70,178
38,603
31,575
70,178
9(ii)
9
9
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.
80
Breville Group Limited annual report 2020
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 2019
of 18.5 cents per share, 11.1 cents (60%) franked (2019: final partially
franked dividend for 2018 of 16.5 cents per share, 9.9 cents (60%) franked)
• Paid in cash
Final dividend
Partially franked interim dividend for the year ending 30 June 2020
of 20.5 cents per share, 12.3 cents (60%) franked (2019: interim
partially franked dividend for 2019 of 18.5 cents per share, 11.1 cents
(60%) franked)
• Paid in cash
Interim dividend
Total partially franked dividends declared and paid during the year
of 39.0 cents per share, 23.4 cents (60%) franked (2019: 35.0 cents
per share (21.0 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 2020 of 20.5 cents per share,
12.3 cents (60%) franked (2019: final partially franked dividend of
18.5 cents per share, 11.1 cents (60%) franked) (i)
(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% (2019: 30%)
• franking (debits)/credits that will arise from the payment of income tax
(receivable)/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% (2019: 30%).
Consolidated
30 June 2020
$’000
30 June 2019
$’000
24,121
24,121
21,466
21,466
26,728
26,728
24,068
24,068
50,849
50,849
45,533
45,533
27,992
24,121
13,754
(1,545)
12,209
8,089
2,932
11,021
(7,198)
5,011
(6,189)
4,832
(i) The Group has established a new Dividend Reinvestment Plan (“DRP”) for its shareholders, replacing its previous inactive DRP.
The DRP will apply to the final dividend for the year ending 30 June 2020 and will remain in place until further notice. Please refer
to page 19 of the Directors’ report for full details.
Breville Group Limited annual report 2020
81
Notes to the financial statements
for the year ended 30 June 2020
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 2020
$’000
30 June 2019
$’000
Earnings used in calculating basic and diluted earnings per share:
Net profit attributable to ordinary equity holders of Breville Group
Limited
66,201
67,385
Thousands
Thousands
Weighted average number of shares:
Weighted average number of ordinary shares for basic and diluted
earnings per share
131,090
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.
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 2020
$’000
30 June 2019
$’000
(a)
(b)
246,445
140,050
-
-
246,445
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.
82
Breville Group Limited annual report 2020
Note 13. Issued capital and reserves continued
Issued capital continued
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 Share 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 2020
Consolidated
30 June 2019
Note
Number of
shares
$’000
Number of
shares
$’000
(a) Movements in ordinary
issued shares:
Beginning of the year
130,095,322
140,050
130,095,322
140,050
Movements during the year
Ordinary shares issued during the year
for Breville Group Performance Share
Plan Trust
Ordinary shares issued, net of
transaction costs and tax, as part of
capital raise
(i)
(ii)
331,155
5,496
6,117,648
100,899
-
-
-
-
End of the year
136,544,125
246,445
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
Ordinary shares transferred to
participants of the Breville Group
Performance Share Plan
Ordinary shares subscribed to/acquired
by the Breville Group Performance Share
Plan Trust during the year - cash
End of the year
(iii)
(iv)
331,155
5,496
268,720
3,767
(331,155)
(5,496)
(268,720)
(3,767)
-
-
-
-
(i) During the year the group issued 331,155 fully paid ordinary shares (2019: nil) of Breville Group Limited as a result of the vesting
of Performance Rights issued under the Breville Group Performance Share Plan. The average value attributable to these issued
shares was $16.60 (2019: nil), as of the date of issue.
(ii) In May and June 2020 the Group successfully completed an institutional placement and retail share purchase plan (SPP),
issuing 6,117,648 shares at $17.00 per share, raising $100,899,000 net of transaction costs and tax.
(iii) During the year the Trustee of the Breville Group Performance Share Plan Trust transferred 331,155 ordinary company shares
(2019: 268,720) to participants in order to fulfil its obligations under the Breville Group Limited Performance Share Plan.
(iv) During the year the Trustee of the Breville Group Performance Share Plan Trust subscribed to 331,155 ordinary shares
of Breville Group Limited (2019: acquired 268,720 shares) in order to fulfil its obligations under the Breville Group Limited
Performance Share Plan. The average value placed on these subscriptions was $16.60 per share (2019: average value placed
on these acquisitions was $14.02 per share). Details are provided in note 16(b) and note 18.
