WELLBEING
A n n u Al R e p oR t 2 0 1 6
Our 2016
ANNuAL
rEpOrt
The 2016 Annual Report of
Blackmores Limited provides
information on the organisation
and company performance for the
year 1 July 2015 to 30 June 2016.
Cover image: Caroline Hayes and Edgar Cabal from the procurement and sourcing team, at an olive grove in New
South Wales, Australia. Olive leaf extract is traditionally used in western herbal medicine for the relief of coughs and
colds and is an ingredient that features in both the Blackmores and BioCeuticals product ranges.
2
About us
4
Highlights
6
Chairman’s
Introduction
8
Ceo’s Year
In Review
14
operating +
Financial Review
Group Strategy
Group and Divisional Results
Financial Review
operating Review
Group Risks
ANNUAL GENERAL MEETING
The 54th Annual General Meeting of the Company will be held at
11am on Thursday 27 October 2016 at the Blackmores Campus,
20 Jubilee Avenue, Warriewood NSW 2102.
24
Sustainability
+ Community
40
Directors’
+
Remuneration
Report
64 Consolidated Financial Statements
executive team
Directors’ Profiles
Auditor’s Independence Declaration
Independent Auditor’s Report
Directors’ Declaration
Additional Information
Company Information
34
38
60
61
63
104
105
“
We offer no wonder drug, just the
resourceful use of nature.
B lA Ck m oReS l A BoR A t oR IeS, S InCe 1 9 3 2
”
Our
VALuES
Our
purpOSE
Blackmores’ values are at the
heart of our business. these
values, known as pIRlS,
are both behavioural and
aspirational. they underpin
our work practices and are
supported by legal policies
and procedures.
Blackmores improves people’s
lives by delivering the world’s
best natural health solutions.
We achieve this by translating
our unrivalled heritage and
knowledge into innovative,
quality branded healthcare
solutions that work.
passion for natural Health
Integrity
Respect
leadership
Social Responsibility
Our
StrAtEGIc
prIOrItIES
Blackmores is committed to
superior business performance.
our strategic direction is focused on
delivering growth and continuous
improvement to maintain
Blackmores’ leading position in the
industry and to achieve ongoing
success for our company, our
people and our shareholders.
Consumer Centricity
Asia Growth
product leadership
operational effectiveness
1
Blackmores annual report 2016 ABOut uS
Blackmores is Australia’s leading natural health company. Founded
by visionary naturopath maurice Blackmore in 1932, Blackmores
combines traditional naturopathic expertise with scientific research
to help people achieve optimal health and wellbeing. Committed
to developing innovative natural health products and services of
the highest quality, Blackmores reaches consumers in 15 countries.
Blackmores’ extensive range of vitamins,
herbal and mineral supplements,
and nutritional foods uses premium
ingredients from around the world,
with products made to strict Australian
manufacturing standards with rigorous
quality checks. Blackmores respects
the innate link between healthy people
and a healthy planet, implementing
sustainable packaging and waste-
reduction practices and supporting
charitable community initiatives.
Industry leaders for more than 80 years,
Blackmores established the Blackmores
Institute to drive an evidence-based
approach to natural health through
education, research and professional
advisory services. For health
professionals and consumers alike,
Blackmores is a trusted source of
natural health advice.
With a strong naturopathic heritage,
Blackmores is an ASX 100 publicly listed
company with a market capitalisation
of $2.3 billion. The Group manages
1,000 people across Asia-Pacific and
includes BioCeuticals, Australia’s
leading practitioner range; Pure Animal
Wellbeing, natural health products
for pets; and Global Therapeutics,
Australia’s leading provider of Chinese
herbal medicine. Blackmores’ teams
in Asia comprise sales and marketing
personnel as well as healthcare
professionals. The Blackmores Campus
head office and production facility is
located on Sydney’s Northern Beaches.
Our
BrANDS
2
Blackmores annual report 2016 Our rEAch
OpERATIONS ANd MARkETS
Company headquarters, operations
and signifiCant revenues
operations and signifiCant revenue
Joint venture operations or
operations and emerging market
Brand presenCe
3
AustrAliAUSAKazaKhstan new zealandIndonesIa mongolia Singapore (regional HeadquarterS) japan korea china Taiwan hong kong MacauVietnamcambodiaThailandMalaysia Blackmores annual report 2016 #1
vitamin and
supplement
company in
australia
8 years
most trusted Brand
117
new
products
lAuncHEd AcRoss
tHE GRoup
acquired
Global therapeutics with market
leading chinese herbal medicine
brands, fusion Health and
oriental Botanicals
high
86%
Recognised as one of
Australia’s best employers
through the Aon Hewitt
Best Employer Awards -
employee engagement
50%
GRoup sAlEs
EstimAtEd to
comE fRom AsiAn
consumERs
douBled
operational
capacity
4
186 nEw RolEs
AcRoss
tHE GRoup
Blackmores annual report 2016 net profit
after tax
100
$million
Record sales and improved operating
leverage enabled net profit after tax
(NPAT) to grow to $100 million,
up 115% on the prior year.
100
80
60
40
20
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
5
Blackmores annual report 2016 chAIrmAN’S
INtrODuctION
It has been another momentous year for Blackmores, with
continued sales and profit growth and a strong financial
performance securing us a place in the ASX 100, just over
30 years since we first listed on the Australian Securities
exchange and 84 years since our company was founded.
It has been another momentous year for Blackmores, with
continued sales and profit growth and a strong financial
performance securing us a place in the ASX 100, just over
30 years since we first listed on the Australian Securities
Exchange and 84 years since our company was founded.
I’m often asked why our business has endured through the
generations and how we focus on ensuring that we will remain
financially sound and relevant to consumers in the years to
come. Indeed ‘sustainability’ as a principle has been bantered
about in many boardrooms in recent years.
Reflecting the importance of understanding and sharing
our vision for business sustainability, you will note that our
inaugural Blackmores Sustainability Report will be available on
our website this year. In the interests of minimising our impact
on the environment, the full report is online, with an abridged
version in this annual report.
Sustainability encompasses so much more than
environmental initiatives. It encompasses our commitment
to our community, our employees, our shareholders, our
governance and our investment in the future of our industry.
I am inspired by one of our international trading partners,
Alibaba, who are one of the world’s biggest e-commerce
merchants. Their vision is to be a company that endures for
102 years, meaning they will span three centuries.
Our strong values and culture combined with our
rigorous approach to quality, research and innovation
will position us well for our future.
The vision we have for our business is shared by our
employees who each act as ambassadors for our brands.
Among these valued employees, one quarter hold a
healthcare qualification and more than half speak an Asian
language as their mother tongue.
The importance of Asia to our Group revenues is very
clearly highlighted by the 50 head office employees who
are currently electing to learn Mandarin. Though they’re all
realistic about the time it takes to be proficient in speaking,
reading and writing Chinese, it does indicate our employees’
commitment to understand and respect the people, culture,
and health needs of our growing number of Asian consumers.
All of our staff members have shared in our growing profits
6
Blackmores annual report 2016 with 44 additional days salary paid to each employee as part
of our long-standing profit sharing program, which has always
sought to align staff remuneration with shareholder benefits.
Our leadership team remuneration is also closely aligned
with shareholder value, and you’ll note the strong correlation
between our healthy profitability and the executive incentives
paid as a result.
Our team is always deserving of recognition for their
hard-work, commitment to our values and enthusiasm for our
business and this year is no exception. I welcome the team
from Global Therapeutics to the Blackmores family. Since
acquiring this leading Australian herbal medicine company in
May, we’ve come to understand more about the potency and
potential for Chinese herbs as powerful medicines and we
are excited about the future prospects for their brands Fusion
Health and Oriental Botanicals.
A little over a year ago, we advised shareholders of our
challenges to meet the growing demand for our product
whilst upholding our unrivalled quality standards. To address
the supply constraints, our business has changed significantly
with new staff, additional facilities, new supplier partnerships
and improved infrastructure. It has been one big team effort
and one that wouldn’t be possible without the stewardship of
our Executive Team and Board. I sincerely thank them for their
leadership.
It is impossible for me to note leadership without expressing
my great appreciation for our Chief Executive Officer, Christine
Holgate. She has received many accolades this year including
recognition as CEO of the Year. In my opinion she is deserving
of this praise as she has led our company with passion over the
past year. It’s a passion evident in our broader team and they
share my excitement about our future.
The best of health.
Marcus C. Blackmore AM
Chairman
7
Blackmores annual report 2016 cEO’S YEAr
IN rEVIEW
717
group sales
$m
Dear Shareholder,
I’m delighted to share our full year performance reflecting a year of significant growth across all
divisions and brands in the Group delivering Group sales of $717 million (up 52%) on the prior
year and resulting in net profit after tax (NPAT) of $100 million (up 115%) on the prior year. This
follows the previous record year.
Growing consumer demand for our products enabled us to realise further operational
benefits and saw the Group double capacity over the year. Importantly, our unrivalled quality
standards were extended further into our supply chain and were never compromised whilst
productivity and efficiency was boosted.
495
aus sales
$m
AuStRAlIA (InCluDInG pAW)
Our heartland Australian business delivered $495 million (up 56%) in revenue over the year
reflecting the strong growth from our domestic consumers and further boosted by sales to
Chinese tourists and exporters to satisfy the appetite for Blackmores’ quality products in China.
We estimate that Chinese consumers influenced over $200 million of our Australian
revenues with a combination of sales through Australian retailers and exporters and in-
country sales.
Pure Animal Wellbeing, Blackmores’ animal health division, achieved $7 million in sales
(up 31%) and maintained a strong leadership position in the natural pet health market.
129
asia sales
$m
ASIA
In-country sales in Asia of $129 million (up 54%) were through a range of channels including
pharmacy, online retailers and health stores.
Some of our more established markets did experience challenges, though pleasingly
maintained top-line growth. Our established Asian markets achieved sales of $81 million
(up 6%) including sales from Thailand and Malaysia.
Singapore, Hong Kong and Taiwan delivered record growth with range extensions,
increased distribution and further investment in our brand.
Asia sales were further bolstered by in-country sales in China of $48 million (up 536%).
The expansion of free trade zones and our ability to serve e-commerce customers through our
bonded warehouse in China has enabled us to benefit from the growing Chinese demand.
We estimate that Chinese consumers now influence over $250 million of our Group sales,
almost a four-fold increase in the last 12 months. This is evidence of the strong demand for our
products in such an important market.
Blackmores experienced challenges in Kores. Excluding Korea, ‘Other Asia’ sales were
up 11%. This, in addition to investment in Blackmores’ upcoming launch into Indonesia, and
Blackmores International resulted in a reduction in earnings for Blackmores’ ‘Other Asia‘
compared to the prior year.
69
Bioceuticals
sales $m
BIoCeutICAlS
BioCeuticals, our practitioner-only brand, delivered $69 million in sales (up 25%). New product
innovation and education was central to their success as this brand does not have the benefit
of established businesses in Asia. They have also commenced distribution in the United States,
a market with a strong network of allied health practitioners. Since acquiring this business in
2012, we have doubled its profitability and paid down all debt required to fund the acquisition.
BioCeuticals’ growth was particularly pleasing given that this year’s results include the payment
of incentives and profit share to BioCeuticals employees following their adoption of the
Blackmores Enterprise Agreement as well as the investment in new offices to support growth.
23
other sales
$m
DeVelopInG BuSIneSSeS
Developing businesses including New Zealand, Blackmores’ contribution from their nutritional
foods partnership with Bega, and sales from the recently acquired Global Therapeutics,
contributed $23 million to Group revenue up from $15 million in the prior year. Sales in New
Zealand of $16 million (up 53%) were positively impacted by a change to our business model in
this country including the appointment of a Blackmores sales team.
Our partnership to develop nutritional foods including infant formula with Bega has
achieved early sales of $9 million of which Blackmores has a 50% share.
In May 2016, Blackmores acquired Global Therapeutics, an Australian company, with two
brands offering Chinese herbal medicine, Fusion Health and Oriental Botanicals. Each are
market leaders in this category in health food stores and pharmacy with an estimated 80%
market share of retail Chinese herbal medicine. We are excited about the growth opportunities
for these products both in Australia and in Asia. Global Therapeutics contributed $3 million to
our revenues since the acquisition.
8
Blackmores annual report 2016 9
Blackmores annual report 2016 cEO’S YEAr
IN rEVIEW
thE GrOup
fOcuSED
ON fOur
StrAtEGIc
prIOrItIES
01 Blackmores Wellbeing Centre at
Bondi Junction
02 Raymond Chan, Deputy
Managing Director of Blackmores
Asia (left) and Jason Zhang, Country
Director of Blackmores China
03 Belinda Reynolds, Senior
Educator, BioCeuticals
04 Clement Smith, Warehouse
Manager, Blackmores
01
Consumer Centricity
03
product leadership
• Blackmores #1 vitamin and supplement brand and Group
in Australia and number one brand in Thailand, Malaysia,
Singapore and Hong Kong.
• Most Trusted Brand in Australia, eight years running.
•
Integrated campaigns that have resulted in a step change in
brand health metrics.
• Opened a flagship store at Bondi in Sydney – the
Blackmores Wellness Centre.
• Opened Blackmores duty free pop-up stores at Sydney,
Melbourne, Hong Kong, Shanghai and Gold Coast
International airports.
• New operating model in New Zealand with Blackmores
• 117 new products launched across the Group.
• Explored partnerships in medicinal cannabis through
BioCeuticals.
• BioCeuticals launched in the USA, the largest practitioner
market in the world, through a leading distributor.
• BioCeuticals FX Medicine podcasts downloaded more
than 65,000 times in 40 countries achieving a number three
ranking in its category on iTunes.
• Launch of BioCeuticals Liposomals range was a market first.
• Blackmores Institute provided 25,000 healthcare
professionals with accredited training across the Group in
the last year.
sales team.
• Hosted corporate wellness programs in leading
organisations attracting more than 3,000 attendees.
• Extended offering qualified naturopaths in pharmacies and
health food stores to provide advice to consumers.
• The iconic Blackmores Sydney Running Festival attracted
more than 32,000 participants and achieved International
Association of Athletics Federation (IAAF) Marathon Gold
Label Road Race status.
02
Asia Growth
• Asian consumers represent almost 50% of Group sales and
shows strong desire for the Blackmores brand.
• Of that, Chinese consumers influence over $250 million of
•
Group sales and our business is still growing.
Invested in Thailand with more than 50 new in-store
product advisors.
• Established joint venture with Kalbe Farma to facilitate entry
into the Indonesian market.
• Blackmores regional headquarters in Singapore expanded
operations enabling improved decision making and
customer management in Asia.
• Hosted events for our shareholders on ‘Doing Business in
China’ to assist with understanding of this complex market
in Sydney, Melbourne and Shanghai.
• 447,816 education touchpoints across the Group.
• Grass roots approach to training with thousands
participating in local training hubs in key markets.
• Developed and delivered an accredited course in
evidence-based complementary medicine partnering
with Griffith University.
• 24 research projects including clinical trials underway
across Blackmores Group.
• Successful publication of clinical trial using Blackmores
Insolar®.
• Blackmores Institute expanded presence in Asia and NZ.
• Launched medicinal foods, including infant formula, in
partnership with Bega.
• Acquisition of Global Therapeutics – leading Chinese
herbal medicine brand in Australia and supporting
growing consumer interest in Chinese medicine.
04
operational effectiveness
• Doubled our capacity to overcome supply challenges.
• Doubled production output to meet growth and invested
further in automation and staff.
• Slow moving and obsolete stock at a 10 year low.
• Progressed directed sourcing of scarce and key ingredients.
• Extended our supplier base including stronger supplier
partnerships.
• CEO appointed Chair of Australia-ASEAN Council.
• Secured dual manufacturing supply of core products with
partners in trusted markets including Germany and Canada.
• New efficiency-driving technology installed including
robotics and multi-head counters.
10
•
• Hosted supplier quality awards.
• Expanded our warehousing footprint.
•
Invested in 186 new roles across the Group including the
addition of a production night shift and new front-line health
advisory roles.
Increased investment in staff training.
Blackmores annual report 2016 01
02
03
04
11
Blackmores annual report 2016 cEO’S YEAr
IN rEVIEW
outlook
We have proven demand for our brand across the Asia
Pacific region and have been positively impacted by
external dynamics, including the expansion of free trade
zones in China and growing consumer interest in our
category. Our population is ageing and governments
are faced with rising healthcare costs. Many of our
neighbours in Asia are seeing significant demographic
changes with a growing middle class and two child
families in China.
Consumers universally are changing, with moves
towards personalised health, an increasing role of digital
technologies in product purchase and the evolution of
food as medicine.
Blackmores is well positioned to benefit from these
trends with our commitment to sustainability, ingredient
traceability, proven efficacy and quality, we have strong
consumer demand, high staff engagement and multiple
routes to market.
These opportunities are balanced by an increasingly
complex business environment, including an evolving
regulatory landscape in Asia and volatility in the
Australian wholesale market as a result of changing
retail dynamics.
We’re continuing to invest in long-term growth
platforms for the Group, including our new business
in Indonesia.
The Board remains confident in our strategic
priorities and we will continue to diversify our revenues,
invest in new opportunities and progress the ongoing
re-shaping of our business.
Thank you for your support of Blackmores.
Christine Holgate
Chief Executive Officer
Clockwise from top right
Duncan MacKellar, Blackmores Campus
team, ensuring effective paper recycling
Isabella Truong, Advisory Pharmacist,
Blackmores Institute
Julien Calvet, General Manager, Pure
Animal Wellbeing and Felicia Tam,
Veterinarian, Pure Animal Wellbeing
Susan Mahoney, Social Media Manager,
Blackmores
Amie Skilton, Senior Educator, BioCeuticals
Soane Nofo’Akifolau, Distribution
Operator, Pick To Light, and Graeme
Fookes, Warehouse Operations Support
and Inventory Controller, Blackmores
12
Blackmores annual report 2016 13
Blackmores annual report 2016 Anita Wolf, Marketing Manager,
Global Therapeutics
14
Operating + Financial reviewBlackmores annual report 2016 01GrOup
StrAtEGY
Blackmores is the leading natural healthcare
company across the Asia Pacific region.
Blackmores’ operations include product
innovation and formulation, sourcing of the
highest quality ingredients, quality programs
to ensure compliance with standards of good
manufacturing practice and the marketing,
sales and distribution of products to
customers and consumers.
• Asia Growth – Asia brings access to two
billion health conscious consumers, this
is an opportunity for Blackmores to grow,
increase scale, diversify our earnings and
build a natural hedge into our business.
Blackmores’ Asian-based regional structure
is fully operational to enable more efficient
decision making and improved
operational efficiencies.
Our operations are structured to service
• product Leadership – Blackmores is a
and deliver to multiple channels including
pharmacy, mass merchandisers, grocery,
health food stores, practitioners and online.
Our Animal Health range is also sold to vets
and wholesalers.
Activities across the Group for the 2016
financial year were aligned to four key
strategic priorities:
• Consumer Centricity – To promote our high
quality products, supported by evidence
and access to trusted advice, the Group
significantly increased brand investment
and our understanding of the consumer in
our core markets in Australia and in Asia.
clear leader in the area of research and
development and we have supported
this with increased investment in the
Blackmores Institute, a program of product
range innovations and the development
of independently accredited education
programs.
• Operational Effectiveness – Improved
operational efficiencies were derived from
investment in and with our supply chain
partners, leveraging our Central Services
business model and optimising our
increased size into scale benefits.
15
Blackmores annual report 2016 I
W
E
I
V
E
r
L
A
c
N
A
N
I
f
+
G
N
I
t
A
r
E
p
O
16
$6.7
3%
$53.1
20%
2012
GROUP
SALES
$260.8M
YEAr 5
DIVErSIfIcAtION
Of rEVENuE BY
SEGmENt ($m)
$7.6
2%
$23.2
3%
$69.2
10%
$81.4
11%
$48.0
7%
2016
$15.4
3%
$201
77%
$55.5
12%
$76.4
16%
2015
$316.7
67%
GROUP
SALES
$471.6M
$495.4
69%
GROUP SALES
$717.2M
austraLia
China
other asia
BioCeutiCaLs
other
Blackmores annual report 2016
GRoup AnD DIVISIonAl ReSultS
Group Sales for the year were $717.2 million
(2015: $471.6 million), an increase of 52%
compared with the prior year and our 14th
consecutive year of sales growth.
Sales in Australia, our heartland market,
were up 56% compared to the prior
year and were stimulated by a growing
consumer demand for high quality, natural
wellness products. We have launched new
products and improved our service of retail
customers while investing in our brand
through integrated marketing activity. The
Australian business continued to benefit from
increased sales through Chinese tourists and
entrepreneurs shopping in Australia and
Chinese Australian consumers purchasing for
relatives and friends and shipping to China.
Excluding the impact of these sales, the
Australian consumer business remains very
healthy with sales up approximately 10%.
By combining the contribution from these
consumers with our in-country revenues
from Asia, the Asian consumer accounts for
almost 50% of Group sales. This demonstrates
the growing demand for our brand outside
Australia and highlights the importance of
our Asia growth strategy.
Increased sales to China have been
supported by the Wholly Foreign-Owned
Enterprise (WFOE) established in recent years.
The opening of free trade zones in 2014 and
further expansion across the current year
has created a substantial opportunity for the
company, especially as Blackmores is one of
only a few companies in this category to secure
a licence to directly trade within the zones.
We are encouraged by the Australian
Government’s commitment to improved
trade relations within the Asian region, which
we believe will continue to support further
growth. Asia is a key region for Blackmores,
providing an important platform to secure
long-term profitable growth.
Blackmores Asia achieved record sales,
with full year sales up 54% to $129.4 million
and EBIT up 79% to $14.9 million. In-country
sales from Asia now comprise 18% of
Group revenue.
Blackmores Korea experienced sales
challenge. This, coupled with the investment
in Blackmores’ upcoming launch into
Indonesia, resulted in a reduction in
earnings for the ‘Other Asia’ segment
compared to the prior year.
Our growing revenue from Asia has
helped create a natural hedge whereby the
impact of changes to off-shore revenues as
a result of foreign exchange fluctuations are
partially offset by the procurement benefits
to the Group. Our growing businesses in
Asia have afforded the Group many scale
benefits which have improved our operating
efficiencies. We have grown our workforce
considerably to support the growth, creating
new jobs in Australia and Asia. Overall this
has bolstered the returns we have delivered
to our shareholders.
BioCeuticals sales grew 25%, with strong
growth in the practitioner-only range. This
performance, combined with successful new
product launches and a close management
of the cost base, delivered EBIT growth of
9% on the prior year. This EBIT result includes
the payment of incentives and profit share
to BioCeuticals employees following their
adoption of the Blackmores Enterprise
Agreement. Excluding this, underlying
BioCeuticals EBIT is up 28%. BioCeuticals
represents approximately 10% of Group
revenue.
Blackmores New Zealand, Global
Therapeutics and Blackmores’ proportion
of our Nutritional Foods partnership with
Bega are reported as part of the ‘Other’
segment. These businesses have contributed
$23 million in sales, up from $15 million the
prior year.
02
GrOup AND
DIVISIONAL
rESuLtS
$316.7
67%
GROUP
SALES
$471.6M
$6.7
3%
$53.1
20%
2012
GROUP
SALES
$260.8M
$15.4
3%
$201
77%
$55.5
12%
$76.4
16%
2015
$23.2
3%
$69.2
10%
$81.4
11%
$48.0
7%
2016
$7.6
2%
$495.4
69%
GROUP SALES
$717.2M
17
Blackmores annual report 2016 12
13
14
15
16
return on sharehoLders’ equity
return on assets
Cash Conversion
gearing
12
13
14
15
16
%
60
50
40
30
20
10
0
%
120
100
80
60
40
20
0
%
60
50
40
30
20
10
0
12
13
14
15
16
18
Operating + Financial reviewBlackmores annual report 2016 SAleS
Significant growth
across all divisions
and brands in the
Group delivering
Group sales of $717
million, up 52% on
the prior year
eBIt
Earnings before
interest and taxes
of $145 million, up
101% on the prior
year.
03
fINANcIAL
rEVIEW
npAt
Net profit after tax
(NPAT) to grow to
$100 million, up
115% on the prior
year.
epS
Earnings per share
of 580.6 cents, up
114.5% on prior
year.
800
700
600
500
400
300
200
100
150
120
90
60
30
100
80
60
40
20
600
500
400
300
200
100
12
13
14
15
16
717
$million
>
52%
145
$million
12
13
14
15
16
> 101%
DIVIDenDS peR SHARe
Dividends of 410 cents per share
more than doubled in the 12 months.
500
400
300
200
100
410
cents
12
13
14
15
16
> 102%
100
$million
12
13
14
15
16
>
115%
580.6
cents
12
13
14
15
16
>
114.5%
GRoup FInAnCIAl poSItIon
Total current assets increased by
$107 million to $295 million, 57%
up on the prior year. This reflects
an increase in working capital
commensurate with growth in the
business with inventory increasing
by $78 million to $116 million
largely due to higher inventory
levels to meet consumer demand.
Current liabilities have
increased from $115 million to
$192 million reflecting both the
increased inventory purchases,
higher employee incentives and
increased income tax obligations.
Non-current liabilities have
increased from $45 million to $61
million largely due to an increase
in interest-bearing liabilities. Net
debt remains low at $18 million
but has increased marginally from
the $7 million reported in the
prior year. This increase includes
$23 million of debt funding
required to acquire Global
Therapeutics.
The business has continued
to generate strong net operating
cash flows at $83.7 million, 18%
growth over the prior period.
This was due to a strong trading
performance, improved treasury
capability offset by direct
purchasing of raw materials to
secure quality ingredients.
The cash conversion ratio of
81% reflected a continued focus
on operational effectiveness
initiatives whilst the company
built inventory levels, invested in
packaging robotics and acquired
Global Therapeutics.
The Group gearing ratio at
9.1% remained low (2015: 5.1%)
and net interest cover at 80.2
times (2015: 21.1 times) provides
significant cover within our
existing banking covenants even
after the acquisition of Global
Therapeutics.
Equity increased from $133
million to $181 million, a $48
million increase due to growth in
Group NPAT, reserves, retained
earnings and our interest in PT
Kalbe Blackmores Nutrition, our
Indonesian joint venture.
Group NPAT was $100.0
million (2015: $46.6 million) a
115% increase on the prior year
and similarly Basic earnings per
share (EPS) increased from 270.7
cents per share to 580.6 cents per
share, an increase of 114.5%.
Our focus on delivery of
shareholder returns has resulted
in industry leading return on
assets at 39.9% and return on
equity of 56.1% and highlights a
continued trajectory of year on
year improvement.
