ANNUAL REPORT 201717
p02
About Us
p04
Highlights
p07
Chairman’s
Introduction
p08
CEO’s Year
In Review
Operating + Financial Review
20
Consolidated Financial Statements 78
Group Strategy
Group and Divisional Results
Financial Review
Operating Review
Group Risks
22
24
26
28
30
Executive Team
Directors’ Profiles
Auditor’s Independence Declaration
Independent Auditor’s Report
Directors’ Declaration
Additional Information
Company Information
44
48
72
73
77
118
119
p32
Sustainability,
Community +
People
p50
Directors’
+ Remuneration
Reports
Annual General Meeting
The 54th Annual General Meeting of the
Company will be held at 11am on 26 October
2017 at the Blackmores Campus, 20 Jubilee
Avenue, Warriewood NSW 2102.
Cover image: Fiona Yeo, Assistant Marketing
Manger, Export Sales. Fiona is profiled in this
report on page 42.
OUR
ANNUAL
REPORT
2017
OUR
VALUES
OUR
PURPOSE
#4 STRATEGIC
PRIORITIES
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.
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.
Passion for Natural Health
Integrity
Respect
Leadership
Social Responsibility
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.
#1 Consumer Centricity
#2 Asia Growth
#3 Product Leadership
#4 Operational Effectiveness
THE 2017 ANNUAL REPORT
OF BLACKMORES LIMITED
PROVIDES INFORMATION ON THE
ORGANISATION AND COMPANY
PERFORMANCE FOR THE YEAR
1 JULY 2016 TO 30 JUNE 2017.
1
BLACKMORES ANNUAL REPORT 2017 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 17 markets around the world.
supporting charitable
community initiatives.
Industry leaders for
85 years, Blackmores
established the
Blackmores Institute in
2012 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 200
publicly-listed company
with a market capitalisation
of $1.5 billion. The Group
employs 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.
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 and rigorous
quality checks. Blackmores
respects the innate link
between healthy people
and a healthy planet,
implementing sustainable
packaging and waste-
reduction practices and
OUR BRANDS
ABOUT
02
ISOWHEY
BIOCEUTICALS
BLACKMORES
PURE ANIMAL
WELLBEING
FUSION
HEALTH
ORIENTAL
BOTANICALS
2
BLACKMORES ANNUAL REPORT 2017 GLOBAL FOOTPRINT
Operations and Markets
COMPANY HEADQUARTERS, OPERATIONS
AND SIGNIFICANT REVENUES
OPERATIONS AND SIGNIFICANT
REVENUE
JOINT VENTURE OPERATIONS OR
OPERATIONS AND EMERGING MARKETS
BRAND PRESENCE
3
BLACKMORES ANNUAL REPORT 2017AUSTRALIANEW ZEALANDINDONESIA MONGOLIA SINGAPORE (REGIONAL HEADQUARTERS) JAPAN KOREA CHINA TAIWAN HONG KONG MACAUVIETNAMCAMBODIATHAILANDMALAYSIA USAKAZAKHSTAN 04
NO.1
VITAMIN AND
SUPPLEMENT
COMPANY IN
AUSTRALIA –
BLACKMORES
HIGHLIGHTS
NO.1
NO.1
9
110
1.9
MILLION
1.2
MILLION
1ST
PRACTITIONER BRAND
– BIOCEUTICALS
HEALTH FOOD STORE
BRAND – FUSION HEALTH
CONSECUTIVE YEARS AS
AUSTRALIA’S MOST TRUSTED
BRAND IN VITAMINS &
SUPPLEMENTS
NEW PRODUCTS LAUNCHED
ACROSS THE GROUP
MEMBERS ACROSS
ONLINE AND SOCIAL
MEDIA PLATFORMS
ACROSS THE GROUP
EDUCATION TOUCHPOINTS
ACROSS THE GROUP
RELEASED INAUGURAL
BLACKMORES GROUP
SUSTAINABILITY REPORT
4
BLACKMORES ANNUAL REPORT 2017 HIGHLIGHTS
NET PROFIT
AFTER TAX
58
$MILLION
Richard Henfrey, Blackmores’ newly appointed Chief Executive Officer.
5
BLACKMORES ANNUAL REPORT 2017 MARCUS BLACKMORE
In February I announced to shareholders that I was taking a sabbatical after 50 years in the
business to give me the opportunity to ‘clean out the garage’, metaphorically speaking. Over the
years we accumulate so much – some of it invaluable relics of our rich history and some of it junk
– and occasionally it’s good to review what we have, so we can focus on our vision for the future
and what we will need to get us there.
This is also true for
Blackmores. We have
refocused on the pillars of
growth for our business –
our unwavering values, a
strong purpose and a clear
strategy – and as a result
our company has stronger
foundations.
My sabbatical was an
opportunity for Stephen
Chapman to step into the
role of Chairman, after
more than 20 years serving
on the Board, where he
did an outstanding job. I’m
pleased he will continue to
share his extensive business
expertise and strong
corporate governance
experience as he continues
in the role.
This will enable me to
devote more to the areas
of the business where I
have been spending an
increasing amount of time
in recent years, including
our invaluable relationships
with governments,
regulators and business
partners in Asia.
As the financial year
drew to a close, we
announced the news that
our CEO of the past nine
years, Christine Holgate,
would be moving on to
take on new challenges as
the CEO of Australia Post.
While this is disappointing
for me personally,
Christine leaves behind
an exceptionally capable
executive team and
emerging opportunities
that will yield continued
growth for our business.
I would like to thank
Christine for the wonderful
contribution she has made.
She has been a change
agent with a focus on
business transformation
and driving a performance
culture. She has nurtured
our people and our values
and enhanced our strategy
enabling Blackmores to
expand our brand portfolio
and our geographic
footprint. She has served
as a wonderful role model
for our staff and for women
in corporate life. She
leaves Blackmores with our
very best wishes and our
deepest gratitude.
I am looking forward
to working with Richard
Henfrey in his new role as
Chief Executive Officer of
Blackmores.
Our business has had
its challenges in the past
12 months, and we have
met them standing up and
are stronger for it. We are
better prepared to grasp
the countless opportunities
that we have before us as
the demand for high quality
natural health solutions
continues to grow.
As a substantial
shareholder, I share the
disappointment of our
investors that this year’s
results have not matched
last year’s exceptional
profits; however, I am
confident about the
future opportunities for
Blackmores, knowing
that our ‘house is in
order’ and I thank you
for your support.
The best of health
Marcus C. Blackmore AM
6
BLACKMORES ANNUAL REPORT 2017 CHAIRMAN’S INTRODUCTION
Health checks are part of the vernacular at Blackmores. Blackmores Institute and BioCeuticals’
innovation teams are constantly investigating the latest in diagnostics to better understand the
markers of inflammation or the indicators of compromised wellbeing.
Boards take the same
approach when looking
at the health of a business,
assessing the markers
and indicators of how
a company is tracking
and how robust its
underpinnings are to
deliver the strategy.
Though the remarkable
momentum of recent
years was broken by a
disappointing first quarter
result, I’m pleased with the
progress we have made
since then to strengthen the
core and refine our business
strategy for the next phase
of growth. We have become
a much more diversified
and capable business in
recent years and we are in
a growing global business
sector – natural healthcare.
The profit after tax of
$58 million this year was
disappointing. Whilst lower
that the exceptional profit
last year it was a solid
performance compared to
our 2014 and 2015 profits
of $25 million and $47
million respectively. Our
balance sheet is sound and
return on shareholders’
equity remain strong.
The board has declared
a final dividend of 140 cents
per share making the total
dividend for the 2017 year
270 cents per share. We
believe this is consistent
with the profit for the year,
our sound financial
position and our
confidence in the future.
Leadership has also
been a theme this year
with the Board initiating
an evaluation process
of internal and external
candidates to appoint a
new Chief Executive Officer
following the resignation
of Christine Holgate. The
Board was in agreement
that for Blackmores to
continue our growth
journey, we would need
a CEO who understands
Blackmores’ unique
culture and heritage, has
the ability to define and
deliver strategy and has the
experience to carry forward
our vision for Asia.
The appointment of
Richard Henfrey, who was
previously Blackmores’
Chief Operating Officer,
will ensure a seamless
transition for our team
and the continuation of
our growth strategy. He
understands the natural
healthcare industry,
has demonstrated his
management capability and
he met all of the Board’s
criteria to become the next
leader of our business.
Asia continues to be
important to our vision
and therefore it was very
significant that Blackmores
was appointed in July in a
key leadership advisory role
to the China Association for
Quality Inspection (CAQI),
a high-level non-profit
Chinese organisation with
responsibility for product
quality inspection.
The recognition as a
Vice President Company
of CAQI was furthered with
the appointment of Peter
Osborne, Blackmores’
Managing Director, Asia, as
Vice Chairman of CAQI’s
Advisory Committee – the
first and only foreign citizen
to hold a CAQI board
position. This reflects the
respect that China has
for Australia’s stringent
regulatory systems and
its confidence in the
quality of goods
manufactured in Australia.
Our commitment
to the communities in
which we operate and to
innovation was remarkably
demonstrated this year
when Marcus and Caroline
Blackmore, through
their foundation, made a
significant contribution
to support research at
the National Institute of
Complementary Medicine.
Together with Blackmores’
contribution, this was the
largest ever donation
received by Western
Sydney University and
is a strong foundation for
our industry’s future.
I’d like to thank my
fellow Board members who
have used their extensive
experience to help
navigate the challenges of
the past year. I particularly
thank Marcus Blackmore
who, as always, brings great
vision, values and passion
to this company.
I also thank the
Blackmores Executive
Team. The decline in
executive incentive
payments is consistent
with our approach to align
executive remuneration to
shareholder returns. It does
not reflect the passion or
commitment of this very
strong team, who have
worked tirelessly to lead our
wonderful people through
this period of change.
As well as making
the recent leadership
changes, we have refined
the business strategy to
pursue the opportunities on
our doorstep and to better
focus on our strengths and
competitive advantages.
I look forward to sharing
our progress with you as
we embark on the next
stage of our journey.
Stephen Chapman
Chairman
7
BLACKMORES ANNUAL REPORT 2017 CEO’S YEAR IN REVIEW
Following two exceptional years of growth, 2016/2017 was a rebalancing
year for the Blackmores Group, delivering $693 million in sales (down 3%)
and a net profit after tax (NPAT) of $58 million (down 42%) on the prior year.
GROUP
SALES*
$693
MILLION
After a challenging
start to the year, we are
pleased with our recent
performance. We finished
the year in a stronger
position than we entered
it. We have changed
our expense structure
to reflect a different
trading environment,
although we maintained
investment in core future
growth platforms; we
have made appropriate
provisions to protect us
in future years and, with
tight management of our
inventory and cash, we
exit the year with a strong
balance sheet.
TRANSFORMING OUR
BUSINESS TO ADDRESS
NEW CHALLENGES
In 2015 and 2016 we
were pleased to share
extraordinary profit results
with our shareholders.
This was the outcome
of strong performances
across all brands and
markets and was bolstered
by the opening of free
trade zones in China. The
rapid and unprecedented
growth compromised our
continuity of supply of key
ingredients and product
lines and in response,
inventory was increased
in line with the growth
trajectory.
Speculation in
April 2016 about
potential regulatory
changes in China impacted
the buying patterns of
Chinese entrepreneurs
and tourists who previously
were purchasing through
Australian retailers. The
decline in sales to Chinese
consumers through
Australian retailers was
significant and came
without warning. This
was evident in the high
levels of stock in the
market in the first
quarter of the 2016/2017
financial year which
could be seen in our
first quarter results.
The demand for
Blackmores products in
China remained strong
throughout the year
although the route to
serve consumers changed
significantly. Blackmores
responded quickly to the
changes in the market
by both building a new
China Export Team and
strengthening our in-
country China business
and tightly managing our
inventory. We closed the
year with direct China sales
up 71% at $132 million
and, including estimated
sales through Australian
retailers, China accounts for
approximately $250 million
Christine Holgate.
* ‘Sales’ refers to sales net of discounts.
8
BLACKMORES ANNUAL REPORT 2017 of Group sales.
Although sales
recovered as the
year progressed, the
changed Australian retail
environment saw a return
to market competition and
normalised levels of trading
terms, which diminished
our profits further on a year
to year comparison.
Management
responded to the pressure
on profits across our
Blackmores Australia
business by realigning
expenses without
compromising our growth
initiatives. Among these
growth initiatives were new
businesses in Indonesia
and Vietnam, supporting
the growth of BioCeuticals
and Global Therapeutics;
developing a world first
online education platform
and the fit out of a state-of-
the-art distribution centre
in Western Sydney that will
support future growth for
the Group.
STRONG FOUNDATIONS
Business fundamentals are
strong and the balance
sheet demonstrates
the focus on inventory,
cash conversion, debt
management and
working capital.
The investment in
infrastructure, including
updated technology
platforms, automation of
processes and the new
distribution centre, will
support future growth. As
we grow globally, these
foundations will be more
important than ever before
as we continue to build
scale across our business.
Retail markets are
no longer defined by
geographic boundaries
and so a global approach
to channel management
and e-commerce has been
necessary. Continued
investment in this area was
undertaken in the year with
further work required as we
develop these capabilities.
The Group achieved
quarter on quarter sales
growth over the year
supported by healthy
consumer demand.
Macro global trends
towards natural health,
ageing populations and
fast growing middle classes
in key markets in Asia are
also encouraging.
Brand health is
strong with Blackmores
receiving recognition for
the ninth year running
as most trusted brand in
the category by Reader’s
Digest and maintaining
our leadership position in
Australia.
New product
development has yielded
strong results this year
with key launches such
as shelf-stable probiotics
in Australia and line
extensions for BioCeuticals
delivering increased sales
and shelf space.
Blackmores Institute
and BioCeuticals continue
to lead in education and
research, with more than
1.2 million education
touchpoints across the
Group and 40 research
projects underway.
9
BLACKMORES ANNUAL REPORT 2017 CEO’S YEAR IN REVIEW
SALES
$372
MILLION
SALES
$216
MILLION
SALES
$102
MILLION
SALES
$4
MILLION
NUTRITIONAL FOODS
Sales of $4 million from
Blackmores’ infant nutrition
products through our
Bemore partnership
with Bega Cheese were
particularly impacted by
regulatory uncertainty
in China. Half of these
sales are accounted for
in Blackmores’ Financial
Statements through
our partnership with
Bega Cheese. Prudent
provisions have been taken
throughout the year against
all finished inventory to
reduce the possibility of
future potential risks. As
we look ahead, there are
opportunities emerging
to expand further into
export markets where
consumer demand for
high quality product
offerings is growing.
BIOCEUTICALS GROUP
BioCeuticals and Global
Therapeutics delivered
sales of $102 million.
BioCeuticals achieved
sales of almost $80 million
which was a 15% increase
compared to the prior year.
BioCeuticals exceeded the
ten year sales and earnings
goal, set when the business
was acquired in 2012, within
five years. On a like-for-like
comparison, sales of Global
Therapeutics products were
up 11% and the business is
now successfully integrated
into the Blackmores Group.
BioCeuticals continues to
be the leading practitioner
brand in Australia, and
with pioneering product
innovation it has secured
60% market share in
pharmacy in this category.
Its education programs are
renowned as world-class
and they are now in the
top 10 health podcasts in
the world.
AUSTRALIA & NEW
ZEALAND
Blackmores Australia and
New Zealand sales of
$372 million, including
Pure Animal Wellbeing
(2016: $482 million) were
down 23% primarily due
to Chinese tourists and
exporters changing their
buying patterns and
following a return to market
competitive pressures.
Excluding the impact of
Chinese influenced sales,
our Blackmores branded
domestic sales were in line
with the prior year.
ASIA
Our Asia direct sales were
$216 million, up 36%
highlighting the strategic
importance of Asia as a
growth platform for the
Group.
The particular
importance of the China
market is evident with
Blackmores China direct
sales, including sales
through our Export division,
at $132 million, up 71%.
Many of our other
established Asian markets
experienced strong
growth, securing market
share and benefiting from
new products, increased
investment in the brand
and strong support from
the Blackmores Institute. In
local currencies Thailand
was up 8%, Malaysia was
up 11%, Singapore was up
13%, Hong Kong up 50%,
Taiwan was up 58% and
Indonesia added $4 million
in sales. As we moved to
our planned new operating
model in Korea to improve
profits, sales there were
down 70%.
Excluding the impact
of both China and Korea,
other Asia sales were $81
million, up 15%.
In the year we
launched in Indonesia
and have progressed the
establishment of a business
in Vietnam, where we are
preparing to launch with
a range of Blackmores
products in coming months.
Blackmores Institute
expanded its influence
across Asia with new
partnerships agreed with
Rangsit University Thailand,
National University of
Malaysia and Taylor’s
University, Malaysia.
10
BLACKMORES ANNUAL REPORT 2017 CHALLENGES
The Blackmores Group has
more than 1,300 products
across all brands and
markets. Consequently,
forecasting demand
and product mix is more
complex than ever before.
In order to ensure the
quality of our products
is never compromised,
there is an average 12
week lead time to produce
each product line. The
unforeseen disruption in
Australia in the first quarter
resulted in our inventory
peaking in September.
Careful management
delivered a significant
reduction throughout the
year with Group inventory
down at $85 million at year
end. However, in order
to protect against future
potential uncertainty and
ageing inventory, we have
included an additional $10
million in provisions above
normal levels, impacting
earnings by the same
amount.
In 2016 when some
key products were scarce
in Australia we benefited
from lowered promotional
discounts. Demand and
supply of these products
has now rebalanced and
consequently typical trade
spend levels and intense
competition has returned.
The significant change in
Australia highlights the
importance of continuing
to diversify the business
into new markets such as
practitioner products and
new geographies to ensure
we are not reliant on any
one business.
Adapting the cost
base has been undertaken
whilst continuing to invest
for future growth and I’m
pleased that controlling
expenses has been a
focus throughout the year
with underlying business
costs carefully managed
to enable funding of the
engines that will deliver
returns in the medium term,
such as our new business
in Indonesia, a world class
e-learning platform and a
state-of-the-art distribution
centre.
OUTLOOK
The financial health of the
business gives Blackmores
a strong entry into the new
financial year. The Group
exited the 2016/2017 year
in a stronger position than
we entered it.
Our underlying
performance has improved
as the year progressed.
The balance sheet has
significantly strengthened,
with inventory and debt
reducing and cash
generation improving in
the last 6 months. We have
taken prudent provisions
to reduce future risk and
our investment in a world-
class distribution centre
in Western Sydney and in
new technology platforms
will support the growth
we anticipate, including
additional volumes from
our emerging businesses
in Asia.
In line with our updates
over the year, reported
profits for the full year did
not meet those of last year’s
exceptional results, though
represent 25% growth on
the very strong 2015 year.
The Board and
management expect year-
on-year growth this
financial year.
We are well-placed for
future growth with more
than 85 years of deep
expertise in natural health,
40 years of experience in
Asia, a house of leading
and trusted brands, a
world-class research and
education program, a
strong operational base of
facilities and infrastructure,
supported by a talented
team of people.
I’d like to congratulate
Richard Henfrey on his
appointment as your new
CEO. I’m extremely pleased
that the Board recognised
someone from our
leadership team; it will bring
stability to the business
to have someone who
deeply understands our
culture, the complexity of
the retail environment and
the strategic opportunities
for our Group, and I respect
Richard’s leadership and
integrity. Although we will
face new challenges, I know
the company is in strong
hands for the future.