Breville Group Limited annual report 2020
83
Notes to the financial statements
for the year ended 30 June 2020
Note 13. Issued capital and reserves continued
Issued capital continued
(c) Rights over ordinary shares:
The company has a share-based payment rights schemes 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
1,380,127 (2019: 1,106,255) potential unissued ordinary shares in respect of 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 2020
$’000
30 June 2019
$’000
2,921
(1,721)
859
2,059
5,267
(1,800)
1,086
4,553
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 2020
$’000
30 June 2019
$’000
-
-
47,283
47,283
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 2020 and 30 June 2019.
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.
84
Breville Group Limited annual report 2020
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 2020 was assessed to be insignificant (2019:
insignificant). Details regarding interest rate, foreign exchange and liquidity risk are disclosed in note 15.
Financing facilities available
At reporting date, the following financial facilities have been
negotiated and were available to the group:
Facilities used at the reporting date
Facilities unused at the reporting date
Total facilities
(a) Facilities used at the reporting date:
- Non-current cash advance facilities – 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
Consolidated
Note
30 June 2020
$’000
30 June 2019
$’000
(a)
(b)
(c)
7,984
276,974
284,958
52,057
66,518
118,575
-
-
395
1,929
5,660
-
7,984
261,376
-
11,053
1,612
2,207
726
276,974
261,376
-
11,448
3,541
7,867
726
284,958
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
Breville Group Limited annual report 2020
85
Notes to the financial statements
for the year ended 30 June 2020
Note 14. Borrowings continued
Group facilities
In June 2020, the Group refinanced its existing debt facilities with ANZ bank including
- an extension of committed base and seasonal multicurrency facilities from 1 to 3 years (30 June 2020:
$246,000,000)
- a $115,000,000 one year multicurrency facility, with a defined extension mechanism.
Seasonal facilities
The Group also has 3 year committed seasonal facilities available between August and January for FY21, FY22 and
FY23, which range between $43,619,000 and $99,682,000 (2019: between $9,710,000 and $71,137,000).
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.
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.
86
Breville Group Limited annual report 2020
Note 15. Financial risk management continued
Recognition and measurement continued
Derivative financial instruments and hedging 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 2020, the Group has the following exposure to interest rate risk:
Cash at bank
Cash advance facilities
Net exposure
Consolidated
30 June 2020
$’000
30 June 2019
$’000
128,457
-
128,457
57,129
(47,283)
9,846
The Group’s net exposure to interest rate risk calculated as at 30 June 2020 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.
At 30 June 2020, the Group did not have any borrowings drawn down from its cash advance facilities, and so there
is no material interest rate risk that would impact finance costs due to exposure to floating rates.
Breville Group Limited annual report 2020
87
Notes to the financial statements
for the year ended 30 June 2020
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 2020, 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
Instruments used by the group
Consolidated
30 June 2020
$’000
30 June 2019
$’000
7,346
3,178
(15,358)
2,243
(1,016)
(3,607)
9,873
4,404
(15,826)
2,016
(464)
3
Derivative financial instruments are used by the Group in the normal course of business in order to hedge exposures
to fluctuations in interest and foreign exchange rates.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on
observable market data.
The fair value of all derivative assets and liabilities have been determined under Level 2.
88
Breville Group Limited annual report 2020
Note 15. Financial risk management continued
Instruments used by the group continued
(i) Forward exchange contracts – cash flow hedges
The majority of the Group’s inventory purchases from suppliers are denominated in US dollars (US$). 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
(2019: 0-12 months).
The cash flows are expected to occur between 0-12 months from 1 July 2020 (2019: 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 2020
A$’000
30 June 2019
A$’000
115,446
3,265
17,222
107,844
15,779
15,432
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 $4,698,000 was credited to inventory (2019: $4,289,000 credited) and $2,254,000 was credited
(2019: $2,411,000 credited) to equity in respect of the Group.
At 30 June 2020, the Group had hedged 42% (2019: 50%) of its forecast foreign currency purchases extending to
June 2021 (2019: June 2020). The remaining 58% (2019: 50%) is exposed to some foreign exchange risk, however
is also naturally hedged within the Group.
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 $10,649,000 (2019: $9,702,000). 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 $8,633,000 (2019: $7,608,000).
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 2020
and 30 June 2019 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).
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.