19
Blackmores annual report 2016 Suki Petgo, Assistant Production Operator
(left) and Elena Irlandez, Production
Operator, Blackmores
20
Operating + Financial reviewBlackmores annual report 2016 24
hour
operation
25K
points of
distriBution
486
million
capsules
04
OpErAtING
rEVIEW
GRoup opeRAtIonAl ReVIeW
In the prior year, Blackmores was constrained
by an inability to maintain stock to meet the
rapidly growing demand for our products
from consumers in Asia. A number of
initiatives, from investing in the company’s
capacity programs through to putting in
additional partnership arrangements with
suppliers and customers, have been executed
in the year.
We are also holding inventory of scarce
raw materials to give us access in a growing
market to mitigate against the vulnerability of
having core product lines out of stock.
Total expenses for the year were $454
million representing a 43% increase over
the prior year. Total sales growth of 52% was
the primary contributor with sales-related
expenses of raw materials and freight up
46% to $225 million. The remaining expenses
increased by $66 million to $229 million
included employee performance related
incentives which were $16 million greater than
the prior year.
opeRAtIonAl HIGHlIGHtS
Unprecedented consumer demand for
products has continued.
To protect our unrivalled quality standards
and build capacity, the Group has:
•
Increased staff and shifts at the Blackmores
Campus packaging facility.
• Audited and secured more quality-
approved suppliers.
• Completed extensive quality audits of new
suppliers.
•
• Doubled warehouse footprint including
new leased facilities at Eastern Creek in
Western Sydney.
Invested in new plant equipment including
quadruple head counters, increasing
packing speed from 4,000 tablets per
minute to 13,000 tablets per minute.
Installed four new robotic packing cell.
•
ReSultInG In ReCoRD outputS
In the past 12 months, the Group produced
486 million tablets and capsules and shipped
43 million units which we delivered to more
than 25,000 retail partners.
21
Blackmores annual report 2016 22
Operating + Financial reviewBlackmores annual report 2016 there are countless opportunities in the global health category as well as some
inherent risks. Blackmores takes a proactive approach to managing these with a
focus on the following core areas to mitigate risk:
• Robust risk governance framework overseen by the Audit and Risk Committee of the
Blackmores’ Board.
• Attract and retain strong management teams with local experience in all markets.
• Diversify revenues to ensure less reliance on any one brand, channel or market.
• Ability to identify risks, and the agility and capability to respond accordingly.
The material risks that could impact Blackmores achieving future financial performance and
outcomes are summarised as follows:
rISKS
pOtENtIAL ImpActS
rESpONSE
Industry risk
Quality or claims breaches
by competitors or suppliers
impact the credibility of the
industry domestically and
internationally.
• High visibility and transparency of our full supply
chain and enforcement of Blackmores’ own quality
standards.
• Crisis and communication response plans are
continually reviewed, updated and tested to
ensure appropriate skills and capabilities are ready
to be deployed.
• Key government and regulatory relationships are
actively maintained.
Supply
constraints
Blackmores’ high quality
and sustainability standards
and limited availability of
natural ingredients puts
pressure on the continuous
supply of some key
products.
• Increased inventory on hand.
• Increased direct sourcing of key and scarce
ingredients.
• Customer service line activated to assist
consumers finding the products through stores
and online merchants.
• Strengthened supplier relationships.
Product
quality issue
Financial loss due to:
• Delay in restoring supply
• Long term relationships with suppliers, quality
audits and supply chain business reviews.
05GrOup
rISKS
of product for sale.
• Product recall and
reformulation costs.
• Reduced industry
capacity.
• Industry concentration
reducing competitor
tensions and ability to
negotiate price and
supply.
• Product testing and validation procedures in place.
Every product has passed more than 30 tests and
quality assessments.
• Retention of samples from every batch for
ongoing testing and quality evaluation to cover
the whole shelf-life of all products.
Brand
damage
Brand damage caused by a
product or industry related
event resulting in loss of
share and value.
Treasury risk
Regulatory
changes
Treasury risks including
change in exchange rates,
ingredient prices, interest
rates and funding causes a
financial loss.
Government policy and
regulation may change and
restrict or limit the ability
to sell existing product or
ranges in key markets.
Reliance on
customers and
markets
• Financial loss due to
reduced revenue of a
key customer or market.
• Greater financial cost to
serve customers due to
aggressive competitors.
• Financial loss due to a
large bad debt.
• High quality controls throughout the supply chain.
• Focus on complaint handling.
• Active program to train stakeholders on
Blackmores’ business values and ethics practices.
• Consumer advisory line to provide product
information.
• Diversification of currencies and working with
supply partners to more effectively use these
currencies for Group procurement.
• Employing strong, experienced local teams able to
actively engage with local governments.
• Blackmores actively engages with key stakeholders
to monitor and react to regulatory changes in key
markets such as China.
• Continue to educate and inform stakeholders of
the regulatory rules and routes to market in China
through both the Australian and China business
• Engagement with industry associations in key
markets to encourage informed policy setting
and regulation.
• Diversification of revenues.
• Diversification of routes to market.
• Focus on Blackmores’ brand health to drive brand
loyalty and consumption.
• Drive category solutions to gain consumer loyalty.
• Close monitoring of customer payments and
continued transparency across markets.
• Diversification of revenues.
23
Blackmores annual report 2016 SuStAINABILItY
Raphael Maufay, Gardener & Handyman, Blackmores
24
Blackmores annual report 2016 25
Blackmores annual report 2016 SuStAINABILItY
Understanding the innate connection between
healthy people and a healthy planet
As a company that relies on the bounty of our natural
environment, it is fitting that Blackmores is committed to
practices that affirm environmental sustainability.
However, our approach to sustainability extends beyond
the protection of the environment and incorporates our
corporate governance, workplace practices and responsibility
to the community.
These elements have underpinned our business
for more than 80 years, though we have more recently
developed a framework that will help us manage our
performance to ensure our business continues to grow for
generations to come.
Sustainability is integral to our core business objectives.
To embed sustainability in our business and operations we are
focusing our efforts on addressing the most material issues
across our four sustainability commitments of:
Responsible Facility Management – To reduce the
environmental intensity and carbon footprint of our
facilities and operations.
Sustainable Supply Chain Management – To encourage,
support and facilitate an environmentally and socially
responsible approach to supply chain management.
Industry Leadership – To be a leader in natural health
solutions through innovation, research and education.
people & Community – To give back and build a
supportive workforce, community and marketplace.
Importantly, we are committed to sharing our vision
and knowledge with suppliers, business partners,
government and shareholders.
For Blackmores’ inaugural full sustainability report, visit blackmoressustainability.com.au
26
Blackmores annual report 2016 Understanding the innate connection between
healthy people and a healthy planet
86% employee
engagement score
and recognition
as an aon hewitt
employer of
choice award
447,816
touchpoints
educating our
consumers and
customers
our partnership
with the world
wide fund for
nature to ensure
our fish is sourced
sustainaBly
increasing the
amount of waste
diverted from
landfill from
43% to 71%
keY AReAS oF mAteRIAlItY – FIFteen topICS ConSIDeReD AS pRIoRItIeS FoR BlACkmoReS
11
12
13
14
15
10
08
05
06
07
09
04
>
S
R
E
d
L
O
H
E
k
A
T
S
O
T
E
C
N
A
T
R
O
p
M
I
IMpACT ON BLACkMORES BUSINESS >
03
02
01
1. Work health & safety
2. Water
3. Energy
4.
Investment in research
5. Our People
6. Emissions
7. Anti-corruption
8. Effluent & waste
9. Product & service
compliance
10. Business performance
11. Supply chain
12. Stakeholder engagement
13. Communities
14. Customer privacy
& data protection
15. Materials
27
Blackmores annual report 2016
Edouard Picherit, Category Manager, Blackmores
and Emma Gaukrodger, Health & Wellness
Administrator, Blackmores, train for the annual
Blackmores Sydney Running Festival which has
raised millions of dollars for charity.
cOmmuNItY
28
Blackmores annual report 2016 29
Blackmores annual report 2016 cOmmuNItY
Building healthier communities
Blackmores has a long-
term commitment to social
responsibility and giving
back to the communities
in which we operate. Our
company strives to make
a difference by building
healthier communities in
Australia and overseas.
This year Blackmores
supported 50+ charitable
organisations and
inspirational individuals
who are helping to create a
brighter future.
oRGAnISAtIonS InCluDe:
• Dr Charlie Teo’s Cure
Brain Cancer
• Quest for Life Foundation
• Heart Research Institute
• Macular Disease
Foundation
• United in Compassion
• Arthritis New Zealand
• First 1000 Days (China)
• Heart Ali (China).
The iconic Blackmores
Sydney Running Festival
continues to raise millions
of dollars for charity, whilst
the inaugural Blackmores
Community Open Day
provided a strong platform
for local community
organisations to showcase
their services and raise funds
for their cause.
The Blackmores
Employee Matched
Donations Scheme, whereby
staff are encouraged to
donate 0.5% of their taxable
pay with Blackmores
matching the amount,
generated $188,770 for 87
charities. Staff also hosted
regular fundraising events
such as bake sales and
BBQ days to support other
worthy causes of their own
choosing such as the Fred
Hollows Foundation, Young
Endeavour Youth Scheme,
Defence Reserves and Big
Red Run to fight diabetes.
We believe that everyone
can make a difference.
30
Blackmores annual report 2016 Building healthier communities
eDuCAtIon AnD
ACADemIC pARtneRSHIpS
• National Institute of
Complementary Medicine
(NICM) Scholars Program
– Building future leaders
through educational
scholarships
• Rangsit University
– Strengthening
pharmaceutical education
in Thailand
• RMIT – Integrating
complementary medicine
education into allied
health degrees
• NICM, Western Sydney
University
• University of Technology
Sydney, ARCCIM
• Chulalongkorn University,
Thailand
• Taylor’s University,
Malaysia
• UKM Pharmacy Faculty
(National University of
Malaysia)
InDuStRY pARtneRSHIpS
• Malaysian Pharmaceutical
Society
• Pharmaceutical Society
of Australia (PSA)
• Pharmacy Guild of
Australia
• Complementary
Medicines Australia
• Australasian Integrative
Medicine Association
(AIMA)
Blackmores Community open
Day attracted more than 4,000
visitors to the Warriewood
Campus, raising funds for local
not-for-profit organisations.
Kerryn Hoffman, Product Manager
BioCeuticals; Nicole Hoyek, Marketing
Manager, BioCeuticals; Carlotta Trabattoni,
Brand Manager, BioCeuticals
Darren Dziedziczak, Head of Quality &
Regulatory, Blackmores
The Blackmores Sydney Running Festival in
2015 supports numerous worthy charities, in
2015 raising more than $1.5 million.
31
Blackmores annual report 2016 cOmmuNItY
32
24 active research projects,
clinical trials and scholarly
activities across the group
60,000+ education touchpoints
with healthcare professionals,
veterinarians, pharmacy
students and retail staff
5 research symposia
with 1,400 attendees
australian clinical trial using
BlacKmores insolar, showed
vitamin B3 derivative cut the
risK of new sKin cancers By 23%
estaBlished the BlacKmores
institute research council
Blackmores annual report 2016 Blackmores Group proudly supports
HeAltH AnD WellBeInG
• Arthritis NZ
• Australia’s Biggest
Morning Tea – Cancer
Council
• First 1000 Days (China)
• Heart Ali (China)
• Heart Research Institute
• Lifeline
• Macular Degeneration
• Avanti IsoWhey Sports
Foundation
Cycling Team
• Be Centre
• Bear Cottage
• Bloody Long Walk
• Burdekin Association
• Cerebral Palsy Alliance
• CCNB
• Cure Brain Cancer Charity
• Epilepsy Awareness Day
• Exodus Foundation
• Macular Degeneration NZ
• Men’s Health Week
• MiNDD Foundation
• Northern Beaches
Interchange
• Quest For Life
• Rainbow Rain (China)
• Raise Foundation
• Sydney Skinny
• United in Compassion
tHe eARtH
• Boomerang Bags
• Clean-Up Day Australia
• Eco Art
• Living Ocean
• Marine Rescue
• Permaculture Northern
Beaches
• Planet Ark
• World Wide Fund for
Nature
ouR CommunItY
• Avalon Computer Pals
• Bilgola SLSC
• Bungan Board Riders
• Collingwood FC
• Holly Wawn
• Koori Kinnections
• Mat Belcher & Will Ryan,
Olympic sailors
• Mona Vale Hospital
Auxiliary
• Manly Warringah Pittwater
Community Aid Service
• Oxfam 100km Walk
• People’s Association
Singapore
• Red Cross Australia
• Red Cross Thailand
• Rural Fire Service
• Sam Bloom
• Salvation Army Toy
& Book Appeal
• Tennis Australia
• Vinnies CEO Sleepout
• Animal Welfare League
• German Shepherd Dogs
in Need (Australia)
• Sydney Wildlife
Awards and Recognition
Blackmores’ winning
commitment to delivering
high quality innovative
products and services
underpinned by sustainable
business growth and strong
leadership was recognised by
more than 35 awards across
Asia-Pacific in 2016.
For the eighth year
running in Australia,
Blackmores received the
Reader’s Digest Most Trusted
Brand award in the Vitamins
and Supplements category,
as well as the prestigious
Superbrands award in
Malaysia, Singapore and
Thailand.
Our business awards
included Australian Growth
Company of the Year
(Health and Life Sciences),
Premier’s NSW Export
Award (Healthcare and
BioTechnology) and
AusCham Australia China
Business Award.
We also received
an Australian Packaging
Covenant (High Performer)
for our sustainable packaging
solutions.
• Most Trusted Brand Australia
• Most Trusted Brand NZ (Highly
Commended)
• Most Trusted Brand (Malaysia)
• Most Trusted Brand (Singapore)
• Superbrands Award (Malaysia)
• Superbrands (Singapore)
• Superbrands (Thailand)
• VIP.com Most Popular Brand (China)
• CanStar Blue (Australia)
• Brand Laureate Best Choice award 2015-
2016 under the Nutritional Supplement
category (Malaysia)
• MIA-2016 Top SKU Award
(Vitamin E Cream) (China)
• Watson’s Health Wellness & Beauty Award
•
(Thailand)
InStyle Magazine’s Reader’s Best Pick (BKL
Fish Oil 1000) (Thailand)
• NZSMI Award for best integrative
marketing campaign – Kids Gummies
• ABA Product Excellence (PawDerm
technology)
InDuStRY GRoWtH & eXpoRt
• Australian Packaging Covenant
– High Achiever
• Premier’s NSW Export Awards – Healthcare
& BioTechnology – Blackmores
• Australian Export Award – Healthcare
& BioTechnology – Blackmores (53rd, 2015)
• JD.com – The Best Growth Award
• Australian Growth Company Awards:
Australian Growth Company of the Year
(Health & Life Sciences) – Blackmores
• Hong Kong Business Excellence Award
• AusCham Australia China Business Award
WInnInG leADeRSHIp & emploYee
oF CHoICe
• AON Hewitt Employer of Choice (finalist)
• ABA Employer of Choice (PAW)
• Rotary Foundation – Paul Harris Fellows
(Nathan Cheong & Cecile Cooper)
• Australian Growth Company Awards:
Women in Leadership Award
– Christine Holgate
• Australian Customer Service Awards (Silver)
• CEO Magazine Award – CEO of the Year –
(BioCeuticals)
Christine Holgate
• Natural Food Awards – Best Superfood –
IsoWhey Wholefoods Superfood Sprinkle
• PopSugar – Best Sports Product – IsoWhey
Sports Electrolyte Formula
• PopSugar – Best Protein Balls - IsoWhey
Wholefoods Protein Balls
• Australian Packaging Design Awards – Gold
Award - Health & Beauty (IsoWhey)
• ADMA AC&E Award
iAB award (Digital)
•
33
Blackmores annual report 2016 ExEcutIVE
tEAm
01
03
05
07
34
02
04
06
08
Blackmores annual report 2016 01
CHRIStIne HolGAte
Chief Executive Officer and
Managing Director
Christine has more than 30 years
of diverse international leadership
experience in highly regulated
industries, including healthcare,
media, telecommunications
and finance. Christine was
appointed to her current role
as Blackmores Chief Executive
Officer in November 2008. She
has more than 20 years of public
board experience as either a
Non-Executive Director or CEO
and has held senior management
positions in Asia, the Americas
and Australia.
Christine has three post-
graduate diplomas and a
Masters Degree in Business
Administration (MBA). She is the
inaugural Chair of the Board of
the Australia-ASEAN Council,
supporting the development
of trade and cultural relations
between Australia and the 10
member countries of the ASEAN
region. Christine also serves
on the Board of Collingwood
Football Club and was a Non-
Executive Director of Ten Network
Holdings Limited for five years,
retiring in December 2015.
In 2015 Christine was
recognised in the top 100
Women of Influence in Australia
by the Australian Financial Review
and named CEO of the Year by
CEO Magazine. She was also
named the highest performing
CEO in Australia by the Daily
Telegraph and received the
Australian Growth Company
Award for Women in Leadership.
In 2013 Christine was honoured
with the Rotary Paul Harris Award
and she recently climbed Mount
Kilimanjaro as part of Dr Charlie
Teo’s Million$Mission to help
Cure Brain Cancer.
02
RICHARD HenFReY
Chief Operating Officer
Richard Henfrey has more than
25 years of experience in strategic
and business development roles
across a wide range of blue chip,
start up and strategy consulting
businesses in Europe, North
America and Australia, including
key leadership positions with
Telstra. Much of his career has
focused on developing and
implementing new businesses
or change initiatives in the highly
regulated industries of healthcare
and telecommunications.
Richard joined Blackmores in
2009 as the Director of People
and Strategy and became
Director of the Blackmores
Strategic Sourcing division in
2011. He was appointed Chief
Operating Officer in 2014.
Richard is a Board Member
of the industry association
Complementary Medicines
Australia and served as Board
President from 2011 to 2015.
He leads a positive approach
to engagement with regulators
and governments to advocate
for a greater recognition of
complementary medicines
in the development of health
policy and improved regulation
of complementary medicines.
Richard is a graduate of the
Australian Institute of
Company Directors.
03
DAVID Fenlon
Managing Director, Australia
and New Zealand
David brings more than 25
years of retail experience to
Blackmores including an in-depth
understanding of grocery and
retail channel strategies. With an
emphasis on driving business
transformation and showcasing
leadership, David has held key
positions in Tesco throughout
Europe and Safeway in the UK.
In Australia, he has held key
leadership roles with a diverse
range of brands.
David recently served on the
Board of ASX-listed The PAS
Group. He is a member of the
Australian Institute of Company
Directors and a Director of the
Quest For Life Foundation.
04
nAtHAn CHeonG
Managing Director, BioCeuticals
With more than 15 years of
experience in the complementary
medicine industry, Nathan is
a qualified Naturopath and
Herbalist, holding degrees in
Health Science, Science and
Social Work, and graduating
with majors in Biochemistry
and Psychology. Prior to joining
BioCeuticals in 2012, Nathan
was the General Manager of
Herbs of Gold, a subsidiary of
Vita Life Science.
Nathan sits on the
Complementary Medicines
Australia’s Complaints Resolution
Panel and Practitioner Medicine
Technical Committee, and is
a member of the Australian
Institute of Company Directors
and Australian Institute of
Management. In 2015 he was
awarded the Rotary Paul Harris
Fellow and he recently climbed
Mount Kilimanjaro as part of
Dr Charlie Teo’s Million$Mission
to help Cure Brain Cancer.
05
peteR oSBoRne
Managing Director, Asia
Peter is a former Australian
trade diplomat with extensive
experience in business
development, sales and
marketing, trade development,
and export and investment
facilitation and promotion. He is
responsible for Blackmores’ Asia
business, including subsidiary
companies in Singapore,
Thailand, Malaysia, Taiwan,
Hong Kong, Korea and China;
joint venture Kalbe Blackmores
Nutrition in Indonesia;
distribution partnerships in
Vietnam, Cambodia, Kazakhstan
and Mongolia; and overall
strategy for Blackmores’ growth
objectives in Asia.
Prior to joining Blackmores in
2009, Peter was one of Australia’s
most senior trade diplomats
working with the Australian
Trade Commission in China,
Taiwan, and Hong Kong. He
also spent several years in Fiji
as the Trade and Investment
Director of the South Pacific
Forum Secretariat and served
as the South Pacific Expert
Adviser on trade development
to the UN Conference on Trade
and Development and the UN
Commission for Sustainable
Development. Peter has lived and
worked in Asia for over 25 years
and speaks Mandarin-Chinese.
Peter is a graduate of the
Australian Institute of Company
Directors and a Fellow of the
Hong Kong Institute of Directors.
06
CeCIle CoopeR
Company Secretary and Director
of Corporate Affairs
Cecile is an accountant and
Company Secretary with more
than 30 years of commercial
experience. She is responsible
for Blackmores’ board
administration, secretariat,
governance, risk management,
compliance and corporate
communications initiatives.
She has held a variety of senior
positions within Blackmores,
including Business Manager
for Development, marketing
and sales.
Cecile is a Chartered Secretary
and a Certified Practicing
Accountant and has a Bachelor
of Business (Accounting) and a
Graduate Diploma of Applied
Corporate Governance with
the Governance Institute of
Australia. She is a graduate of the
Australian Institute of Company
Directors. Cecile serves on the
Governance Institute of Australia’s
Legislation Review Committee
and is the Chairman of CCNB
Limited.
In 2015 she was awarded the
Rotary Paul Harris Fellow.
07
AARon CAnnInG
Chief Financial Officer
Aaron has a wealth of experience
gained from working in a variety
of general management and
financial leadership positions
in ASX listed and multinational
organisations in Asia, Australia
and New Zealand, the UK
and the US. Prior to joining
Blackmores in December 2014,
Aaron worked at Goodman
Fielder, Westfield and Diageo
Plc. At Goodman Fielder he held
several leadership roles including
Managing Director Grocery
Category, Managing Director
Asia Pacific, and Finance
Director Asia Pacific.
Aaron has a Bachelor of
Commerce degree in Marketing
and Management and a
Postgraduate 1st Class Honours
degree in Management. He
is a qualified accountant, a
Fellow of the Association of
Chartered Certified Accountants
and graduate of the Australian
Institute of Company Directors.
08
DR leSleY BRAun
Director, Blackmores Institute
Dr Braun is an Adjunct Associate
Professor at the National Institute
of Complementary Medicine
(Western Sydney University)
and an Adjunct Senior Research
Fellow at the Monash/Alfred
Psychiatric Research Centre.
She has held research positions
at The Alfred Hospital and was
Vice President of the National
Herbalists Association of
Australia and an Academic Board
Member of Endeavour College.
Lesley is a member of key
industry groups including
the Australian Therapeutic
Goods Advisory Council, the
Advisory Committee for the
Australasian Integrative Medicine
Association, and the National
E Health Authority (NeHTA)
medicines terminology group.
She is a member of the Clinical
Oncology Society of Australia’s
Complementary and Integrative
Therapies Group Executive and
a member of the Pharmaceutical
Society of Australia. Lesley is the
main author of the best-selling
textbook ‘Herbs and Natural
Supplements – an evidence
based guide’, founding editor-
in-chief of the journal ‘Advances
in Integrative Medicine’, and
a regular columnist for the
Australian Journal of Pharmacy.
35
Blackmores annual report 2016
fINANcIAL
rEpOrt
Five Year History
Directors’ Profiles
directors’ Report
Remuneration Report
Auditor’s Independence declaration
Independent Auditor’s Report
directors’ declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Financial Statements
37
38
40
44
60
61
63
64
65
66
67
68
104 Additional Information
105 Company Information
36
Blackmores annual report 2016 5
YEAr
hIStOrY
$’000
2016
2015
2014
2013
2012
Sales1
Earnings before interest, tax, depreciation and
amortisation (EBITDA)
Depreciation and amortisation
Earnings before interest and tax (EBIT)
Net interest expense
Profit before tax
Income tax expense
Profit for the year
Net debt
Shareholders’ equity
Total assets
Current assets
Current liabilities
Net tangible assets (NTA)
Net operating cash flows
Number of shares on issue (’000s)
Earnings per share (EPS) - basic (cents)
Ordinary dividends per share (cents)
Share price at 30 June
Net tangible assets (NTA) per share
Cash conversion ratio2
Return on shareholders’ equity3
Return on assets4
Dividend payout ratio
Gearing ratio5
EBIT to sales
Effective tax rate
Current assets to current liabilities (times)
Net interest cover (times)
Gross interest cover (times)
% change on prior year
Sales
EBITDA
EBIT
Profit for the year
EPS
Ordinary dividends per share
717,211
471,615
346,760
326,603
260,832
152,266
7,045
145,221
1,810
143,411
43,391
100,020
17,793
178,263
434,023
294,624
192,279
115,568
83,676
17,225
580.6
410
$131.39
$6.71
80.8%
56.1%
39.9%
70.6%
9.1%
20.2%
30.3%
1.53
80.2
63.9
52.2%
93.6%
101.0%
114.8%
114.5%
102.0%
78,655
6,391
72,264
3,432
68,832
22,276
46,556
7,069
132,915
293,407
187,844
114,998
90,809
71,127
17,224
270.7
203.0
$75.27
$5.27
114.2%
35.0%
27.3%
75.0%
5.1%
15.3%
32.4%
1.63
21.1
18.8
36.0%
70.8%
81.6%
83.1%
81.4%
60.0%
46,055
6,266
39,789
4,826
34,963
9,534
25,429
54,401
104,226
236,594
131,376
58,040
65,185
37,491
17,113
149.2
127.0
$27.20
$3.81
107.5%
24.4%
17.0%
85.1%
34.3%
11.5%
27.3%
2.25
8.2
7.7
6.2%
3.1%
2.8%
1.8%
0.9%
0.0%
44,692
5,989
38,703
4,752
33,951
8,975
24,976
69,043
98,051
231,477
124,030
45,035
58,860
22,014
16,972
147.9
127.0
$26.94
$3.47
85.7%
25.5%
19.1%
85.9%
41.3%
11.9%
26.4%
2.75
8.1
7.9
25.2%
(4.7%)
(7.8%)
(10.2%)
(10.8%)
0.0%
46,879
4,922
41,957
2,761
39,196
11,390
27,806
33,040
86,166
174,771
99,993
42,024
79,629
20,846
16,780
165.8
127.0
$26.25
$4.75
80.4%
32.3%
25.6%
76.6%
27.7%
16.1%
29.1%
2.38
15.2
14.3
11.3%
0.6%
(0.2%)
1.8%
1.6%
2.4%
1. Represents sale of goods before promotional and other rebates and excludes other revenue items.
2. Calculated as cash generated from operations divided by EBITDA.
3. Calculated as net profit after tax divided by closing shareholders’ equity.
4. Calculated as EBIT divided by average total assets.
5. Gearing ratio is calculated as net debt divided by the sum of net debt and shareholders’ equity.
37
Blackmores annual report 2016
DIrEctOrS’
prOfILES
01
02
04
06
38
03
05
07
Blackmores annual report 2016 06
DAVID AnSell
BA (COMMUNICATION), GAICD
Independent Director
Mr Ansell joined the Board in
October 2013, following a highly
successful career in consumer-
facing organisations in Australia,
Asia and the United States.