On a personal note, I
would like to thank all our
shareholders, suppliers,
customers, business
partners, our Executive
Team and of course our
wonderful staff for their
support of me and of
our strategy throughout
my nine-year tenure as
CEO. I will remain a large
shareholder reflecting my
continued belief in the
strong growth prospects
for Blackmores.
Christine Holgate
Chief Executive Officer
11
BLACKMORES ANNUAL REPORT 2017
CEO’S YEAR IN REVIEW
• Blackmores #1 vitamin and supplement brand and
Group in Australia*.
• Most Trusted Brand in Australia (nine years running) and
key markets in Asia including Malaysia and Singapore**.
• Strengthened our digital footprint, with 1.9 million
Blackmores members across our websites and social
media in Asia-Pacific.
• Welcomed new brand ambassadors Lauren Burns,
taekwondo Olympic gold medallist for Oriental
Botanicals and Dr Katrina Warren, celebrity vet, for Pure
Animal Wellbeing.
• Opened two new Blackmores flagship stores in
Hong Kong, plus increased airport presence in Sydney,
Bangkok and Kuala Lumpur.
• Strategic competitive positioning through customer
planning days and in-store merchandising.
• Expanded our supermarket reach, launching Blackmores
products in Costco and Aldi and was number one
vitamin brand in Coles and Woolworths.
• Supported Australia’s top athletes through sponsorships
with Collingwood Football Club, Collingwood Magpies
Netball Team and an elite IsoWhey Sports cycling team.
• Sponsored key sporting events in Australia and Asia,
including the Blackmores Sydney Running Festival, Byron
Bay Lighthouse Run, Run&Move in Thailand and Penang
International Triathlon/Duathlon in Malaysia.
* Source: IRI MarketEdge, Vitamin and Dietary Supplement, Australia Grocery Pharmacy, Estimated Local
Demand Sales MAT to 14/05/2017. ** Source: Reader’s Digest annual Most Trusted Brand surveys
12
BLACKMORES ANNUAL REPORT 2017 #
CENTRICITY
Australia.1CONSUMER
Howard Dawson, Head
of Grocery & Emerging
Channels, Blackmores
13
BLACKMORES ANNUAL REPORT 2017 CEO’S YEAR IN REVIEW
• Asian consumers represent almost 50% of Group sales
and show strong loyalty to the Blackmores brand.
• Chinese consumers, both in China and Australia,
influence approximately $250 million of Group sales
and our business is still growing.
• $60 million in e-commerce sales across Asia, up 31%
on prior year.
• Launched in Vietnam via a distribution agreement with
the Mesa Group, which has a strong retail network of
150,000 stores.
• Announced a new partnership in Iran with Tasnim
Pharma, one of the fastest growing life sciences
companies in the Middle East.
• First year of operations in Indonesia through Kalbe
Blackmores Nutrition joint venture – 300 staff, 12 cities
and 30 products launched.
• Blackmores infant nutrition range was launched in
27 provinces in China, with an infant nutrition flagship
store in Changsha, Hunan Province.
• Built international relations by participating in a series
of high profile events including the Australia China
Economic and Trade Cooperation Forum (ACETCF),
Business Council of Australia-China CEO Roundtable,
Australia Week in China, and Australia Indonesia
Business Week in Indonesia.
• Blackmores was appointed Vice President Company
of the China Association for Quality Inspection (CAQI).
Blackmores Managing Director for Asia, Peter Osborne
was appointed Vice Chairman of their Advisory
Committee – the first and only foreign citizen to hold a
CAQI board position.
Left: Nurul Imania,
Nutritional Health Advisor,
Indonesia.
Page 15: Jeff Zhang,
Country Manager, China.
14
BLACKMORES ANNUAL REPORT 2017 #
2ASIA
GROWTH
15
BLACKMORES ANNUAL REPORT 2017 CEO’S YEAR IN REVIEW
#
3• 110 new products launched across the Group, including
PRODUCT
LEADERSHIP
• Explored nutrigenomic testing for personalised nutrition
and progressed partnerships in medicinal cannabis
through BioCeuticals
• BioCeuticals FX Medicine podcasts were downloaded
more than one million times in 100 countries achieving
a #2 ranking in its category on iTunes.
• Developed a new herbal extraction process through
Global Therapeutics, delivering increased product
potency and decreased environmental impact.
an innovative fridge-free probiotic range in Australia and
market-leading beauty supplements in Asia.
the Group, reaching healthcare professionals, pharmacy
students, retailers and vets.
• More than 1.2 million educational touchpoints across
• Launched an online drug, herb and nutrient interactions
portal for health professionals through BioCeuticals in
partnership with IM Gateway and the University of Sydney.
• 44 research projects, clinical trials and scholarly activities
across the Group, including a diabetes study in Thailand
and Malay traditional herbs study in Malaysia.
• Four research symposia in Australia, Thailand and
Singapore with 1,860 delegates and esteemed
international keynote speakers.
• Blackmores Institute signed Memorandums of
Understanding for educational partnerships with the
Royal Melbourne Institute of Technology, Rangsit
University Thailand, Malaysian Pharmaceutical Society,
National University of Malaysia, Taylors University and
University of Hawaii.
• Blackmores Institute Advisory Service responded to
35,464 calls, emails, live chats and web posts.
• Blackmores Institute launched a global multi-language
online learning platform.
16
BLACKMORES ANNUAL REPORT 2017 Page 16: Jessica Jong,
Product Development
Project Manager.
Below: Evan Hayes,
Director of Sourcing
and Brooke Crabbe,
BioCeuticals Regulatory
Affairs Manager
17
BLACKMORES ANNUAL REPORT 2017 CEO’S YEAR IN REVIEW
Right: Siony Castillo
and Suma Kennaway,
Production Operators.
Main image: Adam Martin
and BaLong Nguyen
moving inventory to the
the new Bungarribee
warehouse which will
be fully operational in
October 2017.
18
BLACKMORES ANNUAL REPORT 2017 OPERATIONAL
EFFECTIVENESS4#
• 800+ batches of product quality checked every month.
• Signed a Memorandum of Understanding with
Alibaba for blockchain anti-fraud technology to
assure product integrity.
• Produced more than 4 billion tablets and capsules
shipped to 32,691 points of distribution globally.
• Built a state-of-the-art 16,000m2 warehouse and
distribution facility at Bungarribee in Western Sydney,
doubling our capacity and supporting long-term growth.
to drive continuous improvement of supply chain,
product innovation and sustainable partnerships.
• First manufacturing and raw materials review completed
• Launched Supplier Code of Conduct with 100 per cent
of inventory suppliers on board.
• Launched inaugural Blackmores Group Sustainability
Report to affirm our corporate governance, workplace
practices and responsibility to the community.
• 100% reduction in paper forms for accounts payable and
human resources recruitment and induction processes.
• Invested in 189 new roles across the Group.
• 185 learning and development sessions for staff,
including our Leadership Development Program and
Blackmores Business Acumen Academy.
19
BLACKMORES ANNUAL REPORT 2017 OPERATING
+ FINANCIAL
REVIEW
20
Richard Henfrey meeting with
Leandro Ravetti, Technical
Director at Boundary Bend,
one of Blackmores’
ingredient suppliers.
20
GROUP STRATEGY 22GROUP AND DIVISIONAL RESULTS 24FINANCIAL REVIEW 26OPERATING REVIEW 28GROUP RISKS 30BLACKMORES ANNUAL REPORT 2017 21
GROUP STRATEGY 22GROUP AND DIVISIONAL RESULTS 24FINANCIAL REVIEW 26OPERATING REVIEW 28GROUP RISKS 30BLACKMORES ANNUAL REPORT 2017 OPERATING
+ FINANCIAL
REVIEW
GROUP STRATEGY
GROUP AND DIVISIONAL RESULTS
FINANCIAL REVIEW
OPERATING REVIEW
GROUP RISKS
Activities across the Group for the 2017 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
has significantly increased
brand investment and
our understanding of the
consumer in our core
markets in Australia
and in Asia.
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 currency
hedge into our business.
Blackmores’ Asian-based
regional structure is fully
operational to enable more
efficient decision making
and improved operational
efficiencies.
PRODUCT LEADERSHIP
Blackmores is a 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.
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.
Our operations are
structured to service 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.
LOOKING AHEAD
The Group’s strategic direction that yielded strong
results in recent years has been reviewed by the Board
and management in consideration of the changing
retail and consumer landscape and the aspirations
for future growth. The 2020 Strategic Priorities are:
CONSUMER
CONNECTEDNESS
Building deeper
connections and leveraging
the opportunities that
digital technology presents
to the category to enhance
the consumer experience.
INNOVATION & EXPERTISE
Growing the research
capacity of the Blackmores
Institute and BioCeuticals
and leveraging Blackmores’
expertise to increase the
knowledge base of natural
healthcare for product
innovation and accredited
education.
GLOBAL ADVANTAGE
Nurturing and growing
the Australian heartland
business to leverage
Blackmores’ leadership
position in other markets.
Continuing to grow across
Asia and to explore new
frontiers.
OPERATIONAL FITNESS
Streamlining and
simplifying operations,
building leadership and
cross cultural skills and
capabilities.
22
BLACKMORES ANNUAL REPORT 2017 Erika Morvayova – Global Therapeutics
Technical Services.
23
BLACKMORES ANNUAL REPORT 2017 OPERATING
+ FINANCIAL
REVIEW
GROUP STRATEGY
GROUP AND DIVISIONAL RESULTS
FINANCIAL REVIEW
OPERATING REVIEW
GROUP RISKS
Following two exceptional years of growth, 2016/2017 was a rebalancing year for the Blackmores
Group, delivering $693 million in sales (down 3%) and a net profit after tax (NPAT) of $58 million
(down 42%) on the prior year.
Blackmores introduced a dedicated Australia-based China Export Division in the year to appropriately service the sales made through larger
exporters to China. As a result, the Australia and Asia reported sales numbers have been restated to ensure a more informed comparison.
01
03
BIOCEUTICALS GROUP
BioCeuticals and Global Therapeutics together delivered
sales of $102 million. BioCeuticals achieved sales of $79
million which was a 15% increase compared to the prior
year. BioCeuticals exceeded the ten year sales and earnings
goal within five years of acquisition. On a like for like
comparison, sales of Global Therapeutics products were up
11% and contributed $23 million to the BioCeuticals Group.
04
NUTRITIONAL FOODS
Sales of $4 million from Blackmores’ infant nutrition
products through our Bemore partnership were impacted
by continued regulatory uncertainty in China. Half of these
sales are attributable to Blackmores through our partnership
with Bega Cheese. Our share of Bemore operating loses
totalled $7 million for the year with all finished goods
inventory fully provided for. The Partners continue to
monitor the operating performance of the joint operation.
The Australian market remains highly competitive, however,
there are opportunities emerging to expand further into
export markets where consumer demand for high quality
product offerings is growing.
AUSTRALIA & NEW ZEALAND
Blackmores Australia and New Zealand sales of $372
million, including Pure Animal Wellbeing (2016: $482
million) were down 23% as Chinese tourists and exporters
changed their buying patterns. Underlying domestic sales
(excluding sales destined for Chinese consumers) are
estimated to be flat. New Zealand sales of $19 million were
down 5% compared to the prior year.
Blackmores Australia cemented its leadership position
in the category and maintained the number one brand
position in our heartland market across the category.
Additionally, Blackmores was recognised as the most
trusted brand for the ninth consecutive year in the Reader’s
Digest Most Trusted Brand Survey 2017. Blackmores
Australia amplified its brand presence through increased
social media activity and sponsorships of the Blackmores
Sydney Running Festival and the Australian Open.
02
ASIA
Total Asia sales were $216 million, up 36%.
China direct sales were $132 million, up 71%. This
includes $62 million of in-country sales in China, up 46%,
as well as $70 million through our Australian China export
division, up 141%.
Blackmores Other Asia sales were $84 million, up 4%.
All core markets are in growth with smaller markets
achieving particularly strong results including Singapore
up 13%, Hong Kong up 51% and Taiwan up 58%. Thailand
and Malaysia were up 8% and 11% respectively. We pay our
respects to our colleagues in Thailand who have been in an
official mourning period following the passing of their king
during the year.
Blackmores Korea transitioned to a new operating
model. Sales are down 70%, though earnings have
improved year-on-year and are expected to continue
to improve. The impact of Korea’s performance and the
investment in our new business in Indonesia masked an
other wise pleasing performance from our Asia business.
The investment in Indonesia is expected to yield strong
returns as the consumer take-up of initial product lines has
exceeded expectations since the September 2016 launch.
24
BLACKMORES ANNUAL REPORT 2017 2013
2014
2015
2016
2017
SALES $MILLIONS
01
AUSTRALIA & NEW ZEALAND SALES
02
CHINA DIRECT SALES
OTHER ASIA SALES
03
BIOCEUTICALS GROUP SALES
04
NUTRITIONAL FOODS SALES
500
400
300
200
100
0
150
120
90
60
30
0
100
80
60
40
20
0
120
100
80
60
40
20
0
5
4
3
2
1
0
481
372
332
221
233
132
77
1
2
7
81
84
76
64
59
55
44
47
72
4
102
2
25
BLACKMORES ANNUAL REPORT 2017 OPERATING
+ FINANCIAL
REVIEW
GROUP STRATEGY
GROUP AND DIVISIONAL RESULTS
FINANCIAL REVIEW
OPERATING REVIEW
GROUP RISKS
GROUP FINANCIAL
POSITION
The Group finished the
2017 financial year in a
strong financial
position with pleasing
improvements to financial
health measures through
the second half of the year.
Total net assets
remained flat at $179
million. Total current assets
decreased by $36 million
to $259 million, 12% down
on the prior year. The main
driver was a managed
reduction throughout the
year in inventory levels,
down $32 million or 27%
compared to the prior year
after provisions. Strong
inventory management led
to improved stock turns and
a reduction of inventory
days. Furthermore, this
result reflects a $49 million
reduction compared to
the peak inventory period
reached in September
2016. The year-end position
reflects a normalised
inventory holding after
inventory provisions.
Current liabilities have
decreased from $192
million to $143 million
largely due to trade and
other payables down 21%
on the prior year. The lower
balances that make up this
total reflect lower taxation
obligations, accrued
incentive payments and
outstanding inventory
payments to suppliers.
Non-current liabilities
have increased from $71
million to $91 million
largely due to an increase
in gross debt recorded as
interest-bearing liabilities.
Net debt has increased
from $18 million to $45
million due to higher
gross debt required to
fund record dividend,
taxation and staff incentive
payments made during the
FY17 year in respect of the
prior year. Funding capacity
was increased in the year
through the addition
of a new Asian banking
partner to our established
Australian lending group.
The debt position of
the Group remains low
with a 20% gearing ratio
maintaining a conservative
level of headroom against
all debt covenants. Net
interest cover at 20.6 times
(2016: 80.2 times) continues
to reflect a conservative
approach to servicing
ongoing debt commitments.
Cash generated
from operations of $95
million was delivered in
the year. This represents
a 23% decline versus
the prior year, but
compares favourably to
the 41% decline in EBIT.
Pleasingly, cash generation
performance over the
second half of the financial
year was 93% ahead of
the same period last year,
reflecting an improved
balance sheet.
The cash conversion
ratio at 101% was a 20%
improvement on the
prior year and, similarly
to cash generation
performance, reflected a
strong performance over
the latest six-month period
as working capital and
operating expenses
were tightly managed.
26
Net profit after tax was
$58 million (2016: $100
million) a 42% decrease
on the prior year and,
similarly, basic earnings
per share (EPS) decreased
from 580.6 cents per share
to 342.6 cents per share, a
decrease of 41%. Dividends
per share were 270 cents
(2016: 410 cents) reflecting
a 79% payout ratio. The
business delivered strong
returns on assets and
shareholders’ equity at
20% and 33% respectively
reflecting continued robust
investment returns. Income
tax expense was lower than
the prior year, reflecting the
profit results. Blackmores
continued to meet and pay
all its taxation obligations
in the jurisdictions in which
it operates.
Aaron Canning
Chief Financial Officer
BLACKMORES ANNUAL REPORT 2017
SALES
$693 MILLION
The Group delivered
sales of $693 million
across all divisions
and brands, a 3%
decline on last year.
EBIT
$86 MILLION
Earnings before
interest and taxes
of $86 million
were down 41%
compared to the
prior year.
NPAT
$58 MILLION
Net profit after
tax (NPAT) of $58
million, down 42%
on prior year.
EPS
342. 6 CENTS
Earnings per share
(EPS) of 342.6 cents,
were down 41% on
prior year.
DIVIDENDS
PER SHARE
270 CENTS
Dividends of 270
cents per share were
down 34% compared
to 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
500
400
300
200
100
13
14
15
16
17
13
14
15
16
17
13
14
15
16
17
13
14
15
16
17
13
14
15
16
17
RETURN ON SHAREHOLDERS’ EQUITY
RETURN ON ASSETS
13
14
15
16
17
CASH CONVERSION
13
14
15
16
17
GEARING
13
14
15
16
17
DIVIDEND PAYOUT RATIO
%
60
50
40
30
20
10
0
%
120
100
80
60
40
20
0
%
60
50
40
30
20
10
0
%
95
90
85
80
75
70
65
13
14
15
16
17
27
BLACKMORES ANNUAL REPORT 2017 OPERATING
+ FINANCIAL
REVIEW
GROUP STRATEGY
GROUP AND DIVISIONAL RESULTS
FINANCIAL REVIEW
OPERATING REVIEW
GROUP RISKS
INVESTING IN
INFRASTRUCTURE
Blackmores progressed
the fit-out of a state-of-the-
art distribution centre at
Bungarribee in Western
Sydney to double the
Group’s warehousing
footprint and accommodate
the higher sales volumes.
The technology will deliver
operational efficiencies and
meet future needs as the
company expands across
the globe.
Supporting technology
upgrades is also core to
the Group adopting a
global mindset to better
enable the workforce. This
has included investing in
systems upgrades that will
streamline core business
processes such as a
paperless accounts payable
system, cloud-based
technologies, a new human
resources management
system, warehouse
automation and introducing
international payment
systems such as AliPay.
The introduction of
robotics in our packing
operation in the 2015/2016
financial year has
already delivered strong
productivity improvements
and reduced workplace
health and safety incidents.
Progressed the fit-out of a new
16,000m2 world-class warehouse
facility to double capacity
32,691 points of distribution
4.0
BILLION
29.3
MILLION
51.8
MILLION
tablets/capsules produced
units produced
units shipped
800
BATCHES
of product quality
checked each month
Full manufacturing and raw
materials review completed
100%
of raw material and manufacturing
suppliers committed to Blackmores’
new Code of Conduct
LEVERAGING SCALE
The rapid growth of the
past two years yielded
strong shareholder returns
yet resulted in some
‘growing pains’ from an
operational perspective.
To counter this, the
Group has undertaken
a major supplier review
resulting in significant
purchasing efficiencies
that will be realised over
the coming years. New
supplier agreements will
better enable Blackmores
to accommodate growing
volumes and adapt to the
demand changes and
to maintain continuity
of supply without
compromising margins,
which have been negatively
impacted by the volatility
of recent years.