Breville Group Limited annual report 2020
89
Notes to the financial statements
for the year ended 30 June 2020
Note 15. Financial risk management continued
Credit risk continued
Post COVID-19 a number of retailers/customers have experienced cashflow difficulties with an increased instance
of delayed payments or bankruptcy. At the same time insurers have reduced insurable limits with a number of
customers heightening the Group’s exposure to credit risk. In response the Group has increased its doubtful debt
provision.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad
debts is appropriately provided for.
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.
Group facilities
In June 2020, the Group refinanced its existing debt facilities with ANZ bank including
- an extension of committed base and seasonal multicurrency facilities from 1 to 3 years (30 June 2020:
$246,000,000)
- a $115,000,000 one year multicurrency facility, with a defined extension mechanism.
As at 30 June 2020, the Group did not have any outstanding debt relating to its cash advance facilities (2019: 100%
of the Group’s borrowings were due to mature in greater than one year and 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 2020, the remaining contractual maturities of the Group’s financial liabilities are:
Less than 1 year
Between 1 and 5 years
Consolidated
30 June 2020
$’000
30 June 2019
$’000
148,907
15,499
164,406
123,164
50,678
173,842
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 2020
Consolidated
30 June 2019
Less than
1 year
$’000
Between 1
and 5 years
$’000
Total
$’000
Less than
1 year
$’000
Between 1
and 5 years
$’000
Total
$’000
Trade and other payables
147,891
15,499
163,390
122,700
3,395
126,095
Borrowings
Other financial liabilities
-
1,016
-
-
-
1,016
-
464
47,283
47,283
-
464
148,907
15,499
164,406
123,164
50,678
173,842
Contractual maturities disclosed in the tables above include contracted interest payments. Total borrowings disclosed
in note 14 exclude such contracted interest payments.
90
Breville Group Limited annual report 2020
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 2020
%
30 June 2019
%
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
Sage Appliances France SaS
Australia
Australia
Australia
Australia
Australia
New Zealand
Hong Kong
China
USA
USA
Canada
Canada
Canada
UK
Germany
France
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
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 (refer note 13)
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 year the Trustee of the Breville Group Performance Share Plan Trust subscribed to 331,155 ordinary
shares of Breville Group Limited (2019: acquired 268,720 shares) in order to fulfil its obligations under the Breville
Group Limited Performance Share Plan. The average value placed on these subscriptions was $16.60 per share
(2019: average value placed on these acquisitions was $14.02 per share). Details are provided in note 18.
Breville Group Limited annual report 2020
91
Notes to the financial statements
for the year ended 30 June 2020
Note 17. Parent entity information
As at and throughout the financial year ended 30 June 2020 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 2020
$’000
30 June 2019
$’000
53,457
53,457
74,996
253,684
-
-
47,220
47,220
66,862
147,376
(2,774)
(2,774)
253,684
144,602
246,445
(1,721)
8,960
253,684
140,050
(1,800)
6,352
144,602
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 taxpayer 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.
92
Breville Group Limited annual report 2020
Other
Note 18. Share-based payments
Performance rights plan (LTI) and fixed deferred remuneration plan
Under the performance rights plan (LTI) and fixed deferred remuneration plan participants are issued with rights over
the ordinary shares of Breville Group Limited issued in accordance with the Breville Group Limited Share Plan. See
pages 29 and 31 of the Remuneration report for details of the two plans.