He played a pivotal role in
the start-up years of Foxtel and
was CEO of leading advertising
agency Saatchi & Saatchi. He
has led business units of Mars
Incorporated in Australia and
most recently in the United
States. Mr Ansell has a strong
operating and supply chain skill
set and a deep understanding
of consumer and customer
strategy. He is also Managing
Director and Chairman of Jacobs
Douwe Egberts ANZ and a Board
Member of Cycling Australia.
07
JoHn ARmStRonG
B BUS, MBA, MAICD
Independent Director
Mr Armstrong joined the Board
in May 2015.
He is a company director
and financial professional, with
over 25 years experience in
various financial and commercial
management roles. His most
recent executive role was at
SEEK Limited, an ASX 100
listed leading recruitment and
education provider, where he
was the Chief Financial Officer for
over 12 years. In recent years, he
also had a focus on SEEK’s Asian
operations and investments,
including directorships of SEEK’s
business in China, Zhaopin (a
US listed company), and SEEK
Asia, which operates across
South East Asia. Prior to SEEK,
he held management roles at
Carlton United Breweries and
commenced his career at
Ernst & Young.
Mr Armstrong is a Non-
Executive Director of Melbourne
IT (since February 2016) and
was a Non-Executive Director
of iProperty Group Ltd, until its
recent sale (February 2016).
.
01
mARCuS C BlACkmoRe Am
ND, MAICD, D Univ
Chairman of the Board
Executive Director
Mr Blackmore has served on the
Board since October 1973 and is
the Chairman of the Company.
He is also an Honorary
Doctor of Southern Cross
University, a Director of the
Young Endeavour Youth
Scheme, National Chairman
of the Defence Reserves
Support Council, an honorary
trustee of the Committee for
the Economic Development of
Australia (CEDA), an Alumnus of
Harvard Business School, and
an Honorary Fellow of the Heart
Research Institute.
02
CHRIStIne HolGAte
Chief Executive Officer and
Managing Director
Ms Holgate joined the Board
in November 2008. She has
more than 30 years of diverse
international leadership
experience in highly regulated
industries, including healthcare,
media, telecommunications
and finance. Ms Holgate was
appointed to her current role
as Blackmores Chief Executive
Officer in November 2008.
She has more than 20 years
of public board experience as
either a Non-Executive Director
or CEO and has held senior
management positions in Asia,
the Americas and Australia.
Her prime responsibilities have
been leading teams through
significant change to deliver
growth and expansion in Asia. Ms
Holgate has three post-graduate
diplomas and a Masters Degree
in Business Administration (MBA).
She is the inaugural Chair
of the Board of the Australia-
ASEAN Council, supporting
the development of trade and
cultural relations between
Australia and the 10 member
countries of the ASEAN region.
She also serves on the Board of
Collingwood Football Club and
was a Non-Executive Director
of Ten Network Holdings
Limited for five years, retiring in
December 2015.
In 2015 Ms Holgate was
recognised in the top 100
Women of Influence in Australia
by the Australian Financial Review
and named CEO of the Year
by CEO Magazine (she was the
first female to win this award).
She was also named the highest
performing CEO in Australia
by the Daily Telegraph and
received the Australian Growth
Company Award for Women in
Leadership. In 2013 Ms Holgate
was honoured with the Rotary
Paul Harris Award in recognition
of her charitable work.
03
StepHen CHApmAn
BCOMM, MBA, CA, FAICD
Deputy Chairman and
Independent Director
Mr Chapman is an investment
banker and joined the Board in
September 1993.
He is a founder and Chairman
of Baron Partners Limited, an
Australian investment bank.
He is an independent Director
of ANZ Wealth Group and the
independent Chairman of ANZ
Share Investing Limited (formerly
ETrade Australia).
04
BRent W WAllACe
BCOMM (MARKETING), FAICD
Chairman of the Audit and Risk
Committee and Independent
Director
Mr Wallace joined the Board in
October 2005 and is Chairman
of the Audit and Risk Committee
and Independent Director.
He is a co-founder and CEO of
Galileo Kaleidoscope (Galkal), a
company known for its strategic
marketing, brand and consumer
research and insight solutions.
Mr Wallace has more than
30 years of experience in
marketing, advertising and brand
development across a wide
variety of consumer categories.
He has held senior positions in
London and Sydney advertising
agencies and until 1996 was
Managing Director of Ogilvy &
Mather in Australia. Mr Wallace
is also a Board Director and
Governor of World Wide
Fund for Nature (WWF), the
global environmental group.
05
Helen nASH
BA (HONS), GAICD
Chairman of the People and
Remuneration Committee and
Independent Director
Ms Nash joined the Board of
Blackmores in October 2013.
Ms Nash has more than 17 years
of experience in brands and
marketing, including seven years
in fast moving consumer goods
at Procter & Gamble, followed
by three years in publishing at
IPC Media.
She has held a variety of
roles at McDonald’s Australia
over a period of nine years and
most recently held the position
of Chief Operating Officer,
overseeing restaurant operations,
marketing, menu, insights
and research and information
technology. Ms Nash is a Director
of Metcash (since October 2015)
and a Director of Southern Cross
Media Group (since April 2015)
and was a Board member of
Pacific Brands Limited (until
July 2016).
39
Blackmores annual report 2016
DIrEctOrS’
rEpOrt
2016
40
Blackmores annual report 2016 DIrEctOrS’ rEpOrt
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
dIRECTORS’ SHAREHOLdINGS
The following table sets out each Director’s relevant interest in all financial instruments issued by Blackmores as at the date of this report:
diREctoRs
David Ansell
John Armstrong
Marcus Blackmore
Stephen Chapman
Christine Holgate
Helen Nash
Brent Wallace
Total
fullY pAid oRdinARY sHAREs
sHARE RiGHts
1,000
-
4,219,835
20,028
45,002
1,000
12,302
4,299,167
-
-
-
-
46,563
-
-
46,563
SHARE RIGHTS GRANTEd TO dIRECTORS ANd SENIOR EXECUTIVES
Selected Senior Executives are invited annually by the Board to participate in the Executive Performance Share Plan (EPSP). Under this plan,
eligible Senior Executives are granted rights to acquire shares in Blackmores. Refer to the Remuneration Report on pages 44 to 59 for more
details. During the year, the following rights to shares were granted:
executive Director
Christine Holgate
Senior executives
Lesley Braun
Aaron Canning
Nathan Cheong
Cecile Cooper
Richard Henfrey
Peter Osborne
2016
numBER1, 2
12,127
1,744
2,507
1,744
1,580
2,452
1,986
24,140
1. Nil shares vested in the 2016 Financial Year.
2. Rights granted during the 2016 Financial Year vest provided specific performance objectives and hurdles are met over the three year period commencing 1 July 2015 to the year ending 30 June 2018.
SHARE OpTIONS
During and since the end of the financial year, no share options were in existence and no new share options were granted to Directors or
Senior Executives of Blackmores.
REMUNERATION OF dIRECTORS ANd kEY MANAGEMENT pERSONNEL
Information about remuneration of Directors and Key Management Personnel is set out in the Remuneration Report of this Directors’ Report,
on pages 44 to 59.
COMMITTEE MEMBERSHIpS
As at the date of this Report, the Company had an Audit and Risk Committee, a Nominations Committee and a People and Remuneration
Committee. Members of the Board acting on the Committees during the year were:
Audit and Risk:
Nominations:
People and Remuneration:
1. Marcus Blackmore ceased to be a member of the People and Remuneration Committee as at 30 June 2016 in accordance with ASX Listing Rule requirements.
2. Stephen Chapman was on an unpaid leave of absence from 14 April 2015 to 30 November 2015.
Brent Wallace, Chairman
David Ansell
John Armstrong
Stephen Chapman2
Stephen Chapman, Chairman2
David Ansell
John Armstrong
Marcus Blackmore
Christine Holgate
Helen Nash
Brent Wallace
Helen Nash, Chairman
Marcus Blackmore1
Stephen Chapman2
Brent Wallace
41
Blackmores annual report 2016
DIrEctOrS’ rEpOrt
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
COMpANY SECRETARIES
Cecile Cooper, BBus, Dip Inv Rel (AIRA), CPA, GAICD. Company Secretary and Director Corporate Affairs. Ms Cooper joined Blackmores in
1991. As Company Secretary, Ms Cooper is responsible for company secretarial and corporate governance support across the Group. She
has held a variety of positions within Blackmores and her experience includes financial and management experience including enterprise
resource planning system implementations, design of business reporting solutions, business management, risk management and compliance.
Ms Cooper is the Chairman of CCNB Ltd.
Aaron Canning, BCom(Hons), FCCA, GAICD. Chief Financial Officer. Mr Canning joined Blackmores in 2014 as Chief Financial Officer. He
has extensive management experience in Asia, New Zealand, the UK, the USA and Australia from ASX listed and multinational organisations
including Goodman Fielder, Westfield and Diageo Plc. His most recent experience was with Goodman Fielder as the Managing Director
Grocery Category. Prior to this he was the Managing Director Asia Pacific and Finance Director Asia Pacific. Mr Canning is a qualified
accountant, Fellow of the Association of Chartered Certified Accountants and a member of the Australian Institute of Company Directors.
pRINCIpAL ACTIVITIES
The principal activity of the Blackmores Group in the course of the financial year was the development, sales and marketing of natural health
products for humans and animals including vitamins, and herbal and mineral nutritional supplements. The Blackmores Group has operations
in Australia, New Zealand and Asia.
RESULTS
The financial report for the years ended 30 June 2016 and 30 June 2015 and the results herein have been prepared in accordance with
Australian Accounting Standards.
The net profit after tax (NPAT) attributable to the shareholders of the Blackmores Group for the financial year was $100.0 million (2015: $46.6
million).
A review of the operations of the Blackmores Group during the financial year and the results of those operations is set out in the Operating
and Financial Review on pages 14 to 23 inclusive.
dIVIdENdS
The amounts paid or declared by way of dividend since the start of the financial year are:
• a final dividend of 135 cents per share fully franked in respect of the year ended 30 June 2015, as detailed in the Directors’ Report for that
financial year, was paid on 22 September 2015
• an interim dividend of 200 cents per share fully franked in respect of the year ended 30 June 2016 was paid on 24 March 2016
• on 24 August 2016, Directors declared a final dividend for the year ended 30 June 2016 of 210 cents per share fully franked, payable on
21 September 2016 to shareholders registered on 7 September 2016.
This will bring total ordinary dividends to 410 cents per share fully franked (2015: 203 cents per share fully franked) for the full year.
CHANGES IN STATE OF AFFAIRS
During the financial year there was no significant change in the state of affairs of the Blackmores Group other than that referred to in the
Consolidated Financial Statements or notes thereto and elsewhere in the Annual Report of the Blackmores Group for the year ended
30 June 2016.
SUBSEQUENT EVENTS
There has not been any matter or circumstance, other than that referred to in the Financial Statements or notes thereto, that has arisen since
the end of the financial year, that has significantly affected, or may significantly affect, the operations of the Blackmores Limited, the results of
those operations, or the state of affairs of the Blackmores Group in future financial years.
CORpORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviour and accountability, the Board of Blackmores endorses the ASX
Corporate Governance Council’s Corporate Governance Principles and Recommendations. The Company’s Corporate Governance Statement
is available on the Blackmores’ website at blackmores.com.au (Go to ‘Investor Centre’, then click on ‘Corporate Governance’).
INdEMNIFICATION OF OFFICERS ANd AUdITORS
During the financial year, Blackmores paid a premium in respect of a contract insuring the Directors, the Company Secretary and all Executive
Officers of the Blackmores Group against any liability incurred in their role as Director, Company Secretary or Executive Officer to the extent
permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the
premium. Blackmores has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify an Officer or
auditor of the Blackmores Group against a liability incurred as such an Officer or Auditor.
42
Blackmores annual report 2016 DIrEctOrS’ rEpOrt
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
dIRECTORS’ MEETINGS
The number of Directors’ Meetings held (including meetings of Committees of Directors) during the financial year are as follows:
diREctoRs
David Ansell
John Armstrong
Marcus Blackmore
Stephen Chapman2
Christine Holgate3
Helen Nash
Brent Wallace
BoARd of
diREctoRs
pEoplE And
Audit & RisK
committEE
nominAtions
committEE
REmunERAtion
committEE
HEld1
AttEndEd
HEld1
AttEndEd
HEld1
AttEndEd
HEld1
AttEndEd
8
8
8
5
8
8
8
8
8
8
5
8
8
8
4
4
-
3
4
-
4
4
4
-
3
4
-
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
2
3
3
3
-
-
3
2
3
3
2
1. Reflects the number of meetings held during the time that the Director held office during the year.
2. Stephen Chapman was on an unpaid leave of absence from 14 April 2015 to 30 November 2015.
3. Christine Holgate’s attendance at the Audit and Risk Committee and People and Remuneration Committee was as an invitee.
STATEMENT OF NON-AUdIT SERVICES
The Directors are satisfied that the provision of non-audit services during the year by the auditor (or by another person or firm on the auditor’s
behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Details of amounts paid
or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 12 to the Consolidated Financial
Statements.
Directors have accepted a statement from the auditor that it is satisfied that the provision of these services did not breach the independence
standards included in the Corporations Act 2001. Based on this statement from the auditor and having regard to the nature and fees involved
in the provision of these non-audit services, the Directors are satisfied that the provision of non-audit services during the year by the auditor
(or other person or firm on the auditor’s behalf) did not compromise the audit independence requirements of the Corporations Act 2001.
AUdITOR’S INdEpENdENCE dECLARATION
A copy of the Auditor’s Independence Declaration is set out on page 60 of this Annual Report.
ROUNdING OFF AMOUNTS
In accordance with the Australian Securities and Investments Commission (ASIC) Class Order 98/0100, dated 10 July 1998, the amounts in the
Directors’ Report and the Financial Report are rounded off to the nearest thousand dollars, unless otherwise indicated.
43
Blackmores annual report 2016
2016
rEmuNErAtION
rEpOrt
Introduction from the Chairman of the people and Remuneration Committee
Dear Shareholder,
I am pleased to present our Remuneration Report for 2016, which is designed to provide a clear summary of the remuneration strategy,
arrangements and outcomes for the Chief Executive Officer (CEO), direct reports to the CEO (Senior Executives) and Non-Executive Directors.
2016 was another exceptional year of sales and profit growth across all areas of the business. These outstanding results are directly attributable
to the dedication and quality of our people.
Throughout the year, management:
• Continued to deliver on the Group strategy to grow the business – sales up 52% and NPAT up 115%.
• Continued to deliver on the Group strategy to grow the Australian business – Australian revenue up 56.5% and EBIT up 100.9%.
• Continued to grow Blackmores’ business in Asia – total Asia sales up 54% and Asian consumers now influence 50% of Group revenue.
• Continued to invest in world class innovation and new product development – launched 117 new products, announced a partnership with
Bega to produce nutritional foods, and acquired Global Therapeutics, a leader in Chinese herbal medicine.
• Delivered responsible financial management resulting in strong net operating cash flows of $83.7 million, net debt of $17.8 million, and
return on shareholders’ equity of 56.1%.
These successes have been recognised in our share price which increased by 75% per cent during the year. We were one of the highest
performing stock of the S&P/ASX 100 companies during 2016.
Blackmores delivered total shareholders’ return (TSR) of 180% for FY16 and EPS accretion of 114.5% and dividend growth of 102%.
ALIGNING REMUNERATION WITH BUSINESS pERFORMANCE ANd STRATEGY
Following last year’s record growth across all areas of the business we reviewed our remuneration framework to ensure that it retains our key
executives, rewards and recognises the individual contributions of our people and further inspires them to achieve results aligned to business
strategy and shareholder interests. As part of this review, and with particular note to the growing size and resulting market capitalisation of the
Company, the Committee conducted a thorough external benchmarking review of Senior Executive and Non-Executive Director Remuneration.
kEY OUTCOMES FOR FY16 REMUNERATION
1. Following the external benchmarking review, the Board undertook to increase the Fixed Annual Remuneration (FAR) of some senior
executives. The increases ranged between 3% and 22%. Full details are on page 53.
2. The Board is very pleased with the ongoing performance of the CEO in continuing to deliver against the business strategy and leading the
organisation through a period of unprecedented change and extraordinary growth. With regard to performance, relevant benchmarks and
previous modest increases in FAR, the Board increased the CEO’s FAR by 29%. It is the intention of the Board to conduct another review of
the CEO’s FAR for FY17.
3. In a year in which Blackmores delivered TSR of 180% and NPAT growth of 115%, it was appropriate to see NPAT financial targets for the Group
and for most of Blackmores businesses achieved or exceeded. This triggered the payment of $3,563,981 of short-term incentives (STI) to Key
Management Personnel (KMP) for FY16 which was higher than FY15 STI payments. Additionally, for the first time the FY16 STI maximum potential
incentive was set at 100% FAR and it is very pleasing to see that many senior executives have achieved this outcome. The CEO received $890,098
in STI for FY16 which represented 100% FAR. The STI was based on statutory NPAT and the Board did not exercise discretion in changing the
calculation for purposes of determining the financial achievement of targets. Full details of the STI payments are on page 55.
4. The Board was also very pleased that under the long-standing Profit Share scheme, whereby of 10% of NPAT is paid to employees of
Blackmores, delivered 44 days incremental salary for each employee as a result of the record profit.
5. No executive long-term incentive (LTI) awards were eligible to vest in FY16 as the first three year LTI plan came into effect at the beginning of
FY15. The FY16 LTI plan remains a three year plan. The total remuneration for the financial year, the details of which are shown on page 53,
includes an accounting expense for all unvested performance rights and has been calculated using the value of the maximum number of
rights that could vest over the three year performance period of each LTI plan.
6. In line with market capitalisation growth and following a review of relevant external benchmarks, Non-Executive Director fees were increased
by 13.5%. Shareholders approved an increase of $300,000 to the total Directors Fee pool at the FY15 AGM. The total pool is now $1,000,000.
FUTURE CHANGES TO REMUNERATION BEING CONSIdEREd
The FY17 LTI achievement hurdles have been increased following a review of market benchmarks and further consultation. The LTI plan will have
an increased threshold hurdle of 5% three year compound annual growth rate (CAGR) in EPS. In order to receive the maximum award under the
plan an achievement of 25% CAGR will be required. These new hurdles will ensure that executive reward is aligned with increasing shareholder
value, a continuous focus on the successful achievement of long-term strategic goals and long-term retention of key executive management.
On behalf of the Board and People and Remuneration Committee, I invite you to read the 2016 Remuneration Report and welcome your
feedback on our approach to and disclosure of Blackmores’ remuneration arrangements.
Helen Nash
Chairman, People and Remuneration Committee
44
Blackmores annual report 2016 CONTENTS
Introduction
1.
2. Senior Executive Remuneration Table – Non-statutory
3. Remuneration Governance and Framework
4. Senior Executive Remuneration Structure
5. performance and Remuneration Outcomes
6. Senior Executive Remuneration Tables – Statutory
7. Employment Contracts
8. Non-Executive directors’ Remuneration
9. Non-Executive directors and Senior Executive Transactions
2016
rEmuNErAtION
rEpOrt
1. INTROdUCTION
The Directors of Blackmores Limited present the Remuneration Report (the ‘Report‘) for the Blackmores Group. The Report outlines
Blackmores’ remuneration framework and the outcomes for the year ended 30 June 2016 (FY16) for Blackmores Key Management Personnel.
The Report has been prepared in accordance with the requirements of section 300A of the Corporations Act 2001.
In this Report the following terms and phrases have the meanings indicated below:
Executive Directors – Chairman and the Chief Executive Officer and Managing Director.
Directors – Executive Directors and Non-Executive Directors.
Key Management Personnel – Non-Executive Directors and Senior Executives
Senior Executives – Executive Directors and the other company executives who have authority and responsibility for planning, directing and
controlling the activities of the Blackmores Group, directly or indirectly.
Exercised – Owned.
Granted – Assigned to, but not yet vested.
Vested – Met performance criteria and available to be exercised, but not yet owned.
key Management personnel
The following table lists all the current Key Management Personnel (KMP) referred to in this Report:
Non-Executive directors
David Ansell
Non-Executive Director and member of the Audit and Risk Committee and Nominations Committee
John Armstrong
Non-Executive Director and member of the Audit and Risk Committee and Nominations Committee
Stephen Chapman
Non-Executive Director, Deputy Chairman, Chairman of the Nominations Committee, member of the Audit and Risk
Committee and People and Remuneration Committee
Helen Nash
Brent Wallace
Executive directors
Non-Executive Director, Chairman of the People and Remuneration Committee and member of the Nominations
Committee
Non-Executive Director, Chairman of the Audit and Risk Committee, member of the People and Remuneration
Committee and Nominations Committee
Marcus Blackmore
Chairman of the Board, member of the People and Remuneration Committee and Nominations Committee
Christine Holgate
Chief Executive Officer, Managing Director and member of the Nominations Committee
Senior Executives
Lesley Braun
Director Blackmores Institute
Aaron Canning
Chief Financial Officer
Nathan Cheong
Managing Director BioCeuticals
Cecile Cooper
Company Secretary and Director of Corporate Affairs
David Fenlon
Managing Director Australia and New Zealand
Richard Henfrey
Chief Operating Officer
Peter Osborne
Managing Director Asia
45
Blackmores annual report 2016 2016
rEmuNErAtION
rEpOrt
2. SENIOR EXECUTIVE REMUNERATION OUTCOMES
The following table has been provided to disclose additional non-statutory information to assist shareholders in understanding the total value
of the remuneration paid or payable to Senior Executives who were KMP of Blackmores in FY16.
The table sets out the cash and other benefits paid or payable relating to FY16.
The remuneration outcomes prepared in accordance with accounting standards as required by the Corporations Act 2001 are contained
on page 53 of the Report. The totals in the statutory remuneration table on page 53 of the Report are higher than the following table. This is
because of the following:
1. leave movements – annual leave and long service leave movements due to an increase in the statutory accruals rather than cash payments;
and
2. share-based payments – accounting standards require the share-based payments expense to be calculated using the fair value of
the shares at grant date, amortised over the relevant performance and service period. The statutory remuneration table includes the
accounting value for LTI grants for the FY15 and FY16 years which have not yet vested as they require performance hurdles and service
periods being met in the future.
sAlARY And
fEEs
$
sti And pRofit
sHARE
$
non-
monEtARY1
$
otHER2 supERAnnuAtion
$
$
totAl
$
Executive directors
marcus Blackmore
2016
2015
Christine Holgate
2016
2015
lesley Braun
2016
2015
Aaron Canning
2016
2015
nathan Cheong
2016
2015
Cecile Cooper
2016
2015
David Fenlon
2016
2015
Richard Henfrey
2016
2015
peter osborne
2016
2015
Former Senior Executive
Chris last4
2016
2015
Total
2016
2015
364,530
353,891
368,691
284,395
872,325
671,475
1,037,454
528,599
281,131
286,775
286,818
254,220
446,303
231,710
512,940
217,239
350,972
268,304
297,650
147,655
261,097
207,245
335,871
203,170
430,848
412,514
486,882
370,351
419,909
362,079
486,882
346,199
375,744
314,364
391,508
273,349
-
237,480
-
13,944
37,901
-
25,596
-
6,713
-
42,017
-
15,352
-
4,625
-
82,201
-
37,218
15,566
-
-
-
-
4,011
4,011
19,308
18,255
794,441
660,552
-
-
-
-
19,308
18,255
1,954,683
1,218,329
19,308
18,255
593,970
559,250
1,633
1,633
27,372
31,338
1,030,265
481,920
-
-
19,308
7,947
683,282
423,906
2,004
2,004
1,748
1,748
1,825
1,825
-
-
29,372
29,024
632,969
441,443
19,308
18,441
1,020,987
803,054
25,808
24,755
971,642
750,424
-
-
767,252
587,713
-
5,836
-
13,691
-
270,951
3,802,859
3,345,837
4,204,696
2,639,121
251,623
15,566
11,221
17,057
179,092
179,961
8,449,491
6,197,542
1. ‘Non-monetary’ includes motor vehicle benefits and any fringe benefits tax paid on these benefits.
2. ‘Other’ includes insurance and superannuation membership fees.
3. The value of LTI grants that vested in FY16 was Nil.
4. Chris Last ceased as a Senior Executive 27 March 2015.
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3. REMUNERATION GOVERNANCE ANd FRAMEWORk
Remuneration Governance
people and Remuneration Committee
The primary responsibility of the People and Remuneration Committee (the ‘Committee‘) is to make recommendations to the Board on
remuneration strategy and policy for KMP and other executives of Blackmores that are in the best interests of Blackmores and its shareholders.
This includes recommendations related to Non-Executive Directors Fees, executive remuneration and Short-term Incentives (STI ) and
Long-term Incentive (LTI) schemes. The Committee also advises the Board on remuneration policies and practices for the Company. The
responsibilities of the People and Remuneration Committee are set out in the Committee’s charter which can be viewed or downloaded from
the Company’s website at blackmores.com.au (go to ‘Investor Centre’, then click on ‘Corporate Governance’). The charter is reviewed annually
by the Committee and the Board.
The People and Remuneration Committee comprises three independent Non-Executive Directors and the Executive Chairman who have
experience in both remuneration governance and the Blackmores business. The members during FY16 were Helen Nash (Committee
Chairman), Marcus Blackmore (Executive Chairman), Stephen Chapman and Brent Wallace.
Marcus Blackmore will cease be a member of the Committee in FY17 in accordance with ASX Listing Rule requirements.
Advisors to the Committee
The People and Remuneration Committee has established protocols for engaging and dealing with external advisors and this is included
in the Committee’s charter. The Committee obtains specialist external advice about remuneration structure and levels. The advice is used to
support its assessment of the market to ensure that Senior Executives and Non-Executive Directors are being rewarded appropriately, given
their responsibilities and experience. Executive remuneration packages are also reviewed annually against suitable benchmarks to ensure that
an appropriate balance between fixed and incentive pay is achieved.