Blackmores’
commitment to our
unrivalled quality standards
had previously resulted
in supply challenges
as demand grew and
meant Blackmores paid a
premium as our suppliers
also reached capacity. The
newly negotiated supplier
agreements will bring a
number of benefits:
• Full compliance to
Blackmores’ Supplier
Code of Conduct
• Upholding commitment
to sustainability
• Access to broader
selection of raw
materials that will enable
innovation and new
product development
• Better pricing leveraging
Blackmores’ size and
scale
28
BLACKMORES ANNUAL REPORT 2017 Blackmores’ new
Bungarribee warehouse.
29
BLACKMORES ANNUAL REPORT 2017 OPERATING
+ FINANCIAL
REVIEW
GROUP STRATEGY
GROUP AND DIVISIONAL RESULTS
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:
• Maintain a 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
affect Blackmores’ future
financial performance and
their potential impacts are
summarised in this table:
Brand
damage
FINANCIAL REVIEW
OPERATING REVIEW
GROUP RISKS
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.
• Improved demand planning and forecasting
processes.
• Dedicated internal capability focused on sourcing.
• Increased direct sourcing of key and scarce
ingredients.
• Strengthened supplier relationships and contracts
balancing volume requirements.
Product
quality issue
Financial loss due to:
• Delay in restoring supply
of product for sale.
• Product recall and
reformulation costs.
• Reduced industry
capacity.
• Industry concentration
reducing competitor
tensions and ability to
negotiate price and supply.
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.
• Long-term relationships with suppliers, quality audits
and supply chain business reviews.
• 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.
• 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.
Reliance on
customers
and markets
• Financial loss due to
• Focus on Blackmores’ brand health to drive brand
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.
loyalty and consumption.
• Drive category solutions to gain consumer loyalty.
• Close monitoring of customer payments and
continued transparency across markets.
• Diversification of revenues.
30
BLACKMORES ANNUAL REPORT 2017 John Russell, Team Leader
(Warehouse) and Alvin Chan,
Export and Warehouse Manager
– Eastern Creek.
31
BLACKMORES ANNUAL REPORT 2017 SUSTAINABILITY,
COMMUNITY +
OUR PEOPLE
32
Amy Wagner, Integrated
Communications &
Sponsorship Manager,
Blackmores Australia.
32
BLACKMORES ANNUAL REPORT 2017 33
BLACKMORES ANNUAL REPORT 2017 SUSTAINABILITY
100%
of raw material and
manufacturing suppliers
committed to Blackmores’
Code of Conduct
69% of our waste generated is
diverted to recovery streams
Silver Partnership recognition with
the NSW Office of Environment
and Heritage Sustainability
Advantage program
40
research projects, clinical
trials and scholarly activities
across the Group
Healthy People, Healthy Planet
Blackmores has had a
long-standing commitment
to sustainability and giving
back to the communities
in which we operate. This
started with our founder
Maurice Blackmore whose
views on preventive
medicine, supporting
people, the environment
and recycling were ahead
of his time.
After more than 85 years
many of these values and
practices are intrinsically
woven into both our values
and business practices.
They extend beyond
the protection of the
environment incorporating
our corporate governance,
workplace practices
and responsibility to the
community.
With the objective
to accurately reflect the
organisation’s sustainability
position and bring our
customers, staff, suppliers
and many other stakeholders
with us on this journey
towards a healthy future,
Blackmores committed to
its first Sustainability Report
in 2016.
The opportunity
enabled Blackmores
to understand the
organisation’s overall
sustainability performance,
capturing actions that
deliver wide societal value
including support for health,
regional development and
respect for the environment
by promoting technologies
that reduce the emission of
greenhouse gases.
The 2017 Sustainability
Report, prepared in
accordance with the
Global Reporting Initiative
Standards describes our
sustainability initiatives
and the reporting of our
progress. It will provide
our stakeholders with
transparency to help us
manage our performance
and ensure our business
continues to grow for
generations to come.
STAKEHOLDER
ENGAGEMENT, AN
ONGOING CONVERSATION
In our quest for sustainable
business outcomes, we
engage with an increasingly
complex range of
stakeholders, with diverse
expectations of key issues.
These stakeholders, both
internal and external,
play an integral role in
the way we identify and
prioritise material risks and
opportunities for
our business.
Stakeholder
engagement helps us
to identify and prioritise
material issues most
relevant to our business.
This in turn helps us
manage key risks and
achieve far greater positive
impacts on environmental,
social and economic issues.
Blackmores’ full Sustainability Report is available at blackmoressustainability.com.au
>
34
BLACKMORES ANNUAL REPORT 2017 SUSTAINABILITY
Key areas of materiality
FIFTEEN TOPICS CONSIDERED AS PRIORITIES FOR BLACKMORES
11
12
13
14
15
>
S
R
E
D
L
O
H
E
K
A
T
S
O
T
E
C
N
A
T
R
O
P
M
I
10
08
05
06
07
09
04
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
35
BLACKMORES ANNUAL REPORT 2017
SUSTAINABILITY
Sustainability focus areas
To embed sustainability into our business and operations we are focusing our efforts on
addressing the most material issues across our four sustainability commitments of:
1
Responsible Facilities
Management
To reduce the
environmental intensity
and carbon footprint of our
facilities through innovation,
best practice management,
staff cooperation and
a quest for continual
improvement.
2
Sustainable Supply
Chain Management
To encourage, support and
facilitate an environmentally
and socially responsible
approach to procurement,
supplier management and
product accountability and
transparency.
3
Industry Leadership
To be a leader in natural
health solutions through
innovation, research,
education and a robust
corporate governance
framework.
4
People and Community
To foster a responsible
workforce; a safe and
secure workplace and to
maintain our ‘licence to
operate’ in our communities
and markets.
1
RESPONSIBLE
FACILITIES
MANAGEMENT
2
SUSTAINABLE
SUPPLY CHAIN
MANAGEMENT
New warehouse space, Bungarribee,
Western Sydney
Published Blackmores Supplier Code
of Conduct
The lease of a new purpose built 16,000m2
warehouse in Bungarribee, Western Sydney will
future proof us for the growth that we anticipate.
Securing this site has provided the opportunity
to customise the site for operational efficiencies
while ensuring we are providing a workplace that
is aligned to our values of supporting employee
wellbeing and environmental sustainability. The
new state-of-the-art warehouse management
system will double our customer order picking
capacity and the building includes a staff wellness
centre and a range of sustainable features such as
storm water reclamation, solar panels on the roof
to reduce our purchased energy and additional
insulation on roof and within walls to reduce
thermal load.
Aligned to our existing Code of Conduct we
published our comprehensive Supplier Code
of Conduct that incorporates sustainability
actions. The code provides a basis for how
we plan to work with our suppliers who make
genuine efforts to improve their sustainability
performance over time. Similar to a roadmap,
this code aims to identify the extent of our
suppliers’ sustainable business practices in order
to make improvements that are appropriate for
their business. All Blackmores Tier 1 Inventory
suppliers agreed to this code of conduct.
36
BLACKMORES ANNUAL REPORT 2017 SUSTAINABILITY
HIGHLIGHTS
4
PEOPLE AND
COMMUNITY
Blackmores Twilight Community Market
In December 2016, Blackmores Twilight
Community Market provided a platform for social
enterprises and fair trade organisations with a
community or environmental cause to sell goods
and raise awareness about their social causes.
Held at our Warriewood Campus, the initiative
attracted more than 60 stallholders and more
than 2,500 Christmas shoppers were able to
feel good about buying gifts that give back to
communities in need.
3
INDUSTRY
LEADERSHIP
The Blackmores Way
Over the past 12 months our focus on those
behaviours that clearly demonstrate our values
(‘the PIRLS’) has been enhanced. We call these
values-based behaviours ‘The Blackmores Way’ and
they are set out in our revised Code of Conduct,
which was launched in October 2016.
“Our Code of Conduct should do no more and
no less than simply document the values-based
behaviours that are the hallmark of how we work
together.” Marcus Blackmore.
It also sets out the basic behaviours we expect
from those with whom we do business including our
suppliers, distributors, customers, and others who may
act on our behalf. The Blackmores Way is focused
on ‘doing the right thing’ in all locations where we
work and is not only at the heart of our brand and
reputation, it is a key component of our corporate
governance framework. This year it has been brought
to life through internal campaigns, staff training and
revised policies and procedures.
37
BLACKMORES ANNUAL REPORT 2017 COMMUNITY
Giving back to the community
The Blackmores Group 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 more than 100
charitable organisations
and inspirational individuals
who are helping to create a
brighter future. Recognising
that charity starts at home,
Group employees gave
$186,000 to a further
91 registered charities of
their choice through our
matched donations scheme
whereby 0.5% of their
taxable pay is donated
with Blackmores matching
this amount.
We hosted a Christmas
Twilight Market at
Warriewood Campus,
welcoming 2,500 visitors
who shopped for ethical,
fair trade and community-
based products and wares.
Runners laced up their
shoes for the Blackmores
Sydney Running Festival, at
the Byron Bay Lighthouse
Run sponsored by Global
Therapeutics, and at the
Blackmores Run&Move
event in Thailand, raising
a total of $1.4 million for
various charitable causes.
Our Malaysia colleagues
teamed charitable giving
with teamwork and
painted the National
Cancer Society building
in Kuala Lumpur bright
yellow, while Executive
Team members in Sydney
donned superhero
costumes to raise $13,000
for Bear Cottage.
Bottom left: Blackmores Malaysia team supporting National Cancer Society Malaysia.
38
BLACKMORES ANNUAL REPORT 2017 Formosa Cancer
Foundation (Taiwan)
Supporting vulnerable
children and their families in
Taiwan.
Heart Ali
Founded by Chinese
actress Fan Bingbing,
Heart Ali supports people
suffering from congenital
heart disease in Tibet.
National Cancer Society
Providing holistic education,
care and support to people
affected by cancer in
Malaysia.
Project We Care
Encouraging corporate
giving and volunteerism
for meaningful community
causes in Singapore.
Taiwan Breast Cancer
Foundation
Strengthening breast
cancer prevention and
support in Taiwan.
Taiwan Fund for Children
and Families
Working to reduce cancer
incidence and mortality
through public health
education and quality
treatment.
Tencent Charity Funds
The first online charity in
China, Tencent helps a
broad range of people and
established the country’s
annual ‘9th September
Charity Day’.
COMMUNITY
Other organisations proudly supported by Blackmores
AUSTRALIA
AND NZ
Animal Welfare League
Caring for abandoned,
surrendered and neglected
animals.
Arthritis New Zealand
Improving the life of every
person in New Zealand
affected by arthritis.
Bear Cottage
Support, respite and end-of-
life care for children with
life-limiting conditions and
their families.
Be Centre
A leading children’s mental
health charity providing
play therapy.
Bilgola Surf Life Saving
Club
Proudly serving the
community.
CCNB
Supporting people living
with disability or ageing.
Cure Brain Cancer
Foundation
Australia’s peak
organisation for brain
cancer research, advocacy
and awareness.
Exodus Foundation
Meeting the needs
of Sydney’s poor and
homeless with free meals,
counselling and outreach
services.
Free to Shine
Working to prevent sex
trafficking in South East
Asia through community
education, scholarship
materials and social
support.
Guide Dogs Australia
Assisting people who
are blind or have a vision
impairment to gain freedom
and independence.
Homes for Heroes
Contemporary veterans
homelessness and
assistance program.
Legacy
Enhancing the lives of
veteran families through
innovative and practical
programs.
Lifeline (Northern Beaches)
The leading provider of
suicide prevention services
in Australia.
Macular Degeneration
New Zealand
Providing awareness,
education and support
to those who suffer from
macular degeneration.
Mat Belcher and Will Ryan
Olympic sailors who won
silver medals at Rio 2016.
OzHarvest
Australia’s leading food
rescue charity, supporting
people in need and
diverting food waste from
landfill.
Pollie Pedal
An annual event of
politicians riding to help
veterans and their families
to Soldier On.
Quest for Life Foundation
Providing practical skills
and strategies for people to
create peace and resilience
in their lives.
School for Life Foundation
Empowering rural
communities in Uganda to
help themselves through
the provision of education.
Smith Family (Christmas
Appeal)
Helping disadvantaged
children get the most
out of their education to
create better futures for
themselves.
The Liora Project
Supporting victims of sex
trafficking in India and the
Philippines and creating
livelihood opportunities for
these women.
The Possibility Project
Delivering social justice
programs, including
livelihood and sanitation
programs in India, through
social entrepreneurship.
TwoGood
A national provider of
beautiful food and lifestyle
products to domestic
violence refuges and soup
kitchens.
United in Compassion
Advocating for patient
access to medicinal
cannabis in a manner that
is safe, effective, affordable,
equitable and favourable
for patients, for the
dignified relief of suffering.
World Wild Fund for Nature
Working to stop the
degradation of the planet’s
natural environment and
to build a future in which
humans live in harmony
with nature.
ASIA
AiYou Foundation
The world’s largest
surgical treatment project
for orphaned and poor
children with congenital
heart disease in China.
Bumi Sehat Foundation
Delivering community
health services in rural
Indonesia with a focus on
maternal-child health.
The Cardiac Children
Foundation
Under the Royal Patronage
of H.R.H. Princess Galayani
Vadhana Krom Luang
Naradhiwas Rajanagarinda,
the Foundation provides
medical and emotional
support to children with
cardiac disease and their
families in Thailand.
Caritas (Hong Kong)
Offering health services,
education and humanitarian
assistance to the poor and
distressed in Hong Kong.
Charis Home
A home for orphans and
the elderly in Malaysia
providing spiritual
guidance, shelter, education
and healthy community
activities.
39
BLACKMORES ANNUAL REPORT 2017 COMMUNITY
AWARDS
The Blackmores Group
has been recognised with
more than 36 awards
for product innovation,
industry leadership and
our commitment to
sustainability, including
a recent induction into
the Queensland Business
Leaders’ Hall of Fame.
OUR BEST IN CLASS
AWARDS INCLUDE:
• Reader’s Digest Most
Trusted Brand – Vitamins
& Supplements
(Australia)
• Reader’s Digest Trusted
Brand – Platinum Award
(Malaysia)
• Brand Laureate – Brand
Influencer Award
(Malaysia)
• Reader’s Digest Trusted
Brand (Singapore)
• Superbrand Award
(Thailand)
• Complementary
Medicines Australia –
Vince Russell Retailer of
the Year
WE ARE ALSO ESPECIALLY
PROUD OF THE
FOLLOWING ACCOLADES:
• Australian Packaging
Covenant – APC
Signatory of the Year
• Australian Pharmaceutical
Industries – Excellence in
Training
• China Association for
Quality Inspection –
Product and Service
Quality Demonstration
Company Certificate
• CEO Magazine Executive
of the Year – MD of the
Year
• CEO Magazine Executive
of the Year – HR Leader
of the Year
• Complementary
Medicines Australia
– Most Outstanding
Contribution to Research,
Education or Training
• HKABA National Business
Awards – Business
Excellence
• NSW Business Chamber
Awards – Excellence in
Export
• NSW Export Awards –
Exporter of the Year
• NSW Export Awards –
Health & Biotechnology
• NSW Government
Sustainability Advantage
program – Silver Partner
BUMI SEHAT
FOUNDATION:
EMPOWERING
MATERNAL AND
BABY HEALTH IN
INDONESIA
Proudly supported by Kalbe Blackmores
Nutrition, Bumi Sehat Foundation runs
Community Health Education and Childbirth
Clinics for impoverished rural populations
in Bali and Aceh, drawing on a blend of
allopathic and holistic medicine.
Recognising that many of their patients
can’t afford adequate nutrition, Bumi Sehat
– or ‘Healthy Mother Earth’ – emphasises
quality pregnancy nutrition as crucial to the
health of mothers and babies.
Bumi Sehat works at a village grassroots
level, delivering 29,000 consultations and
575 births per year. Their community health
workers see firsthand the positive difference
a nutritious diet can make to improving
public health and optimising the wellbeing
of expectant mothers.
By supporting the work of Bumi Sehat
Foundation, Kalbe Blackmores Nutrition is
firmly committed to making a difference to
maternal-child health in Indonesia.
Learn more at:
bumisehatfoundation.org/bumi-sehat-bali
40
BLACKMORES ANNUAL REPORT 2017 COMMUNITY
GLOBAL LEADERSHIP: ADVANCING
SCIENCE AND INNOVATION IN
COMPLEMENTARY MEDICINE
As industry leaders, Blackmores believes it is our
responsibility to invest in complementary medicine research
and to support innovation in this field.
In March 2017, Blackmores and the Blackmore
Foundation, Marcus and Caroline Blackmore’s personal
philanthropic trust, each gifted $5 million to the National
Institute of Complementary Medicine (NICM) at Western
Sydney University to further natural health research. This
will be paid over seven years. NICM is a global leader in
complementary medicine research and policy and has been
ranked by the Australian Research Council as operating at
higher standards than world’s best-practice.
“This very welcome gift will expand our research and
clinical trials, and education and training,” said NICM
Director Professor Alan Bensoussan. “Our country has the
lowest level of industry-research collaboration in the OECD
and this is a great example of universities and industry
collaborating to drive research.”
Blackmores’ untied gift will not only support the
Australian research community, but most importantly, it will
advance the global evidence-base and help move research
findings into practical healthcare solutions to improve
public health. Blackmores is enormously proud of the
legacy that this gift to NICM will make toward boosting the
understanding and advancement of natural health for now
and the future.
PARTNERSHIPS
ACADEMIC INSTITUTIONS
• Australian College of
Natural Therapies
• Australasian College
of Nutritional and
Environmental Medicine
• Australian
Research Centre in
Complementary and
Integrative Medicine at
University of Technology
Sydney
• Chulalongkorn
University, Thailand
• Endeavour College of
Natural Health, Australia
• National Institute
of Complementary
Medicine at Western
Sydney University,
Australia
• Royal Melbourne Institute
of Technology, Australia
• Malaysian
INDUSTRY ASSOCIATIONS
• ACNEM (Australasian
College of Nutritional
and Environmental
Medicine
• ARONAH (Australian
Register of Naturopaths
and Herbalists
• Australasian Integrative
Medicine Association
• Australian Traditional-
Medicine Society
• China Association for
Quality Inspection
• China Medical
Pharmaceutical Material
Association
• Complementary
Medicines Australia
• Global Organisation for
EPA and DHA Omega-3
(GOED)
• Heart Research Institute
• International Probiotics
Pharmaceutical Society
Association
• National University of
Malaysia (Universiti
Kebangsaan Malaysia)
• National University of
Singapore
• Rangsit University,
• Macular Disease
Foundation
• MINDD Foundation
• Naturopaths & Herbalists
Association of Australia
• Pharmaceutical Society
Thailand
of Australia
• Taylors University,
• Sports Dietitians
Malaysia
• University of Hawaii, USA
• University of Sydney,
Australia
Australia
• Sports Medicine
Australia
41
BLACKMORES ANNUAL REPORT 2017 OUR PEOPLE
<
DYNAMIC CROSS-
CULTURAL IMMERSIONS,
THE BLACKMORES WAY
As Blackmores expands its geographic footprint,
our workforce of the future will have greater
fluidity, cross-cultural understanding, and
dynamism than ever before.
To achieve this, Blackmores is creating unique growth
opportunities for employees through career secondments,
delivering myriad global benefits across the business.
After three years working as a Senior Product Manager
for Blackmores Singapore, Fiona Yeo, 33, was eager for
her next challenge. A fluent Mandarin speaker with broad
knowledge of the Blackmores Asia business, Fiona was
seconded to the Group’s newly formed Export Division at
Warriewood Campus in Sydney as an Assistant Marketing
Manager in 2016.