At 30 June 2020 there were 1,380,127 (2019: 1,106,255) total rights outstanding under both plans, 1,183,900
(2019: 1,046,255) under the performance rights plan (LTI) and 196,227 (2019: 60,000) under the fixed deferred
remuneration plan. 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 plan (LTI)
The following table illustrates the number and weighted average exercise prices (“WAEP”) of and movements in
performance rights issued during the year:
30 June 2020
30 June 2019
Number of
performance
rights
Note
Number of
performance
rights
WAEP
WAEP
Outstanding at the beginning of the year
1,046,255
0.0000
978,440
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)
1,183,900
Exercisable at the end of the year
-
(7,600)
476,400
0.0000
351,700
0.0000
(331,155)
0.0000
(268,720)
0.0000
0.0000
0.0000
-
(15,165)
1,046,255
-
0.0000
0.0000
-
Breville Group Limited annual report 2020
93
Notes to the financial statements
for the year ended 30 June 2020
Note 18. Share-based payments continued
Rights outstanding under the performance rights plan (LTI)
Notes
(a) The outstanding balance as at 30 June 2020 is represented by:
Number of
performance rights
Note
Grant date
Vesting date
Expiry date
WAEP $
Fair value at
grant date ($)
109,700
97,000
96,300
116,700
116,000
114,900
19,800
19,800
19,700
159,200
157,400
157,400
1,183,900
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
9-Aug-16
31-Aug-20
13-Nov-17
28-Aug-20
2-Oct-20
1-Oct-20
13-Nov-17
27-Aug-21
1-Oct-21
11-Sep-18
28-Aug-20
11-Sep-18
27-Aug-21
11-Sep-18
29-Aug-22
16-Nov-18
28-Aug-20
16-Nov-18
27-Aug-21
16-Nov-18
29-Aug-22
11-Oct-19
27-Aug-21
11-Oct-19
29-Aug-22
11-Oct-19
29-Aug-23
1-Oct-20
1-Oct-21
3-Oct-22
1-Oct-20
1-Oct-21
3-Oct-22
1-Oct-21
3-Oct-22
2-Oct-23
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
3.51
6.81
6.68
7.07
6.81
6.58
7.07
6.81
6.58
6.51
6.81
7.06
(i) 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.
(ii) 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.
(iii) 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.
(iv) 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.
(v) 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.
(vi) 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.
(vii) These performance rights vest based on the Group’s total shareholder return (TSR) from 30 June 2019 to 30 June 2021
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 2019 to 30 June 2022
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 2019 to 30 June 2023
applying both an absolute test and a relative test measured against a TSR peer Group.
94
Breville Group Limited annual report 2020
Note 18. Share-based payments continued
Rights granted and outstanding under the fixed deferred remuneration plan
The following table illustrates the number and weighted average exercise prices (“WAEP”) of and movements in rights
issued during the year:
30 June 2020
30 June 2019
Note
Number of
share rights
Outstanding at the beginning of the year
Rights granted during the year
Rights exercised during the year
Rights lapsed during the year
60,000
136,227
-
-
Outstanding at the end of the year
(b)
196,227
Exercisable at the end of the year
-
WAEP
0.0000
0.0000
0.0000
0.0000
0.0000
-
Number of
share rights
-
60,000
-
-
60,000
-
WAEP
0.0000
0.0000
0.0000
0.0000
0.0000
-
Rights outstanding under the fixed deferred remuneration plan
Notes
(b) The outstanding balance as at 30 June 2020 is represented by:
Number of
performance rights
Note
Grant date
Vesting date
Expiry date
WAEP $
Fair value at
grant date ($)
60,000
16,467
29,940
29,940
29,940
29,940
196,227
(i)
(ii)
(iii)
(iv)
(v)
(vi)
13-Nov-17
31-Aug-20
29-Jan-20*
25-Aug-20
29-Jan-20*
25-Aug-21
29-Jan-20*
25-Aug-22
29-Jan-20*
25-Aug-23
29-Jan-20*
25-Aug-24
1-Oct-20
1-Oct-20
1-Oct-21
3-Oct-22
2-Oct-23
1-Oct-24
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
10.12
16.70
16.70
16.70
16.70
16.70
* material terms and conditions of the grant were agreed in January 2020 but administrative finalisation of grants were delayed
due to COVID-19 priorities. In line with AASB2, fair value was based on price at time when grant was agreed when VWAP for H1
FY20 was $16.70.
(i) Rights granted as fixed deferred remuneration with vesting condition that the participant must still be employed by the company
on 30 June 2020.
(ii) Rights granted as fixed deferred remuneration with vesting condition that the participant must complete the service period
between 26 August 2019 – 25 August 2020.
(iii) Rights granted as fixed deferred remuneration with vesting condition that the participant must complete the service period
between 26 August 2020 – 25 August 2021.
(iv) Rights granted as fixed deferred remuneration with vesting condition that the participant must complete the service period
between 26 August 2021 – 25 August 2022.
(v) Rights granted as fixed deferred remuneration with vesting condition that the participant must complete the service period
between 26 August 2022 – 25 August 2023.
(vi) Rights granted as fixed deferred remuneration with vesting condition that the participant must complete the service period
between 26 August 2023 – 25 August 2024.