The Committee did not use a remuneration consultant in the current financial year. Benchmarking of KMPs was conducted by utilising various
independent published remuneration surveys.
Remuneration Framework
The remuneration framework links remuneration to both the Group’s performance and the individual’s performance and behaviour and provides
the opportunity to share in the success and profitability of Blackmores in alignment with increased shareholder wealth. The remuneration
framework is included in Blackmores’ remuneration structure and policies and the key elements of this framework are illustrated below:
BLACkMORES REMUNERATION STRATEGY
Rewards for the achievement of
strategic goals, financial targets and
operational performance
Attract and retain talented Senior
Executives and Directors
Align Senior Executives to the
enhancement of Blackmores’ earnings
and shareholder wealth
Fixed Remuneration – Not at Risk Component
performance-based Remuneration – At Risk Component
BLACkMORES REMUNERATION FRAMEWORk
Fixed Remuneration – It is targeted to be
reasonable and fair, taking into account
Senior Executives’ responsibilities and
experience compared with competitive market
benchmarking against companies with relative
size and scale of Blackmores’ operations.
Short-term incentives (STI) – comprise cash payments linked to clearly specified
annual group targets and individual objectives and behaviours. This element of
remuneration is considered to be an effective tool in promoting the interests of
Blackmores and its shareholders. The STI scheme is designed around appropriate
performance benchmarks based primarily on Blackmores’ NPAT performance
relative to prior year and requires the achievement of year on year growth.
Profit share – Executive Directors and Senior Executives participate in the same
cash based profit share plan as all permanent Blackmores staff. The scheme
allocates up to 10% of the Group NPAT to eligible employees.
Long-term incentives (LTI) – Participation is open to Executive Directors and Senior
Executives determined to be eligible by the Board. Under this plan, rights to
acquire shares in Blackmores are granted annually to eligible Senior Executives at
no cost and vest provided specific performance hurdles are met. The Chairman’s
incentive is a cash-based equivalent.
Special long-term incentives (SLTI) – From time to time the Board may offer
‘one-off’ SLTIs to particular Executive Directors and Senior Executives in addition
to the LTI. There are currently no SLTI’s in place.
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4. SENIOR EXECUTIVE REMUNERATION STRUCTURE
Executive Remuneration Mix
In determining the mix of Senior Executive remuneration, the Board aims to find a balance between:
• fixed (not at risk) and performance (at risk) remuneration
• short and long term remuneration
• remuneration paid in cash and deferred equity.
Blackmores’ target of fixed and at risk components of the current Senior Executives disclosed in the Report as a percentage of total target
annual remuneration for FY16, is as follows:
On Target Remuneration Mix
CEO
Senior Executives
55%
18%
27%
70%
16%
14%
At maximum levels of STI and LTI the mix of remuneration elements expressed as a % of total remuneration2 is as follows:
Remuneration Mix at Maximum Reward
CEO
Senior Executives
27%
32%
41%
1. Fixed remuneration includes cash, non-monetary benefits and superannuation.
2. Total is the Aggregate Reward (Fixed Remuneration plus STI plus Profit Share plus LTI).
3. LTI value is expressed as the % of Fixed Annual remuneration as at the start of the three year performance period.
36%
42%
22%
Fixed Remuneration1
STI / Profit Share
LTI3
Fixed Annual Remuneration (FAR)
FAR includes base salary, non-monetary benefits (including fringe benefits tax and superannuation).
The Committee and the Board conducts an annual review of remuneration at the end of each financial year for Senior Executives. The process
incorporates a comprehensive assessment of market benchmarking, individual and company performance. The review conducted at the
commencement of FY16 considered the considerable growth in market capitalisation and the size and regional expansion of operations.
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Short-term Incentives (STI) – performance Conditions
Specific information relating to the actual annual performance awards is set out in the table on page 54.
What is the
annual incentive
and who is
eligible to
participate?
What is the
amount
the eligible
employee can
earn?
What were the
performance
conditions for
FY16?
The STI plan provides eligible employees with a reward for annual performance against measured targets set at the
beginning of the performance period. Eligible employees include the Executive Directors, Senior Executives and
other nominated employees.
Chairman
Chief Executive Officer
Senior Executives
Year on year EBIT / NPAT Growth
% of FAR
Less than 4%
0%
0%
0%
>60%
Measures
Sliding Scale
Sliding Scale
Sliding Scale
100%
Chairman
80%
80%
Chief Executive Officer
Senior Executives
Financial measures:
Group NPAT achievement of
growth over prior year
100%
Divisional EBIT achievement of
growth over prior year
-
Individual objectives:
Financial (i.e. revenue, new
product launches and other
specific objectives)
Non-financial measures (i.e.
safety, employee engagement
and other agreed objectives)
NA
100%
-
Group
Roles
divisional
Heads
100%
30%
-
70%
Personal multiplier of
0 – 1.25 applied to the
outcome of financial
measures
Personal multiplier of
0 – 1.25 applied to the
outcome of financial
measures
Why were these
performance
measures
chosen?
NPAT performance over prior year is a well-recognised measure of financial performance and a key driver of
shareholder returns. It is the primary measure considered by Directors in determining the level of dividend payments
to shareholders. Using NPAT as an incentive performance measure ensures that incentive payments are aligned with
Blackmores’ business strategy and objectives.
The incentive targets are set by the Board at levels designed to reward superior performance.
Achievement of NPAT growth over prior year aligns remuneration outcomes with shareholder’s expectations.
Similarly EBIT as an incentive measure rewards dividend heads for the performance of business under their direct
management.
Individual performance was selected as a secondary performance condition to ensure that Senior Executives have
clear objectives and performance indicators that are linked to Blackmores’ performance.
Blackmores’ policy is that STIs will only be awarded when Blackmores meets agreed performance hurdles. In addition,
Senior Executives are not awarded any STI in the instance of the lowest personal performance assessment.
When are
performance
conditions
tested?
NPAT and Divisional EBIT is calculated by Blackmores at the end of the financial year, verified by Blackmores’ auditors
and published in the Group’s Financial Statements before any payment is made. This method was chosen to ensure
transparency and consistency with disclosed information.
The person to whom a Senior Executive reports assesses that individual’s performance by reviewing his or her
individual objectives, key tasks and performance indicators and the extent to which they have been achieved.
Individual objectives are set at the start of each financial year and are formally reviewed every six months. The Board
reviews performance assessments for KMP.
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Profit Share – Performance Conditions and Operation
Specific information relating to the actual annual performance awards is set out in the table on page 54.
What is the annual
incentive and who is
eligible to participate?
Senior Executives participate in a profit share plan, whereby up to 10% of the Group NPAT is allocated to
all eligible permanent Group staff on a pro-rata basis by reference to their fixed annual remuneration. The
profit share plan is in addition to the STI award.
What is the amount the
executive can earn?
What were the
performance conditions
for FY16?
The amount distributed is a percentage of Group NPAT. As the amount is distributed on a pro-rata basis,
the amount earned in any year depends on both the Group NPAT achievement and the total number of
employees and salaries in the calculation. The approximate maximum amount of fixed annual remuneration
that can be earned is 17%.
Under the Company’s Collective Agreement, 7.5% of Group NPAT is allocated and an additional 2.5% of
Group NPAT is allocated conditional on the achievement of Group NPAT growth on the prior financial year.
Why were these
performance measures
chosen?
NPAT is a well-recognised measure of financial performance and a key driver of shareholder returns. Using
NPAT as an incentive performance measure ensures that incentive payments are aligned with Blackmores’
business strategy and objectives.
When are performance
conditions tested?
Profit share is paid twice a year based on Blackmores’ NPAT calculation.
All employees, including Senior Executives, may purchase up to $1,000 of Blackmores shares each year
under the Staff Share Acquisition Plan with money that would have otherwise been received under the
profit share plan.
Long-term Incentives (LTI) – performance Conditions
Specific information relating to the actual annual performance awards is set out in the table on page 54.
What is the annual
incentive and who is
eligible to participate?
What is the amount the
eligible employee can
earn?
Eligible employees are invited annually by the Board to participate in the Executive Performance Share Plan
(EPSP). Under this plan, eligible employees are granted rights to acquire shares in Blackmores.
Eligible employees include the Executive Directors, Senior Executives and other nominated employees.
Chief Executive Officer
Chairman and Senior Executives
% of target performance
% of FAR
Less than 3.9%
3.9%
3.9% to 7.8%
7.8%
7.8% to 17.9%
17.9%
0%
25%
Sliding scale
50%
Sliding scale
150%
0%
10%
Sliding Scale
20%
Sliding scale
60%
What was the performance
condition for FY16?
The performance condition is the three-year compound annual growth rate in EPS. The performance period
for measuring EPS growth is three years (FY16 to FY18).
Why were these
performance measures
chosen?
In determining the performance conditions for Blackmores’ LTI plan, the Board has recognised EPS growth
to be the key driver of shareholder value, influencing both share price and the capacity to pay increased
dividends.
Growth in EPS is simple to calculate and basing the vesting of rights on EPS growth encourages Senior
Executives to improve Blackmores’ financial performance. As Senior Executives increase their shareholding
in Blackmores through awards received under the EPSP, their interests become more directly aligned with
those of Blackmores’ other shareholders.
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Long-term Incentives (LTI) – performance Conditions
How does the EPSP
operate?
The value of rights granted to eligible employees is equivalent to a percentage of their base remuneration
at the time of grant.
The number of rights granted equals the value of rights divided by:
•
•
the weighted average price of Blackmores shares for the five day trading period commencing seven
days after Blackmores’ results in respect of the prior financial year (year ended 30 June 2015) are
announced to the ASX, less
the amount of any final dividend per share declared as payable in respect of the prior financial year
(year ended 30 June 2015).
Rights are automatically exercised following vesting, audit clearance of the 2018 Financial Statements, Board
approval and the first trading window. These Blackmores shares are issued to participants at zero cost.
The number of shares issued is identical to the number of rights exercised.
In the case of the Chairman, a cash equivalent is paid in lieu of shares. Where regulations prohibit an equity
based plan, a cash equivalent is awarded.
When are performance
conditions tested?
Compounded annual growth in EPS is calculated at the end of the three year performance period and
verified with reference to Blackmores’ audited Financial Statements prior to determining the number of
rights that will vest. This method was chosen as it is an objective test that is easy to calculate and ensures
transparency and consistency with public disclosures.
What happens if the
eligible employee ceases
employment during the
performance period?
If an executive ceases employment during the three year performance period the rights lapse. In certain
circumstances the board has discretion to allow a portion of rights to vest for a ‘good leaver‘.
5. pERFORMANCE ANd REMUNERATION OUTCOMES
performance Incentives – Actual performance 2016 Financial Year
A continued focus on delivering against the strategic priorities and unprecedented growth over the past two years is reflected in improved
returns that are illustrated in the charts below:
RETURN ON EQUITY (%)
56%
dIVIdENd pER SHARE (CENTS)
410
500
400
300
200
100
0
60
50
40
30
20
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Investors who bought a
Blackmores share five years
ago would have multiplied
their investment five times.
SHARE pRICE ($)
131.4
150
120
90
60
30
0
2012
2013
2014
2015
2016
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Short-term Incentives (STI)
Similar to previous years, NPAT achievement was selected as the
Group performance measure for the STI awards in respect of FY16.
Blackmores’ FY16 NPAT of $100 million represented a 115%
increase.
The amount awarded to the Senior Executives for the FY16 STI was
$3,563,981 (2015: $2,245,759). This award is included under the
‘STI and Profit Share’ column in the remuneration disclosures table
on page 53.
Blackmores NPAT over the past five years is shown in the following
graph.
Long-term Incentives (LTI)
Similar to previous years, EPS achievement was selected as the
Group performance measure for the LTI awards in respect of FY15.
No long term incentive (LTI) awards were eligible to vest in
FY16. A new LTI Plan first came into effect in FY15 LTI plan which
included a three-year performance period.
The total remuneration for the financial year, the details of which
are shown on page 53, includes an accounting expense of
$2,026,265 (2015: $736,784) for these unvested performance
rights. This amount has been calculated assuming the
achievement of the maximum performance hurdle over the three-
year performance period and represents one third of the total
value of the unvested rights Blackmores EPS over the past five
years is shown in this graph.
100
NpAT ($M)
100.0
80
60
40
20
0
600
500
400
300
200
100
0
2012
2013
2014
2015
2016
EpS (CENTS)
580.6
2012
2013
2014
2015
2016
CEO Remuneration Outcomes – Five Year History
The Group’s remuneration framework is designed to reward Senior Executives based on the achievement of the Group’s performance
goals and to share in the success and profitability of Blackmores in alignment with increased shareholder wealth. The history of the CEO
performance related remuneration over the past five years illustrates this linkage to business performance.
STI earned as a
% of maximum
Cents
LTI awarded as a
% of maximum
600
500
400
300
200
100
0
100
80
60
40
20
0
100
80
60
40
20
0
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Net Earnings After Tax (NPAT)
Earnings Per Share (EPS)
STI
LTI
AUS$m
120
100
80
60
40
20
0
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6. SENIOR EXECUTIVE REMUNERATION TABLES
Statutory Remuneration Table
The following table discloses the remuneration outcomes of the Senior Executives of Blackmores for the financial year ended 30 June 2016.
The table has been prepared in accordance with Section 300A of the Corporations Act 2001 and has been audited.
The amounts in statutory table are higher than from the remuneration table on page 46 because of the following:
1. Leave movements – annual leave and long service leave movements due to an increase in the statutory accruals are included rather than
cash payments
2. Share-based payments - accounting standards requires share-based payments expense to be calculated using the grant date fair value of
the shares amortised over the relevant performance and service period. The statutory remuneration table includes the accounting value
for LTI grants for the FY15 and FY16 years which have not yet vested.
short-term empLoyment Benefits
saLary
sti and
and fees profit share1
$
$
non-
monetary2
$
other3
$
post-
empLoyment
Benefits
super-
annuation
$
other
Long-term
empLoyment
Benefits
share-
Based
payment
performanCe
rights5
$
other4
$
totaL
$
Executive directors
marcus Blackmore
2016
2015
Christine Holgate
2016
2015
lesley Braun
2016
2015
Aaron Canning6
2016
2015
nathan Cheong
2016
2015
Cecile Cooper
2016
2015
David Fenlon
2016
2015
Richard Henfrey
2016
2015
peter osborne
2016
2015
Former Senior Executive
Chris last7
2016
2015
Total
2016
2015
357,770
353,891
368,691
284,395
37,901
-
33,418
33,890
19,308
18,255
7,088
6,502
166,433
63,754
990,609
760,687
775,198 1,037,454
528,599
637,909
25,596
-
68,229
52,622
19,308
18,255
33,161
12,410
885,696 2,844,642
289,492 1,539,287
267,401
270,170
286,818
254,220
6,713
-
11,612
22,084
19,308
18,255
1,401
468
137,188
51,447
730,441
616,644
421,343
200,198
512,940
217,239
42,017
-
36,168
19,812
27,372
31,338
961
-
172,832 1,213,633
518,167
49,580
334,143
254,076
297,650
147,655
15,352
-
28,145
22,635
19,308
7,947
2,800
712
134,276
48,535
831,674
481,560
240,275
194,364
335,871
203,170
4,625
-
33,221
19,880
29,372
29,024
25,902
7,440
117,394
39,716
786,660
493,594
407,735
387,255
486,882
370,351
82,201
-
35,621
32,539
19,308
18,441
2,264
859
72,026 1,106,037
881,471
72,026
366,955
328,407
486,882
346,199
37,218
15,566
40,615
32,052
25,808
24,755
12,970
6,795
187,905 1,158,353
821,131
67,357
317,937
291,723
391,508
273,349
-
234,742
-
13,944
-
-
-
-
28,661
26,323
-
-
-
-
152,515
54,877
890,621
646,272
-
7,346
-
13,691
-
1,068
-
-
-
270,791
3,488,757 4,204,696
3,152,735 2,639,121
251,623
15,566
315,690
269,183
179,092
179,961
86,547 2,026,265 10,552,670
736,784 7,029,604
36,254
1. ‘STI and Profit Share’ includes amounts paid by way of profit share on 17 Dec 2015 and 24 Jun 2016.
2. ‘Non-monetary’ includes motor vehicle benefits and any fringe benefits tax paid on these benefits.
3. ‘Other’ shown in short-term employment benefits relate to provisions for annual leave.
4. ‘Other’ shown in long-term employment benefits relate to provisions for long service leave.
5. The FY16 share-based payments relate to the LTI plan and represent the FY16 portion of the fair value of rights granted in FY16 and FY15. Vesting of the rights remains subject to performance and service
conditions as outlined page 50.
6. Aaron Canning joined 4 Dec 2014.
7. Chris Last ceased as a Senior Executive 27 Mar 2015.
Directors’ and Officers’ liability insurance has not been included in the figures above since the amounts involved are not material and it is not
possible to determine an appropriate allocation basis.
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performance Related Remuneration
Statutory performance Related Remuneration Table
The following table shows an analysis of the non-performance and performance related (STI, Profit Share and LTI) components of the FY16
remuneration mix detailed in the Statutory Remuneration table.
non-pERfoRmAncE
RElAtEd REmunERAtion1
%
sti And
pRofit sHARE
%
pERfoRmAncE
totAl pERfoRmAncE
RiGHts2 RElAtEd REmunERAtion
%
%
Executive directors
marcus Blackmore
2016
2015
Christine Holgate
2016
2015
Senior Executives
lesley Braun
2016
2015
Aaron Canning3
2016
2015
nathan Cheong
2016
2015
Cecile Cooper
2016
2015
David Fenlon
2016
2015
Richard Henfrey
2016
2015
peter osborne
2016
2015
Former Senior Executive
Chris last4
2016
2015
Total
2016
2015
46.0%
54.2%
32.4%
46.9%
42.0%
50.4%
43.5%
48.5%
48.1%
59.3%
42.4%
50.8%
49.5%
49.8%
41.7%
49.6%
38.9%
49.2%
-
94.8%
41.0%
52.0%
37.2%
37.4%
36.5%
34.3%
39.2%
41.2%
42.3%
41.9%
35.8%
30.7%
42.7%
41.2%
44.0%
42.0%
42.1%
42.2%
44.0%
42.3%
-
5.2%
39.8%
37.6%
16.8%
8.4%
31.1%
18.8%
18.8%
8.4%
14.2%
9.6%
16.1%
10.0%
14.9%
8.0%
6.5%
8.2%
16.2%
8.2%
17.1%
8.5%
-
-
19.2%
10.5%
54.0%
45.8%
67.6%
53.1%
58.0%
49.6%
56.5%
51.5%
51.9%
40.7%
57.6%
49.2%
50.5%
50.2%
58.3%
50.4%
61.1%
50.8%
-
5.2%
59.0%
48.0%
1. Non-performance related remuneration includes the accounting expense from all of the columns in the ‘Statutory Remuneration Table’ other than ‘STI and Profit Share’ and the LTI ‘Performance Rights’.
2. LTI is the ‘Performance Rights’ which includes the FY16 accounting expense of the FY16 portion of the rights granted in FY16 and FY15.
3. Aaron Canning joined 4 December 2014.
4. Chris Last ceased as a Senior Executive 27 March 2015.
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Short Term Incentives
The following table shows the details of the STI cash bonuses awarded as remuneration to Executive Directors and Senior Executives that was
paid for the financial year ended 30 June 2016.
Executive directors
Marcus Blackmore
Christine Holgate
Senior Executives
Lesley Braun
Aaron Canning
Nathan Cheong4
Cecile Cooper
David Fenlon
Richard Henfrey
Peter Osborne
sti
included in
remuneration1
$
personal3
multiplier
sti earned as a %
of maximum sti
%
% of maximum sti
award forfeited2
%
307,016
890,098
239,262
434,917
246,767
290,000
414,000
414,000
327,921
-
1.25
1.00
1.15
1.25
1.25
1.15
1.15
1.15
100
100
80
92
77
100
92
92
92
0
0
20
8
23
0
8
8
8
1. Amounts included in remuneration for the financial year represent the amount related to the financial year based on achievement of personal goals and satisfaction of performance criteria. The Committee
approved these amounts on 12 August 2016.
2. Amounts forfeited are due to the performance or service criteria not being met in relation to the current financial year.
3. The maximum potential award was achieved in respect of Group financial measure being Group NPAT achievement over prior year. Senior Executives have the ability to earn a personal multiplier on the
achievement of individual objectives. The maximum multiplier is 1.25.
4. Nathan Cheong’s STI financial measure includes divisional EBIT achievement over prior year. The maximum potential was not achieved in FY16.
Share based payments
The table below outlines the rights over ordinary shares in the Company that were granted as compensation to Executive Directors and Senior
Executives during FY16 and FY15. The fair value of awards is calculated in accordance with AASB 2 Share-based Payments.
name
grant
vesting
eXerCise
end of
hoLding
LoCk
date
numBer of
rights
note
fair vaLue
per right
totaL fair
vaLue
share
priCe
maXimum
vaLue1
numBer
of
rights2, 5
% of
numBer
granted
date
vaLue3
date
vaLue of
rights not
vested
Executive director
Christine Holgate
Senior Executives
Lesley Braun
7/11/2014 34,436
$25.22 $868,476
$32.22 $1,109,528 30/06/2017
24/11/2015 12,127
$147.49 $1,788,611
$179.50 $2,176,797 30/02/2018
7/11/2014
6,120
$25.22 $154,346
$32.22
$197,186 30/06/2017
24/11/2015 1,744
$147.49 $257,223
$179.50
$313,048 30/02/2018
Aaron Canning
10/12/2014 5,143
$28.92 $148,736
$32.65
$167,919 30/06/2017
24/11/2015 2,507
$147.49 $369,757
$179.50
$450,007 30/02/2018
Nathan Cheong
7/11/2014
5,773
$25.22 $145,595
$32.22
$186,006 30/06/2017
Cecile Cooper
7/11/2014
4,724
$25.22 $119,139
$32.22
$152,207 30/06/2017
24/11/2015 1,744
$147.49 $257,223
$179.50
$313,048 30/02/2018
David Fenlon
Richard Henfrey
24/11/2015 1,580
$147.49 $233,034
$179.50
$283,610 30/02/2018
7/11/2014
8,568
$25.22 $216,085
$32.22
$276,061 30/06/2017
7/11/2014
8,012
$25.22 $202,063
$32.22
$258,147 30/06/2017
24/11/2015 2,452
$147.49 $361,645
$179.50
$440,134 30/02/2018
Peter Osborne
7/11/2014
6,528
$25.22 $164,636
$32.22
$210,332 30/06/2017
24/11/2015 1,986
$147.49 $292,915
$179.50
$356,487 30/02/2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 09/2017
$1,109,527
- 09/2018
$2,176,796
- 09/2017
- 09/2018
- 09/2017
- 09/2018
- 09/2017
- 09/2018
- 09/2017
- 09/2018
- 09/2017
- 09/2017
- 09/2018
- 09/2017
- 09/2018
$197,186
$313,048
$167,918
$450,006
$186,006
$313,048
$152,207
$283,610
$276,060
$258,146
$440,134
$210,332
$356,487
1. Disclosure of maximum value is required under s300A of the Corporations Act 2001. The value disclosed represents the underlying value of shares at the time of grant multiplied by the number of rights granted to
each individual. The minimum value of rights awarded is zero if performance conditions are not achieved.
2. The total value of rights granted in the year is the fair value of the rights calculated at the time of grant. This amount is allocated to remuneration over the vesting period (i.e. FY16 grant over 1 July 2015 to 30 June
2018).
3. The number of rights vested is equal to the number of rights exercised and the number of shares issued; vesting occurs on 30 Jun and shares are issued in Sep following audit clearance of the Group’s results and
Board approval.
4. Value of rights at exercise is equal to the number of rights exercised multiplied by the share price at exercise date.
5. There were nil shares that vested in the FY16 and FY15 years.
55
Blackmores annual report 2016
2016
rEmuNErAtION
rEpOrt
7. EMpLOYMENT CONTRACTS
The remuneration and other terms of employment are covered in employment contracts. No contract is for a fixed term.
TERMINATION
Executive Directors’ and Senior Executives’ contracts can be terminated by Blackmores or the Senior Executive providing notice periods as
shown in the following table.
Name
Notice periods / Termination payment
Christine Holgate1
Six months’ notice (or payment in lieu) including redundancy.
Senior
Executives2
May be terminated immediately for serious misconduct.
Three months’ notice (or payment in lieu).
May be terminated immediately for serious misconduct.
Redundancy Payments
Years of continuous service
Notice periods / Termination Payments.
Up to one year
Two weeks’ pay.
Between one and 10 years
10 years or more
Two weeks’ pay plus an additional three weeks of
pay for each completed year of service.
29 weeks’ pay plus an additional three weeks of pay
for each completed year of service following
10 years capped at a maximum of 52 weeks of pay.
1. For the purposes of calculating Christine Holgate’s payment, a month of pay is based on her total remuneration package at the time, being base salary, superannuation contributions and other benefits as agreed
from time to time.
2. For the purposes of calculating the amount payable for all other Senior Executives, one week of pay is the average amount received by the individual as wages or salary over the four weeks of employment
immediately preceding termination of employment.
8. NON-EXECUTIVE dIRECTOR REMUNERATION
Non-Executive Directors receive fixed annual fees comprising a Board fee, Committee fee and Committee Chair fee as applicable. No
incentive based payments are awarded to Non-Executive Directors.
Blackmores makes superannuation contributions on behalf of Non-Executive Directors in accordance with statutory obligations and each
Non-Executive Director may sacrifice their fees in return for additional superannuation contributions paid by Blackmores. Retirement
allowances were accrued until 1 October 2003 for Non-Executive Directors appointed prior to this date. For Directors appointed prior to
1 October 2003, a retirement allowance applies of $15,333 per annum, which accrues each year but is capped after nine years of service
at $138,000. No further retirement allowances have accrued to these individuals. Non-Executive Directors appointed after 1 October 2003
do not receive a retirement allowance.
Shareholders at a meeting held on 29 October 2015 determined the maximum total Non-Executive Directors’ fees payable, including
committee fees, to be $1,000,000 per year, to be distributed as the Board determines.
Compensation arrangements for Non-Executive Directors are determined by Blackmores after reviewing published remuneration surveys and
market information. In line with market capitalisation and following a review of relevant external benchmarks, base and committee fees for
Non-Executive Directors were increased in FY16 by 13.5% effective 1 July 2015.