“It’s not just about how Fiona’s language and professional
skills can strengthen the business, but also about enriching
our multicultural workplace, learning from each other’s
diverse experiences, and building a fluid international team,”
said Linda Redfearn, Head of Human Resources.
“My secondment has resulted in a deep sense of
belonging and I’ve come to truly know the Blackmores
brand beyond products on a Singaporean shelf to the way
they are sustainably sourced, manufactured, quality checked
and aligned with 85 years of natural health values. It’s been
a wonderful opportunity to develop my career,” said Fiona,
who was one of 26 Group employees in a seconded role
this year.
Page 42 (clockwise): Fiona Yeo,
Assistant Marketing Manager,
Export Sales. Paul Brazel, Team
Leader, Grocery at Bungarribee.
Leanne McLean, Advisory
Naturopath and Chair of the
Staff Liaison Committee with the
Australian native bee hive at the
Blackmores Campus.
Page 43: Jodie Bauchop –
Health & Wellness Coordinator.
Edward Allardice, Head of Sales,
Global Therapeutics. Kellie
Daley, Learning Management
System Executive. Danielle
Steedman, Advisory Naturopath.
42
BLACKMORES ANNUAL REPORT 2017 >
WELLNESS AT WORK
Blackmores has a strong focus on the wellbeing
of their employees.
Continuous workforce improvement through structured
induction and training, refreshing and improving skills and
the development of leadership capacity is a priority.
Even with the significant growth of the past five years
with double the volumes being packaged and distributed,
the acquisition of new companies and additional staff,
Workplace Health and Safety incidents have decreased.
• Health and safety incidents are down 42% at the
Warriewood Campus compared to the prior year
• Lost time injuries have halved compared to the prior year
• 87% of injuries reported resulted in no impairment
These achievements are the result of a project that
commenced seven years ago including the following
modifications to infrastructure and processes:
• Shipper designs were modified to reduce cardboard
thickness and increase flap score width to reduce the
force required to manually erect shippers as an interim
measure while robotics were awaiting implementation.
• Introduction of gravity conveyor systems for finished
goods shippers to reduce over reaching by production
operators during palletising process.
• Stretching was introduced twice per shift to reduce
likelihood of injury.
• Mobile hydraulic lift tables were introduced to assist in
lifting and moving heavy machine parts.
• Introduction of cap elevators with the purchase of new
capping machines on all lines in 2012 to reduce lifting
heights of container caps when loading machinery.
• Increased staff training.
• Introduction of four new counting machines in 2015
reduced weights of machine parts (aluminium vs stainless
steel parts).
• Introduction of automated packing cells removing almost
half of the manual lifting in the production operator role
and completely eliminating the two most significant
manual handling risks in the Production area.
• Introduction of low platforms to reduce lifting / working
heights for shorter operators when handling bulk tablets
and capsules.
43
BLACKMORES ANNUAL REPORT 2017 EXECUTIVE TEAM
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, a
Board Director of Collingwood
Football Club, and was a
Non-Executive Director of Ten
Network Holdings Limited.
In 2015 Christine was
recognised in the top 100
Women of Influence in Australia
(Australian Financial Review),
named CEO of the Year
(CEO Magazine) and highest
performing CEO in Australia
(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 in 2016 she climbed Mount
Kilimanjaro as part of Dr Charlie
Teo’s Million$Mission to help
Cure Brain Cancer.
Christine will be leaving
Blackmores on 29 September
2017 after nine successful years
leading the Group.
02
RICHARD HENFREY
Chief Operating Officer
(Appointed CEO 17 August 2017)
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 Strategic
Sourcing Division in 2011. He
was appointed Chief Operating
Officer in 2014. Richard served as
Board President of the industry
association Complementary
Medicines Australia 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 30 years
of retail and brand 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 joined Blackmores in
2013 as Managing Director of
the Australian, New Zealand
and Animal Health divisions.
Previously he served on the
Board of ASX-listed The PAS
Group, is a graduate of the
Australian Institute of Company
Directors, a Director of the Quest
For Life Foundation, and is on the
Board of the Special Olympics.
04
NATHAN CHEONG
Managing Director, BioCeuticals
With more than 20 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 Board of
Complementary Medicines
Australia and their Complaints
Resolution Panel and Practitioner
Medicine Technical Committee.
Named CEO Magazine’s 2016
Managing Director of the Year,
he is a graduate of the Australian
Institute of Company Directors
and Australian Institute of
Management. In 2015 Nathan
was awarded the Rotary Paul
Harris Fellow and in 2016 he
climbed Mount Kilimanjaro
as part of Dr Charlie Teo’s
Million$Mission to help Cure
Brain Cancer.
44
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. He is
responsible for Blackmores’ Asia
business, including subsidiary
companies in Singapore,
Thailand, Malaysia, Taiwan, Hong
Kong, Korea, China and Japan;
joint venture Kalbe Blackmores
Nutrition in Indonesia;
distribution partnerships in
Vietnam, Cambodia, Kazakhstan,
Mongolia, Iran and Pakistan; 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 Expert Adviser
to the UN Conference on Trade
and Development and the UN
Commission for Sustainable
Development. Peter has lived
in Asia for nearly 30 years and
speaks Mandarin-Chinese. Peter
is a graduate of the Australian
Institute of Company Directors,
a Fellow of the Hong Kong
Institute of Directors, and the
first foreigner to be appointed
as Honorary Vice Chairman of
the China Association for Quality
Inspection in Beijing.
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.
In 2016, Aaron was recognised as
CFO of the Year (Runner Up) by
CEO Magazine.
Aaron has a Bachelor of
Commerce degree in Marketing
and Management and a post-
graduate 1st Class Honours
degree in Management. He is a
qualified accountant, a fellow of the
Association of Chartered Certified
Accountants, a member of the
Chartered Accountants Association
of Australia and New Zealand and
graduate of the Australian Institute
of Company Directors.
08
DR LESLEY BRAUN
Director, Blackmores Institute
Dr Lesley Braun is an Adjunct
Associate Professor at the National
Institute of Complementary
Medicine (Western Sydney
University) and has held research
positions at The Alfred Hospital,
Monash University. She was
Vice President of the National
Herbalists Association of Australia,
an Academic Board Member
of Endeavour College, and
former member of key industry
groups including the Australian
Therapeutic Goods Advisory
Council, Advisory Committee for
Complementary Medicine (TGA),
the Advisory Committee for the
Australasian Integrative Medicine
Association, and the National
e-Health Transition Authority
(NeHTA) medicines
terminology group.
Lesley is a current member
of the Clinical Oncology Society
of Australia’s Complementary
and Integrative Therapies Group
Executive, Pharmaceutical
Society of Australia, Australian
Institute of Company Directors,
Australia-China Business Council
Health, and Medical Research
working group, plus on the
course advisory committees for
nutrition at Endeavour College
and the Think Group. She is the
main author of four best-selling
textbooks, founding Editor-in-
Chief of the journal Advances
in Integrative Medicine, and a
regular columnist for Australian
Journal of Pharmacy.
BLACKMORES ANNUAL REPORT 2017 01
03
05
07
02
04
06
08
45
BLACKMORES ANNUAL REPORT 2017 FINANCIAL
REPORT 17
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
47
48
50
54
73
74
77
78
79
80
81
82
118 Additional Information
119 Company Information
46
BLACKMORES ANNUAL REPORT 2017 5 YEAR
HISTORY
$’000
2017
2016
2015
2014
2013
Sales (net of discounts)1
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 after tax
Net debt
Shareholders’ equity
Total assets
Current assets
Current liabilities
Net tangible assets (NTA)
Cash generated from operations
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 after tax
EPS
Ordinary dividends per share
692,790
717,211
471,615
346,760
326,603
94,642
8,411
86,231
4,180
82,051
24,023
58,028
44,717
177,541
412,174
258,662
142,556
117,330
95,310
17,226
342.6
270.0
$95.84
$6.81
100.7%
32.7%
20.2%
78.8%
20.1%
12.4%
29.3%
1.81
20.6
37.9
(3.4)
(37.8)
(40.6)
(42.0)
(41.0)
(34.1)
152,266
7,045
145,221
1,810
143,411
43,391
100,020
17,793
178,263
443,362
294,624
192,279
116,484
123,022
17,225
580.6
410.0
$131.39
$6.76
80.8%
56.1%
39.4%
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
89,791
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
49,507
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
38,308
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
1. Represents revenue from the 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.
47
BLACKMORES ANNUAL REPORT 2017
DIRECTORS’ PROFILES
02
04
06
07
01
03
05
48
BLACKMORES ANNUAL REPORT 2017 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 renowned advertising
agency Saatchi & Saatchi. He
has led business units of Mars
Incorporated in Australia and
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, Australasia’s
largest pure play coffee
company, and a Board Member
of Cycling Australia.
07
JOHN ARMSTRONG
BBUS, MBA, MAICD
Independent Director
Mr Armstrong joined the Board
in May 2015. Mr Armstrong
has more than 25 years of
experience in various financial
and commercial management
roles. His most recent executive
role was at SEEK Limited,
the ASX 100 listed leading
recruitment and education
provider, where he was the
Chief Financial Officer for over
12 years. In recent years, he has
also had a focus on SEEK’s Asian
operations and investments,
including directorships of SEEK’s
business in China, Zhaopin Ltd
(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 and was a Non-Executive
Director of ASX listed iProperty
Group Ltd until its sale to News
Corporation.
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.
Christine will be leaving
Blackmores on 29 September
2017 after nine years leading
the Group.
04
BRENT W WALLACE
BCOMM (MARKETING), FAICD
Independent Director
Mr Wallace joined the Board in
October 2005 and is Chair of
the Audit and Risk Committee.
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 Governor of World
Wildlife Fund, the global
environmental group.
05
HELEN NASH
BA (HONS) GAICD
Independent Director
Ms Nash joined the Board of
Blackmores in October 2013.
Ms Nash has more than 20 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 held a variety of roles at
McDonald’s Australia over a nine-
year period and most recently
held the position of Chief
Operating Officer, overseeing
restaurant operations, marketing,
menu, insights and research
and information technology. Ms
Nash is currently a Non-Executive
Director of Metcash, a Non-
Executive Director of Southern
Cross Media Group, a Non-
Executive Director of Inghams
Group Limited, and a former
Non-Executive Director of Pacific
Brands Limited (2013-2016).
01
STEPHEN CHAPMAN
BCOMM, MBA, CA, FAICD
Chairman
Mr Chapman is an experienced
corporate director, investor and
investment banker. He joined
the Board in September 1993.
He is Chairman of Baron Partners
Limited, an Australian investment
bank. Mr Chapman is a Non-
Executive Director of several
ANZ Wealth group subsidiaries,
including Chairman of One Path
Funds Management Limited
and Share Investing Limited. He
held the position as Blackmores
Deputy Chairman from 24
October 2007 to 1 March 2017
when he was Acting Chairman
until 27 June 2017 when he
was appointed Blackmores
Chairman.
02
MARCUS C BLACKMORE AM
ND, MAICD, D UNIV, D LITT
Executive Director
Mr Blackmore has served on the
Board since October 1973. He
holds an Honorary Doctorate
from Southern Cross University
for distinguished leadership
in complementary medicines
in Australia and an Honorary
Doctorate of Letters from
Western Sydney University for
his distinguished services to
business, charity and the broader
community.
Marcus is 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.
Marcus Blackmore held the
position of Chairman up to
28 February 2017.
03
CHRISTINE HOLGATE
Chief Executive Officer and
Managing Director
Ms Holgate 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-
49
BLACKMORES ANNUAL REPORT 2017 DIRECTORS’
REPORT 17
50
BLACKMORES ANNUAL REPORT 2017 DIRECTORS’ REPORT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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 Holgate1
Helen Nash
Brent Wallace
Total
FULLY PAID ORDINARY SHARES
SHARE RIGHTS
1,000
800
4,219,835
20,028
46,002
1,487
12,302
4,301,454
-
-
-
-
34,436
-
-
34,436
1. 12,127 share rights granted for the 2016 financial year (FY16) and 15,051 share rights granted for the 2017 financial year (FY17) were forfeited due to Christine Holgate’s resignation prior to
completion of the service period.
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 54 to 71.
for more details. During the year, the following rights to shares were granted:
Executive Director
Christine Holgate3
Senior Executives
Lesley Braun
Aaron Canning4
Nathan Cheong4
Cecile Cooper4
Dave Fenlon
Richard Henfrey4
Peter Osborne
Total
2017
NUMBER1, 2
15,051
2,166
3,414
2,197
1,994
3,045
3,076
2,352
33,295
1. Nil share rights vested in FY17.
2. Rights granted during FY17 vest provided specific performance objectives and hurdles are met over the three-year period commencing 1 July 2016 to the year ending 30 June 2019
3. Share rights granted for FY17 were forfeited due to Christine Holgate’s resignation prior to completion of the service period.
4. Includes rights granted during FY17 under the Staff Share Plan. Rights to 31 shares for these Senior Executives will vest in the 2018 financial year (FY18).
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 54 to 71.
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:
Brent Wallace, Chairman
David Ansell
John Armstrong
Stephen Chapman
Stephen Chapman, Chairman
David Ansell
John Armstrong
Marcus Blackmore
Christine Holgate
Helen Nash
Brent Wallace
Helen Nash, Chairman
Stephen Chapman
Brent Wallace
51
BLACKMORES ANNUAL REPORT 2017
DIRECTORS’ REPORT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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, CA, 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, member of the Chartered Accountants Association
of Australia and New Zealand 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 2017 and 30 June 2016 and the results herein have been prepared in accordance with
Australian Accounting Standards.
The net profit after tax (NPAT) of the Blackmores Group for the financial year was $58 million (2016: $100 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 20 to 30 inclusive.
DIVIDENDS
The amounts paid or declared by way of dividend since the start of the financial year are:
• a final dividend of 210 cents per share fully franked in respect of the year ended 30 June 2016, as detailed in the Directors’ Report for
that financial year, was paid on 21 September 2016
• an interim dividend of 130 cents per share fully franked in respect of the year ended 30 June 2017 was paid on 22 March 2017
• on 29 August 2017, Directors declared a final dividend for the year ended 30 June 2017 of 140 cents per share fully franked, payable
on 26 September 2017 to shareholders registered on 12 September 2017.
This will bring total ordinary dividends to 270 cents per share fully franked (2016: 410 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 2017.
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 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 Ltd 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.
52
BLACKMORES ANNUAL REPORT 2017 DIRECTORS’ REPORT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
DIRECTORS’ MEETINGS
The number of Directors’ Meetings held (including meetings of Committees of Directors) during the financial year are as follows:
BOARD OF
DIRECTORS
AUDIT & RISK
COMMITTEE
NOMINATIONS
COMMITTEE
PEOPLE AND
REMUNERATION
COMMITTEE
DIRECTORS
HELD1
ATTENDED
HELD1
ATTENDED
HELD1
ATTENDED
HELD1
ATTENDED
David Ansell
John Armstrong
Marcus Blackmore2,3
Stephen Chapman
Christine Holgate2,3
Helen Nash2
Brent Wallace
9
9
9
9
9
9
9
9
9
7
9
9
9
9
4
4
-
4
-
-
4
4
4
1
4
4
1
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
-
3
3
-
-
1
3
3
3
3
1. Reflects the number of meetings held during the time that the Director held office during the year.
2. Marcus Blackmore, Christine Holgate and Helen Nash attended the Audit and Risk Committee as invitees.
3. Marcus Blackmore and Christine Holgate attended the People and Remuneration Committee as invitees.
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 72 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.
53
BLACKMORES ANNUAL REPORT 2017
2017
REMUNERATION
REPORT
KEY POINTS
Introduction from the Chairman of the People
and Remuneration Committee
• Blackmores’ remuneration
structure aligns Senior Executive
remuneration to Group performance
• Blackmores’ long-standing
profit share scheme aligns the
remuneration of all employees to
profits of the Group
• No FY17 short-term incentives (STI)
were paid to the Executive Directors
or Senior Executives
• Long-term incentive (LTI) awards in
the year reflect achievement of the
three year EPS growth targets for the
FY15 plans, granted in July 2014.
No LTI vested in relation to FY16 or
FY17 plans
• Non-Executive Director fixed annual
remuneration (FAR) increases
have been staged over several
years based on independent
benchmarking reviews and only
when significant gaps existed
between Non-Executive Director
fees and comparable external
benchmarks
• Senior Executive FAR increases
have been staged over several
years based on independent
benchmarking reviews. CEO FAR
increases have been staged over
recent years as it previously sat
below the 40th percentile compared
to companies of similar market
capitalisation
Dear Shareholder,
I am pleased to present to you our 2017 Remuneration Report.
This report outlines FY17 performance and remuneration
outcomes for Blackmores, the Chief Executive Officer (CEO), direct
reports to the CEO (Senior Executives) and Executive and Non-
Executive Directors.
Our remuneration structure is linked to the achievement of
year-on-year profit growth and shareholder returns. No Executive
Director or Senior Executive received an award under the short-
term incentive (STI) plan. Shares vested for the first time under the
three-year long-term incentive (LTI) plan. Executive Directors and
Senior Executives were awarded the maximum under this plan due
to the achievement of significant earnings per share (EPS) growth
during the FY15 to FY17 performance period.
The Group has grown significantly in size, scope and complexity
over the past three years. As a result, salary and fee levels have
needed to be adjusted and this has been undertaken in a staged
approach over several years. The increases reported in the FY17
remuneration report are part of this staged process.
Fixed Annual Remuneration (FAR) for the CEO and some Senior
Executives was increased during the period. The increases reflect
the staged approach actioned by the Committee over several
years to close the considerable gap in Key Management Personnel
(KMP) FAR relative to the median FAR of appropriately selected
industry benchmarks. The FY17 portion of the increase was
deferred to the last quarter in FY17. The approach to increases of
Non-Executive Director Fees has been on the same basis.
Following the exceptional prior year, in FY17 the Blackmores
Australian business experienced challenges and rapid changes
in the operating environment, particularly the diminishing role
played by Australian retailers in servicing demand from Chinese
consumers. While other Blackmores business units delivered
strong growth in sales and profit this was not enough to offset the
shortfall in the Australian business with Group Sales down 3% and
NPAT down 42% on the prior year.
Throughout the year management responded to the changing
dynamics while maintaining focus on delivering the Group
strategy:
•
Invested in the Australian consumer – affirmed number one
brand status in Australia
• Continued to grow Blackmores’ business in Asia – total Asia
sales up 36%
• Continued to deliver on the Group strategy of Product
Leadership - Delivered 110 new products and launched a
leading global education platform
• Advanced operational effectiveness - invested in the new
infrastructure and commercial relationships that will deliver
economies as a result of our new scale
• Focused on strong capital management, balance sheet and
cash management - solid cash generation from operations of
$95.3 million, cash conversion ratio of 101%, net debt of $44.7
million and return on shareholder’s equity of 33%.
* Source: IRI MarketEdge, Vitamin and Dietary Supplement, Australia Grocery Pharmacy,
Estimated Local Demand Sales MAT to 14/05/2017.
54
BLACKMORES ANNUAL REPORT 2017 2017
REMUNERATION
REPORT
Notwithstanding management’s focus on adapting the business
to the changes in the Australian market, the exceptional FY16
performance was not repeated however strong growth was
achieved over the very good FY15 performance.