Breville Group Limited annual report 2020
95
Notes to the financial statements
for the year ended 30 June 2020
Note 18. Share-based payments continued
Rights granted under the performance rights plan and fixed deferred remuneration plan
The average remaining contractual life for the performance and the fixed deferred remuneration rights outstanding at
30 June 2020 is between 1 and 4 years (2019: 1 and 4 years).
The exercise price for performance rights and the fixed deferred remuneration rights outstanding at the end of the
year was $nil (2019: $nil).
The weighted average fair value of performance rights granted under the performance rights plan during the year was
$6.83 (2019: $6.82).
The fair value of the equity-settled performance rights granted under the performance rights plan is estimated as
at the date of grant using a Black-Scholes or Monte-Carlo option-pricing model, taking into account the terms and
conditions upon which the options and performance rights were granted.
The following table lists the inputs to the model used for the grants during the year ended 30 June 2020 and
30 June 2019:
30 June
2020
(Monte-
Carlo)
30 June
2020
(Monte-
Carlo)
30 June
2020
(Monte-
Carlo)
30 June
2019
(Monte-
Carlo)
30 June
2019
(Monte-
Carlo)
30 June
2019
(Monte-
Carlo)
Grant date
11 Oct 19
11 Oct 19
11 Oct 19
11 Sept 18/
16 Nov 18
11 Sept 18/
16 Nov 18
11 Sept 18/
16 Nov 18
Vesting date
Dividend yield (%)
Expected volatility (%)
Historical volatility (%)
Risk-free interest rate (%)
Expected life of
performance right
Performance right
exercise price ($)
Weighted average share
price ($)1
Weighted average fair
value ($)1
1 At grant date
27 Aug 21
29 Aug 22
29 Aug 23
28 Aug 20
27 Aug 21
29 Aug 22
2.50
33.00
33.00
0.70
2.50
33.00
33.00
0.70
2.50
33.00
33.00
0.70
3.50
25.00
25.00
2.00
3.50
25.00
25.00
2.00
3.50
25.00
25.00
2.00
1.8 years
2.8 years
3.8 years
1.8 years
2.8 years
3.8 years
0.00
0.00
0.00
0.00
0.00
0.00
16.70
16.70
16.70
11.59
11.59
11.59
6.51
6.81
7.06
7.07
6.81
6.58
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.
The weighted average fair value of share rights granted under the fixed deferred remuneration plan during the year
was $16.70 (2019: nil).
96
Breville Group Limited annual report 2020
Note 19. Related party transactions
(i) Consolidated statement of financial position for
class order closed group
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Total current assets
Non-current assets
Investments
Right-of-use-assets
Current tax assets
Plant and equipment
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Lease liabilities
Other financial liabilities
Total current liabilities
Non-current liabilities
Other payables
Lease liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
30 June 2020
$’000
30 June 2019
$’000
43,991
59,111
28,491
2,245
24,059
47,401
34,286
2,016
133,838
107,762
166,176
10,826
1,545
9,588
114,890
303,025
436,863
71,773
-
7,717
2,949
1,016
83,455
2,476
13,439
2,674
911
19,500
102,955
333,908
246,445
(861)
88,324
333,908
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
Breville Group Limited annual report 2020
97
Notes to the financial statements
for the year ended 30 June 2020
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
Adjustment due to change in accounting standard (AASB 16)
Dividends paid or reinvested
Accumulated profits at the end of the year
30 June 2020
$’000
30 June 2019
$’000
84,211
(23,449)
60,762
80,999
(2,588)
(50,849)
88,324
80,910
(23,250)
57,660
68,872
-
(45,533)
80,999
(a) Ultimate controlling entity
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 2020
$
30 June 2019
$
(i)
4,769,722
5,006,165
187,262
35,278
1,177,713
6,169,975
208,698
73,490
982,792
6,271,146
(i) This comprises defined contribution plans expense of $187,262 (2019: $208,698).
98
Breville Group Limited annual report 2020
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
Consolidated
30 June 2020
$
30 June 2019
$
524,956
101,468
431,424
138,740
154,869
390,456
139,701
521,416
1,171,749
1,231,281
The increase in the Group’s audit fee between FY19 to FY20 is largely reflective of additional procedures and audit
effort required over the expanded European geographies. For FY20, the ratio between audit and non-audit fees is 1.4
to 1.0. A portion of the non-audit fees associated with taxation and accounting advisory services in FY20 are non-
recurring in nature, relating to ATO Top 1000 review, ChefSteps acquisition, impact of US tariffs and tax compliance in
Europe.