Non-Executive Directors’ fees levels for FY16 include:
2016
dEputY
cHAiRmAn
$
47,894
-
-
-
cHAiRmAn
$
-
16,356
16,356
-
mEmBER
$
cHAiRmAn
$
95,787
9,813
9,813
-
-
14,410
14,410
-
2015
dEputY
cHAiRmAn
$
42,196
-
-
-
mEmBER
$
84,394
8,646
8,646
-
fEEs
Board1
Audit and Risk
People and Remuneration
Nomination
1. Chairman of the Board is an Executive Director
56
Blackmores annual report 2016
2016
rEmuNErAtION
rEpOrt
The total annual Non-Executive Director remuneration for the Board of five Non-Executive Directors for FY16 was $561,761.
The following table discloses the remuneration of the Non-Executive Directors for the financial year ended 30 June 2016.
sHoRt-tERm
EmploYmEnt
BEnEfits
post
EmploYmEnt
BEnEfits
fEEs And AllowAncEs
$
non-monEtARY1
$
supERAnnuAtion
$
totAl
$
Non-Executive directors
David Ansell
2016
2015
John Armstrong2
2016
2015
Stephen Chapman3
2016
2015
Helen nash
2016
2015
Brent Wallace
2016
2015
Former Non-Executive director
Verilyn Fitzgerald4
2016
2015
Total
2016
2015
96,438
84,968
96,438
14,052
86,623
106,737
102,413
88,654
111,375
93,859
-
30,217
493,287
418,487
4,235
-
-
-
10,352
-
6,882
-
-
-
-
-
21,469
-
9,170
8,074
9,170
1,335
8,337
10,140
9,738
8,422
10,590
8,917
-
2,871
47,005
39,759
109,843
93,042
105,608
15,387
105,312
116,877
119,033
97,076
121,965
102,776
-
33,088
561,761
458,246
1. ‘Non-monetary’ includes benefits and any applicable fringe benefits tax.
2. John Armstrong joined as a Non-Executive Director 5 May 2015.
3. Stephen Chapman was on an unpaid leave of absence from 14 April 2015 to 30 November 2015
4. Verilyn Fitzgerald retired as a Non-Executive Director 23 October 2015. Shareholders approved a retirement scheme by resolution in 1993 and V Fitzgerald was paid a retirement amount of $138,000 in accordance
with this approved scheme. The amount was fully provided and disclosed in prior year’s financial statements.
Directors’ and Officers’ liability insurance has not been included in the figures above since the amounts involved are not material and it is not possible to determine an appropriate allocation basis.
57
Blackmores annual report 2016
2016
rEmuNErAtION
rEpOrt
9. NON-EXECUTIVE dIRECTORS ANd SENIOR EXECUTIVE TRANSACTIONS
EQUITY HOLdINGS
During FY16 and FY15 there were no share options in existence. There have been no share options issued since the end of the financial year.
SHARES
The table below outlines the fully paid ordinary shares of Blackmores Limited held by KMP.
FULLY pAId ORdINARY SHARES OF BLACkMORES LIMITEd
2016
Non-Executive directors
David Ansell
John Armstrong
Stephen Chapman
Helen Nash
Brent Wallace
Executive directors
Marcus Blackmore
Christine Holgate
Senior Executives
Aaron Canning
Leslie Braun
Cecile Cooper
Richard Henfrey
Peter Osborne
Total
BAlAncE At
1/7/15
numBER
REcEiVEd on
sEttlEmEnt
of RiGHts
numBER
nEt cHAnGE
otHER1
numBER
BAlAncE At
30/6/16
numBER
1,000
-
27,528
1,000
13,701
4,268,815
68,102
15,500
10,855
41,792
7,797
356
4,456,446
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,500)
-
(1,399)
1,000
-
20,028
1,000
12,302
(48,980)
(23,100)
4,219,835
45,002
12
(3,000)
(988)
(250)
(166)
(85,371)
15,512
7,855
40,804
7,547
190
4,371,075
1. Includes shares issued under the Company’s Staff Share Acquisition Plan.
RIGHTS TO SHARES
The table below outlines the rights to fully paid ordinary shares of Blackmores Limited held by KMP.
2016
BAlAncE
As At 1/7/15
GRAntEd As
compEn-
sAtion
EXERcisEd
nEt otHER
cHAnGE
BAlAncE As
At 30/6/16
BAlAncE
VEstEd At
RiGHts
VEstEd
30/6/16 EXERcisABlE EXERcisABlE duRinG YEAR
VEstEd
But not
VEstEd
And
Executive director
C Holgate
Senior Executives
Lesley Braun
Aaron Canning
Nathan Cheong
Cecile Cooper
David Fenlon
Richard Henfrey
Peter Osborne
Total
(for Key Management Personnel)
numBER
numBER
numBER
numBER
numBER
numBER
numBER
numBER
numBER
34,436
12,127
6,120
5,143
5,773
4,724
8,568
8,012
6,528
79,304
1,744
2,507
1,744
1,580
-
2,452
1,986
24,140
-
-
-
-
-
-
-
-
-
-
46,563
-
-
-
-
-
-
-
-
7,864
7,650
7,517
6,304
8,568
10,464
8,514
103,444
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1. Rights granted during FY15 for Aaron Canning are for the period as a KMP (4 December 2014 to 30 June 2015).
58
Blackmores annual report 2016
2016
rEmuNErAtION
rEpOrt
LOAN dISCLOSURES
There were no loan balances exceeding $100,000 due from KMP during or at the end of the financial year (2015: $nil).
OTHER TRANSACTIONS WITH kEY MANAGEMENT
Transactions entered into during the year with KMP of Blackmores Limited and the Group are on the same basis as normal employee, supplier
or customer relationship on the same terms and conditions and those dealings on an arm’s length basis which include:
•
the receipt of dividends on their shareholdings, whether held privately or through related entities or through the employee share plans in
the same manner as all ordinary shareholders
•
terms and conditions of employment
• purchases of goods and services
• expense reimbursement.
No interest was paid to or received from KMP.
Signed in accordance with a Resolution of the Directors made pursuant to s298(2) of the Corporations Act 2001.
On behalf of the Directors
Marcus C Blackmore AM
director
Dated in Sydney, 24 August 2016
59
Blackmores annual report 2016
AuDItOr’S INDEpENDENcE DEcLArAtION
60
Blackmores annual report 2016 INDEpENDENt AuDItOr’S rEpOrt
61
Blackmores annual report 2016 INDEpENDENt AuDItOr’S rEpOrt
62
Blackmores annual report 2016 DIrEctOrS’ DEcLArAtION
The Directors declare that:
(a) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable;
(b) in the Directors’ opinion, the attached Financial Statements are in compliance with International Financial Reporting Standards, as stated
in note 2 to the Financial Statements;
(c) in the Directors’ opinion, the attached Financial Statements and notes thereto are in accordance with the Corporations Act 2001,
including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Group;
and
(d) the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the
deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in
accordance with the deed of cross guarantee.
In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order
applies, as detailed in note 32 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are, or
may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
Marcus C Blackmore AM
director
Dated in Sydney, 24 August 2016
63
Blackmores annual report 2016 cONSOLIDAtED StAtEmENt
Of prOfIt Or LOSS AND
OthEr cOmprEhENSIVE
INcOmE
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
Sales
Other income
Promotional and other rebates
Net revenue and other income
Raw materials and consumables used
Employee benefits expenses
Selling and marketing expenses
Depreciation and amortisation expenses
Operating lease rental expenses
Professional and consulting expenses
Repairs and maintenance expenses
Freight expenses
Bank charges
Other expenses
Total expenses
Earnings before interest and tax
Interest revenue
Interest expense
Net interest expense
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign controlled entities
Net gain/(loss) on hedging instruments entered into for cash flow hedges, net of tax
Other comprehensive (expense)/income for the year, net of tax
Total comprehensive income for the year
Profit attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
eARnInGS peR SHARe
– Basic earnings per share (cents)
– Diluted earnings per share (cents)
Notes to the Consolidated Financial Statements are included on pages 68 to 103.
notEs
2016
$’000
2015
$’000
5
6
7
7
7
7
9
717,211
1,045
(118,771)
599,485
214,263
134,933
49,177
7,045
4,496
9,168
4,683
10,906
2,099
17,494
454,264
145,221
462
(2,272)
(1,810)
143,411
(43,391)
100,020
471,615
908
(83,285)
389,238
147,750
94,353
34,779
6,391
3,519
7,372
3,275
6,615
1,355
11,565
316,974
72,264
415
(3,847)
(3,432)
68,832
(22,276)
46,556
24.2
(838)
537
(301)
4,158
(400)
3,758
99,719
50,314
100,008
12
100,020
46,556
-
46,556
99,690
29
99,719
50,314
-
50,314
27
27
580.6
575.9
270.7
269.1
64
Blackmores annual report 2016
cONSOLIDAtED
StAtEmENt Of
fINANcIAL pOSItION
AS AT 30 JUNE 2016
ASSetS
CuRRent ASSetS
Cash and cash equivalents
Receivables
Inventories
Other assets
Total current assets
non-CuRRent ASSetS
Property, plant and equipment
Investment property
Other intangible assets
Goodwill
Deferred tax assets
Other assets
Amounts advanced to related parties
Total non-current assets
Total assets
lIABIlItIeS
CuRRent lIABIlItIeS
Trade and other payables
Current tax liabilities
Provisions
Other liabilities
Total current liabilities
non-CuRRent lIABIlItIeS
Interest-bearing liabilities
Provisions
Other liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
eQuItY
CApItAl AnD ReSeRVeS
Issued capital
Reserves
Retained earnings
Equity attributable to shareholders of Blackmores Ltd
Equity attributable to non-controlling interests
Total equity
Notes to the Consolidated Financial Statements are included on pages 68 to 103.
notEs
2016
$’000
2015
$’000
35.1
13
14
37,653
134,636
116,486
5,849
294,624
36,931
107,076
38,665
5,172
187,844
15
16
17
18
9.2
33
19
20
22
21
22
9.2
23
24
25
26
67,626
2,160
32,736
20,032
12,257
628
3,960
139,399
434,023
160,478
24,204
7,588
9
192,279
55,446
1,134
3,655
916
61,151
253,430
180,593
60,735
2,160
18,530
16,863
6,713
562
-
105,563
293,407
94,908
12,862
6,284
944
114,998
44,000
730
562
202
45,494
160,492
132,915
37,753
5,252
135,258
178,263
2,330
180,593
37,753
8,063
87,099
132,915
-
132,915
65
Blackmores annual report 2016
notEs
2016
$’000
2015
$’000
35.3
38.5
766,436
(643,414)
123,022
(4,375)
(34,971)
83,676
480,780
(390,989)
89,791
(3,847)
(14,817)
71,127
462
(22,661)
(13,846)
(3,960)
41
25
(39,939)
11,357
2,500
(57,704)
2,301
(41,546)
2,191
36,931
(1,469)
37,653
415
-
(3,625)
-
8
11
(3,191)
(29,000)
-
(22,703)
-
(51,703)
16,233
18,599
2,099
36,931
cONSOLIDAtED
StAtEmENt
Of cASh fLOWS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
CASH FloWS FRom opeRAtInG ACtIVItIeS
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Interest and other costs of finance paid
Income taxes paid
Net cash flows from operating activities
CASH FloWS FRom InVeStInG ACtIVItIeS
Interest received
Net cash outflow on acquisition of subsidiaries
Payments for property, plant and equipment and other intangible assets
Amounts advanced to related parties
Proceeds from disposal of property, plant and equipment
Dividends received
Net cash used in investing activities
CASH FloWS FRom FInAnCInG ACtIVItIeS
Proceeds from/(repayment of) bank borrowings
Proceeds from other borrowings
Dividends paid
Proceeds from issue of equity to non-controlling interests
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance of cash held in foreign currencies
Cash and cash equivalents at the end of the year
35.1
Notes to the Consolidated Financial Statements are included on pages 68 to 103.
66
Blackmores annual report 2016
cONSOLIDAtED
StAtEmENt Of
chANGES IN EQuItY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
Equity-settled
Employee cash flow
foreign
currency
Benefits
Reserve
non-
Hedging translation Retained Blackmores controlling
interest
Earnings
Reserve
Reserve
ltd
Attributable
to owners of
total
$’000
$’000
$’000
$’000
$’000
$’000
$’000
issued
capital
$’000
Balance as at 1 July 2014
34,502
5,855
(513)
(2,115)
66,497
104,226
- 104,226
Dividends declared
Profit for the period
Loss recognised on cash flow hedges
Income tax related to loss on cash flow hedges
Foreign currency translation of controlled entities
Other comprehensive income for the year, net of tax
-
-
-
-
-
-
Total comprehensive income for the year
Issue of shares under Dividend Reinvestment Plan
Recognition of share-based payments
Balance as at 30 June 2015
-
3,251
-
37,753
Reclassification to retained earnings
Dividends declared
Profit for the period
Gain recognised on cash flow hedges
Income tax related to gain on cash flow hedges
Foreign currency translation of controlled entities
Other comprehensive income for the year, net of tax
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,078
6,933
(5,855)
-
-
-
-
-
-
Total comprehensive income for the year
Recognition of share-based payments
Equity issued to holders of non-controlling interests
Balance as at 30 June 2016
-
-
-
37,753
-
3,362
-
4,440
Notes to the Condensed Consolidated Financial Statements are included on pages 68 to 103.
-
-
(572)
172
-
(400)
(400)
-
-
(913)
-
-
-
767
(230)
-
537
537
-
-
(376)
- (25,954)
(25,954)
- (25,954)
- 46,556
46,556
- 46,556
-
-
4,158
4,158
-
-
-
-
(572)
172
4,158
3,758
4,158
-
-
2,043
46,556
-
-
87,099
50,314
3,251
1,078
132,915
-
-
-
-
(572)
172
4,158
3,758
- 50,314
3,251
-
1,078
-
- 132,915
-
5,855
- (57,704)
-
(57,704)
-
-
- (57,704)
- 100,008
100,008
12 100,020
-
-
(855)
(855)
-
-
-
-
767
(230)
(855)
(318)
-
-
17
17
767
(230)
(838)
(301)
(855) 100,008
-
-
1,188 135,258
-
-
99,690
3,362
-
178,263
99,719
29
3,362
-
2,301
2,301
2,330 180,593
67
Blackmores annual report 2016
NOtES
NOtES tO thE
fINANcIAL
StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
68
Blackmores annual report 2016 NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
1 GENErAL INfOrmAtION
Blackmores Limited (the Company) is a public company listed on
the Australian Securities Exchange (trading under the symbol ‘BKL’),
incorporated in Australia and operating in Australia, Asia and New
Zealand.
Blackmores Limited’s registered office and its principal place of
business is as follows:
20 Jubilee Avenue
Warriewood NSW 2102
Telephone +61 2 9910 5000
The Group’s principal activity is the development, sales and
marketing of health products for humans and animals including
vitamins, herbal and mineral nutritional supplements.
2
SIGNIfIcANt AccOuNtING
pOLIcIES
rEpOrtING ENtItY
2.1
Blackmores Limited (the Company) is domiciled in Australia. The
Consolidated Financial Report (Financial Report) of Blackmores
as at and for the twelve months ended 30 June 2016 comprises
Blackmores and its subsidiaries (the Group).
The Consolidated Annual Financial Report of the Group as at and
for the year ended 30 June 2016 is available upon request from the
registered office of Blackmores at 20 Jubilee Avenue, Warriewood,
NSW 2102 or online at blackmores.com.au
StAtEmENt Of cOmpLIANcE
2.2
These Financial Statements are General Purpose Financial
Statements which have been prepared in accordance with the
Corporations Act 2001, Accounting Standards and Interpretations
and comply with other requirements of the law.
The Financial Statements comprise the Consolidated Financial
Statements of the Group. For the purposes of preparing the
Consolidated Financial Statements, the Company is a for-profit entity.
Accounting Standards include Australian Accounting Standards.
Compliance with Australian Accounting Standards ensures that the
Financial Statements and notes of the Company and the Group
comply with International Financial Reporting Standards (‘IFRS’).
The Financial Statements were authorised for issue by the Directors
on 24 August 2016.
BASIS Of prEpArAtION
2.3
The Consolidated Financial Statements have been prepared on the
basis of historical cost, except for certain non-current assets and
financial instruments that are measured at revalued amounts or fair
values, as explained in the following accounting policies. Historical
cost is generally based on the fair values of the consideration given in
exchange for assets. All amounts are presented in Australian dollars,
unless otherwise noted.
The accounting policies and methods of computation in the
preparation of the Consolidated Financial Statements are consistent
with those adopted and disclosed in the Consolidated Financial
Statements for the year ended 30 June 2015.
The Company is a company of the kind referred to in ASIC Class
Order 98/100, dated 10 July 1998, and in accordance with that Class
Order amounts in the Financial Statements are rounded off to the
nearest thousand dollars, unless otherwise indicated.
BASIS Of cONSOLIDAtION
2.4
The Consolidated Financial Statements incorporate the Financial
Statements of the Company and entities (including structured
entities) controlled by the Company and its subsidiaries. Control is
achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement
with the investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
Where necessary, adjustments are made to the Financial Statements
of subsidiaries to bring their accounting policies into line with those
used by other members of the Group.
All intragroup assets and liabilities, equity, income, expenses and
cash flows relating to transactions between members of the Group
are eliminated in full on consolidation.
2.5
cASh AND cASh EQuIVALENtS
Cash is comprised of cash on hand and cash at bank. Cash
equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash, which are subject to an
insignificant risk of changes in value and have a maturity of three
months or less at the date of acquisition. Bank overdrafts are shown
within borrowings in current liabilities in the Consolidated Statement
of Financial Position.
fINANcIAL INStrumENtS
2.6
Financial assets and financial liabilities are recognised when a
Group entity becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or
financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or
financial liabilities at fair value through profit or loss are recognised
immediately in profit or loss.
2.6.1
Financial Assets
Financial assets are classified into the following specified categories:
financial assets at ‘fair value through profit or loss’ (FVTPL), ‘available-
for-sale’ (AFS) financial assets and ‘loans and receivables’. The
classification depends on the nature and purpose of the financial
assets and is determined at the time of initial recognition. All regular
way purchases or sales of financial assets are recognised and
derecognised on a trade date basis. Regular way purchases or sales
are purchases or sales of financial assets that require delivery of
assets within the time frame established by regulation or convention
in the marketplace.
2.6.1.1 effective Interest method
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest income
over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts (including all fees
on points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts)
through the expected life of the debt instrument, or (where
appropriate) a shorter period, to the net carrying amount on initial
recognition.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified as at FVTPL.
2.6.1.2 Financial Assets at FVtpl
Financial assets are classified as at FVTPL when the financial asset is
either held for trading or it is designated as at FVTPL.
A financial asset is classified as held for trading if:
•
it has been acquired principally for the purpose of selling it in the
near term; or
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• on initial recognition it is part of a portfolio of identified financial
instruments that the Group manages together and has a recent
actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging
instrument.
A financial asset other than a financial asset held for trading may be
designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise
arise; or
• the financial asset forms part of a group of financial assets or
financial liabilities or both, which is managed and its performance
is evaluated on a fair value basis, in accordance with the Group’s
documented risk management or investment strategy, and
information about the grouping is provided internally on that
basis; or
• it forms part of a contract containing one or more embedded
derivatives, and AASB 139 ‘Financial Instruments: Recognition
and Measurement’ permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any gains or
losses arising on remeasurement recognised in profit or loss. The net
gain or loss recognised in profit or loss incorporates any dividend
or interest earned on the financial asset and is included in the ‘other
gains and losses’ line item in the statement of comprehensive
income. Fair value is determined in the manner described in note 36.
2.6.1.3 loans and Receivables
Trade receivables, loans and other receivables that have fixed or
determinable payments that are not quoted in an active market
are classified as ‘loans and receivables’. Loans and receivables are
measured at amortised cost using the effective interest method less
impairment. Interest income is recognised by applying the effective
interest rate, except for short-term receivables when the recognition
of interest would be immaterial.
A financial liability other than a financial liability held for trading may
be designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise
arise; or
• the financial liability forms part of a group of financial assets or
financial liabilities or both, which is managed and its performance
is evaluated on a fair value basis, in accordance with the Group’s
documented risk management or investment strategy, and
information about the grouping is provided internally on that
basis; or
• it forms part of a contract containing one or more embedded
derivatives, and AASB 139 ‘Financial Instruments: Recognition
and Measurement’ permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or
losses arising on remeasurement recognised in profit or loss. The
net gain or loss recognised in profit or loss incorporates any interest
paid on the financial liability and is included in the ‘other income’
line item in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income. Fair value is determined in the manner
described in note 36.
2.6.2.5 other Financial liabilities
Other financial liabilities, including borrowings, are initially measured
at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised
cost using the effective interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash payments through
the expected life of the financial liability, or (where appropriate) a
shorter period, to the net carrying amount on initial recognition.
2.6.2
Financial liabilities and equity Instruments
2.6.3
Derivative Financial Instruments
2.6.2.1 Classification as Debt or Equity
Debt and equity instruments are classified as either liabilities or
as equity in accordance with the substance of the contractual
arrangement.
2.6.2.2 equity Instruments
An equity instrument is any contract that evidences a residual interest
in the assets of an entity after deducting all of its liabilities. Equity
instruments issued by the Group are recorded at the proceeds
received, net of direct issue costs.
2.6.2.3 Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’
or ‘other financial liabilities’.
2.6.2.4 Financial liabilities at FVtpl
Financial liabilities are classified as at FVTPL when the financial
liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
• it has been acquired principally for the purpose of repurchasing it
in the near term; or
• on initial recognition it is part of a portfolio of identified financial
instruments that the Group manages together and has a recent
actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging
instrument.
70
The Group enters into a variety of derivative financial instruments
to manage its exposure to interest rate and foreign exchange rate
risk, including forward foreign exchange contracts and interest
rate swaps. Further details of derivative financial instruments are
disclosed in note 36 to the Consolidated Financial Statements.
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently remeasured
to their fair value at each reporting date. The resulting gain or loss
is recognised in profit or loss immediately unless the derivative is
designated and effective as a hedging instrument, in which event, the
timing of the recognition in profit or loss depends on the nature of
the hedge relationship.
2.6.3.1 Hedge Accounting
The Group designates certain hedging instruments, which include
derivatives and non-derivatives in respect of foreign currency risk,
as either fair value hedges, cash flow hedges or hedges of net
investments in foreign operations. Hedges of foreign exchange risk
on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship the entity documents
the relationship between the hedging instrument and the hedged
item, along with its risk management objectives and its strategy
for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group
documents whether the hedging instrument is highly effective in
offsetting changes in fair values or cash flows of the hedged item
attributable to the hedged risk.
Blackmores annual report 2016 NOtES tO thE fINANcIAL StAtEmENtS
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SIGNIfIcANt AccOuNtING pOLIcIES (cONt.)
Note 36 sets out details of the fair values of the derivative instruments
used for hedging purposes. Movements in the hedge reserve in
equity are also detailed in the Consolidated Statement of Changes
in Equity.
from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of property, plant and equipment
is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit or loss.
2.6.3.2 Cash Flow Hedges
The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognised in
other comprehensive income and accumulated under the heading
of cash flow hedging reserve. The gain or loss relating to the
ineffective portion is recognised immediately in profit or loss, and is
included in the ‘other gains and losses’ line item.
Amounts previously recognised in other comprehensive income
and accumulated in equity are reclassified to profit or loss in the
periods when the hedged item is recognised in profit or loss, in the
same line of the Consolidated Statement of Profit or Loss and Other
Comprehensive Income as the recognised hedged item. However,
when the hedged forecast transaction results in the recognition
of a non-financial asset or a non-financial liability, the gains and
losses previously recognised in other comprehensive income and
accumulated in equity are transferred from equity and included in
the initial measurement of the cost of the non-financial asset or
non -financial liability.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, when the hedging instrument expires or
is sold, terminated, or exercised, or when it no longer qualifies
for hedge accounting. Any gain or loss recognised in other
comprehensive income and accumulated in equity at that time
remains in equity and is recognised when the forecast transaction is
ultimately recognised in profit or loss. When a forecast transaction is
no longer expected to occur, the gain or loss accumulated in equity
is recognised immediately in profit or loss.
INVENtOrIES
2.7
Inventories are stated at the lower of cost and net realisable value.
Costs, including an appropriate portion of fixed and variable
overhead expenses, are assigned to inventory on hand by the
method most appropriate to each particular class of inventory, with
the majority being valued on a first-in-first-out basis. Net realisable
value represents the estimated selling price less all estimated costs of
completion and costs necessary to make the sale.
2.8
prOpErtY, pLANt AND EQuIpmENt
Property, and associated land, in the course of construction for
production or administrative purposes, is carried at cost, less any
recognised impairment loss. Cost includes professional fees and, for
qualifying assets, borrowing costs capitalised in accordance with the
Group’s accounting policy. Depreciation of these assets, on the same
basis as other property assets, commences when the assets are ready
for their intended use.
Plant and equipment and leasehold improvements are measured at
cost less accumulated depreciation and impairment. Construction in
progress is stated at cost. Cost includes expenditure that is directly
attributable to the acquisition or construction of the item.
Depreciation is provided on property, plant and equipment,
including freehold buildings but excluding land. Depreciation is
calculated on a straight-line basis so as to write off the net cost of
each asset over its expected useful life to its estimated residual
value. Leasehold improvements are depreciated over the period
of the lease or estimated useful life, whichever is the shorter, using
the straight-line method. The estimated useful lives, residual values
and depreciation method are reviewed at the end of each annual
reporting period, with the effect of any changes recognised on a
prospective basis.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
Freehold land is not depreciated. The following estimated useful lives
are used in the calculation of depreciation:
• Buildings
• Leasehold improvements
• Plant and equipment
• Motor vehicles
25-40 years
3-13 years
3-20 years
4-5 years
2.9
ImpAIrmENt Of NON-currENt ASSEtS
At the end of each reporting period, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment loss
(if any). Where it is not possible to estimate the recoverable amount
of an individual asset, the Group estimates the recoverable amount
of the cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified,
corporate assets are also allocated to individual cash-generating
units, or otherwise they are allocated to the smallest group of cash
generating units for which a reasonable and consistent allocation
basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the carrying amount of
the asset (cash-generating unit) is reduced to its recoverable amount.
An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit), other than goodwill,
is increased to the revised estimate of its recoverable amount, but
so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised immediately in profit
or loss.
BOrrOWING cOStS
2.10
Borrowing costs directly attributable to the acquisition, construction
or production of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use
or sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific
borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation. All
other borrowing costs are recognised in profit or loss in the period in
which they are incurred.
LEASING
2.11
Leases are classified as finance leases whenever the terms of the
lease transfer substantially all the risks and rewards of ownership to
the lessee. All other leases are classified as operating leases.