The share price decreased 27% during the year. Blackmores total
shareholders’ return (TSR) was a decrease of 25%, EPS decrease of
41% and dividend decrease of 34%.
ALIGNING REMUNERATION WITH BUSINESS PERFORMANCE
AND STRATEGY
In recent years the scale and diversity of our business has changed
significantly. Between 2014 (FY14) and FY17, the Group NPAT
more than doubled. The exceptional growth during this period
required more focus by the Committee on performance-based
remuneration for those Senior Executives responsible for leading
the delivery of Blackmores’ strategy and to ensure it aligned
remuneration outcomes with shareholder returns. In addition,
as outlined in the 2016 Report, the Committee had conducted a
comprehensive benchmarking review of the CEO, Senior Executive
and Non-Executive Director Remuneration, which considered
market capitalisation and the size of the Company. A staged
approach was adopted by the Committee to adjust the relevant
KMP FAR over several years.
KEY OUTCOMES FOR FY17 REMUNERATION
1. Following the external benchmarking review, the Board
increased the Fixed Annual Remuneration (FAR) of the CEO
and some Senior Executives whose role and responsibilities
had significantly increased with the growth of the Group in the
prior year. The CEO’s FAR was increased by 26% and some
Senior Executive’s FAR were increased ranging between 18%
and 20%. These increases were deferred until the last quarter
of FY17. Other Senior Executives increases were deferred until
FY18. Full details are on page 65.
2. The FY17 NPAT decrease of 42% was below the target set by
the Board for FY17 and the hurdle rate that requires positive
NPAT growth for any component of STI to be awarded. As a
result, no STI was awarded to any Senior Executives. This is in
contrast to the FY16 payments, where NPAT growth of 115%
triggered STI payments of $3,563,981 to Senior Executives.
The CEO did not receive a STI payment for FY17. The Board
consider the STI outcomes for FY17 and FY16 highlight the
strong alignment between financial performance, shareholders’
interests and remuneration outcomes. The STI calculation
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.
3. Under the long-standing profit share scheme, 7.5% of NPAT
was paid to employees of Blackmores being equivalent to
16 days’ incremental salary. This compares to FY16 which met
the conditional requirement of achieving year on year growth
whereby an additional 2.5% of NPAT was distributed resulting
in a total payment of 44 days incremental salary.
4. Long-term incentive (LTI) awards were eligible to vest in FY17
as the first three year LTI plan came into effect at the beginning
of FY15. The Board is very pleased that the FY15 plan vested
at the maximum potential based on the performance metric
of 32% three-year compound annual growth rate (CAGR) in
EPS and reflects the exceptional growth over this period. The
FY16 and FY17 LTI plans remain a three-year plan. The total
remuneration for the financial year, the details of which are
shown on page 65, includes an accounting expense for all
vested and unvested performance rights calculated using the
value of the number of rights that could vest over the three-year
performance period of each LTI plan.
5. As outlined in the 2016 Report, the FY17 LTI achievement
hurdles were increased following a review of market
benchmarks and further consultation. The LTI plan has 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.
6. To further align Senior Executives with shareholders, a staff
share plan was established whereby participants can contribute
salary for the purchase of shares throughout the year. At the
end of the year, Blackmores will provide an additional benefit
by matching these purchased shares on a pre-determined
matching ratio subject to capping of the total cost.
7. Non-Executive fee increases have been staged over several
years in line with the Company’s market capitalisation growth
over the period and a review of relevant external benchmarks.
The FY17 increase of 26% was deferred to the fourth quarter
of FY17. 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. The projected FY18 annualised Non-Executive
Director fees are $785,000. Full details are on page 68.
FY18 CHANGES TO REMUNERATION
Consistent with our ‘One Blackmores’ philosophy, whereby we
strive to create a unified culture and set of goals, the FY18 STI
plan will include a strategic measure component in addition to
the current measure of NPAT growth performance over prior year.
The current hurdle that requires positive NPAT growth for any
component of the STI to be awarded to a Senior Executive remains
in place.
The FY18 key terms of Blackmores’ newly appointed CEO, Mr
Richard Henfrey, were included in the ASX announcement dated
17 August 2017. These are FAR $950,000, participation in the
Company’s cash based profit share plan, STI maximum potential
calculated at 100% of FAR and, subject to shareholder approval
at the 2017 AGM, grants to rights in the LTI plan at maximum
potential calculated at 150% of FAR.
On behalf of the Board and People and Remuneration Committee,
I invite you to read the 2017 Remuneration Report and welcome
your feedback on our approach to and disclosure of Blackmores’
remuneration arrangements.
Helen Nash
Chairman, People and Remuneration Committee
55
BLACKMORES ANNUAL REPORT 2017 2017
REMUNERATION
REPORT
Introduction
1.
2. Senior Executive Remuneration Outcomes Table
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
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 2017 (FY17) 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:
Directors – Executive Directors and Non-Executive Directors.
Executive Directors – Marcus Blackmore and the Chief Executive Officer
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.
Key Management Personnel – Non-Executive Directors and Senior Executives
Exercised – Owned.
Granted – Assigned to, but not yet vested.
Vested – Met performance and service criteria and available to be exercised, but not yet owned.
Key Management Personnel
The following table lists all the current Key Management Personnel (KMP) and their titles as at 30 June 2017:
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, Chairman of the Board, 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
Executive Director, member of the Nominations Committee
Christine Holgate
Chief Executive Officer, Managing Director and member of the Nominations Committee (resigned effective 29
September 2017)
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
56
BLACKMORES ANNUAL REPORT 2017 2017
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 of Senior Executives, who were KMP of Blackmores during the year.
The table sets out the remuneration that the KMP became entitled to during FY17 and that was either paid or payable during the financial
year or will be paid subsequent to the end of the year.
The remuneration outcomes prepared in accordance with accounting standards as required by the Corporations Act 2001 are contained
on page 65 of the Report. The totals in the statutory remuneration table on page 65 of the Report differ to the following table. This is
because of the following:
1. Leave movements – the statutory remuneration table shows annual leave and long service leave movements due to an increase in the
statutory accruals rather than cash payment.
2. Share-based payments – the 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. Included in the statutory remuneration table
is the FY17 portion of the fair value of rights granted in FY15, FY16 and FY17 under the LTI plan. Vesting of the FY16 and FY17 rights
remains subject to performance and service conditions being met in the future.
The FY15 rights have vested and were valued at $28.92 for one Senior Executive and $25.22 for the other Senior Executives in the
statutory remuneration table. This differs to the following outcomes table, which includes the FY15 LTI awards valued at $95.84, which was
the share price on 30 June 2017 vesting date.
SALARY AND
FEES
$
STI AND PROFIT
SHARE
$
NON-
MONETARY1
$
OTHER2 SUPERANNUATION
$
$
TOTAL
$
EQUITY THAT
VESTED DURING 20173
Executive Directors
Marcus Blackmore4
2017
2016
Christine Holgate
2017
2016
304,573
364,530
931,443
872,325
Senior Executives
Lesley Braun
2017
2016
Aaron Canning
2017
2016
Nathan Cheong
2017
2016
Cecile Cooper
2017
2016
David Fenlon
2017
2016
Richard Henfrey
2017
2016
Peter Osborne
2017
2016
279,876
281,131
474,542
446,303
316,771
300,972
284,765
261,097
432,349
430,848
420,586
419,909
363,629
375,744
17,356
368,691
60,596
1,037,454
17,119
286,818
28,433
512,940
20,326
347,650
18,222
335,871
20,521
37,901
9,550
25,596
-
6,713
5,815
42,017
18,701
15,352
11,652
4,625
26,482
486,882
111,650
82,201
26,482
486,882
29,014
391,508
8,060
37,218
-
-
3,260
4,011
17,708
19,308
363,418
794,441
-
-
-
-
19,616
19,308
1,021,205
1,954,683
19,618
19,308
316,613
593,970
1,675
1,633
27,616
27,372
538,081
1,030,265
-
-
1,882
2,004
1,587
1,748
1,784
1,825
-
-
19,622
19,308
20,384
29,372
375,420
683,282
336,905
632,969
19,625
19,308
591,693
1,020,987
26,124
25,808
-
-
483,036
971,642
392,643
767,252
712,830
-
3,300,349
-
586,519
-
492,918
-
553,324
-
452,776
-
821,128
-
767,899
-
625,619
-
Total
2017
2016
3,808,534
3,752,859
244,030
4,254,696
185,949
251,623
10,188
11,221
170,313
179,092
4,419,014
8,449,491
8,313,362
-
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 equity that vested in FY17 year relates to the FY15 LTI grant. The value disclosed is based on the share price on the vesting date 30 June 2017. Mr Blackmore received his LTI as a cash
equivalent in lieu of shares.
4. Mr Blackmore’s salary and fees include annual and long service leave payments relevant to the period he was on sabbatical.
57
BLACKMORES ANNUAL REPORT 2017
2017
REMUNERATION
REPORT
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 who have experience in
both remuneration governance and the Blackmores business. The
members during FY17 were Helen Nash (Committee Chairman),
Stephen Chapman (Chairman) and Brent Wallace.
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 KMP 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 here:
58
BLACKMORES REMUNERATION
FRAMEWORK
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
BLACKMORES REMUNERATION FRAMEWORK
Fixed Remuneration – Not at Risk Component
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.
Performance-based Remuneration – At Risk Component
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.
Staff Share Plan – Participation is open to Senior Executives as
well as all permanent Blackmores staff. Under the plan, staff can
elect annually to participate and purchase shares. At the end of
the financial year, Blackmores will provide an additional benefit
by matching these purchased shares on a pre-determined
matching ratio subject to capping of the total cost. Exercise of
the matched shares is at no cost and vesting takes place once
the service condition has been met.
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. Marcus Blackmore’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 additionto the LTI. There are currently no
SLTIs in place.
BLACKMORES ANNUAL REPORT 2017 2017
REMUNERATION
REPORT
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 FY17, is as follows:
On Target Remuneration Mix
Fixed Remuneration1
STI / Profit Share
LTI3
55%
18%
27%
70%
16%
14%
CEO
Senior
Executives
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
24%
28%
48%
34%
39%
27%
CEO
Senior
Executives
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.
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. No Executives
received increases as part of the annual review. Some Executives received deferred increases in the last quarter of FY17.
59
BLACKMORES ANNUAL REPORT 2017
2017
REMUNERATION
REPORT
Short-term Incentives (STI) – Performance Conditions
Specific information relating to the actual annual performance awards is set out in the table on page 66.
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%
>60.4%
Measures
Sliding scale
Sliding scale
Sliding scale
80%
100%
100%
Chairman
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:
N/A
Financial (i.e. revenue, new
product launches and other
specific objectives)
Non-financial measures (i.e.
safety, employee engagement
and other agreed objectives)
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.
A requirement of NPAT growth over prior year aligns remuneration outcomes with shareholders’ expectations.
Similarly, EBIT as an incentive measure rewards divisional heads for the performance of the businesses 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 an 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.
Does the Board
have an Executive
Clawback Policy?
The Board has adopted a Clawback Policy that is applicable to KMP with a view to further aligning the interests of
KMP with the long-term interests of Blackmores. In the event of any deliberate misstatement or manipulation of
results in the financial statements for any of the immediately preceding three financial years, after assessment, the
Board may require that KMP to repay all or a part of the STI Award and may withhold the payment or allocation of
all or a part of an unpaid STI.
60
BLACKMORES ANNUAL REPORT 2017
2017
REMUNERATION
REPORT
Staff Share Plan – Performance Conditions and Operation
Specific information relating to the actual annual performance awards is set out in the table on page 66.
What is the annual incentive
and who is eligible to
participate?
All eligible permanent staff in the Group, including Senior Executives, can elect to contribute between
$1,000 and $10,000 to be used to purchase shares in the Company. At the end of the financial year, the
Company will provide a benefit by applying a matching ratio to the shares purchased by each participant
for that financial year.
What is the amount the
executive can earn?
The total benefit an executive can earn is determined by the number of matched shares the Company
will provide. This number is subject to capping and a maximum cost to the Company.
What were the performance
conditions for FY17?
For FY17, the Company will match one share for every three shares purchased during the financial year.
For FY17 the Board has capped the total cost to the Company for the matched shares at $500,000. An
executive must be employed by the Company at 30 June 2017 and have purchased shares during the
year which remain in the plan.
Why were these
performance measures
chosen?
When are performance
conditions tested?
As Senior Executives increase their shareholding in Blackmores, their interests become more directly
aligned with those of Blackmores’ other shareholders.
Matched shares are provided each July following the completion of the annual service period.
Profit Share – Performance Conditions and Operation
Specific information relating to the actual annual performance awards is set out in the table on page 66.
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?
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%.
What were the performance
conditions for FY17?
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?
When are performance
conditions tested?
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.
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.
61
BLACKMORES ANNUAL REPORT 2017 2017
REMUNERATION
REPORT
Long-term Incentives (LTI) – Performance Conditions
Specific information relating to the actual annual performance awards is set out in the table on page 66.
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 5.0%
5.0%
5.0% to 10.0%
10.0%
10.0% to 25.0%
25.0%
0%
25%
Sliding scale
50%
Sliding scale
200%
0%
10%
Sliding scale
20%
Sliding scale
80%
What was the performance
condition for FY17?
The performance condition is the three-year compound annual growth rate in EPS. The performance
period for measuring EPS growth is three years (FY17 to FY19).
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.
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 are announced to the ASX, less
•
the amount of any final dividend per share declared as payable in respect of the prior financial year.
Rights are automatically exercised following vesting, audit clearance of the 2019 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 Executive Director, Marcus Blackmore, 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?
Does the Board have an
Executive Clawback Policy?
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‘.
The Board has adopted a Clawback Policy that is applicable to KMP with a view to further aligning the
interests of KMP with the long-term interests of Blackmores. In the event of any deliberate misstatement
or manipulation of results in the financial statements for any of the immediately preceding three financial
years, after assessment, the Board may require KMP to repay all or a part of the LTI Award, forfeit all or any
unvested LTI; and withhold all or part LTI to the extent it has not been given to that KMP.
62
BLACKMORES ANNUAL REPORT 2017
2017
REMUNERATION
REPORT
5.
PERFORMANCE AND REMUNERATION
OUTCOMES
Performance Incentives – Actual Performance 2017
Financial Year
The exceptional FY16 performance was not repeated in FY17,
however there was good growth compared to the FY15 year.
The actual performance is illustrated in the charts below:
SHARE PRICE ($)
150
120
90
60
30
0
95.84
2013
2014
2015
2016
2017
Short-term Incentives (STI)
Similar to previous years, NPAT achievement was selected as
the Group performance measure for the STI awards in respect
of FY17.
Blackmores FY17 NPAT of $58 million represented a 42%
decrease on prior year.
The amount awarded to the Senior Executives for the FY17 STI
was $Nil (2016: $3,563,981). This award is included under the
‘STI and Profit Share’ column in the remuneration disclosures
table on page 65.
Blackmores NPAT over the past five years is shown in the
following graph.
500
400
300
200
100
0
60
50
40
30
20
100
80
60
40
20
0
DIVIDEND PER SHARE (CENTS)
410
270
2013
2014
2015
2016
2017
RETURN ON EQUITY (%)
33
2013
2014
2015
2016
2017
NPAT ($M)
58
2013
2014
2015
2016
2017
63
BLACKMORES ANNUAL REPORT 2017 2017
REMUNERATION
REPORT
Long-term Incentives (LTI)
Similar to previous years, EPS achievement was selected as the
Group performance measure for the LTI awards in respect of FY17.
A new LTI Plan that came into effect in FY15 included a three-year
performance period. The FY15 LTI awards were eligible to vest in
FY17. The FY16 and F17 awards were not eligible to vest in FY17.
The total remuneration for the financial year, the details of
which are shown on page 65, includes an accounting expense
of $960,764 (2016: $2,026,265) for these performance rights.
This amount has been calculated based on an assessment of
the achievement of the performance hurdle over the three-year
performance period and represents one third of the total value of
the unvested rights. In the case of the Executive Director Marcus
Blackmore, the incentive is cash based.
Blackmores EPS over the past five years is shown in this graph.
600
500
400
300
200
100
0
EPS (CENTS)
343
2013
2014
2015
2016
2017
CEO Remuneration Outcomes – Five Year History
The Group’s remuneration framework is designed to reward Senior Executives based on the achievement of the Group’s performance
goals and to share in the success and profitability of Blackmores in alignment with increased shareholder wealth. The history of the CEO
performance related remuneration over the past five years illustrates this linkage to business performance.
STI earned as a
% of maximum
Cents
LTI awarded as a
% of maximum
600
500
400
300
200
100
0
100
80
60
40
20
0
100
80
60
40
20
0
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Net Profit After Tax (NPAT)
Earnings Per Share (EPS)
STI
LTI
AUS$m
120
100
80
60
40
20
0
64
BLACKMORES ANNUAL REPORT 2017 2017
REMUNERATION
REPORT
6.
SENIOR EXECUTIVE REMUNERATION TABLES – STATUTORY
Statutory Remuneration
The following table discloses the remuneration outcomes of the Senior Executives of Blackmores for the financial year ended 30 June 2017.
The table has been prepared in accordance with Section 300A of the Corporations Act 2001 and has been audited.
The amounts in statutory table differ to the remuneration table on page 57 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.
2. Share-based payments – The accounting standards require 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 year which have vested and the FY16 and FY17 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
RIGHTS5,6
$
OTHER4
$
TOTAL
$
Executive Directors
Marcus Blackmore
2017
2016
Christine Holgate7
2017
2016
Senior Executives
Lesley Braun
2017
2016
Aaron Canning
2017
2016
Nathan Cheong
2017
2016
Cecile Cooper
2017
2016
David Fenlon
2017
2016
Richard Henfrey
2017
2016
Peter Osborne
2017
2016
Total
2017
2016
169,165
357,770
17,356
368,691
20,521
37,901
23,537
33,418
17,708
19,308
2,599
7,088
582,116
166,433
833,002
990,609
856,348
775,198
60,596
1,037,454
9,550
25,596
86,323
68,229
19,616
19,308
18,183
33,161
(306,712)
743,904
885,696 2,844,642
265,998
267,401
17,119
286,818
-
6,713
27,693
11,612
19,618
19,308
1,949
1,401
93,140
137,188
425,517
730,441
435,717
421,343
28,433
512,940
5,815
42,017
38,551
36,168
27,616
27,372
2,023
961
652,096
113,941
172,832 1,213,633
312,613
284,143
20,326
347,650
18,701
15,352
35,537
28,145
19,622
19,308
4,383
2,800
94,564
134,276
505,746
831,674
260,630
240,275
18,222
335,871
11,652
4,625
32,011
33,221
20,384
29,372
22,119
25,902
81,841
117,394
446,859
786,660
409,158
407,735
26,482
486,882
111,650
82,201
34,627
35,621
19,625
19,308
2,989
2,264
72,026
676,557
72,026 1,106,037
391,626
366,955
26,482
486,882
8,060
37,218
34,823
40,615
26,124
25,808
9,700
12,970
130,433
627,248
187,905 1,158,353
346,485
317,937
29,014
391,508
-
-
27,611
28,661
-
-
-
-
99,415
152,515
502,525
890,621
3,447,740
244,030
3,438,757 4,254,696
185,949
251,623
340,713
315,690
170,313
179,092
63,945
960,764 5,413,454
86,547 2,026,265 10,552,670
1. ‘STI and Profit Share’ includes amounts paid by way of profit share on 21 December 2016 and 28 June 2017.