Note 21. 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.
Breville Group Limited annual report 2020
99
Notes to the financial statements
for the year ended 30 June 2020
Note 22. AASB 16 Leases
This note provides information for leases where the group is a lessee. The Group does not act as a lessor under any
circumstances.
a) Amounts recognised in the consolidated statement of financial position
Right-of-use assets
Buildings
Vehicles
Total
Lease liabilities
Current
Non-current
Total
Consolidated
Note
30 June 2020
$’000
30 June 2019
$’000
17,186
12
17,198
(i)
-
-
-
Consolidated
30 June 2020
$’000
30 June 2019
$’000
7,382
16,964
24,346
-
-
-
(i) Additions to the right-of-use assets during FY20 were $4,029,000
b) Amounts recognised in the consolidated income statement
Consolidated
Note
30 June 2020
$’000
30 June 2019
$’000
Depreciation charge of right-of-use assets
Buildings
Vehicles
Total
Other expenses
3(c)
Interest expense on lease liabilities (included in finance costs)
3(f)
Expenses relating to short-term and low value assets (included in
premises, lease & utilities expenses)
6,328
49
6,377
1,588
114
-
-
-
-
-
The total cash outflow for leases during FY20 was $8,913,000 (includes principal elements of lease payments of
$7,325,000 (refer consolidated cash flow statement) plus interest expense on lease liabilities of $1,588,000).
As at 30 June 2020, the Group’s leases do not contain any variable payment terms.
100
Breville Group Limited annual report 2020
Note 22. AASB 16 Leases continued
c) The Group’s leasing activities and how these are accounted for
The Group leases various office buildings and motor vehicles, with rental contracts typically spanning fixed periods of
1 to 6 years, with some having options to extend.
Contracts may contain both lease and non-lease components. The group allocates the consideration in the contract
to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate
for which the group is a lessee, it has elected not to separate lease and non-lease components and instead accounts
for these as a single lease component.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease agreements do not impose any covenants other than the security interests in the leased assets that are
held by the lessor. Leased assets may not be used as security for borrowing purposes.
Until FY19 and prior, leases were classified as operating leases or financial leases under AASB 117. From 1 July
2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
-
-
fixed payments (including in-substance fixed payments), less any lease incentives receivable
variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date
- amounts expected to be payable by the group under residual value guarantees
-
the exercise price of a purchase option if the group is reasonably certain to exercise that option, and
- payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the
liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar
value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
- where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to
reflect changes in financing conditions since third party financing was received
- uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by Breville
Group Limited, which does not have recent third party financing, and
- makes adjustments specific to the lease, e.g. term, country, currency and security.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period.
Right-of-use assets are measured at cost comprising the following:
-
the amount of the initial measurement of lease liability
- any lease payments made at or before the commencement date less any lease incentives received
- any initial direct costs, and
-
restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on
a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset’s useful life.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are
recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of
12 months or less. Low-value assets comprise IT equipment and small items of office furniture.
Breville Group Limited annual report 2020
101
Notes to the financial statements
for the year ended 30 June 2020
Note 22. AASB 16 Leases continued
d) Impact of the adoption of AASB 16 Leases
This note explains the impact of the adoption of AASB 16 Leases in FY20 on the Group’s financial statements where
the Group is a lessee. The Group does not act as a lessor under any circumstances.
As indicated in Note 24(d), the Group has adopted AASB 16 Leases retrospectively from 1 July 2019, but has not
restated comparatives for the 30 June 2019 reporting period, as permitted under the specific transition provisions in
the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in
the opening consolidated statement of financial position on 1 July 2019.
On adoption of AASB 16 Leases, the Group recognised right-of-use assets and lease liabilities in relation to leases
which had previously been classified as ‘operating leases’ under the principles of AASB 117 Leases. These liabilities
were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental
borrowing rate as of 1 July 2019. The weighted average lessee’s incremental borrowing rate applied to the lease
liabilities on 1 July 2019 was 5.7%.