2.11.1 the Group as lessee
Operating lease payments are recognised as an expense on
a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which
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economic benefits from the leased asset are consumed. Contingent
rentals arising under operating leases are recognised as an expense
in the period in which they are incurred.
prOVISIONS
2.12
Provisions are recognised when the Group has a present obligation
(legal or constructive) as a result of a past event, it is probable that
the Group will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end of
the reporting period, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using
the cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows (where the effect of
the time value of money is material).
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, the
receivable is recognised as an asset if it is virtually certain that
reimbursement will be received and the amount of the receivable
can be measured reliably.
2.12.1 onerous Contracts
Present obligations arising under onerous contracts are recognised
and measured as provisions. An onerous contract is considered to
exist where the Group has a contract under which the unavoidable
cost of meeting the obligations under the contract exceeds the
economic benefits estimated to be received from the contract.
EmpLOYEE BENEfItS
2.13
A liability is recognised for benefits accruing to employees in respect
of wages and salaries, annual leave and long service leave when it
is probable that settlement will be required and they are capable of
being measured reliably.
Liabilities recognised in respect of short-term employee benefits
are measured at their nominal values using the remuneration rate
expected to apply at the time of settlement.
Liabilities recognised in respect of long-term employee benefits
are measured as the present value of the estimated future cash
outflows to be made by the Group in respect of services provided by
employees up to reporting date.
rEVENuE rEcOGNItION
2.14
Revenue is measured at the fair value of the consideration received
or receivable. Revenue is reduced for estimated customer returns.
2.14.1 Sale of Goods
Revenue from the sale of goods is recognised when all the following
conditions are satisfied:
• the Group has transferred to the buyer the significant risks and
rewards of ownership of the goods;
• the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold;
• the amount of the revenue can be measured reliably;
• it is probable that the economic benefits associated with the
transaction will flow to the Group; and
• the costs incurred or expected to be incurred in respect of the
transaction can be measured reliably.
Specifically, revenue from the sale of goods is recognised when
goods are delivered and legal title is passed.
2.14.2 Dividend and Interest Income
Dividend income from investments is recognised when the Group’s
right to receive payment has been established (provided that it is
probable that the economic benefits will flow to the Group and the
amount of income can be measured reliably).
Interest income from a financial asset is recognised when it is
probable that the economic benefits will flow to the Group and the
amount of revenue can be measured reliably. Interest income is
accrued on a time basis, by reference to the principal outstanding
and at the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying amount
on initial recognition.
2.14.3 Government Grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attaching
to them and that the grants will be received. Government grants are
recognised in profit or loss on a systematic basis over the periods in
which the Group recognises as expenses the related costs for which
the grants are intended to compensate.
2.15
fOrEIGN currENcIES
2.15.1
Individual Controlled entities
The individual Financial Statements of each Group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the purpose
of the Consolidated Financial Statements, the financial results and
financial position of each Group entity are expressed in Australian
Dollars (‘$’), which is the functional currency of the Company, and the
presentation currency for the Consolidated Financial Statements.
2.15.2 Foreign Currency transactions
In preparing the Financial Statements of the individual entities,
transactions in currencies other than the entity’s functional currency
(foreign currencies) are recognised at the rates of exchange
prevailing on the dates of the transactions. At the end of each
reporting period, monetary items denominated in foreign currencies
are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies
are retranslated at the rates prevailing on the date when the fair value
was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
2.15.3 Foreign operations
For the purpose of presenting Consolidated Financial Statements,
the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing at the end of the reporting
period. Income and expense items are translated at the average
exchange rates for the period, unless exchange rates fluctuate
significantly, in which case the exchange rates at the dates of the
transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income and accumulated in
equity (attributed to non-controlling interests as appropriate).
ShArE-BASED pAYmENtS
2.16
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instrument at the grant date. Fair value is measured by use
of a binomial model. The expected life used in the model has
been adjusted, based on management’s best estimate, for the
effects of non-transferability, exercise restrictions and behavioural
considerations.
The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the
vesting and holding lock periods, based on the Group’s estimate
of equity instruments that will eventually vest with a corresponding
increase in equity. At the end of each reporting period, the Group
revises its estimate of the number of equity instruments expected
to vest. The impact of the revision of the original estimates, if any, is
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recognised in profit or loss over the remaining vesting period, with
corresponding adjustment to the equity-settled employee benefits
reserve.
each reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
For cash-settled share-based payments, a liability is recognised for
the goods or services acquired, measured initially at the fair value
of the liability. At the end of each reporting period until the liability
is settled, and at the date of settlement, the fair value of the liability
is remeasured, with any changes in fair value recognised in profit or
loss for the year.
GOODS AND SErVIcE tAx
2.17
Revenues, expenses and assets are recognised net of the amount of
goods and services tax (GST), except:
• where the amount of GST incurred is not recoverable from the
taxation authority, it is recognised as part of the cost of acquisition
of an asset or as part of an item of expense; or
• for receivables and payables which are recognised inclusive of
GST.
The net amount of GST recoverable from, or payable to, the taxation
authority is included as part of receivables or payables.
Cash flows are included in the Consolidated Statement of Cash
Flows on a gross basis. The GST component of cash flows arising
from investing and financing activities which is recoverable from, or
payable to, the taxation authority is classified within operating cash
flows.
tAxAtION
2.18
Income tax expense represents the sum of the tax currently payable
and the movement in deferred tax.
2.18.1 Current tax
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from profit for the year as reported in the
Consolidated Statement of Profit or Loss and Other Comprehensive
Income because of items of income or expense that are taxable
or deductible in other years and items that are never taxable or
deductible. The Group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of
the reporting period.
2.18.2 Deferred tax
Deferred tax is recognised on temporary differences between
the carrying amounts of assets and liabilities in the Consolidated
Financial Statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred tax assets
are generally recognised for all deductible temporary differences
to the extent that it is probable that taxable profits will be available
against which those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities are not recognised
if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor
the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the Group
is able to control the reversal of the temporary difference and it
is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests
are only recognised to the extent that it is probable that there will
be sufficient taxable profits against which to utilise the benefits of
the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of
Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply in the period in which the liability is settled or
the asset realised, based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the
tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
2.18.3 Current and Deferred tax for the Year
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the current
and deferred tax are also recognised in other comprehensive income
or directly in equity, respectively. Where current tax or deferred tax
arises from the initial accounting for a business combination, the tax
effect is included in the accounting for the business combination.
2.18.4 tax Consolidated Group
Blackmores Ltd has formed a consolidated group for Australian
income tax purposes. Blackmores Ltd is the head company of its Tax
Consolidated Group and is liable for income tax liabilities of all its
members.
Members of the Blackmores Ltd Tax Consolidated Group are
Blackmores Ltd and all its 100% owned Australian subsidiaries.
INVEStmENt prOpErtY
2.19
Investment property, which is property held to earn rentals and/
or for capital appreciation is measured initially at its cost, including
transaction costs. Subsequent to initial recognition, investment
property will continue to be measured on a cost basis. Investment
property will be depreciated where applicable.
Depreciation is provided on investment property, including freehold
buildings but excluding land. Depreciation is calculated on a
straight-line basis so as to write off the net cost of each asset over
its expected useful life to its estimated residual value. The estimated
useful lives, residual values and depreciation method are reviewed
at the end of each annual reporting period, with the effect of any
changes recognised on a prospective basis.
An investment property is derecognised upon disposal or when
the investment property is permanently withdrawn from use and
no future economic benefits are expected from the disposal. Any
gain or loss arising on derecognition of the property (calculated as
the difference between the net disposal proceeds and the carrying
amount of the asset) is included in profit or loss in the period in which
the property is derecognised.
2.20
INtANGIBLE ASSEtS
2.20.1
Intangible Assets Acquired Separately
Intangible assets with finite lives acquired separately are carried at
cost less accumulated amortisation and accumulated impairment
losses. Amortisation is recognised on a straight-line basis over their
estimated useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period, with
the effect of any changes in estimate being accounted for on a
prospective basis. Intangible assets with indefinite useful lives
that are acquired separately are carried at cost less accumulated
impairment losses.
73
Blackmores annual report 2016 NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
2
SIGNIfIcANt AccOuNtING pOLIcIES (cONt.)
2.20.2
Internally generated Intangible Assets
2.20.2.1 Research and Development expenditure
Expenditure on research activities is recognised as an expense in the
period in which it is incurred.
An internally generated intangible asset arising from development
(or from the development phase of an internal project) is recognised
if, and only if, all of the following have been demonstrated:
• the technical feasibility of completing the intangible asset so that
it will be available for use or sale
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic
benefits;
• the availability of adequate technical, financial and other
resources to complete the development and to use or sell the
intangible asset; and
• the ability to measure reliably the expenditure attributable to the
intangible asset during its development.
Subsequent to initial recognition, internally generated intangible
assets are reported at cost less accumulated amortisation and
accumulated impairment losses, on the same basis as intangible
assets that are acquired separately.
Brand names recognised by the Company have an indefinite useful
life and are not amortised. Each period, the useful life of this asset is
reviewed to determine whether events and circumstances continue
to support an indefinite useful life assessment for the asset. Such
assets are tested for impairment in accordance with the policy stated
in note 2.9.
2.20.2.2 Website Development expenditure
Website development expenditure is recognised as an intangible
asset to the extent that the above recognition criteria is met and the
website will generate probable future economic benefits. Otherwise,
it is expensed as incurred.
2.20.3
Intangible Assets Acquired in a Business Combination
Intangible assets acquired in a business combination and recognised
separately from goodwill are initially recognised at their fair value at
the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in
a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis
as intangible assets that are acquired separately.
2.20.4 Derecognition of Intangible Assets
An intangible asset is derecognised on disposal, or when no future
economic benefits are expected from use or disposal. Gains or
losses arising from derecognition of an intangible asset, measured as
the difference between the net disposal proceeds and the carrying
amount of the asset are recognised in profit or loss when the asset is
derecognised.
BuSINESS cOmBINAtIONS
2.21
Acquisitions of businesses are accounted for using the acquisition
method. The consideration transferred in a business combination
is measured at fair value which is calculated as the sum of the
acquisition-date fair values of assets transferred by the Group,
liabilities incurred by the Group to the former owners of the acquire
and the equity instruments issued by the Group in exchange for
control of the acquiree. Acquisition-related costs are recognised in
profit or loss as incurred.
Goodwill is measured as the excess of the sum of the consideration
transferred over the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition-date amounts of the
identifiable assets acquired and liabilities assumed exceeds the sum
of the consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer’s previously
held interest in the acquiree (if any), the excess is recognised
immediately in profit or loss as a bargain purchase gain.
Where the consideration transferred by the Group in a business
combination includes assets or liabilities resulting from a contingent
consideration arrangement, the contingent consideration is
measured at its acquisition-date fair value, with corresponding
adjustments against goodwill. Measurement period adjustments are
adjustments that arise from additional information obtained during
the ‘measurement period’ (which cannot exceed one year from the
acquisition date) about facts and circumstances that existed at the
acquisition date.
The subsequent accounting for changes in the fair value of
contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent consideration
is classified. Contingent consideration that is classified as equity is
not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration
that is classified as an asset or liability is remeasured at subsequent
reporting dates in accordance with AASB 139, or AASB 137
‘Provisions, Contingent Liabilities and Contingent Assets’, as
appropriate, with the corresponding gain or loss being recognised in
profit or loss.
GOODWILL
2.22
Goodwill arising on an acquisition of a business is carried at cost as
established at the date of the acquisition of the business (see note
2.21 above) less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated
to each of the Group’s cash-generating units (or groups of cash
generating units) that is expected to benefit from the synergies of the
combination.
A cash-generating unit to which goodwill has been allocated is
tested for impairment annually, or more frequently when there is
indication that the unit may be impaired. If the recoverable amount
of the cash-generating unit is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of
any goodwill allocated to the unit and then to the other assets of the
unit pro rata based on the carrying amount of each asset in the unit.
INtErEStS IN jOINt OpErAtIONS
2.23
A joint operation is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the assets,
and obligations for the liabilities, relating to the arrangement.
Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.
When a group entity undertakes its activities under joint operations,
the Group as a joint operator recognises in relation to its interest in a
joint operation:
•
•
•
•
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output arising from the
joint operation;
its share of the revenue from the sale of the output by the joint
operation; and
•
its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses
relating to its interest in a joint operation in accordance with the
AASBs applicable to the particular assets, liabilities, revenues and
expenses.
74
Blackmores annual report 2016 NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
3 AppLIcAtION Of NEW AND rEVISED AccOuNtING StANDArDS
3.1
StANDArDS AND INtErprEtAtIONS AffEctING AmOuNtS rEpOrtED IN thE currENt pErIOD
(AND/Or prIOr pErIODS)
Standards affecting presentation and disclosure
There are no new and/or revised Standards and Interpretations adopted in these Financial Statements affecting presentation or disclosure.
Standards and Interpretations affecting the reported results or financial position
There are no new and revised Standards and Interpretations adopted in these Financial Statements affecting the reported results or financial
position.
3.2
The are no new Standards and Interpretations adopted in these Financial Statements.
StANDArDS AND INtErprEtAtIONS ADOptED WIth NO EffEct ON thE fINANcIAL StAtEmENtS
StANDArDS AND INtErprEtAtIONS IN ISSuE, NOt YEt ADOptED
3.3
At the date of authorisation of the Financial Statements, a number of Standards and Interpretations were on issue but not yet effective. In the
Directors’ opinion, the following Standards on issue but not yet effective are most likely to impact the amounts reported by the Group in future
financial periods:
Standard/Interpretation
AASB 9 Financial Instruments, AASB 2010-7 Amendments to Australian Accounting
Standards arising from AASB 9 (December 2010), AASB 2014-1 Amendments to
Australian Accounting Standards [Part E – Financial Instruments], AASB 2014-7
Amendments to Australian Accounting Standards arising from AASB 9 (December 2014)
Effective for annual
periods beginning
on or after
Expected to be
initially applied in
the financial year
ending
1 January 2018
30 June 2019
AASB 15 ‘Revenue from Contracts with Customers’, AASB 2014-5 ‘Amendments to
Australian Accounting Standards arising from AASB 15’, AASB 2015-8 ‘Amendments to
Australian Accounting Standards – Effective date of AASB 15’
1 January 2018
30 June 2019
AASB 16 ‘Leases’
AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of
Acceptable Methods of Depreciation and Amortisation’
1 January 2019
30 June 2020
1 January 2016
30 June 2017
AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements
to Australian Accounting Standards 2012-2014 Cycle’
1 January 2016
30 June 2017
AASB 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 101’
1 January 2016
30 June 2017
AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of
Deferred Tax Assets for Unrealised Losses’
1 January 2017
30 June 2018
AASB 2016-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 107’
1 January 2017
30 June 2018
75
Blackmores annual report 2016 NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
4
crItIcAL AccOuNtING juDGEmENtS AND KEY SOurcES Of EStImAtION
uNcErtAINtY
In the application of the accounting policies, which are described in note 2, management is required to make judgements, estimates
and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects
both current and future periods.
INVENtOrY
4.1
Inventories are stated at the lower of cost and net realisable value. The Directors assess slow moving or obsolete inventory on a regular basis
and a provision is raised to write down inventory to net realisable value as described in note 2.7.
ImpAIrmENt Of GOODWILL
4.2
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating unit to which goodwill has been
allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit
and a suitable discount rate in order to calculate present value.
The carrying amount of goodwill at 30 June 2016 was $20,032 thousand (30 June 2015: $16,863 thousand).
ImpAIrmENt Of NON-currENt ASSEtS
4.3
The Directors considered the recoverability of the Group’s non-current assets, including property, plant and equipment and other intangible
assets. Based on the Group’s performance, there are no indicators of impairment for non-current assets.
uSEfuL LIVES Of prOpErtY pLANt AND EQuIpmENt
4.4
As described in note 2.8, the Group reviews the useful lives of property, plant and equipment at the end of each financial year. No changes
were made during the current year.
76
Blackmores annual report 2016 NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
5
rEVENuE
Revenue from sale of goods
6 OthEr INcOmE
Dividends received
Government grant
7
prOfIt fOr thE YEAr
Profit for the year has been arrived at after charging:
Interest expense
Interest on bank loans
Net settlement of interest rate swaps
Bank margin activation and undrawn facility fees
Total interest expense
Depreciation of non-current assets
Amortisation of non-current assets
Total depreciation and amortisation expense
Operating lease minimum lease payments
Research and development costs expensed as incurred
Employee benefits expense
Post-employment benefits:
Defined contribution plans
Share-based payments:
Equity-settled share-based payments
Other employee benefits
Provision for stock obsolescence
Net foreign exchange losses/(gains)
Loss on disposal of non-current assets
2016
$’000
2015
$’000
717,211
471,615
25
1,020
1,045
11
897
908
1,085
410
777
2,272
6,480
565
7,045
1,965
389
1,493
3,847
5,954
437
6,391
4,496
3,519
10,200
8,972
6,280
4,850
3,362
125,291
134,933
1,078
88,425
94,353
3,027
2,734
2,877
(835)
358
14
77
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
8
SEGmENt INfOrmAtION
Information reported to the Group’s Chief Operating Decision Maker for the purposes of resource allocation and assessment of segment
performance is largely focused on geographical regions. The Group’s reportable segments under AASB 8 are therefore as follows:
Australia
China (in-country)
Other Asia
BioCeuticals
Other
Corporate Costs
The principal activity of each segment is the development and/or marketing of health products including vitamins and herbal and mineral
nutritional supplements.
The accounting policies of the reportable segments are the same as the Group’s accounting policies.
SEGmENt rEVENuES
The following is an analysis of the Group’s revenue from continuing operations by reportable segment:
Australia1
China (in-country)2
Other Asia3
BioCeuticals
Other4
Total Segment Revenue5
2016
$’000
2015
$’000
495,430
48,014
81,360
69,170
23,237
717,211
316,650
7,548
76,403
55,531
15,483
471,615
The Group had one customer (2015: 2) who contributed more than 10% of the Group’s revenue in the year. Included in external sales of the
Australian segment of $495,430 thousand (2015: $316,650 thousand) are sales of $183,875 thousand (2015: $123,507 thousand) which
arose from sales to the Group’s largest customer.
1. Australia segment revenue also includes Pure Animal Well Being and the benefit of sales made to Australian customers which we believe are ultimately intended for Asian markets.
2. Sales through Blackmores’ WFOE and free trade zone entities.
3. Other Asia comprises the markets of Thailand, Malaysia, Singapore, Hong Kong, Taiwan, Korea, Indonesia, Kazakhstan and Cambodia.
4. Other comprises New Zealand, Nutritional Foods, and Global Therapeutics.
5. Excludes interest revenue and other income.
SEGmENt rESuLtS
The following is an analysis of the Group’s EBIT results from continuing operations by reportable segment.
Australia
China (in-country)
Other Asia1
BioCeuticals
Other
Corporate Costs
Earnings before interest and tax
2016
$’000
129,146
12,596
2,282
9,464
916
(9,183)
145,221
2015
$’000
64,272
1,167
7,159
8,672
(282)
(8,724)
72,264
1. Other Asia includes an EBIT loss for Blackmores Korea Limited of $2,798 thousand and additional investment in Indonesia and Blackmores International for the year.
Segment profit represents EBIT earned by each segment. This is the measure reported to the Chief Operating Decision Maker for the
purposes of resource allocation and assessment of segment performance.
78
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
9
9.1
INcOmE tAxES
INcOmE tAx rEcOGNISED IN prOfIt Or LOSS
Current tax:
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax of prior years
deferred tax:
Deferred tax benefit relating to the origination and reversal of temporary differences
Adjustments recognised in the current year in relation to the deferred tax of prior years
Total income tax expense recognised in the current year relating to continuing operations
The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense
in the Consolidated Financial Statements as follows:
Profit before tax
Income tax expense calculated at 30%
Effect of expenses that are not deductible in determining taxable profit
Effect of tax concessions
Effect of withholding tax on intercompany dividend
Effect of tax losses recognised
Effect of tax losses not recognised
Rate differential on overseas operations
Other items
Under provision of income tax in previous year
Income tax expense recognised in profit or loss
2016
$’000
2015
$’000
47,475
789
25,021
(221)
(4,727)
(146)
43,391
(2,842)
318
22,276
143,411
68,832
43,023
20,650
523
(362)
957
(735)
788
(1,265)
(181)
42,748
643
43,391
364
(321)
1,323
(164)
1,100
(773)
-
22,179
97
22,276
The tax rate used for the 2016 and 2015 reconciliations above is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law.
79
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
9
INcOmE tAxES (cONt.)
9.2
Deferred tax assets arise from the following:
DEfErrED tAx BALANcES
cuRREnt YEAR
moVEmEnt
cuRREnt YEAR
moVEmEnt
REcoGnisEd
filinG
REcoGnisEd diffEREncEs
REcoGnisEd
in pRofit
oR loss AcQuisitions
in otHER
in pRofit compREHEnsiVE
incomE
oR loss
opEninG
BAlAncE
closinG
BAlAncE
$’000
$’000
$’000
$’000
$’000
$’000
temporary differences 2016
Property, plant and equipment
Prepayments and other
Provisions
Accruals
Cash flow hedges
Website development
Foreign currency monetary items
Capitalised expenses
Tax losses recognised
Other
(10)
(114)
4,579
2,033
393
58
(475)
32
12
3
6,511
20
52
(930)
4,085
-
38
98
(3)
(12)
1,379
4,727
presented in the Consolidated Statement of Financial position as follows:
Deferred tax asset
Deferred tax liability
temporary differences 2015
Property, plant and equipment
Prepayments and other
Provisions
Accruals
Cash flow hedges
Website development
Foreign currency monetary items
Capitalised expenses
Tax losses recognised
Other
47
(143)
2,369
235
221
65
(90)
509
138
464
3,815
25
51
2,197
1,715
-
(7)
(385)
(445)
(94)
(215)
2,842
presented in the Consolidated Statement of Financial position as follows:
Deferred tax asset
Deferred tax liability
uNrEcOGNISED DEfErrED tAx ASSEtS
The following deferred tax assets have not been brought to account as assets:
Tax losses - capital (no expiry date)
Tax losses - revenue (expiry: 2015)
Tax losses - revenue (expiry: 2017)
Tax losses - revenue (expiry: 2018)
Tax losses - revenue (expiry: 2019)
Tax losses - revenue (expiry: 2020)
Tax losses - revenue (expiry: 2021)
Tax losses - revenue (expiry: 2026)
-
-
-
-
(230)
-
-
-
-
-
(230)
-
-
-
-
172
-
-
-
-
-
172
(79)
-
69
435
-
-
26
(33)
-
(272)
146
(82)
(22)
13
83
-
-
-
(32)
(32)
(246)
(318)
-
-
102
85
-
-
-
-
-
-
187
-
-
-
-
-
-
-
-
-
-
-
(69)
(62)
3,820
6,638
163
96
(351)
(4)
-
1,110
11,341
12,257
(916)
11,341
(10)
(114)
4,579
2,033
393
58
(475)
32
12
3
6,511
6,713
(202)
6,511
2016
$’000
2015
$’000
1,230
-
1
34
67
120
147
572
2,171
1,230
1
1
34
102
444
144
-
1,956
80
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
10 KEY mANAGEmENt pErSONNEL cOmpENSAtION
The aggregate compensation made to Key Management Personnel (KMP) of the Group and the Company is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payment
2016
$
2015
$
8,775,522
226,097
86,547
2,026,265
11,114,431
6,495,092
219,720
36,254
736,784
7,487,850
The compensation of each member of the KMP of the Group and a discussion of the compensation policies of the Company are detailed in
the Directors’ Report and Remuneration Report which accompany these Consolidated Financial Statements.
11 ShArE-BASED pAYmENtS
executive and employee Share option plan
The Executive Performance Share Plan was approved at Blackmores’ Annual General Meeting in October 2015. Participation is open to Senior
Executives determined to be eligible by the Board. Under this plan, rights to acquire shares in the Company are granted annually to eligible
Senior Executives at no cost and vest provided specific performance hurdles are met.
The fair value of rights granted is calculated in accordance with AASB 2 ‘Share-based Payments’. Under the Company Executive Performance
Share Plan, during the year the Company granted entitlements to an allocation of ordinary shares provided specific performance objectives
and hurdles are met over the three year period commencing 1 July 2015 to the year ending 30 June 2018. If the performance and
employment vesting conditions are met, the minimum number of rights that could be vested under the entitlement is 6,780 (2015: 19,553)
and the maximum number of rights that could be vested is 40,673 (2015: 117,326). Several grant dates applied to these rights; as a result the
following fair values applied to the number of rights listed below.
The following share-based payment arrangements were in existence during the current and prior reporting periods:
sHARE RiGHts sERiEs
GRAnts in tHE 2016 YEAR
Granted 25 November 2015
GRAnts in tHE 2015 YEAR
Granted 7 November 2014
Granted 10 December 2014
Granted 20 April 2015
numBER
of RiGHts
GRAnt
dAtE
EXpiRY
dAtE
EXERcisE fAiR VAluE At
GRAnt dAtE
pRicE
$
40,673 25 Nov 2015 30 Jun 2018
N/A
147.49
111,387
7 Nov 2014
5,143 10 Dec 2014
796 20 Apr 2015
30 Jun 2017
30 Jun 2017
30 Jun 2017
N/A
N/A
N/A
The following reconciles the share-based arrangements outstanding at the beginning and end of the year:
Balance at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Balance at the end of the year
Exercisable at the end of the year
2016
2015
wEiGHtEd
AVERAGE
EXERcisE
pRicE
N/A
numBER
of RiGHts
117,326
40,673
-
-
-
157,999
157,999
numBER
of RiGHts
-
117,326
-
-
-
117,326
117,326
The allocation is based on a percentage of each Senior Executive’s and Senior Manager’s base remuneration and the allocation varies
depending on the actual EPS growth delivered for the relevant year as follows:
Share rights are vested at 30 June three years after grant and shares are subsequently issued in September of that year following audit
clearance of the Group’s result and Board approval. The issue price for share rights granted in the 2016 financial year will be determined in
September 2018.