2. ‘Non-monetary’ includes motor vehicle benefits and any fringe benefits tax paid on these benefits.
3. ‘Other’ shown in short-term employment benefits relates to provisions for annual leave.
4. ‘Other’ shown in long-term employment benefits relates to provisions for long service leave.
5. The FY17 share-based payments includes the LTI plan and represent the FY17 portion of the fair value of rights granted in FY15, FY16 and FY17. The FY15 rights have vested. Vesting of the
FY16 and FY17 rights remains subject to performance and service conditions as outlined on page 62. Marcus Blackmore’s LTI plan is paid as a cash equivalent in lieu of shares. Mr Blackmore’s
performance rights are proportionately higher than other KMP as his rights are valued on the share price at 30 June 2017 ($95.84). Other KMP are valued at fair value at grant date. This
difference reflects Mr Blackmore’s LTI plan being paid as a cash equivalent.
6. The FY17 share-based payments include the Staff Share Plan and represent the FY17 portion of the fair value of rights granted in FY17. Vesting of the FY17 plan remains subject to service
conditions as outlined on page 62.
7. Christine Holgate’s FY17 share-based payments (-$306,712) represent the combination of (a) reversal of the fair value of share-based payments ($596,204) expensed in prior financial years that
were forfeited by her as the result of her resignation and therefore the service period that will not be met and (b) the FY17 portion of the fair value awards granted to Ms Holgate in previous
years expensed during FY17 ($289,492).
65
BLACKMORES ANNUAL REPORT 2017
2017
REMUNERATION
REPORT
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 FY17
remuneration mix detailed in the Statutory Remuneration table.
NON-PERFORMANCE
RELATED REMUNERATION1
%
STI AND
PROFIT SHARE
%
PERFORMANCE
TOTAL PERFORMANCE
RIGHTS2,3 RELATED REMUNERATION
%
%
Executive Directors
Marcus Blackmore
2017
2016
Christine Holgate4
2017
2016
Senior Executives
Lesley Braun
2017
2016
Aaron Canning
2017
2016
Nathan Cheong
2017
2016
Cecile Cooper
2017
2016
David Fenlon
2017
2016
Richard Henfrey
2017
2016
Peter Osborne
2017
2016
Total
2017
2016
28.0%
46.0%
133.1%
32.4%
74.1%
42.0%
78.2%
43.5%
77.3%
42.1%
77.6%
42.4%
85.4%
49.5%
75.0%
41.7%
74.4%
38.9%
77.7%
40.5%
2.1%
37.2%
8.1%
36.5%
4.0%
39.3%
4.4%
42.3%
4.0%
41.8%
4.1%
42.7%
3.9%
44.0%
4.2%
42.0%
5.8%
44.0%
4.5%
40.3%
69.9%
16.8%
-41.2%
31.1%
21.9%
18.8%
17.5%
14.2%
18.7%
16.1%
18.3%
14.9%
10.6%
6.5%
20.8%
16.2%
19.8%
17.1%
17.7%
19.2%
72.0%
54.0%
-33.1%
67.6%
25.9%
58.0%
21.8%
56.5%
22.7%
51.9%
22.4%
57.6%
14.6%
50.5%
25.0%
58.3%
25.6%
61.1%
22.3%
59.0%
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. Performance Rights includes the LTI plan and represents the FY17 accounting expense of the FY17 portion of the rights granted in FY15, FY16 and FY17.
3. Performance Rights includes the Staff Share Plan and represents the FY17 accounting expense of the FY17 portion of the rights granted in FY17.
4. Christine Holgate’s Performance Rights represent the combination of (a) reversal of the fair value of share-based payments expensed in prior financial years that were forfeited by her as the
service period will not be met owing to her resignation and (b) the FY17 portion of the fair value awards granted to Ms Holgate in previous years expensed during FY17.
66
BLACKMORES ANNUAL REPORT 2017
2017
REMUNERATION
REPORT
Short-term Incentives
The threshold potential award was not achieved in respect of Group financial measure being Group NPAT achievement over prior year.
No Executive Directors or Senior Executives were eligible for an STI payment for FY17 and 100% of maximum STI award was forfeited.
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 FY17, FY16 and FY15. The fair value of awards is calculated in accordance with AASB 2 Share-based Payments.
(a) LTI Plan
NAME
GRANT
VESTED
EXERCISED
END OF
HOLDING
LOCK
DATE
NUMBER OF FAIR VALUE
RIGHTS PER RIGHT
$
TOTAL FAIR
VALUE2
$
SHARE
PRICE
$
MAXIMUM
VALUE1
$
NUMBER
OF
% OF
NUMBER
RIGHTS3 GRANTED
DATE
VALUE4
$
VALUE5
DATE
VALUE OF
RIGHTS NOT
VESTED
$
Executive Director
Christine Holgate6 7/11/14
34,436
25.22
868,476
32.22 1,109,528
30/6/17
34,436
100%
868,476
24/11/15
12,127
147.49
1,788,611
179.50 2,176,797
17/11/16
15,051
99.19
1,492,909
113.90 1,714,309
-
-
-
-
-
-
-
-
Senior Executives
Lesley Braun
7/11/14
6,120
25.22
154,346
32.22
197,186
30/6/17
6,120
100%
154,346
24/11/15
1,744
147.49
257,223
179.50
313,048
17/11/16
Aaron Canning
10/12/14
2,166
5,143
99.19
28.92
214,846
113.90
246,707
148,736
32.65
167,919
30/6/17
5,143
100%
148,736
24/11/15
2,507
147.49
369,757
179.50
450,007
17/11/16
Nathan Cheong
7/11/14
3,383
5,773
99.19
25.22
335,560
113.90
385,324
145,595
32.22
186,006
30/6/17
5,773
100%
145,595
24/11/15
1,744
147.49
257,223
179.50
313,048
17/11/16
Cecile Cooper
7/11/14
2,166
4,724
99.19
25.22
214,846
113.90
246,707
119,139
32.22
152,207
30/6/17
4,724
100%
119,139
24/11/15
1,580
147.49
233,034
179.50
283,610
194,710
113.90
223,586
17/11/16
David Fenlon
7/11/14
17/11/16
Richard Henfrey
7/11/14
1,963
8,568
3,045
8,012
99.19
25.22
99.19
25.22
216,085
32.22
276,061
30/6/17
8,568
100%
216,085
302,034
113.90
346,826
-
-
-
202,063
32.22
258,147
30/6/17
8,012
100%
202,063
24/11/15
2,452
147.49
361,645
179.50
440,134
17/11/16
Peter Osborne
7/11/14
3,045
6,528
99.19
25.22
302,034
113.90
346,826
164,636
32.22
210,332
30/6/17
6,528
100%
164,636
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24/11/15
1,986
147.49
292,915
179.50
356,487
17/11/16
2,352
99.19
233,295
113.90
267,893
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
09/2017
09/2018
09/2019
09/2017
-
-
-
-
09/2018
313,048
09/2019
246,707
09/2017
-
09/2018
450,007
09/2019
385,324
09/2017
-
09/2018
313,048
09/2019
246,707
09/2017
-
09/2018
283,610
09/2019
223,586
09/2017
-
09/2019
346,826
09/2017
-
09/2018
440,134
09/2019
346,826
09/2017
-
09/2018
356,487
09/2019
267,893
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. FY17 grant over
1 July 2016 to 30 June 2019).
3. The number of rights vested is equal to the number of rights exercised and the number of shares issued; vesting occurs on 30 June and shares are issued in September following audit clearance
of the Group’s results and Board approval.
4. Value of rights vested is equal to the fair value per right multiplied by the number of rights vested
5. Value of rights at exercise is equal to the number of rights exercised multiplied by the share price at exercise date.
6. The fair value of Ms Holgate share rights which were forfeited due to Ms Holgate’s resignation prior to completion of the service period were FY16 $2,176,797 and FY17 $1,714,309.
(b) Staff Share Plan
NAME
Senior Executive
Aaron Canning
Nathan Cheong
Cecile Cooper
Richard Henfrey
GRANT
VESTED
Date
Number of
rights
Fair value
per right
Total fair
value1
Date
Number
of rights2
% of number
granted
31/7/16
31/7/16
31/7/16
31/7/16
31
31
31
31
$152.58
$152.58
$152.58
$152.58
$4,730
$4,730
$4,730
$4,730
31/7/17
31/7/17
31/7/17
31/7/17
-
-
-
-
-
-
-
-
1. 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. FY17 grant over
1 July 2016 to 31 July 2017).
2. There were nil rights that vested in the FY17 year.
67
BLACKMORES ANNUAL REPORT 2017
2017
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).3
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.
3. David Fenlon has six months’ notice (or payment in lieu).
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. The Company has grown significantly in size, scope and complexity over the past three years. As a result, salary
and fee levels have needed to be adjusted and this has been undertaken in a staged approach over several years. The increases reported
in the FY17 remuneration report are part of this staged process.
In line with market capitalisation and following a review of relevant external benchmarks, base fees for Non-Executive Directors were
increased in FY17 by 25.75% and committee fees by 0.42% effective 1 April 2017. Fees are below the 50th percentile of companies of
comparable market capitalisation.
68
BLACKMORES ANNUAL REPORT 2017 2017
REMUNERATION
REPORT
Non-Executive Directors’ fees levels for FY17 include:
FEES
Board2,3
Audit and Risk
People and Remuneration
Nomination
20171
CHAIRMAN
$
MEMBER
$
CHAIRMAN
$
239,615
16,425
16,425
-
120,450
9,855
9,855
-
-
16,356
16,356
-
2016
DEPUTY
CHAIRMAN4
$
47,894
-
-
-
MEMBER
$
95,787
9,813
9,813
-
1. FY17 Non-Executive Directors’ fee levels are as at 1 April 2017, and the Chairman’s fees as at 1 March 2017.
2. Chairman was an Executive Director during FY16 and up to 1 March 2017.
3. Effective 1 March 2017, Chairman’s fees were set at double Board member fees with no additional committee fees payable.
4. Effective 1 March 2017, the Deputy Chairman role was vacated.
The total annual Non-Executive Director remuneration for the Board of five Non-Executive Directors for FY17 was $663,565
(2016: $561,761).
The following table discloses the remuneration of the Non-Executive Directors for the financial year ended 30 June 2017.
SHORT-TERM
EMPLOYMENT
BENEFITS
POST
EMPLOYMENT
BENEFITS
FEES AND ALLOWANCES
$
NON-MONETARY1
$
SUPERANNUATION
$
TOTAL
$
Non-Executive Directors
David Ansell
2017
2016
John Armstrong
2017
2016
Stephen Chapman2,3
2017
2016
Helen Nash
2017
2016
Brent Wallace
2017
2016
Total
2017
2016
102,002
96,438
102,002
96,438
172,631
86,623
107,983
102,413
116,954
111,375
601,572
493,287
4,827
4,235
-
-
-
10,352
-
6,882
-
-
4,827
21,469
9,689
9,170
9,689
9,170
16,421
8,337
10,257
9,738
11,110
10,590
116,518
109,843
111,691
105,608
189,052
105,312
118,240
119,033
128,064
121,965
57,166
47,005
663,565
561,761
1. ‘Non-monetary’ includes benefits and any applicable fringe benefits tax.
2. Stephen Chapman was on an unpaid leave of absence from 14 April 2015 to 30 November 2015.
3. Stephen Chapman was in the role of Chairman from 1 March 2017.
69
BLACKMORES ANNUAL REPORT 2017
2017
REMUNERATION
REPORT
9.
NON-EXECUTIVE DIRECTORS AND SENIOR EXECUTIVE TRANSACTIONS
EQUITY HOLDINGS
During FY17 and FY16 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
2017
Non-Executive Directors
David Ansell
John Armstrong
Stephen Chapman
Helen Nash
Brent Wallace
Executive Directors
Marcus Blackmore
Christine Holgate
Senior Executives
Leslie Braun
Aaron Canning
Nathan Cheong
Cecile Cooper
Richard Henfrey
Peter Osborne
Total
BALANCE AT
1/7/16
NUMBER
RECEIVED ON
SETTLEMENT
OF RIGHTS
NUMBER
NET CHANGE
OTHER1
NUMBER
BALANCE AT
30/6/17
NUMBER
1,000
-
20,028
1,000
12,302
4,219,835
45,002
7,855
15,512
-
40,804
7,547
190
4,371,075
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
800
-
487
-
1,000
800
20,028
1,487
12,302
-
1,000
4,219,835
46,002
-
101
94
301
94
400
3,277
7,855
15,613
94
41,105
7,641
590
4,374,352
1. Includes shares issued under the Company’s Staff Share Plans.
RIGHTS TO SHARES
The table below outlines the rights to fully paid ordinary shares of Blackmores Limited held by KMP.
2017
Executive Director
Christine Holgate
Senior Executives
Lesley Braun
Aaron Canning
Nathan Cheong
Cecile Cooper
David Fenlon
Richard Henfrey
Peter Osborne
GRANTED AS
COMPEN-
BALANCE
AS AT 1/7/16
SATION EXERCISED FORFEITED
NET OTHER BALANCE AS
CHANGE AT 30/6/17
BALANCE
VESTED AT
VESTED
BUT NOT
30/6/17 EXERCISABLE
VESTED
AND
RIGHTS
VESTED
EXERCISABLE DURING YEAR
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
46,563
15,051
- (27,178)
-
34,436
34,436
34,436
-
34,436
7,864
7,650
7,517
6,304
8,568
10,464
8,514
2,166
3,414
2,197
1,994
3,045
3,076
2,352
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,030
11,064
9,714
8,298
11,613
13,540
10,866
6,120
5,143
5,773
4,724
8,568
8,012
6,528
6,120
5,143
5,773
4,724
8,568
8,012
6,528
-
-
-
-
-
-
6,120
5,143
5,773
4,724
8,568
8,012
6,528
Total
103,444
33,295
- (27,178)
- 109,561
79,304
79,304
-
79,304
70
BLACKMORES ANNUAL REPORT 2017
2017
REMUNERATION
REPORT
LOAN DISCLOSURES
There were no loan balances exceeding $100,000 due from KMP during or at the end of the financial year (2016: $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
Stephen Chapman
Chairman
Dated in Sydney, 29 August 2017
71
BLACKMORES ANNUAL REPORT 2017
AUDITOR’S INDEPENDENCE DECLARATION
72
BLACKMORES ANNUAL REPORT 2017 INDEPENDENT AUDITOR’S REPORT
73
BLACKMORES ANNUAL REPORT 2017 INDEPENDENT AUDITOR’S REPORT
74
BLACKMORES ANNUAL REPORT 2017 INDEPENDENT AUDITOR’S REPORT
75
BLACKMORES ANNUAL REPORT 2017 INDEPENDENT AUDITOR’S REPORT
76
BLACKMORES ANNUAL REPORT 2017 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 Corporations Legislative Instrument
2016/785. The nature of the deed of cross guarantee is such that each company that 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
Stephen Chapman
Director
Dated in Sydney, 29 August 2017
77
BLACKMORES ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
NOTES
2017
$’000
2016
$’000
5
6
7
7
7
7
9.1
692,790
(143,547)
545
549,788
236,184
120,209
51,141
8,411
7,942
8,923
5,172
9,809
1,300
14,466
463,557
86,231
384
(4,564)
(4,180)
82,051
(24,023)
58,028
717,211
(118,771)
1,086
599,526
214,263
134,933
49,177
7,045
4,496
9,168
4,683
10,906
2,099
17,535
454,305
145,221
462
(2,272)
(1,810)
143,411
(43,391)
100,020
59,013
(985)
58,028
100,008
12
100,020
(1,922)
(39)
(1,961)
(838)
537
(301)
56,067
99,719
57,119
(1,052)
56,067
99,690
29
99,719
27
27
342.6
340.1
580.6
576.2
Sales (net of discounts)
Promotional and other rebates
Other income
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 after tax
Profit attributable to:
Owners of the parent
Non-controlling interests
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign controlled entities
Net (loss)/gain 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
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 82 to 117.
78
BLACKMORES ANNUAL REPORT 2017
CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
AS AT 30 JUNE 2017
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 82 to 117.
NOTES
2017
$’000
2016
$’000
35.1
13
14
34,251
132,146
84,794
7,471
258,662
37,653
134,636
116,486
5,849
294,624
15
16
17
18
9.2
33
19
20
22
21
22
9.2
23
24
25
26
74,207
2,160
32,293
29,461
9,960
1,320
4,111
153,512
412,174
67,626
2,160
32,736
29,371
12,257
628
3,960
148,738
443,362
124,365
1,811
11,549
4,831
142,556
160,478
24,204
7,588
9
192,279
78,968
1,372
235
10,224
90,799
233,355
178,819
55,446
1,134
3,655
10,255
70,490
262,769
180,593
37,753
4,085
135,703
177,541
1,278
178,819
37,753
5,252
135,258
178,263
2,330
180,593
79
BLACKMORES ANNUAL REPORT 2017
CONSOLIDATED
STATEMENT
OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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
Net proceeds from bank borrowings
Net 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
Notes to the Consolidated Financial Statements are included on pages 82 to 117.
NOTES
2017
$’000
2016
$’000
763,413
(668,103)
95,310
(5,897)
(43,779)
45,634
766,436
(643,414)
123,022
(4,375)
(34,971)
83,676
35.3
384
-
(14,567)
(151)
30
92
(14,212)
23,727
1,100
(58,568)
-
(33,741)
(2,319)
37,653
(1,083)
34,251
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
28
35.1
80
BLACKMORES ANNUAL REPORT 2017
CONSOLIDATED
STATEMENT OF
CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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 2015
37,753
6,933
(913)
2,043
87,099
132,915
- 132,915
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
-
-
-
-
-
-
-
(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
-
-
-
767
(230)
-
537
537
-
-
(376)
-
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
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
-
-
-
-
-
-
-
-
-
-
-
-
-
- (58,568)
(58,568)
- (58,568)
-
(56)
17
-
(39)
- 59,013
-
-
-
-
-
(1,855)
-
(1,855)
59,013
(56)
17
(1,855)
(1,894)
(985)
-
-
(67)
(67)
58,028
(56)
17
(1,922)
(1,961)
Total comprehensive income for the year
Recognition of share-based payments
Balance as at 30 June 2017
-
-
37,753
-
727
5,167
(39)
-
(415)
(1,855)
-
59,013
-
(667) 135,703
57,119
727
177,541
(1,052)
-
56,067
727
1,278 178,819
Notes to the Consolidated Financial Statements are included on pages 82 to 117.
81
BLACKMORES ANNUAL REPORT 2017
NOTES
NOTES TO THE FINANCIAL
STATEMENTS
––––
FOR THE FINANCIAL YEAR ENDED
30 JUNE 2017
82
BLACKMORES ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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 a company domiciled in
Australia. The Consolidated Financial Report (Financial Report) of
Blackmores as at and for the twelve months ended 30 June 2017
comprises Blackmores and its subsidiaries (the Group).
The Consolidated Annual Financial Report of the Group as at and
for the year ended 30 June 2017 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’).
As a consequence of an IFRS Interpretation Committee (IFRIC)
agenda decision issued in November 2016, management has
amended its accounting policy to recognise a deferred tax
liability on indefinite life intangibles acquired as part of a business
combination. The amendment resulted in an increase of $5.0
million to goodwill and deferred tax liabilities as at the beginning
of the earliest comparative period. An additional increase of $4.3
million related to Global Therapeutics business combination as
at 30 June 2016. Therefore, as at 30 June 2016, goodwill and
deferred tax liabilities increased by $9.3 million.