Practical expedients applied
In applying AASB 16 Leases for the first time, the Group has used the following practical expedients permitted by the
standard:
- applying a single discount rate to a portfolio of leases with reasonably similar characteristics
-
relying on previous assessments on whether leases are onerous as an alternative to performing an impairment
review – there were no onerous contracts as at 1 July 2019
- accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-
term leases
- excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
- using hindsight in determining the lease term where the contract contains options to extend or terminate the
lease.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the Group relied on its assessment made applying AASB
117 and Interpretation 4 Determining whether an Arrangement contains a Lease.
Measurement of lease liabilities
Operating lease commitments disclosed as at 30 June 2019
Discounted using the lessee’s incremental borrowing rate at the date of initial application
Less short-term and low value leases not recognised as a liability
Lease liability recognised as at 1 July 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
Lease liability recognised as at 1 July 2019
Measurement of right-of-use assets
30 June 2020
$’000
31,466
27,166
(157)
27,009
6,661
20,348
27,009
The associated right-of-use assets for building leases were measured on a retrospective basis as if the new rules had
always been applied. Other right-of use assets were measured at the amount equal to the lease liability, adjusted by
the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 1
July 2019.
102
Breville Group Limited annual report 2020
Note 22. AASB 16 Leases continued
d) Impact of the adoption of AASB 16 Leases continued
Adjustments recognised in the consolidated statement of financial position on 1 July 2019
The change in accounting policy affected the following items in the consolidated statement of financial position on
1 July 2019:
- Right-of-use assets – increase by $19,396,000
- Deferred tax assets – increase by $1,732,000
- Lease liabilities – increase $27,009,000
- Trade and other payables – decrease by $2,693,000
- Retained earnings – decrease $3,188,000
Impact of the adoption of AASB 16 Leases to the consolidated income statement for FY20
The following table summarises the impact of adopting AASB 16 Leases on the key financial metrics within the
consolidated income statement of the group for the year ended 30 June 2020.
$’000 unless specified
Revenue
Gross profit
Premises, leases and utilities expenses
Other operating expenditure
EBITDA
Depreciation and amortisation
EBIT
Net finance costs
Profit before income tax
Income tax expense
Net profit after tax
Earnings per share (EPS) cents per share
Note 23. Significant events after year end
Year ended
30 June 2020
Post AASB 16
as reported
Year ended
30 June 2020
Pre AASB 16
952,244
320,560
(12,646)
(181,393)
126,521
(25,582)
100,939
(8,176)
92,763
(26,562)
66,201
50.5
952,244
320,560
(20,974)
(181,393)
118,193
(19,205)
98,988
(6,588)
92,400
(26,453)
65,947
50.3
Variance
-
-
8,328
-
8,328
(6,377)
1,951
(1,588)
363
(109)
254
0.2 cps
No matters or circumstances have arisen since the end of the year which significantly affected or may affect the
operations of the consolidated entity.
The financial report of Breville Group Limited for the year ended 30 June 2020 was authorised for issue in accordance
with a resolution of the directors on 13 August 2020.
Breville Group Limited annual report 2020
103
Notes to the financial statements
for the year ended 30 June 2020
Note 24. Other accounting policies
a) Foreign currency translation
(i) Functional and presentation currency
Both the functional and presentation currency of Breville Group Limited and its Australian subsidiaries are Australian
dollars (AUD or A$). 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 and Sage Appliances France SaS).
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.
b) 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 or sell 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.
104
Breville Group Limited annual report 2020
Note 24. Other accounting policies continued
b) Investments and other financial assets continued
(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.
c) 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.
d) New accounting standards and interpretations
(i) Changes to accounting policy and disclosures
The Group had to change its accounting policies as a result of adopting AASB 16 Leases. The Group elected to adopt
the new rules retrospectively but recognised the cumulative effect of initially applying the new standard on 1 July 2019.
For the full impact assessment of adopting AASB 16 Leases, please refer to Note 22.
Besides AASB 16 Leases, the other accounting policies of the Group are consistent with those of the previous financial
year.
The Group adopted all other new and amended Australian Accounting Standards and Interpretations that became
applicable during the current financial year.
Besides AASB 16 Leases, the adoption of other Standards and Interpretations did not have a significant impact on the
Group’s financial results or statement of financial position.
Breville Group Limited annual report 2020
105
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 2020 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 2020.
On behalf of the board
Steven Fisher
Non-executive chairman
Sydney
13 August 2020
106
Breville Group Limited annual report 2020
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:
• giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial
performance for the year then ended
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 2020
the consolidated statement of comprehensive income 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 consolidated 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 (including Independence Standards) (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.