81
$
25.22
28.92
52.44
wEiGHtEd
AVERAGE
EXERcisE
pRicE
N/A
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
11 ShArE-BASED pAYmENtS (cONt.)
2016
RAtE of Eps GRowtH
3.9%
3.9% to 7.8%
7.8%
7.8% to 17.9%
17.9%
Greater than 17.9%
2015
RAtE of Eps GRowtH
3.9%
3.9% to 7.8%
7.8%
7.8% to 17.9%
17.9%
Greater than 17.9%
Share-Based Conditions
pERcEntAGE of pARticipAnt’s BAsE REmunERAtion
pro rata between
pro rata between
cHiEf EXEcutiVE
officER
25.0
25.0 to 50.0
50.0
50.0 to 150.0
150.0
150.0
otHER
sEnioR
compAnY
EXEcutiVEs mAnAGEmEnt
sEnioR
10.0
10.0 to 20.0
20.0
5.0
5.0 to 10.0
10.0
20.0 to 60.0 10.0 to 30.0
30.0
30.0
60.0
60.0
pERcEntAGE of pARticipAnt’s BAsE REmunERAtion
cHiEf EXEcutiVE
officER
otHER
sEnioR
compAnY
EXEcutiVEs mAnAGEmEnt
sEnioR
25.0
25.0 to 50.0
50.0
50.0 to 150.0
150.0
150.0
10.0
10.0 to 20.0
20.0
20.0 to 60.0
60.0
60.0
5.0
5.0 to 10.0
10.0
10.0 to 30.0
30.0
30.0
pro rata between
pro rata between
The number of shares to be issued to a Senior Executive is determined by dividing the percentage amount of base remuneration calculated in
accordance with the above by:
• the weighted average price of the shares for the five day trading period commencing seven days after Blackmores’ results in respect of the
prior financial year are announced to the ASX, less
• the amount of any final dividend per share declared as payable for the prior financial year.
Staff Share Acquisition plan
The Group has established a Staff Share Acquisition Plan. The plan is open to all employees including Senior Executives and enables them to
purchase up to $1,000 of Blackmores shares tax free (subject to taxable income thresholds) each year with money that would have otherwise
been paid as profit share. 872 shares were issued during the year ended 30 June 2016 (2015: 1,640 shares). In July 2016, 651 shares (2015:
776 shares) will be issued to employees, including Senior Executives, for profit share entitlement that would otherwise have been paid in cash
during the year ended 30 June 2016.
options plan
At 1 July 2015 and at 1 July 2014 there were no share options outstanding, none were issued during the year ended 30 June 2016 (2015: nil)
and as at 30 June 2016 (2015: nil) there were no unexercised share options.
The compensation of each member of the Key Management Personnel of the Group and a discussion of the compensation policies of the
Company are detailed in the Remuneration Report which accompanies these Consolidated Financial Statements.
82
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
12 rEmuNErAtION Of AuDItOr
Auditor of the parent entity
Auditing or reviewing the Financial Statements
Taxation services
Other non-audit services1
network Firm of the parent Company Auditor
Auditing the Financial Statements
Taxation services
The auditor of Blackmores Limited is Deloitte Touche Tohmatsu.
1. ‘Other non-audit services’ is comprised of fees in relation to the provision of accounting advice and consulting services.
13 trADE AND OthEr rEcEIVABLES
Current
Current trade and other receivables1
Allowance for doubtful debts
Allowance for claims
Goods and services tax (GST) recoverable
Other receivables
2016
$
2015
$
316,065
110,000
253,293
679,358
228,335
-
228,335
280,160
110,000
45,500
435,660
224,884
88,813
313,697
2016
$’000
2015
$’000
135,518
(1,218)
(1,096)
133,204
1,432
-
134,636
107,355
(169)
(927)
106,259
615
202
107,076
1. The average credit period on sale of goods is 60 days from the end of the month of invoice. No interest is charged on trade receivables and the Group does not hold any collateral over these balances. Trade
receivables consist of a large number of customers spread across several retail channels and geographic regions.
At 30 June 2016, the Group had two customers (2015: three customers) each comprising amounts greater than 5% of the total trade
receivables. These customers owed the Group more than $46,000 thousand (2015: $52,000 thousand) and accounted for approximately
35% (2015: 49%) of all receivables owing.
Ageing of past Due But not Impaired
0 - 30 days past due date
31 - 60 days past due date
61 - 90 days past due date
> 90 days past due date
Total
2016
$’000
2015
$’000
17,440
3,125
1,717
1,443
23,725
17,912
827
651
710
20,100
An allowance has been made for estimated irrecoverable trade receivable amounts arising from the past sale of goods, determined by
reference to past default experience. In determining the recoverability of a trade receivable, the Group considers any change in the credit
quality of the trade receivable from the date credit was initially granted up to the reporting date. The Group manages credit risk with regular
review of the balances outstanding and restrictive action is taken where necessary.
83
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
13 trADE AND OthEr rEcEIVABLES (cONt.)
Ageing of Impaired trade Receivables
0 - 30 days
31 - 60 days
61 - 90 days
> 90 days
Total
2016
$’000
2015
$’000
16
711
481
10
1,218
-
49
9
111
169
Included in the allowance for doubtful debts are individually impaired trade receivables with a balance of $31 thousand (2015: $77 thousand).
The Group does not hold any collateral over these balances. The Directors believe that there is no further credit provision required in excess
of the allowance for doubtful debts.
169
-
1,049
1,218
688
(506)
(13)
169
9,873
50,300
56,313
116,486
1,806
10,420
26,439
38,665
2016
$’000
2015
$’000
110,000
(42,374)
67,626
99,935
(39,200)
60,735
12,848
30,123
1,132
19,899
121
3,503
67,626
12,848
31,054
350
15,049
157
1,277
60,735
movement in the Allowance for Doubtful Debts
Balance at the beginning of the year
Amounts written off as uncollectable
Increase/(reduction) in provision
Balance at the end of the year
14 INVENtOrIES
Ingredients
Raw materials
Finished goods
The provision at balance date to cover inventory write down is $2,107 thousand (2015: $2,949 thousand).
15 prOpErtY, pLANt AND EQuIpmENt
Cost
Accumulated depreciation
Carrying amounts of:
Freehold land
Buildings
Leasehold improvements
Plant and equipment
Motor vehicles
Capital work in progress
84
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
15 prOpErtY, pLANt AND EQuIpmENt (cONt.)
fREEHold
lAnd BuildinGs
$’000
$’000
lEAsEHold
impRoVE- plAnt And
cApitAl
woRK in
mEnts EQuipmEnt VEHiclEs pRoGREss
$’000
motoR
$’000
$’000
$’000
totAl
$’000
Cost
Balance at 30 June 2014
Additions
Category transfers
Disposals
Net foreign currency exchange differences arising on translation of
financial statements of foreign operations
Balance at 30 June 2015
Additions
Additions obtained through business combinations
Category transfers
Disposals
Net foreign currency exchange differences arising on translation of
financial statements of foreign operations
Balance at 30 June 2016
Accumulated Depreciation
Balance at 30 June 2014
Disposals
Depreciation expense
Net foreign currency exchange differences arising on translation of
financial statements of foreign operations
Balance at 30 June 2015
Disposals
Assets obtained through business combinations
Depreciation expense
Net foreign currency exchange differences arising on translation of
financial statements of foreign operations
Balance at 30 June 2016
12,848
-
-
-
36,983
-
-
-
735 45,754
1,585
363
(214)
78
-
-
293
85
-
(64)
363 96,976
3,025
-
(278)
1,277
(363)
-
-
12,848
-
-
-
-
-
36,983
-
-
-
-
13
199
826 47,687
8,946
399
1,251
(3,579)
1,086
147
26
(378)
-
-
314
-
15
212
1,277 99,935
13,535
3,503
561
-
-
- (1,277)
(4,030)
-
(73)
-
12,848
-
36,983
(25)
24
1,682 54,728
-
256
-
(1)
3,503 110,000
- (4,998)
-
-
(931)
-
(419) (27,769)
201
(4,914)
-
(74)
(177)
55
(35)
-
-
- (5,929)
-
-
-
-
(931)
-
17
(156)
(476) (32,638)
3,321
250
(262)
(84)
(5,265)
(252)
-
(157)
60
(6)
(32)
- (33,363)
-
256
- (5,954)
(139)
-
- (39,200)
3,631
-
-
(352)
- (6,480)
-
-
- (6,860)
12
15
(550) (34,829)
-
(135)
-
27
- (42,374)
net Book Value
As at 30 June 2015
As at 30 June 2016
12,848
12,848
31,054
30,123
350
15,049
1,132 19,899
157
121
1,277
60,735
3,503 67,626
No impairment losses have been recognised in the current year (2015: $nil).
85
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
16 INVEStmENt prOpErtY
Cost of investment property
At cost
Balance at beginning of year
Balance at end of year
2016
$’000
2015
$’000
2,160
2,160
2,160
2,160
2,160
2,160
Investment property in the form of a plot of land at 15 Jubilee Avenue, Warriewood, NSW 2102 was acquired during the financial year ended
30 June 2010. At the date of the signing of these Consolidated Financial Statements there were no plans to use this land for the production of
goods or services or for administrative purposes, nor for sale in the ordinary course of business.
In line with the Group’s accounting policy on investment property, this property has been measured at cost. The cost of the purchased
investment property comprises its purchase price and any directly attributable expenditure. Directly attributable expenditure includes
professional fees for legal services, property transfer taxes and other transaction costs. As the property in question is freehold land, no
depreciation is recognised in relation to it.
This investment property is tested for impairment annually. To date no impairment losses have been recognised and the Directors remain
confident that the carrying amount of the investment property will be recovered in full.
17 OthEr INtANGIBLE ASSEtS
Cost
Accumulated amortisation and impairment
2016
$’000
35,629
(2,893)
32,736
2015
$’000
20,858
(2,328)
18,530
cApitAlisEd REGistRA-
tions1
$’000
wEBsitE
$’000
tRAdE- foRmulA-
tions1
mARKs1
$’000
$’000
RoYAltY
stREAm
$’000
BRAnds1
$’000
pAtEnts
$’000
totAl
$’000
Cost
Balance at 30 June 2014
Additions
Additions from internal development
Effect of foreign currency exchange differences
Balance at 30 June 2015
Additions
Additions from internal development
Assets obtained through business combination
Effect of foreign currency exchange differences
Balance at 30 June 2016
Accumulated Amortisation
Balance at 30 June 2014
Amortisation expense
Effect of foreign currency exchange differences
Balance at 30 June 2015
Amortisation expense
Effect of foreign currency exchange differences
Balance at 30 June 2016
net Book Value
As at 30 June 2015
As at 30 June 2016
2,070
-
600
-
2,670
-
311
-
-
2,981
(1,610)
(334)
4
(1,940)
(392)
-
(2,332)
893
-
-
-
893
-
-
-
-
893
288
-
-
-
288
-
-
1,160
-
1,448
272
-
-
-
272
-
-
-
-
272
450
-
-
-
450
-
-
-
-
450
15,313
-
-
-
15,313
-
-
13,300
-
28,613
972
-
-
-
972
-
-
-
-
972
20,258
-
600
-
20,858
-
311
14,460
-
35,629
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(188)
(90)
-
(278)
(90)
-
(368)
-
-
-
-
-
-
-
(97)
(13)
-
(110)
(83)
-
(193)
(1,895)
(437)
4
(2,328)
(565)
-
(2,893)
730
649
893
893
288
1,448
272
272
172
82
15,313
28,613
862
779
18,530
32,736
1. These assets are considered to be of indefinite life and therefore do not require amortisation, but are subject to impairment testing.
86
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
17 OthEr INtANGIBLE ASSEtS (cONt.)
The following useful lives are used in the calculation of amortisation expense:
Capitalised website development
Patents
Royalty stream
3 years
20 years
5 years
The amortisation expense has been included in the line item ‘depreciation and amortisation expenses’ in the Consolidated Statement of
Profit or Loss and Other Comprehensive Income.
18 GOODWILL
Cost
2016
$’000
2015
$’000
Balance at beginning of the year
Additional amounts recognised from business combinations occurring during the year (note 38.4)
Balance at end of the year
16,863
3,169
20,032
16,863
-
16,863
18.1
Goodwill has been allocated for impairment testing purposes to the following cash-generating units:
ALLOcAtION Of GOODWILL tO cASh-GENErAtING uNItS
Pure Animal Wellbeing
BioCeuticals
Global Therapeutics
Intangible assets with indefinite lives have been allocated for impairment testing purposes to the
following cash-generating units:
Pure Animal Wellbeing
BioCeuticals
Global Therapeutics
658
16,205
3,169
20,032
1,189
15,481
14,460
31,130
658
16,205
-
16,863
1,189
15,481
-
16,670
pure Animal Wellbeing
The recoverable amount of this cash-generating unit is determined on a value in use calculation. This calculation uses cash flow projections
based on the five year plan approved by management and endorsed by the Board, and also uses a terminal value calculation.
Cash flow projections are based on estimated growth in EBITDA (net of tax) and estimated working capital changes. The cash flows beyond
that five-year period have been extrapolated using a steady 2% per annum growth rate which is the projected long-term inflation rate. The
Directors believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the
aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit.
Bioceuticals
The recoverable amount of this cash-generating unit is determined on a value in use calculation. This calculation uses cash flow projections
based on the five year plan approved by management and endorsed by the Board, and also uses a terminal value calculation.
Cash flow projections are based on estimated growth in in EBITDA (net of tax) and estimated working capital changes. The cash flows beyond
that five-year period have been extrapolated using a steady 2% per annum growth rate which is the projected long-term inflation rate. The
Directors believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the
aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit.
The key assumptions used in the value in use calculations for Pure Animal Wellbeing and BioCeuticals cash-generating units are as follows.
Budgeted sales growth
Budgeted margins
Discount rate
Budgeted sales growth is expected to be in line with sales growth in the category
Budgeted margins are expected to remain consistent
The discount rate used for both Pure Animal Wellbeing and BioCeuticals is 8%
19 trADE AND OthEr pAYABLES
Trade payables1
Goods and services tax (GST) payable
Other creditors and accruals
2016
$’000
102,096
4,339
54,043
160,478
2015
$’000
52,835
2,940
39,133
94,908
1. The average credit period on purchases is 30 days from the end of the month of invoice. The Group has financial risk management policies in place to ensure all payables are paid within the credit time-frame.
87
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
20 currENt tAx LIABILItIES
Income tax payable
Withholding tax payable
21 INtErESt BEArING LIABILItIES
non-current
Secured – at amortised cost:
Bank bills1
2016
$’000
24,093
111
24,204
2015
$’000
12,815
47
12,862
2016
$’000
2015
$’000
55,446
44,000
Summary of borrowing arrangements:
1. In accordance with the security arrangements of liabilities, as disclosed in this note to the Consolidated Financial Statements, effectively all assets of the Parent Entity have been pledged as security.
22 prOVISIONS
Current
Employee benefits
Directors’ retirement benefits
non-current
Employee benefits
23 ISSuED cApItAL
17,225,156 fully paid ordinary shares (2015: 17,224,284)
2016
$’000
2015
$’000
7,440
148
7,588
6,136
148
6,284
1,134
730
2016
$’000
2015
$’000
37,753
37,753
2016
numBER
’000
2016
issuEd
cApitAl
$’000
2015
numBER
’000
Fully paid ordinary Shares
Balance at beginning of financial year
Issue of shares under Executive and employee share plans (notes 11, 34.3)
Issue of shares under Dividend Reinvestment Plan
Balance at end of financial year
17,224
1
-
17,225
37,753
-
-
37,753
17,113
2
109
17,224
2015
issuEd
cApitAl
$’000
34,502
-
3,251
37,753
Fully paid ordinary shares carry one vote per share and carry a right to dividends.
employee Share plans
Further details of the Group’s Executive and employee share plans are contained in note 11 to the Consolidated Financial Statements.
88
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
24 rESErVES
Equity-settled employee benefits reserve
Cash flow hedging reserve
Foreign currency translation reserve
2016
$’000
4,440
(376)
1,188
5,252
2015
$’000
6,933
(913)
2,043
8,063
24.1 EQuItY-SEttLED EmpLOYEE BENEfItS rESErVE
The equity-settled employee benefits reserve arises on the grant of share rights to Executives and employees under various share plans.
Further information about share-based payments to Executives and employees is in note 11 to the Consolidated Financial Statements.
Balance at beginning of year
Reclassification to retained earnings
Recognition of share-based payments (net of tax)
Balance at end of year
6,933
(5,855)
3,362
4,440
5,855
-
1,078
6,933
24.2 cASh fLOW hEDGING rESErVE
The hedge reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred
gain or loss on the hedge is recognised in profit or loss when the hedged transaction impacts the profit or loss, or is included as a basis
adjustment to the non-financial hedged item, consistent with the applicable accounting policy.
Balance at beginning of year
Net gain/(loss) on revaluation (net of tax)
Balance at end of year
(913)
537
(376)
(513)
(400)
(913)
24.3 fOrEIGN currENcY trANSLAtION rESErVE
Exchange differences relating to foreign currency monetary items forming part of the net investment in a foreign operation and the translation
of foreign controlled entities are brought to account by entries made directly to the foreign currency translation reserve, as described in note
2.15 to the Consolidated Financial Statements.
Balance at beginning of year
Exchange differences arising on translating the foreign controlled entities
Balance at end of year
25 rEtAINED EArNINGS
Retained earnings
Balance at the beginning of the year
Reclassification of equity settled employee benefit reserve
Profit for the year
Payment of dividends
Balance at end of year
2,043
(855)
1,188
(2,115)
4,158
2,043
2016
$’000
2015
$’000
135,258
87,099
87,099
5,855
100,008
(57,704)
66,497
-
46,556
(25,954)
135,258
87,099
89
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
26 EQuItY AttrIButABLE tO NON-cONtrOLLING INtErEStS
Balance at the beginning of the year
Non-controlling interests arising on the incorporation of PT Kalbe Blackmores Nutrition
Share of profit for the year
Share of other comprehensive income
Balance at end of year
27 EArNINGS pEr ShArE
Basic earnings per share
Diluted earnings per share
Basic earnings per Share
2016
$’000
-
2,301
12
17
2,330
2015
$’000
-
-
-
-
-
2016
cEnts pER
sHARE
2015
cEnts pER
sHARE
580.6
575.9
270.7
269.1
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Earnings (reconciles directly to profit for the year in the Consolidated Statement of Profit or Loss)
100,008
46,556
2016
$’000
2015
$’000
Weighted average number of ordinary shares on issue during the financial year
used in the calculation of basic earnings per share
Diluted earnings per Share
2016
numBER
2015
numBER
17,225,093
17,196,049
Earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:
Earnings (reconciles directly to profit for the year in the Consolidated Statement of Profit or Loss)
100,008
46,556
2016
$’000
2015
$’000
Weighted average number of ordinary shares used in the calculation of basic earnings per share
Shares deemed to be issued for no consideration in respect of:
Employee share plans
Weighted average number of ordinary shares and potential ordinary shares used in the
calculation of diluted earnings per share
2016
numBER
2015
numBER
17,225,093
17,196,049
141,344
106,310
17,366,437
17,302,359
90
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
28 DIVIDENDS
Recognised Amounts
Fully paid ordinary shares
Final dividend for year ended 30 June 2015 (2015: 30 June 2014)
– fully franked at 30% corporate tax rate
Interim dividend for year ended 30 June 2016 (2015: 30 June 2015)
– fully franked at 30% corporate tax rate
DRP residual payments
Unrecognised Amounts
Fully paid ordinary shares
2016
cEnts pER
sHARE
totAl
$’000
2015
cEnts pER
sHARE
totAl
$’000
135
23,254
83
14,205
200
-
335
34,450
-
57,704
68
-
151
11,713
36
25,954
Final dividend – fully franked at 30% corporate tax rate
210
36,174
The final dividend in respect of ordinary shares for the year ended 30 June 2016 has not been recognised in these Consolidated Financial
Statements because the final dividend was declared subsequent to 30 June 2016.
Adjusted franking account balance
29 cOmmItmENtS fOr ExpENDIturE
Research and Development Contracts
Not longer than 1 year
Longer than 1 year and not longer than 5 years
plant and equipment
Not longer than 1 year
Longer than 1 year and not longer than 5 years
promotional Services
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Sponsorship
Not longer than 1 year
Longer than 1 year and not longer than 5 years
lease Commitments
Non-cancellable operating lease commitments are disclosed in note 30 of the Consolidated Financial Statements.
compAnY
2016
$’000
2015
$’000
21,075
19,985
2016
$’000
348
145
493
3,906
-
3,906
3,862
5,773
9,635
1,198
5,378
6,576
2015
$’000
158
70
228
9,800
-
9,800
1,370
2,055
3,425
1,118
1,502
2,620
91
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
30 OpErAtING LEASES
leasing Arrangements
Operating leases relate to business premises and the Group’s motor vehicle fleet with lease terms of between three and six years. All
operating lease contracts contain market review clauses in the event that the Group exercises its option to renew. The Group does not have an
option to purchase the leased asset at the expiry of the lease period.
non-cancellable operating lease payments
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
No liabilities have been recognised in respect of non-cancellable operating leases.
31 cONtINGENt LIABILItIES
The Directors do not believe there are any contingent liabilities as at 30 June 2016.
2016
$’000
5,414
12,389
-
17,803
2015
$’000
2,269
2,543
-
4,812
32 SuBSIDIArIES AND OthEr rELAtED cOmpANIES
Details of the Group’s subsidiaries at the end of the financial year are as follows.
nAmE of EntitY
countRY of
incoRpoRAtion
ownERsHip
2016
%
intEREst
2015
%
pRincipAl ActiVitY
Blackmores SPV Co Pty Limited4
Bemore Partnership Pty Limited2
Australia
Australia
Blackmores Nominees Pty Limited4
Pat Health Limited
Blackmores Beijing Co., Limited
Blackmores (Shanghai)
Trading Co., Limited
Blackmores (Taiwan) Limited
Pure Animal Wellbeing Pty Limited4
Australia
Hong Kong
China
China
Taiwan
Australia
100
50
100
100
100
100
100
100
Blackmores (New Zealand) Limited
Blackmores (Singapore) Pte Limited
Blackmores (Malaysia) Sdn Bhd
Blackmores Holdings Limited
Blackmores Limited
Blackmores Korea Limited
Blackmores International Pte. Limited
PT Kalbe Blackmores Nutrition3
FIT-BioCeuticals Limited4
FIT-BioCeuticals (NZ) Limited1
PharmaFoods Pty Limited4
FIT-BioCeuticals Limited
FIT-BioCeuticals (HK) Limited
Hall Drug Technologies Pty Limited4
New Century Herbals Pty Limited4
Global Therapeutics Pty Limited4
100
New Zealand
100
Singapore
100
Malaysia
100
Thailand
100
Thailand
100
Korea
100
Singapore
50
Indonesia
100
Australia
100
New Zealand
Australia
100
United Kingdom 100
100
Hong Kong
100
Australia
100
Australia
100
Australia
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
-
-
Holding company
Marketing of infant and life stage
nutritional powders
Management of employee share plans
Marketing of natural health products
Marketing of natural health products
Marketing of natural health products
Marketing of natural health products
Holder of intellectual property for
Animal Health Division
Marketing of natural health products
Marketing of natural health products
Marketing of natural health products
Holding company
Marketing of natural health products
Marketing of natural health products
Regional head office
Marketing of natural health products
Marketing of natural health products
Marketing of natural health products
Marketing of natural health products
Marketing of natural health products
Marketing of natural health products
Marketing of natural health products
Holding company
Marketing of natural health products
1. These wholly owned subsidiaries have entered into a deed of cross guarantee with Blackmores Limited pursuant to ASIC class order 98/1418 and are relieved from the requirement to prepare and lodge an
audited financial report.
2. Companies incorporated during the year ended 30 June 2016 for the purpose of the newly formed partnership with Bega Cheese Limited. Bemore Parternership Pty Limited represents 50% of shares issue and is a
joint operation owned and managed equally by Bega Cheese Limited and Blackmores Limited.
3. PT Kalbe Blackmores Nutrition was incorporated during the year ended 30 June 2016. Blackmores International Pte Limited’s shareholding in PT Kalbe Blackmores Nutrition represents 50%+1 of shares issued.
4. These subsidiaries are members of Blackmores Limited’s Australian Tax Consolidated Group.
Companies incorporated outside Australia carry on business in the country of incorporation. All overseas entities have been audited by
overseas firms of Deloitte Touche Tohmatsu, except the overseas entities owned by FIT-BioCeuticals Limited.
economic Dependency
The Group is not significantly dependent upon any other entity.
92
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
32 SuBSIDIArIES AND OthEr rELAtED cOmpANIES (cONt.)
fINANcIAL SuppOrt
32.1
The Consolidated Statement of Profit or Loss and Other Comprehensive Income and the Consolidated Statement of Financial Position of the
entities party to the deed of cross guarantee are:
Statement of Profit or Loss and Other Comprehensive Income
Sales
Other income
Promotional and other rebates
Revenue and other income
Raw materials and consumables used
Employee benefits expense
Selling and marketing expenses
Depreciation and amortisation expenses
Operating lease rental expenses
Professional and consulting expenses
Repairs and maintenance expenses
Freight expenses
Bank charges
Other expenses
Total expenses
Earnings before interest and tax
Interest revenue
Interest expense
Net interest expense
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net gain/(loss) on hedging instruments entered into for cash flow hedges, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
2016
$’000
620,937
11,079
(86,744)
545,272
213,207
112,303
31,685
6,544
3,262
7,390
3,886
8,431
2,041
16,367
405,116
140,156
252
(2,231)
(1,979)
138,177
(39,744)
98,433
2015
$’000
409,721
18,267
(65,877)
362,111
144,692
79,918
24,119
6,156
2,721
5,440
3,176
5,992
1,316
13,661
287,191
74,920
297
(3,914)
(3,617)
71,303
(17,767)
53,536
537
537
98,970
(572)
(572)
53,136
98,433
-
98,433
98,970
-
98,970
53,536
-
53,536
53,136
-
53,136
93
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
32 SuBSIDIArIES AND OthEr rELAtED cOmpANIES (cONt.)
32.1
fINANcIAL SuppOrt (cONt.)