The Financial Statements were authorised for issue by the Directors
on 29 August 2017.
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 2016, unless
otherwise stated.
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.
CASH AND CASH EQUIVALENTS
2.5
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.
83
BLACKMORES ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
2
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Income is recognised on an effective interest basis for debt
instruments other than those financial assets classified as at FVTPL.
A financial liability is classified as held for trading if:
• it has been acquired principally for the purpose of repurchasing
2.6.1.2 Financial Assets at FVTPL
it in the near term; or
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
• 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.
2.6.2
Financial Liabilities and Equity 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.
• 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 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.
2.6.3 Derivative Financial Instruments
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.
84
BLACKMORES ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
2
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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.
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.
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
nonfinancial 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.
PROPERTY, PLANT AND EQUIPMENT
2.8
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
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.
Freehold land is not depreciated. The following estimated useful
lives are used in the calculation of depreciation:
• Buildings 25-40 years
• Leasehold improvements 3-13 years
• Plant and equipment 3-20 years
• Motor vehicles 4-5 years
IMPAIRMENT OF NON-CURRENT ASSETS
2.9
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.
85
BLACKMORES ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
2
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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.
• 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.
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 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
Specifically, revenue from the sale of goods is recognised when
goods are delivered and legal title is passed.
2.14.2 Promotional and other rebates
Recognition of rebates requires management to exercise significant
judgement with respect to the amount of the required accruals
which are based on customers’ sales volumes for the period as well
as growth and/or contributions by customers towards promotional
activities (known as case deals).
2.14.3 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.
2.14.4 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.
rewards of ownership of the goods;
2.15.3 Foreign Operations
• 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;
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
86
BLACKMORES ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
2
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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 recognised in
profit or loss over the remaining vesting period, with corresponding
adjustment to the equity-settled employee benefits reserve.
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
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 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.
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.
• for receivables and payables which are recognised inclusive of
2.18.3 Current and Deferred Tax for the Year
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 is 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
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.
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.
87
BLACKMORES ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
2
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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.
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.
88
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.
BLACKMORES ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
2
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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.
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 new and/or revised Standards and Interpretations adopted in these Financial Statements affecting the reported results
or financial position.
STANDARDS AND INTERPRETATIONS ADOPTED WITH NO EFFECT ON THE FINANCIAL STATEMENTS
3.2
There are no new Standards and Interpretations adopted in these 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.
The assessment of the impact of these standards is ongoing and as at the date of this report we have not quantified the impact. 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 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’
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 16 ‘Leases’
AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of
Deferred Tax Assets for Unrealised Losses’
1 January 2019
30 June 2020
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
AASB 9 ‘Financial Instruments’
1 January 2018
30 June 2019
89
BLACKMORES ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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.
PROMOTIONAL AND OTHER REBATES
4.1
For the year ended 30 June 2017 the Group recognised promotional and other rebates of $143.5m (2016: $118.8m) which have been
charged against sales revenue as disclosed in the Consolidated Statement of Profit and Loss and other Comprehensive Income.
Accruals for promotional and other rebates as at 30 June 2017 are included within ‘Other creditors and accruals’ in note 19.
Recognition of rebate accruals at balance date requires management to exercise significant judgement in respect of the amount of
the required accruals which are based on customers’ sales volumes for the period as well as growth and/or contributions by customers
towards promotional activities (known as case deals).
INVENTORY
4.2
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.
As at 30 June 2017 the Group has a provision of $14.1m (2016: $2.1m), against total inventories of $98.9m (2016: $118.6m) as disclosed
in note 14.
Significant judgement is required in estimating the value of slow moving and potentially obsolete items, some of which have a limited
shelf life.
Furthermore, there is uncertainty over changes in consumer preferences and spending patterns, which are primarily driven by wider trends
in the wellness sector which may impact inventory provisioning requirements.
There is a recoverability risk associated with new product launches and significant judgement is required in forecasting demand, including
the possible change in demand between the time the inventory order is placed with the supplier and the ultimate date of sale.
IMPAIRMENT OF GOODWILL
4.3
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 2017 was $29.4m (30 June 2016: $29.4m).
90
BLACKMORES ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
5
REVENUE
Sale of goods (net of discounts)
Promotional and other rebates
Revenue
6 OTHER INCOME
Government grant
Dividends received
Proceeds from the disposal of fixed assets
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 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
Cash-settled share-based payments
Other employee benefits
Provision for stock obsolescence
Net foreign exchange losses
Loss on disposal of non-current assets
2017
$’000
2016
$’000
692,790
(143,547)
549,243
717,211
(118,771)
598,440
423
92
30
545
1,020
25
41
1,086
2,554
111
1,899
4,564
7,901
510
8,411
1,085
410
777
2,272
6,480
565
7,045
7,942
4,496
3,592
10,200
6,632
6,280
781
614
112,182
120,209
3,362
-
125,291
134,933
17,917
3,027
1,816
2,877
30
358
91
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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:
ANZ (Australia and New Zealand)
China (In country and China Export Division)
Other Asia
BioCeuticals Group
Other
Corporate Costs
The principal activity of each segment is the development and/or marketing of health products including vitamins, 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:
ANZ1
China (In country and China Export Division)
Other Asia2
BioCeuticals Group3
Other4
Total Segment Revenue5
2017
$’000
2016
$’000
371,962
132,091
84,384
102,311
2,042
692,790
481,967
77,291
81,360
72,267
4,326
717,211
The Group had one customer (2016: one) who contributed more than 10% of the Group’s revenue in the year. Included in external sales
of the Australian segment of $371,962 thousand (2016: $481,967 thousand) are sales of $162,103 thousand (2016: $183,875 thousand)
which arose from sales to the Group’s largest customer.
1. ANZ segment revenue also includes Pure Animal Wellbeing and the benefit of sales made to Australian and New Zealand customers which we believe are ultimately intended for Asian Markets.
2. Other Asia comprises the markets of Thailand, Malaysia, Singapore, Hong Kong, Taiwan, Korea, Indonesia, Kazakhstan and Cambodia.
3. BioCeuticals Group comprises FIT-BioCeuticals Ltd and Global Therapeutics Pty Ltd.
4. Other comprises Bemore Partnership.
5. Excludes interest revenue and other income.
SEGMENT RESULTS
The following is an anlaysis of the Group’s EBIT results from continuing operations by reportable segment:
ANZ
China (In country and China Export Division)
Other Asia
BioCeuticals Group
Other
Corporate Costs
Earnings before interest and tax
2017
$’000
2016
$’000
62,912
27,904
895
14,316
(6,965)
(12,831)
86,231
117,046
25,753
2,310
9,951
(818)
(9,021)
145,221
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.
92
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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
2017
$’000
2016
$’000
27,239
(968)
47,475
789
(3,092)
844
(4,727)
(146)
Total income tax expense recognised in the current year relating to continuing operations
24,023
43,391
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
(Over)/under provision of income tax in previous year
Income tax expense recognised in profit or loss
82,051
143,411
24,615
43,023
288
(290)
155
(4)
1,086
(1,541)
(162)
24,147
(124)
24,023
523
(362)
957
(735)
788
(1,265)
(181)
42,748
643
43,391
The tax rate used for the 2017 and 2016 reconciliations above is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law.
93
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
9
INCOME TAXES (CONT.)
DEFERRED TAX BALANCES
9.2
Deferred tax assets arise from the following:
CURRENT YEAR
MOVEMENT
RECOGNISED
CURRENT YEAR
FILING
MOVEMENT
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 2017
Property, plant and equipment
Prepayments and other
Provisions
Accruals
Cash flow hedges
Foreign currency monetary items
Capitalised expenses
Indefinite life intangible assets
Other
(69)
(62)
3,820
6,638
163
(351)
(4)
(9,339)
1,205
2,002
16
165
(10)
(3,595)
-
(191)
(20)
-
543
(3,092)
Presented in the Consolidated Statement of Financial Position as follows:
Deferred tax asset
Deferred tax liability
Temporary differences 2016
Property, plant and equipment
Prepayments and other
Provisions
Accruals
Cash flow hedges
Foreign currency monetary items
Capitalised expenses
Tax losses recognised
Indefinite life intangable assets
Other
(10)
(114)
4,579
2,033
393
(475)
32
12
(5,001)
61
510
20
52
(930)
4,085
-
98
(3)
(12)
-
1,417
4,727
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: 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: 2022)
Tax losses - revenue (expiry: 2023)
Tax losses - revenue (expiry: 2024)
Tax losses - revenue (expiry: 2025)
Tax losses - revenue (expiry: 2026)
Tax losses - revenue (expiry: 2027)
Tax losses - revenue (no expiry date)
94
-
-
-
-
(17)
-
-
-
-
(17)
-
-
-
-
(230)
-
-
-
-
-
(230)
21
-
(273)
262
-
-
4
-
830
844
(79)
-
69
435
-
26
(33)
-
-
(272)
146
-
-
-
-
-
-
-
-
-
-
-
-
102
85
-
-
-
-
(4,338)
-
(4,151)
(32)
103
3,537
3,305
146
(542)
(20)
(9,339)
2,578
(264)
9,960
(10,224)
(264)
(69)
(62)
3,820
6,638
163
(351)
(4)
-
(9,339)
1,205
2,002
12,257
(10,255)
2,002
2017
$’000
2016
$’000
1,230
-
15
69
122
29
487
-
-
-
127
186
-
2,265
1,230
34
67
120
147
572
-
-
-
-
-
-
-
2,170
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
10 KEY MANAGEMENT PERSONNEL COMPENSATION
The aggregate compensation made to Key Management Personnel of the Group and the Company is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
2017
$
2016
$
4,824,831
227,479
63,945
960,764
8,775,522
226,097
86,547
2,026,265
6,077,019 11,114,431
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 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 2016. 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 2016 to the year ending 30 June 2019. If the
performance and employment vesting conditions are met, the minimum number of rights that could be vested under the entitlement is
6,481 (2016: 6,780) and the maximum number of rights that could be vested is 51,851 (2016: 40,673). 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 2017 YEAR
Granted
GRANTS IN THE 2016 YEAR
Granted
NUMBER
OF RIGHTS
GRANT
DATE
VESTING
DATE
EXERCISE FAIR VALUE AT
GRANT DATE
PRICE
$
51,851 17 Nov 2016 30 Jun 2019
N/A
99.19
40,673 25 Nov 2015 30 Jun 2018
N/A
147.49
$
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
2017
2016
WEIGHTED
AVERAGE
EXERCISE
PRICE
N/A
NUMBER
OF RIGHTS
157,999
51,851
(34,387)
-
-
175,463
175,463
NUMBER
OF RIGHTS
117,326
40,673
-
-
-
157,999
157,999
WEIGHTED
AVERAGE
EXERCISE
PRICE
N/A
The allocation is based on a percentage of the 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 2017 financial year will be determined in
September 2019.
95
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
11 SHARE-BASED PAYMENTS (CONT.)
2017
RATE OF EPS GROWTH
5.0%
5.0% to 10.0%
10.0%
10.0% to 25.0%
25.0%
Greater than 25.0%
2016
RATE OF EPS GROWTH
3.90%
3.9% to 7.8%
7.80%
7.8% to 17.9%
17.90%
Greater than 17.9%
Share-Based Conditions
PERCENTAGE OF PARTICIPANT’S BASE REMUNERATION
prorata between
prorata between
CHIEF EXECUTIVE
OFFICER
25.0
25.0 to 50.0
50.0
50.0 to 200.0
200.0
200.0
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 80.0 10.0 to 40.0
40.0
40.0
80.0
80.0
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
prorata between
prorata 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 Plans
The Group has established two Staff Share Acquisition Plans. The first plan is open to all eligible 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. 651 shares were issued during the year ended 30 June 2017 (2016: 872 shares). In
July 2017, 726 shares (2016: 651 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 2017.
The second plan, established in the 2017 financial year, is open to all eligible employees including Senior Executives and enables them
to purchase up to $10,000 of Blackmores shares each year out of after tax pay. For every three purchased shares acquired using the
employees contributions, subject to employment vesting condition and scaling applied under the plan, the company will provide one
extra share. The vesting date for the year ended 30 June 2017 is 31 July 2017. The maximum cost of the shares provided by the Company
for 2017 financial year has been set at $500,000.
Options Plan
At 1 July 2016 and at 1 July 2015 there were no share options outstanding, none was issued during the years ended 30 June 2017
(2016: nil) and as at 30 June 2017 there were no unexercised share options (2016: nil).
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.
96
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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
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 RECEIVABLES
Current
Current trade and other receivables1
Allowance for doubtful debts
Allowance for claims
Goods and services tax (GST) recoverable
2017
$
2016
$
322,672
90,000
512,000
924,672
316,065
110,000
253,293
679,358
219,793
219,793
228,335
228,335
2017
$’000
2016
$’000
132,616
(1,059)
(1,061)
130,496
1,650
132,146
135,518
(1,218)
(1,096)
133,204
1,432
134,636
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 2017, the Group had two customers (2016: two customers) each comprising amounts greater than 5% of the total trade
receivables. These customers owed the Group more than $36,000 thousand (2016: $46,000 thousand) and accounted for approximately
28% (2016: 35%) 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
2017
$’000
2016
$’000
26,698
8,035
254
1,704
36,691
17,440
3,125
1,717
1,443
23,725
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.
97
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
13 RECEIVABLES (CONT.)
Ageing of Impaired Trade Receivables
0 - 30 days past due date
31 - 60 days past due date
61 - 90 days past due date
> 90 days past due date
Total
2017
$’000
2016
$’000
14
198
14
925
1,151
16
711
481
10
1,218
Included in the allowance for doubtful debts are individually impaired trade receivables with a balance of $357 thousand (2016: $31
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.
1,218
(287)
128
1,059
169
(1,107)
2,156
1,218
13,524
27,784
43,486
84,794
9,873
50,300
56,313
116,486
2017
$’000
2016
$’000
124,170
(49,963)
74,207
110,000
(42,374)
67,626
12,848
29,208
3,200
22,464
52
6,435
74,207
12,848
30,123
1,132
19,899
121
3,503
67,626
Movement in the Allowance for Doubtful Debts
Balance at the beginning of the year
Amounts written off as uncollectable
Increase 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 downs is $14,141 thousand (2016: $2,107 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
98
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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 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
Additions
Category transfers
Disposals
Net foreign currency exchange differences arising on translation
of financial statements of foreign operations
Balance at 30 June 2017
Accumulated Depreciation
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
Disposals
Depreciation expense
Net foreign currency exchange differences arising on translation
of financial statements of foreign operations
Balance at 30 June 2017
Net Book Value
As at 30 June 2016
As at 30 June 2017
12,848
-
-
-
-
36,983
-
-
-
-
826 47,687
8,946
399
1,251
(3,579)
1,086
147
26
(378)
-
12,848
-
-
-
-
36,983
16
-
-
(25)
24
1,682 54,728
5,438
2,751
3,143
215
(132)
(44)
314
-
15
1,277 99,935
13,535
3,503
561
-
-
- (1,277)
- (4,030)
(73)
-
(1)
-
3,503 110,000
256
14,495
-
6,290
-
- (3,358)
(245)
-
(69)
-
12,848 36,999
-
(7)
(73)
4,597 63,104
-
187
-
(80)
6,435 124,170
- (5,929)
-
-
-
-
(931)
-
(476) (32,638)
3,321
250
(262)
(84)
(5,265)
(252)
-
-
- (6,860)
-
-
(931)
-
12
15
(550) (34,829)
106
(6,036)
23
(877)
(157)
60
(6)
(32)
-
(135)
57
(57)
- (39,200)
3,631
-
-
(352)
- (6,480)
27
-
- (42,374)
-
186
- (7,901)
-
-
-
(7,791)
7
119
(1,397) (40,640)
-
(135)
126
-
- (49,963)
12,848
12,848
30,123
29,208
19,899
1,132
3,200 22,464
121
52
67,626
3,503
6,435 74,207
No impairment losses have been recognised in the current year (2016: $nil).
99
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
16 INVESTMENT PROPERTY
Cost of investment property
At Cost
Balance at beginning of year
Balance at end of year
2017
$’000
2016
$’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
2017
$’000
35,824
(3,531)
32,293
2016
$’000
35,629
(2,893)
32,736
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 2015
Additions
Additions from internal development
Assets obtained through business combination
Effect of foreign currency exchange differences
Balance at 30 June 2016
Additions
Category reclass
Effect of foreign currency exchange differences
Balance at 30 June 2017
Accumulated Amortisation
Balance at 30 June 2015
Amortisation expense
Effect of foreign currency exchange differences
Balance at 30 June 2016
Amortisation expense
Category reclass
Effect of foreign currency exchange differences
Balance at 30 June 2017
Net Book Value
As at 30 June 2016
As at 30 June 2017
2,670
-
311
-
-
2,981
69
108
15
3,173
(1,940)
(392)
-
(2,332)
(342)
(111)
(17)
(2,802)
893
-
-
-
-
893
-
3
-
896
288
-
-
1,160
-
1,448
-
(96)
-
1,352
272
-
-
-
-
272
-
-
-
272
450
-
-
-
-
450
-
96
-
546
15,313
-
-
13,300
-
28,613
-
-
-
28,613
972
-
-
-
-
972
-
-
-
972
20,858
-
311
14,460
-
35,629
69
111
15
35,824
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(278)
(90)
-
(368)
(103)
-
-
(471)
-
-
-
-
-
-
-
-
(110)
(83)
-
(193)
(65)
-
-
(258)
(2,328)
(565)
-
(2,893)
(510)
(111)
(17)
(3,531)
649
371
893
896
1,448
1,352
272
272
82
75
28,613
28,613
779
714
32,736
32,293
1. These assets are considered to be of indefinite life and therefore do not require amortisation, but are subject to impairment testing.
100
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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.
18 GOODWILL
Cost
Balance at beginning of the year
Additional amounts recognised from business combinations occuring during the year (note 38)
Balance at end of the year
ALLOCATION OF GOODWILL TO CASH-GENERATING UNITS
18.1
Goodwill has been allocated for impairment testing purposes to the following 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
2017
$’000
2016
$’000
29,371
21,864
90
29,461
7,507
29,371
1,015
20,849
7,597
29,461
1,189
15,481
14,460
31,130
1,015
20,849
7,507
29,371
1,189
15,481
14,460
31,130
Pure Animal Wellbeing, BioCeuticals and Global Therapeutics
The recoverable amounts of these cash-generating units are 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 use 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.
The key assumptions used in the value in use calculations for Pure Animal Wellbeing, BioCeuticals and Global Therapeutics 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 post-tax discount rate used for Pure Animal Wellbeing, BioCeuticals and Global Therapeutics is 8%.
19 TRADE AND OTHER PAYABLES
Trade payables1
Goods and services tax (GST) payable
Other creditors and accruals
2017
$’000
75,820
3,608
44,937
124,365
2016
$’000
102,096
4,339
54,043
160,478
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.