Breville Group Limited annual report 2020
107
108Breville Group Limited annual report 2020Our audit approachAn 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.• For the purpose of our audit we used overall Group materiality of $4.6 million, which represents approximately 5% of the Group’s profit before tax.• 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.• 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.• 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 Europe, Hong Kong and China with the most financially significant operations being Breville Australia and Breville United States. • Our team from the Australian PwC firm undertook all audit procedures to provide us with sufficient and appropriate audit evidence to express an opinion on the Group’s financial report as a whole.MaterialityAudit scopeIndependent auditor’s report continued 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.
Key audit matter
Estimated recoverable amount of goodwill and
indefinite life intangibles
(Refer to note 10) $98.2m
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.
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 by
comparing to external information sources;
- assessing the reasonableness of the discount
rates by comparing them to market data and
comparable companies, with the assistance of our
valuation experts;
- 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.
Breville Group Limited annual report 2020
109
Independent auditor’s report continued
Key audit matter
Estimated recoverable amount of capitalised
development costs
(Refer to note 9) $44.2m
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
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 the impairment recognised
to the statement of comprehensive income; 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 identifying the projects with the highest
magnitudes of capitalised costs.
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 reasonableness of the discount
rates by comparing them to market data and
comparable companies, with the assistance of our
valuation experts;
-
considering the allocation and presentation of the
impairment charge recognised; and
- 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.
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 2020, 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 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.
110
Breville Group Limited annual report 2020
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: https://www.auasb.gov.au/admin/file/content102/c3/
ar1_2020.pdf. This description forms part of our auditor’s report.
Breville Group Limited annual report 2020
111
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 26 to 47 of the directors’ report for the year
ended 30 June 2020.
In our opinion, the remuneration report of Breville Group Limited for the year ended 30 June 2020
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
13 August 2020
112
Breville Group Limited annual report 2020
Auditor’s independence declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Breville Group Limited for the year ended 30 June 2020, 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
13 August 2020
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.
Breville Group Limited annual report 2020
113
Shareholder information
Substantial shareholders notices as at 21 August 2020
The following information is extracted from the company’s register of substantial shareholder notices:
Name
S. Lew Custodians Pty Limited (a)
Bennelong Australian Equity Partners Ltd
Matthews International Capital Management, LLC
Number of
ordinary shares
% of issued
ordinary shares
43,638,384
12,121,129
8,370,474
31.96%
8.88%
6.13%
(a) The interests of S. Lew Custodians Pty Limited include a deemed relevant interest in the 36,499,538 shares held by Premier
Investments and shares held by other related parties of the group.
Distribution of shareholdings as at 21 August 2020
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
1,281
268
201
44
3,467
757
114
Breville Group Limited annual report 2020
Twenty largest shareholders by registered holder as at 21 August 2020
Name
HSBC Custody Nominees (Australia) Limited
Premier Investments Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
SL Superannuation No1 Pty Ltd
Lew Family Investments Pty Ltd
BNP Paribas Noms Pty Ltd
Lew Family Investments Ltd
BNP Paribas Nominees Pty Ltd
Premier Investments Ltd
S L Nominees Pty Ltd
Mirrabooka Investments Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Brisopt Nominees Pty Ltd
Nofusa Pty Ltd
Quotidian No 2 Pty Ltd
Mr Scott Laurence Brady
Amcil Limited
Total
Unquoted equity securities as at 21 August 2020
Rights issued under the Breville Group Performance Rights Plan and Fixed
Deferred Remuneration Plan to take up ordinary shares
Shares
39,903,834
35,761,415
15,928,242
10,629,833
6,158,384
3,000,000
1,891,461
1,581,209
1,535,718
985,232
738,123
711,667
600,000
535,739
414,752
404,358
351,764
301,764
251,927
249,205
% IC
29.22
26.19
11.67
7.78
4.51
2.20
1.39
1.16
1.12
0.72
0.54
0.52
0.44
0.39
0.30
0.30
0.26
0.22
0.18
0.18
121,934,627
89.30
Number
on issue
Number
of holders
1,380,127*
44
* Number of unissued ordinary shares under the performance rights plan (LTI) and fixed deferred remuneration plan.
Breville Group Limited annual report 2020
115
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
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
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
116
Breville Group Limited annual report 2020
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