Statement of Financial position
2016
$’000
2015
$’000
10,512
129,554
99,429
4,493
243,988
66,126
2,160
31,450
19,374
8,864
15,588
143,562
387,550
15,957
101,273
29,902
3,582
150,713
60,030
2,160
17,429
16,205
6,550
5,584
107,957
258,670
147,012
21,902
-
8,844
-
177,758
80,221
11,629
1,348
5,942
3,751
102,892
52,000
1,134
1,139
1,160
55,433
233,191
154,359
44,000
1,274
109
226
45,609
148,501
110,169
37,753
3,419
113,187
154,359
37,753
5,813
66,603
110,169
ASSetS
CuRRent ASSetS
Cash and cash equivalents
Receivables
Inventories
Other assets
Total current assets
non-CuRRent ASSetS
Property, plant and equipment
Investment property
Other intangible assets
Goodwill
Deferred tax assets
Other financial assets
Total non-current assets
Total assets
lIABIlItIeS
CuRRent lIABIlItIeS
Trade and other payables
Current tax payable
Other financial liabilities
Provisions
Other
Total current liabilities
non-CuRRent lIABIlItIeS
Interest-bearing liabilities
Provisions
Other financial liabilities
Other
Total non-current liabilities
Total liabilities
Net assets
eQuItY
CApItAl AnD ReSeRVeS
Issued capital
Reserves
Retained earnings
Total equity
94
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
33 jOINt OpErAtIONS
The Group has the following interest in joint operations:
Bemore partnership pty Ltd
The following amounts are included in the Group’s Financial Statements in relation to the joint operation, representing the Group’s 50% share
of Bemore Partnership Pty Ltd:
Sales
Promotional and other rebates
Revenue and other income
Raw materials and consumables
Operating expenses
Net loss for the period ended 30 June 2016
Cash and cash equivalents
Receivables
Inventory
Total assets
Other payables
Payables to Joint operators1
Loans from Joint operators1
Total liabilities
Net liabilities
2016
$’000
4,329
(1,075)
3,254
1,945
2,123
(814)
30 June 2016
$’000
822
626
5,029
6,477
510
1,781
5,000
7,291
(814)
1. Included in these balances are amounts owing to the Blackmores Group of $3,960 thousand.
34 rELAtED pArtY AND KEY mANAGEmENt pErSONNEL DIScLOSurES
34.1
EQuItY INtErEStS IN rELAtED pArtIES
equity interests in subsidiaries
Details of the percentage of ordinary shares held in controlled entities are disclosed in note 32 to the Consolidated Financial Statements.
34.2
LOAN DIScLOSurES
There were no loan balances exceeding $100,000 due from Key Management Personnel during or at the end of the financial year (2015: nil).
34.3 OthEr trANSActIONS WIth KEY mANAGEmENt pErSONNEL
Key Management Personnel received dividends on their shareholdings, whether held privately or through related entities or through the
employee share plans on fully vested shares in the same manner as all ordinary shareholders.
No interest was paid to or received from Key Management Personnel.
34.4
The immediate parent and ultimate controlling party of the Group is Blackmores Limited (incorporated in Australia).
rELAtED pArtY trANSActIONS
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on
consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
trading transactions
During the year, group entities did not enter into any trading transactions with related parties that are not members of the Group (2015: $nil).
other related party transactions
During the financial year ended 30 June 2016, the following transactions occurred between the Group and its other related parties:
• Galileo Kaleidoscope Pty Ltd, a company of which Brent Wallace is a Director, performed certain consulting services for the Company for
which fees of $100,675 (2015: $259,246) were charged.
Balances with related parties
No balances outstanding at the end of the financial year with related parties that are not members of the Group (2015: $nil).
95
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
35 NOtES tO thE cONSOLIDAtED StAtEmENt Of cASh fLOWS
cASh AND cASh EQuIVALENtS
35.1
For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents includes cash on hand and in banks and
investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as
shown in the Consolidated Statement of Cash Flows is reconciled to the related items in the Consolidated Statement of Financial Position as
follows:
Cash and bank balances
Cash and cash equivalents
35.2
fINANcING fAcILItIES
Unsecured bank overdraft facility, reviewed annually and payable at call:
Amount used
Amount unused
Unsecured bank bill acceptance facility, reviewed annually:
Amount used
Amount unused
Unsecured revolving term debt facility under Common Terms Deed:
Amount used
Amount unused
2016
$’000
37,653
37,653
2015
$’000
36,931
36,931
570
4,430
5,000
-
5,000
5,000
-
-
-
44,000
69,000
113,000
55,446
82,060
137,506
-
-
-
The Group restructured borrowings during the year to unsecured debt under a Common Terms Deed with three banks.
The Group has access to financing facilities at reporting date as indicated above. The Group expects to meet its other obligations from
operating cash flows and proceeds of maturing financial assets.
35.3
rEcONcILIAtION Of prOfIt fOr thE YEAr tO NEt cASh fLOWS frOm OpErAtING ActIVItIES
Profit for the year
Loss on disposal of non-current assets
Interest revenue disclosed as investing cash flow
Dividend income disclosed as investing cash flow
Depreciation and amortisation of non-current assets
Revaluation of investments
Share-based payments
Other
Increase in current tax liability
Increase in deferred tax balances
Decrease in deferred tax balances related to hedge reserve in equity
Movements in working capital:
Current receivables
Current inventories
Other debtors and prepayments
Current trade payables
Provisions
Net cash flows from operating activities
2016
$’000
100,020
358
(462)
(25)
7,045
(67)
3,362
1,308
11,330
(4,830)
(230)
(24,212)
(73,845)
(415)
62,927
1,412
83,676
2015
$’000
46,556
14
(415)
(11)
6,391
(26)
1,078
(295)
9,057
(2,668)
172
(34,055)
6,459
(1,714)
39,943
641
71,127
NON-cASh trANSActIONS
35.4
During the current year, the Group entered into the following non-cash investing and financing activity which is not reflected in the
Consolidated Statement of Cash Flows:
During the year no shares (2015: 109,252) were issued under the Dividend Reinvestment Plan. Dividends settled in shares rather than cash
during the year totalled nil (2015: $3,251 thousand).
96
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
36 fINANcIAL INStrumENtS
cApItAL mANAGEmENt
36.1
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to
stakeholders through optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2015.
The capital structure of the Group consists of net debt (borrowings as disclosed in note 21 offset by cash and cash equivalents as disclosed in
note 35) and equity of the Group (comprising issued capital, reserves and retained earnings as disclosed in notes 23, 24 and 25 respectively).
The Group operates globally, primarily through the Company and subsidiary companies established in the markets in which the Group trades.
None of the entities within the Group are subject to externally imposed capital requirements.
Operating cash flows are used to maintain and expand the Group’s production and distribution assets, as well as make the routine outflows
of tax, dividends and repayment of maturing debt. The Group’s policy is to borrow centrally, using a variety of capital market issues and
borrowing facilities, to meet anticipated funding requirements. The Group established a debt facility in Singapore during 2016 to assist with
Asian funding.
The Group’s Audit and Risk Committee reviews the capital structure of the Group on a semi-annual basis. Based upon recommendations of
the Committee, the Group will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as
well as the issue of new debt or redemption of existing debt with third parties and, if appropriate, related parties.
Gearing ratio
The gearing ratio at the end of the year was as follows:
Debt1
Cash and bank balances
Net debt
Equity2
Net debt divided by the sum of net debt and shareholders’ equity
1. Debt is defined as long and short-term borrowings, as detailed in note 21.
2. Equity includes all capital and reserves that are managed as capital.
Categories of financial instruments
Financial Assets
Cash and bank balances
Loans and receivables
Other financial assets
Financial liabilities
Derivative instruments in designated hedge accounting relationships
Loans and payables
2016
$’000
55,446
(37,653)
17,793
178,263
9.1%
2015
$’000
44,000
(36,931)
7,069
132,915
5.1%
37,653
134,636
471
172,760
36,931
107,076
391
144,398
834
215,924
216,758
424
138,908
139,332
fINANcIAL rISK mANAGEmENt OBjEctIVES
36.2
The Group’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets
and monitors and manages the financial risks relating to the operations of the Group.
The Group seeks to minimise the effects of currency risk and interest rate risk by using derivative financial instruments to hedge these risk
exposures. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written
principles on foreign exchange risk, interest rate risk and the use of financial derivatives. Compliance with policies and exposure limits
is reviewed internally on a continuous basis. The Group does not enter into or trade financial instruments, including derivative financial
instruments, for speculative purposes.
SIGNIfIcANt AccOuNtING pOLIcIES
36.3
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the
basis on which revenues and expenses are recognised, in respect of each class of financial asset and financial liability, are disclosed in note 2.6
to the Consolidated Financial Statements.
97
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
36 fINANcIAL INStrumENtS (cONt.)
fOrEIGN currENcY rISK mANAGEmENt
36.4
The Group undertakes transactions denominated in foreign currencies; consequently exposures to exchange rate fluctuations arise. Exchange
rate exposures are managed within approved policy parameters utilising forward exchange contracts.
The Group is mainly exposed to New Zealand Dollar (NZD), United States Dollar (USD), and Canadian Dollar (CAD).
The Australian Dollar carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the
reporting period are as follows:
United States Dollar (USD)
New Zealand Dollar (NZD)
Euro (EUR)
Canadian Dollar (CAD)
Swiss Franc (CHF)
Chinese (CNY)
Japanese Yen (JPY)
South Korean Won (KRW)
Thai Baht (THB)
Singapore Dollars (SGD)
Malaysian Ringgit (MYR)
liABilitiEs
2015
$’000
4,759
7,678
79
226
(13)
-
-
-
-
-
-
2016
$’000
19,363
10,917
832
690
93
4
17
47
5
2
7
2016
$’000
3,045
297
-
-
-
57
-
-
12
-
-
AssEts
2015
$’000
1,158
19
-
-
-
-
-
-
-
-
-
Foreign currency sensitivity analysis
The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian Dollar against the relevant foreign
currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to Key Management Personnel and represents
management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive
number below indicates an increase in profit or equity where the Australian Dollar strengthens 10% against the relevant currency. For a
10% weakening of the Australian Dollar against the relevant currency, there would be a comparable impact on the profit or equity, and the
balances below would be negative.
USD impact
NZD impact
EUR impact
CAD impact
CHF impact
CNY impact
JPY impact
KRW impact
pRofit/ (loss)
10% incREAsE
10% dEcREAsE
2016
$’000
1,483
965
75
63
9
(5)
2
4
2015
$’000
327
694
7
21
(1)
-
-
-
2016
$’000
(1,813)
(1,180)
(93)
(76)
(10)
6
(2)
(5)
2015
$’000
(400)
(851)
(9)
(25)
1
-
-
-
This is mainly attributable to the exposure outstanding on foreign currency payables in the Group at the end of the reporting period.
USD impact
NZD impact
EQuitY
10% incREAsE
10% dEcREAsE
2016
$’000
(2,499)
(24)
2015
$’000
-
(2,273)
2016
$’000
2,098
73
2015
$’000
-
819
From time to time during the year, the Group entered into NZD, USD and CAD forward exchange contracts in order to reduce foreign
currency risk.
option contracts
The Group did not utilise any option contracts during the year, so there were no open contracts at 30 June 2016 (2015: $nil).
Forward foreign exchange contracts
The Group utilised forward foreign exchange contracts during the year. At 30 June 2016 there were open contracts of NZD2.0m, USD18.5m
and MYR 1.2m (2015: NZD19.4m, USD3.1m and CAD 0.5m). These contracts are a partial hedge for upcoming raw material purchases.
98
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
36 fINANcIAL INStrumENtS (cONt.)
INtErESt rAtE rISK mANAGEmENt
36.5
The Group is exposed to interest rate risk as it borrows funds on a floating interest rate basis. The risk is managed by the Group by the use of
interest rate swap contracts.
The following table sets out the Group’s exposure to interest rate risk.
Financial liabilities
Borrowings
Interest rate swap1
Net exposure
1. Represents the notional amount of the interest rate swaps.
2016
$’000
2015
$’000
(55,446)
20,000
(35,446)
(44,000)
44,000
-
The following table details the notional amounts and remaining terms of interest rate swap contracts outstanding as at reporting date:
outstAndinG fiXEd foR floAtinG contRActs
Less than 1 year
1 to 2 years
2 to 5 years
> 5 years
AVERAGE contRActEd
fiXEd intEREst RAtE
notionAl pRincipAl Amount
fAiR VAluE
2016
%
5.61
-
1.89
-
2.82
2015
%
3.28
5.61
-
-
3.54
2016
$’000
5,000
-
15,000
-
20,000
2015
$’000
39,000
5,000
-
-
44,000
2016
$’000
(90)
-
(20)
-
(110)
2015
$’000
(173)
(250)
-
-
(423)
The interest rate swaps settle on a quarterly basis. The floating rate on the interest rate swaps is the Australian bank bill swap bid rate.
All interest rate swap contracts are designated as cash flow hedges.
The Group will settle the difference between fixed and floating interest on a net basis.
All other financial assets and liabilities (in the current and prior financial years) are non-interest bearing.
Interest Rate Sensitivity Analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative
instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout
the year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to Key Management Personnel and
represents management’s assessment of the possible change in interest rates.
For the year ended 30 June 2016, if interest rates had been 50 basis points higher or lower and all other variables were held constant,
the Group’s net profit would decrease by $273 thousand (2015: $342 thousand) or increase by $273 thousand (2015: $342 thousand)
respectively as a result of changes in the interest rates applicable to commercial bank bills.
For the year ended 30 June 2016, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the
Group’s other equity reserves would increase by $154 thousand or decrease by $166 thousand respectively (2015: increase by $92 thousand
or decrease by $132 thousand respectively) mainly as a result of the changes in the fair value of the interest rate swap.
There has been no change to the manner in which the Group manages and measures the risk from the previous year.
Interest Rate Swap Contracts
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated
on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of
variable rate debt. The fair value of interest rate swaps at the end of the reporting period is determined by discounting the future cash flows
using the curves at the end of the reporting period and the credit risk inherent in the contract and is disclosed below. The average interest rate
is based on the outstanding balances at the end of the financial year.
The Group entered into $15m in new interest rate swaps during the 2016 financial year, and $39m matured during the year.
99
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
36 fINANcIAL INStrumENtS (cONt.)
crEDIt rISK mANAGEmENt
36.6
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has
adopted a policy of only dealing with creditworthy counterparties. The Group only transacts with entities that have a positive credit history.
The information used to determine creditworthiness is supplied by independent rating agencies where available and, if not available, the
Group uses publicly available financial information, trade references and their own trading record to rate their major customers.
Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with sound credit ratings
assigned by international credit-rating agencies.
The carrying amount of financial assets recorded in the consolidated Financial Statements, net of any allowances for losses, represents the
Group’s maximum exposure to credit risk.
There has been no change to the Group’s exposure to credit risk or the manner in which it manages and measures the risk from the previous
year.
LIQuIDItY rISK mANAGEmENt
36.7
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity
risk management framework for the management of the Group’s short-, medium- and long-term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate reserves and banking facilities and through the continual
monitoring of forecast and actual cash flows.
liquidity and Interest Risk
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay. The tables include both interest and principal cash flows.
wEiGHtEd AVERAGE
EffEctiVE intEREst
RAtE %
<1 montH
$’000
1-3 montHs
$’000
3 montHs
to 1 YEAR
$’000
1-5 YEARs
$’000
5 YEARs
$’000
totAl
$’000
2016
Trade and other payables
Borrowings
2015
Trade and other payables
Borrowings
0.00
2.82
0.00
3.54
-
-
-
-
-
-
160,478
-
160,478
94,908
-
94,908
-
-
-
-
-
-
-
55,446
55,446
-
44,000
44,000
-
-
-
-
-
-
160,478
55,446
215,924
94,908
44,000
138,908
There has been no change to the Group’s exposure to liquidity risks or the manner in which it manages and measures the risk from the
previous year.
The following table details the Group’s liquidity analysis for its derivative financial instruments. The table has been drawn up based on the
undiscounted net cash inflows/(outflows) on the derivative instrument that settle on a net basis and the undiscounted gross inflows/(outflows)
on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been
determined by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date.
<1 montH
$’000
1-3 montHs
$’000
3 montHs
to 1 YEAR
$’000
1-5 YEARs
$’000
5 YEARs
$’000
totAl
$’000
(84)
(84)
(89)
(89)
-
-
-
-
(74)
(74)
40
40
(257)
(257)
(84)
(84)
-
-
-
-
(118)
(118)
(430)
(430)
2016
Net settled:
Interest rate swaps
2015
Net settled:
Interest rate swaps
100
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
36 fINANcIAL INStrumENtS (cONt.)
fAIr VALuE Of fINANcIAL INStrumENtS
36.8
The Directors consider that the carrying amounts of financial assets and financial liabilities recognised at amortised cost in the consolidated
Financial Statements approximate their fair values.
Valuation techniques and assumptions applied for the purpose of measuring fair value
The fair values of financial assets and financial liabilities are determined as follows:
• the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are
determined with reference to quoted market prices;
• the fair value of derivative instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow
analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives and option pricing
models for optional derivatives; and
• the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally
accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions.
Fair value measurements recognised in the consolidated statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into
Levels 1 to 3 based on the degree to which the fair value is observable.
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
lEVEl 1
$’000
lEVEl 2
$’000
lEVEl 3
$’000
totAl
$’000
2016
Financial Assets at FVtpl
Derivative financial assets
Non-derivative financial assets held for trading
Available-for-sale Financial Assets
Unquoted equities
Asset-backed securities reclassified from fair value through profit or loss
Total
Financial liabilities at FVtpl
Derivative financial Liabilities
Total
2015
Financial Assets at FVtpl
Derivative financial assets
Non-derivative financial assets held for trading
Available-for-sale Financial Assets:
Unquoted equities
Asset-backed securities reclassified from fair value through profit or loss
Total
Financial liabilities at FVtpl
Derivative financial liabilities
Total
There were no transfers between Levels 1 and 2.
Derivatives
-
-
-
-
-
-
-
-
-
-
-
-
-
-
471
-
471
110
110
-
-
lEVEl 1
$’000
lEVEl 2
$’000
lEVEl 3
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
391
-
391
423
423
-
-
423
423
-
-
471
-
471
110
110
totAl
$’000
-
-
391
-
391
Interest rate swaps are measured at present value of future cash flows estimated and discounted based upon the applicable yield curves
derived from quoted interest rates.
101
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
37 ASSEtS pLEDGED AS SEcurItY
In accordance with the security arrangements of liabilities, as disclosed in note 21 to the Consolidated Financial Statements, all assets of the
Parent Entity have been pledged as security. The holder of the security does not have the right to sell or repledge the assets.
38 BuSINESS cOmBINAtIONS
38.1
On 10 May 2016 Blackmores Limited acquired 100% of Global Therapeutics Pty Limited and 100% of New Century Herbals Pty Limited.
SuBSIDIArIES AcQuIrED
38.2
cONSIDErAtION trANSfErrED
Cash
Total
ASSEtS AcQuIrED AND LIABILItIES ASSumED At thE DAtE Of AcQuISItION
38.3
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
non-current assets
Deferred tax assets
Plant and equipment
Intangible assets
Current liabilities
Trade and other payables
Tax liabilities
Provisions
38.4
GOODWILL ArISING ON AcQuISItION
Consideration transferred
Less: fair value of identifiable net assets acquired
Goodwill arising on acquisition
38.5 NEt cASh OutfLOW ON AcQuISItION Of SuBSIDIArIES
Consideration paid in cash
Less: cash and cash equivalent balances acquired
2016
$’000
22,880
22,880
10 mAY 2016
219
3,349
3,976
262
187
209
14,460
(2,642)
(12)
(297)
19,711
22,880
(19,711)
3,169
22,880
(219)
22,661
ImpAct Of AcQuISItION ON thE rESuLtS Of thE GrOup
38.6
Included in profit for the year is $300 thousand attributable to the additional business generated by Global Therapeutics Limited. Revenue for
the year includes $3,100 thousand.
Had this business combination been effected on 1 July 2015, the revenue of the Group from continuing operations would have been $20,627
thousand and the profit for the year from continuing operations would have been $1,781 thousand. The directors of the Group consider these
‘pro-forma’ numbers to represent an approximate measure of the performance of the combined group on an annualised basis and to provide
a reference point for comparison in future periods.
In determining the ‘pro-forma’ revenue and profit of the Group had Global Therapeutics been acquired at the beginning of the current year,
the directors have calculated depreciation of plant and equipment acquired on the basis of the fair values arising in the initial accounting for
the business combination rather than the carrying amounts recognised in the pre-acquisition financial statements.
2015
No subsidiaries were acquired during the financial year ended 30 June 2015.
102
Blackmores annual report 2016
NOtES tO thE fINANcIAL StAtEmENtS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016
39 pArENt ENtItY INfOrmAtION
The accounting policies of the Parent Entity, which have been applied in determining the financial information shown below, are the same as those
applied in the consolidated Financial Statements. Refer to note 2 for a summary of the significant accounting policies relating to the Group.
Financial position
Assets
Current assets
Non-current assets
Total assets
liabilities
Current liabilities
Non-current liabilities
Total liabilities
equity
Issued capital
Retained earnings
Reserves
Total equity
Financial performance
Profit for the year
Other comprehensive income
Total comprehensive income
2016
$’000
2015
$’000
207,705
154,191
361,896
127,561
114,822
242,383
160,735
61,096
221,831
138,209
1,041
139,250
37,753
98,808
3,504
140,065
37,753
59,493
5,887
103,133
91,164
537
91,701
57,313
(400)
56,913
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The Company has provided Letters of Support in relation to Pat Health Ltd and Blackmores (Taiwan) Ltd, both wholly owned subsidiaries of
the Group.
The directors have a reasonable expectation that the Company will have sufficient financial accommodation to enable payment of the
subsidiaries' debts as and when they fall due for a period of at least 12 months from the date of signing the local Financial Statements of the
above mentioned entities.
Contingent liabilities
The Directors do not believe there are any contingent liabilities as at 30 June 2016 (2015: $nil).
Commitments for the acquisition of property, plant and equipment by the parent entity
plant and equipment
Not longer than 1 year
3,906
3,906
9,800
9,800
40 EVENtS AftEr thE rEpOrtING pErIOD
Final dividend
The Directors declared a fully franked final dividend of 210 cents per share on 24 August 2016 as described in note 28.
41 ApprOVAL Of fINANcIAL StAtEmENtS
The Consolidated Financial Statements were approved by the Board of Directors and authorised for issue on 24 August 2016.
103
Blackmores annual report 2016
ADDItIONAL
INfOrmAtION
NumBErS Of hOLDErS Of EQuItY
SEcurItIES AS At 20 juLY 2016
OrDINArY ShArE cApItAL
17,225,807 fully paid ordinary shares are held by 13,694
shareholders.
All issued ordinary shares carry one vote per share, and are entitled
to participate in dividends.
There are no options in existence.
There are no restricted securities.
There is no current on-market buy-back.
DIStrIButION Of hOLDErS Of EQuItY SEcurItIES
spREAd of HoldinGs
no. of oRdinARY sHAREHoldERs
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Holdings less than a marketable parcel
SuBStANtIAL ShArEhOLDErS
12,096
1,391
108
81
18
13,694
167
fullY pAid
oRdinARY sHAREHoldERs
numBER
pERcEntAGE
Marcus C Blackmore
4,219,835
24.50
tWENtY LArGESt hOLDErS Of QuOtED EQuItY
SEcurItIES AS At 20 juLY 2016
fullY pAid
sHAREHoldERs
oRdinARY
numBER pERcEntAGE
Mr M C Blackmore
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
Dietary Products Aust Pty Limited
National Nominees Limited
Milton Corporation Limited
RBC Investor Services Australia Nominees P/L
Blackmore Foundation Pty Limited
BNP Paribas Nominees Pty Limited
HSBC Custody Nominees (Australia) A/C 3
AMP Life Limited
Pan Australian Nominees Pty Limited
Mrs E M Whellan
Ms J A Tait
Citicorp Nominees Pty Limited
(Colonial First State Inv A/c)
Mr R Shepherd
Rathvale Pty Limited
Blackmore Superannuation Fund
Mrs P G Wright
Total
3,316,401
1,050,235
774,556
650,858
601,270
490,418
367,014
295,177
278,200
260,847
254,923
217,288
192,830
191,934
118,813
117,201
115,000
103,205
99,230
93,462
9,588,862
19.25
6.10
4.50
3.78
3.49
2.85
2.13
1.71
1.62
1.51
1.48
1.26
1.12
1.11
0.69
0.68
0.67
0.60
0.58
0.54
55.67
104
Blackmores annual report 2016
cOmpANY
INfOrmAtION
company Secretary
The Company Secretaries are Cecile Cooper and Aaron Canning.
principal place of Business
20 Jubilee Avenue
Warriewood NSW 2102
Telephone +61 2 9910 5000
Registered Office
20 Jubilee Avenue
Warriewood NSW 2102
Telephone +61 2 9910 5000
Share registry
Computershare Investor Services Pty Limited
Level 3, 60 Carrington Street
Sydney NSW 2000
(GPO Box 7045 Sydney NSW 1115)
Telephone +61 2 8234 5000
Facsimile +61 2 8234 5050
Securities Exchange Listing
Blackmores Limited’s ordinary shares are quoted by the
Australian Securities Exchange Limited, listing code BKL.
Direct payment to Shareholders’ Bank Accounts
Dividends may be paid directly to bank, building society or credit
union accounts in Australia. These payments are electronically
credited on the dividend date and confirmed by mail. The Company
encourages you to participate in this arrangement, so please contact
our share registry.
change of Address
Shareholders who have changed address should advise our share
registry in writing.
tax file Number
There may be benefit to shareholders in lodging their tax file number
with the share registry.
corporate Governance principles
The Corporate Governance Principles adopted by the
Board are available on our website at blackmores.com.au
(go to ‘Investors’, then click on ‘Corporate Governance’)
or contact the Company Secretary.
Annual report mailing
Shareholders who do not want the annual report or who are
receiving more than one copy should advise the share registrar
in writing. These shareholders will continue to receive all other
shareholder information.
The annual report is available on our website at
blackmores.com.au
(go to ‘Investors’, then click on ‘Annual Reports’).
to consolidate Shareholdings
Shareholders who want to consolidate their separate shareholdings
into one account should advise the share registrar in writing.
Investor Information
Securities analysts and institutional investors seeking information
about the Company should contact Aaron Canning, Chief Financial
Officer on +61 2 9910 5106.
cOmpANY INfOrmAtION
Board of directors
Directors who are executives of the Group:
Marcus C Blackmore (Chairman of Directors)
Christine Holgate (Chief Executive Officer)
Directors who are not executives of the Group:
David Ansell
John Armstrong
Stephen Chapman
Helen Nash
Brent Wallace
Shareholder Discount plan
Shareholders can buy products for personal use at 30% off the
recommended retail price. All shareholders have been given details
of the plan, but please contact the Company Secretary
on +61 2 9910 5137 if you would like more information.
Auditor
Deloitte Touche Tohmatsu
Solicitor
David Lemon
Blackmores Online
Blackmores has a popular website containing information on
a more natural approach to health and the Company in general.
The address is blackmores.com.au.
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105
Blackmores annual report 2016
NOtES
106
Blackmores annual report 2016 Blackmores limited
Australia’s Leading Natural Health Company
ACN 009 713 437
20 Jubilee Avenue
Warriewood NSW 2102, Australia
Tel: +61 2 9910 5000
Fax: +61 2 9910 5555
blackmores.com.au