101
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
20 CURRENT TAX LIABILITIES
Income tax payable
Withholding tax payable
21 INTEREST BEARING LIABILITIES
Non-current
Secured - at amortised cost:
Bank bills1,2
2017
$’000
1,669
142
1,811
2016
$’000
24,093
111
24,204
2017
$’000
2016
$’000
78,968
55,446
Summary of borrowing arrangements:
1. Secured by registered mortgage debentures and a floating charge over certain assets of the Group.
2. 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
Other
Non-current
Employee benefits
23 ISSUED CAPITAL
17,225,807 fully paid ordinary shares (2016: 17,225,156)
2017
$’000
2016
$’000
8,566
148
2,835
11,549
7,440
148
-
7,588
1,372
1,134
2017
$’000
2016
$’000
37,753
37,753
2017
NUMBER
’000
2017
ISSUED
CAPITAL
$’000
2016
NUMBER
’000
2016
ISSUED
CAPITAL
$’000
Fully Paid Ordinary Shares
Balance at beginning of financial year
Issue of shares under Executive and employee share plans (notes 11, 34.3)
Balance at end of financial year
17,225
1
17,226
37,753
-
37,753
17,224
1
17,225
37,753
-
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.
102
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
24 RESERVES
Equity-settled employee benefits reserve
Cash flow hedging reserve
Foreign currency translation reserve
2017
$’000
5,167
(415)
(667)
4,085
2016
$’000
4,440
(376)
1,188
5,252
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
4,440
-
727
5,167
6,933
(5,855)
3,362
4,440
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 (loss)/gain on revaluation (net of tax)
Balance at end of year
(376)
(39)
(415)
(913)
537
(376)
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
1,188
(1,855)
(667)
2,043
(855)
1,188
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
2017
$’000
2016
$’000
135,703
135,258
135,258
-
59,013
(58,568)
135,703
87,099
5,855
100,008
(57,704)
135,258
103
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
26 EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS
Balance at the beginning of the year
Non-controlling interests arising on the incorporation of Kalbe Blackmores Nutrition
Share of (loss)/profit for the year
Share of other comprehensive (expense)/income
Balance at end of year
27 EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
Basic Earnings per Share
2017
$’000
2,330
-
(985)
(67)
1,278
2016
$’000
-
2,301
12
17
2,330
2017
CENTS PER
SHARE
2016
CENTS PER
SHARE
342.6
340.1
580.6
576.2
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)
59,013
100,008
2017
$’000
2016
$’000
Weighted average number of ordinary shares on issue during the financial year
used in the calculation of basic earnings per share
2017
NUMBER
2016
NUMBER
17,225,802
17,225,093
Diluted Earnings per Share
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)
59,013
100,008
2017
$’000
2016
$’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
2017
NUMBER
2016
NUMBER
17,225,802
17,225,093
126,079
132,673
17,351,881
17,357,766
104
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
28 DIVIDENDS
Recognised Amounts
Fully paid ordinary shares
Final dividend for year ended 30 June 2016 (2016: 30 June 2015)
– fully franked at 30% corporate tax rate
Interim dividend for year ended 30 June 2017 (2016: 30 June 2016)
– fully franked at 30% corporate tax rate
Unrecognised Amounts
Fully paid ordinary shares
2017
CENTS PER
SHARE
TOTAL
$’000
2016
CENTS PER
SHARE
TOTAL
$’000
210
36,174
135
23,254
130
340
22,394
58,568
200
335
34,450
57,704
Final dividend – fully franked at 30% corporate tax rate
140
24,117
The final dividend in respect of ordinary shares for the year ended 30 June 2017 has not been recognised in these Consolidated Financial
Statements because the final dividend was declared subsequent to 30 June 2017.
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
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
Longer than 5 years
Lease Commitments
COMPANY
2017
$’000
2016
$’000
28,538
21,075
2017
$’000
70
70
140
8,190
8,190
2,150
4,026
6,176
998
4,087
1,200
6,285
2016
$’000
348
145
493
3,906
3,906
3,862
5,773
9,635
1,198
5,378
-
6,576
Non-cancellable operating lease commitments are disclosed in note 30 of the Consolidated Financial Statements.
105
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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
2017
$’000
4,642
8,374
13,016
2016
$’000
5,414
12,389
17,803
No liabilities have been recognised in respect of non-cancellable operating leases.
31 CONTINGENT LIABILITIES
Blackmores is currently undergoing a detailed review of exemption claims that have been made under the various free trade agreements
in place between Australia and the countries with which Blackmores trades. This review is ongoing and includes a review of potential risks
and opportunities pertaining to the use of and compliance to detailed requirements relating to different export classification codes. As
at the signing date, no conclusions have been reached and discussion with relevant external regulatory bodies are continuing. A reliable
estimate of potential risks or probable outflows as an outcome of the completion of this review cannot be determined. Accordingly no
liability has been recorded in the accounts for 30 June 2017.
32 SUBSIDIARIES
Details of the Group’s subsidiaries at the end of the financial year are as follows.
NAME OF ENTITY
Blackmores Nominees Pty Limited1
Pat Health Limited
Blackmores Beijing Co., Limited
Blackmores China
Co., Limited
Blackmores (Taiwan) Limited
Pure Animal Wellbeing Pty Limited
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 Nutrition
FIT-BioCeuticals Limited
FITBioCeuticals (NZ) Limited1
PharmaFoods Pty Limited1
FIT-BioCeuticals Limited
FIT-BioCeuticals (HK) Limited
Hall Drug Technologies Pty Limited1
Blackmores SPV Co Pty Limited
New Century Herbals Pty Limited1
Global Therapeutics Pty Limited1
Blackmores Japan Limited
COUNTRY OF
INCORPORATION
OWNERSHIP INTEREST
2016
2017
%
%
PRINCIPAL ACTIVITY
Australia
Hong Kong
China
China
Taiwan
Australia
100
100
100
100
100
100
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
Australia
100
Japan
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
-
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
Holding company
Marketing of natural health products
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.
Companies incorporated outside Australia carry on business in the country of incorporation.
Economic Dependency
The Group is not significantly dependent upon any other entity.
106
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
32 SUBSIDIARIES AND OTHER RELATED COMPANIES (CONT.)
FINANCIAL SUPPORT
32.1
The Consolidated Statement of Profit or Loss and the Consolidated Statement of Financial Position of the entities party to the deed of cross
guarantee are:
Statement of Profit or Loss
Sales
Promotional and other rebates
Other income
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
Impairment of loan to related party
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
Profit attributable to:
Owners of the parent
Non-controlling interests
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net (loss)/gain 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
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
2017
$’000
597,844
(111,701)
3,497
489,640
229,429
94,527
32,087
7,683
6,142
7,062
4,138
7,253
1,239
7,200
17,634
414,394
75,246
166
(4,366)
(4,200)
71,046
(19,420)
51,626
2016
$’000
620,937
(86,744)
11,079
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
51,626
-
51,626
98,433
-
98,433
(39)
(39)
51,587
537
537
98,970
51,587
-
51,587
98,970
-
98,970
107
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
32 SUBSIDIARIES AND OTHER RELATED COMPANIES (CONT.)
32.1
FINANCIAL SUPPORT (CONT.)
Statement of Financial Position
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
Total current liabilities
NON-CURRENT LIABILITIES
Interest-bearing liabilities
Provisions
Other financial liabilities
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
EQUITY
CAPITAL AND RESERVES
Issued capital
Reserves
Retained earnings
Total equity
108
2017
$’000
2016
$’000
12,565
117,952
70,950
6,544
208,011
10,512
129,554
99,429
4,493
243,988
72,291
2,160
31,011
19,464
9,136
10,883
144,945
352,956
66,126
2,160
31,450
19,374
8,864
15,588
143,562
387,550
113,635
1,435
481
11,878
127,429
147,012
21,902
-
8,844
177,758
75,000
1,372
199
843
77,414
204,843
148,113
52,000
1,134
1,139
1,160
55,433
233,191
154,359
37,753
4,115
106,245
148,113
37,753
3,419
113,187
154,359
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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 (net of discounts)
Promotional and other rebates
Revenue and other income
Raw materials and consumables
Operating expenses
Loss before interest
Interest income
Net loss for the period
Cash and cash equivalents
Receivables
Inventory
Total assets
Other payables
Provisions
Payables to Joint operators1
Loans from Joint operators1
Total liabilities
Net liabilities
Accumulated losses
2017
$’000
2,042
(1,061)
981
6,433
1,513
(6,965)
6
(6,959)
2016
$’000
4,329
(1,075)
3,254
1,945
2,127
(818)
4
(814)
30 June 2017
$’000
30 June 2016
$’000
217
556
-
773
97
567
682
7,200
8,546
(7,773)
822
626
5,029
6,477
510
-
1,781
5,000
7,291
(814)
(7,773)
(814)
1. Included in these balances are amounts owing to the Blackmores Group of $4,111 thousand (2016: $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.
LOAN DISCLOSURES
34.2
There were no loan balances exceeding $100,000 due from Key Management Personnel during or at the end of the financial year (2016: 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 in the same manner as all ordinary shareholders.
No interest was paid to or received from Key Management Personnel.
RELATED PARTY TRANSACTIONS
34.4
The immediate parent and ultimate controlling party of the Group is Blackmores Limited (incorporated in Australia).
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 (2016: $nil).
Other related party transactions
During the financial year ended 30 June 2017, 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 $48,400 (2016: $100,675) 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 (2016: $nil).
109
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
35 NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
RECONCILIATION OF 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 revolving term debt facility under Common Terms Deed:
• amount used
• amount unused
2017
$’000
2016
$’000
34,251
34,251
37,653
37,653
-
5,000
5,000
570
4,430
5,000
78,968
157,933
236,901
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
Proceeds from disposal of property, plant and equipment disclosed as investing cash flow
Depreciation and amortisation of non-current assets
Revaluation of investments
Share-based payments
Other1
(Decrease)/increase in current tax liability
Increase/(decrease) in deferred tax balances
Decrease in deferred tax balances related to hedge reserve in equity
Movements in working capital:
• Current receivables
• Current inventories
• Other assets
• Current trade payables
• Provisions
• Other liabilities
Net cash flows from operating activities
1. Includes foreign exchange translation of controlled entities.
2017
$’000
2016
$’000
58,028
30
(384)
(92)
(30)
8,411
(724)
781
(1,632)
(22,393)
2,267
17
2,490
31,692
(2,315)
(36,113)
4,199
1,402
45,634
100,020
358
(462)
(25)
(41)
7,045
(67)
3,362
(743)
11,330
(4,830)
(230)
(24,212)
(73,845)
(481)
62,927
1,412
2,158
83,676
110
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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 2016.
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 is 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 cash equivalents
Net debt
Equity2
Net debt to (net debt plus equity) ratio
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
NOTE
2017
$’000
2016
$’000
78,968
(34,251)
44,717
177,541
20.1%
55,446
(37,653)
17,793
178,263
9.1%
36.8
34,251
132,146
1,165
167,562
37,653
134,636
471
172,760
580
203,333
203,913
834
215,924
216,758
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.
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).
111
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
36 FINANCIAL INSTRUMENTS (CONT.)
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)
British Pound (GBP)
Chinese Yuan (CNY)
Japanese Yen (JPY)
South Korean Won (KRW)
Thai Baht (THB)
Singapore Dollars (SGD)
Malaysian Ringgit (MYR)
Taiwan Dollars (TWD)
LIABILITIES
2016
$’000
19,363
10,917
832
690
93
-
4
17
47
5
2
7
-
2017
$’000
12,380
2,132
248
934
(4)
4
-
11
-
-
-
-
35
ASSETS
2016
$’000
3,045
297
-
-
-
-
57
-
-
12
-
-
-
2017
$’000
790
-
-
-
-
-
2
-
-
-
-
-
-
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
GBP impact
CNY impact
JPY impact
KRW impact
TWD impact
PROFIT/ (LOSS)
10% INCREASE
10% DECREASE
2017
$’000
1,117
194
23
85
-
-
-
1
-
3
2016
$’000
1,483
965
75
63
9
-
(5)
2
4
-
2017
$’000
(1,211)
(237)
(28)
(104)
-
-
-
(1)
-
(4)
2016
$’000
(1,813)
(1,180)
(93)
(76)
(10)
-
6
(2)
(5)
-
This is mainly attributable to the exposure outstanding on foreign currency payables in the Group at the end of the reporting period.
USD impact
THB impact
MYR impact
NZD impact
EQUITY
10% INCREASE
10% DECREASE
2017
$’000
(1,260)
(500)
(196)
-
2016
$’000
(2,499)
-
-
(24)
2017
$’000
845
739
292
-
2016
$’000
2,098
-
-
73
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 2017 (2016: $nil).
Forward foreign exchange contracts
The Group utilised forward foreign exchange contracts during the year. At 30 June 2017 there were open contracts of USD8.0m, MYR8.0m
and THB160m (2016: NZD2.0m, USD18.5m and MYR1.2m). These contracts are a partial hedge for upcoming raw material purchases and
intercompany payments.
112
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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.
2017
$’000
2016
$’000
(78,968)
75,000
(3,968)
(55,446)
20,000
(35,446)
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
2017
%
0.00
1.86
2.16
0.00
2.02
2016
%
5.61
-
1.89
-
2.82
2017
$’000
-
35,000
40,000
-
75,000
2016
$’000
5,000
-
15,000
-
20,000
2017
$’000
-
(14)
(150)
-
(164)
2016
$’000
(90)
-
(20)
-
(110)
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 2017, 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 $677 thousand (2016: $273 thousand) or increase by $677 thousand (2016: $273 thousand)
respectively as a result of changes in the interest rates applicable to commercial bank bills.
For the year ended 30 June 2017, 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 $502 thousand or decrease by $683 thousand respectively (2016: increase by $154
thousand or decrease by $166 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 $75m in new interest rate swaps during the 2017 financial year (2016: $15m), $5m matured during the year
(2016: $39m) and $15m was terminated during the 2017 financial year (2016: $nil).
113
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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 cover is purchased.
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
2017
Trade and other payables
Borrowings
2016
Trade and other payables
Borrowings
0.00
2.05
0.00
2.73
-
-
-
-
-
-
124,365
-
124,365
160,478
-
160,478
-
-
-
-
-
-
-
78,968
78,968
-
55,446
55,446
-
-
-
-
-
-
124,365
78,968
203,333
160,478
55,446
215,924
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
2017
Net settled:
Interest rate swaps
2016
Net settled:
Interest rate swaps
114
(49)
(49)
(84)
(84)
-
-
-
-
(152)
(152)
(155)
(155)
(74)
(74)
40
40
-
-
-
-
(355)
(355)
(118)
(118)
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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).
2017
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
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
There were no transfers between Levels 1 and 2.
Derivatives
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
TOTAL
$’000
-
-
-
-
-
580
580
-
-
-
-
-
-
-
-
-
-
-
1,165
-
1,165
1,165
-
1,165
-
-
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
-
-
-
-
-
-
-
-
-
-
-
-
110
110
-
-
471
-
471
-
-
580
580
TOTAL
$’000
-
-
471
-
471
110
110
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.
115
BLACKMORES ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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
2017
No subsidiaries were acquired during the financial year ended 30 June 2017.
2016
Acquisition of Global Therapeutics
On 10 May 2016, the Group signed an agreement to acquire 100% of the issued capital of Global Therapeutics Pty Limited and 100% of
New Century Herbals Pty Limited (together ‘Global Therapeutics’).
The Group paid cash of $22.9m and acquired net assets with a fair value of $15.4m, resulting in Goodwill on Acquisition of $7.5m.
During the financial year ended 30 June 2017, adjustments to provisional accounting were made, which increased goodwill by $0.1m to
$7.6m at balance date.
116
BLACKMORES ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
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
2017
$’000
2016
$’000
175,691
156,829
332,520
207,705
154,191
361,896
114,732
94,669
209,401
160,735
61,096
221,831
37,753
81,180
4,186
123,119
37,753
98,808
3,504
140,065
40,938
(39)
40,899
91,164
537
91,701
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, Blackmores International and Blackmores (Taiwan) Ltd, all
wholly owned subsidiaries of the Group, as well as for Bemore Partnership.
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 abovementioned entities.
Contingent liabilities
Blackmores is currently undergoing a detailed review of exemption claims that have been made under the various free trade agreements
in place between Australia and the countries with which Blackmores trades. This review is ongoing and includes a review of potential risks
and opportunities pertaining to the use of and compliance to detailed requirements relating to different export classification codes. As
at the signing date, no conclusions have been reached and discussion with relevant external regulatory bodies are continuing. A reliable
estimate of potential risks or probable outflows as an outcome of the completion of this review cannot be determined. Accordingly no
liability has been recorded in the accounts for 30 June 2017.
Commitments for the acquisition of property, plant and equipment by the Parent Entity
Plant and equipment
Not longer than 1 year
2017
$’000
2016
$’000
8,190
3,906
40 EVENTS AFTER THE REPORTING PERIOD
Final dividend
The Directors declared a fully franked final dividend of 140 cents per share on 29 August 2017 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 29 August 2017.
117
BLACKMORES ANNUAL REPORT 2017
ADDITIONAL
INFORMATION
NUMBERS OF HOLDERS OF EQUITY
SECURITIES AS AT 31 JULY 2017
ORDINARY SHARE CAPITAL
17,226,533 fully paid ordinary shares are held by 20,795
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
FULLY PAID
ORDINARY SHAREHOLDERS
18,626
1,527
112
81
15
20,361
434
NUMBER PERCENTAGE
Marcus C Blackmore
4,219,835
24.50
TWENTY LARGEST HOLDERS OF QUOTED EQUITY
SECURITIES AS AT 31 JULY 2017
FULLY PAID
ORDINARY SHAREHOLDERS
NUMBER PERCENTAGE
3,316,401
Mr M C Blackmore
Citicorp Nominees Pty Limited
996,409
HSBC Custody Nominees (Australia) Limited 968,032
601,270
Dietary Products Aust Pty Limited
367,014
Milton Corporation Limited
343,275
JP Morgan Nominees Australia Limited
278,200
Blackmore Foundation Pty Limited
218,002
National Nominees Limited
191,934
Mrs E M Whellan
118,813
Ms J A Tait
116,812
Mrs P G Wright
115,000
Mr R Shepherd
103,205
Rathvale Pty Limited
99,230
Blackmore Superannuation Fund
BNP Paribas Nominees Pty Ltd (DRP)
98,953
HSBC Custody Nominees (Aust) Ltd
– GSCO ECA
BNP Paribas Nominees Pty Ltd
(Agency Lending A/C)
Citicorp Nominees Pty Limited
(Colonial First State Inv A/c)
Ms C Holgate
Ms C Cooper
Total
45,342
45,002
40,164
8,184,549
61,268
60,223
19.25
5.78
5.62
3.49
2.13
1.99
1.61
1.27
1.11
0.69
0.68
0.67
0.60
0.58
0.57
0.36
0.35
0.26
0.26
0.23
47.50
118
BLACKMORES ANNUAL REPORT 2017
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.
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.
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 Dee Henz, Group Financial
Controller and Investor Relations Manager on +61 2 9910 5162.
COMPANY INFORMATION
Board of Directors
Directors who are Executives of the Group:
Marcus C Blackmore
Christine Holgate (Chief Executive Officer)
– resigned, effective 29 September 2017
Directors who are not Executives of the Group:
David Ansell
John Armstrong
Stephen Chapman (Chairman of Directors)
Helen Nash
Brent Wallace
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.
119
BLACKMORES ANNUAL REPORT 2017 NOTES
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120
BLACKMORES ANNUAL REPORT 2017 .
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Blackmores Limited
Australia’s Leading Natural Health Company
ACN 009 713 437
20 Jubilee Avenue
Warriewood NSW 2102, Australia
Phone: +61 2 9910 5000
Fax: +61 2 9910 5555
blackmores.com.au