Annual
Report
2018
PA G E
02
Highlights
PA G E
05
About
PA G E
07
Chairman’s
Introduction
PA G E
08
CEO’s Year
In Review
PA G E
35
Sustainability,
Community +
People
PA G E
46
Executive Team
Financial Report
Five Year History
Directors’ Profiles
Directors’ Report
Remuneration Report
Consolidated Financial Statements
PA G E
127
Company Information
48
49
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Annual
Report
2018
THE 2018 ANNUAL REPORT OF BLACKMORES
LIMITED PROVIDES INFORMATION ON THE
ORGANISATION AND COMPANY PERFORMANCE
FOR THE YEAR 1 JULY 2017 TO 30 JUNE 2018.
Annual General Meeting
The 56th Annual General Meeting of the
Company will be held at 11am on 25 October
2018 at the Blackmores Campus, 20 Jubilee
Avenue, Warriewood NSW 2102.
Cover image: Wes Ipsen, Strategic Sourcing Quality
Manager, and Anna Bearpark, Senior Product
Development Manager, overseeing the harvest of
anchovies in Peru for Blackmores Fish Oil.
Inside: Michael Evans, Head of Innovation &
Development, Blackmores Australia.
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 decisions and are
supported by legal policies
and procedures.
Passion for Natural Health
Integrity
Respect
Leadership
Social Responsibility
Blackmores improves
people’s lives by delivering
the world’s best natural health
solutions. We achieve this
by translating our unrivalled
naturopathic heritage and
knowledge into innovative,
quality branded healthcare
solutions that work.
Blackmores is committed to
superior business performance.
Our strategic direction is
focused on delivering growth
and continuous improvement
to maintain Blackmores’
leadership position in the
industry and to achieve
ongoing success for our
company, our people and
our shareholders.
1 Consumer Connectedness
2 Innovation & Expertise
3 Global Advantage
4 Operational Fitness
Our
Values
Our
Purpose
Four
Strategic
Priorities
OUR
UNRIVALLED
HERITAGE
TRANSPARENCY
&
SUSTAINABILITY
BEST IN CLASS
QUALITY
THE
BLACKMORES
DIFFERENCE
GLOBAL
EXPERTISE
A PROUDLY
AUSTRALIAN
COMPANY
COMMITMENT
TO THE
COMMUNITY
LEADING
WITH RESEARCH,
EDUCATION &
ADVICE
1
BLACKMORES ANNUAL REPORT 2018 02
19% 9% 10 4.7m 1.5m
net profit after
tax growth.
revenue growth.
consecutive years
as Australia’s Most
Trusted Brand
in vitamins and
supplements.1
social media fans,
followers and
members of online
communities.
education
touchpoints across
the Group.
>
>
NPAT
$70 million
Attributable to
Blackmores’ shareholders
Revenue of
$601 million
2
>
FY17
1.2m
BLACKMORES ANNUAL REPORT 2018 FY18
Highlights
Blackmores is the No. 1 vitamin
and supplement brand in Australia2,
Thailand, Singapore and Malaysia
A1 71% 158 82% 4.5
Achieved A1 rating
in Therapeutic Goods
Administration of
Australia audit for
compliance to Good
Manufacturing
Practice.
of waste diverted
from landfill.
new products
launched across the
Group.
employee
engagement,
14 percentage points
above the industry
benchmark.3
billion tablets and
capsules servicing
more than 40,000
points of distribution.
>
FY17
69%
>
FY17
110
1. Reader’s Digest Most Trusted Brand Surveys 2018. 2. IRI Aztec total VDS market data MAT to 1/7/2018. 3. Independently assured by The Voice Project at Macquarie University.
3
BLACKMORES ANNUAL REPORT 2018 Global Footprint
4
Operations and Markets
COMPANY HEADQUARTERS, OPERATIONS
AND SIGNIFICANT REVENUES
JOINT VENTURE OPERATIONS OR
OPERATIONS AND EMERGING MARKETS
BRAND PRESENCE
GROUP HEADQUARTERS, SYDNEY
BLACKMORES ANNUAL REPORT 2018MONGOLIA AUSTRALIANEW ZEALANDINDONESIA SINGAPORE (REGIONAL HEADQUARTERS) JAPAN KOREA CHINA TAIWAN HONG KONG MACAUVIETNAMCAMBODIATHAILANDMALAYSIA USAKAZAKHSTAN CANADA About Us
Blackmores is Australia’s leading natural health company. Founded
by visionary naturopath Maurice Blackmore in 1932, Blackmores
combines traditional naturopathic expertise with scientific research
to help people achieve optimal health and wellbeing. Committed
to developing innovative natural health products and services of the
highest quality, Blackmores reaches consumers in 17 markets.
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 supporting charitable community initiatives.
Industry leaders for more than 80 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.
Proud of its strong naturopathic heritage, Blackmores is an ASX 200 publicly-listed company.
The Group employs 1,400 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. The Blackmores
Campus head office and production facility is located on Sydney’s Northern Beaches.
Our Brands
01
02
04
06
03
05
07
01 BLACKMORES
02 BIOCEUTICALS
03 ISOWHEY
04 FUSION HEALTH
05 ORIENTAL BOTANICALS
06 PURE ANIMAL WELLBEING
07 BLACKMORES INSTITUTE
5
BLACKMORES ANNUAL REPORT 2018 Marcus Blackmore
The richness of our past will nourish our future…
My father’s early theories
on optimising health were
always firmly grounded
in better nutrition and he
spent decades researching
and observing the impacts
of minerals on improved
health outcomes.
Maurice Blackmore
was a strong opponent
of chemical fertilisers and
sprays and he advocated for
a clean, wholefoods diet for
clients at his naturopathic
rest home where patients
were treated holistically.
He researched
extensively the role and
best dosage of minerals
for plants, animals and,
ultimately, his patients
and we have extensive
documentation of his
theories and observations.
These stories were
close to our hearts when
we created a wholefoods
garden at the Blackmores
Campus this year. The
garden replaces the
therapeutic herbal
plantings that were part
of the original landscaping
and is called the Maurice
Blackmore Memorial
Garden.
Today’s consumers
have a strong and growing
interest in better nutrition.
The movement towards
fresh grown ingredients, the
rejection of sugar and the
understanding of the role
of vitamins, minerals and
supplementary nutrients is
increasing. It’s a philosophy
that has been part of
the DNA of Blackmores
throughout our 86-year
history and we’re excited
by the consumer-driven
momentum towards
natural health.
The garden is a
daily reminder of our
naturopathic heritage.
It’s a space for staff to
work outdoors or for
quiet reflection. The fruits,
vegetables and herbs we
grow are used in our staff
café and are taken home
by our team who share my
passion for good nutrition.
This strong naturopathic
heritage was the driving
force behind the Blackmore
Foundation (the private
philanthropic trust run
by my wife Caroline and
me), in partnership with
BioCeuticals, supporting
two new research
fellowships within the
Australian Research Centre
in Complementary and
Integrative Medicine at the
University of Technology
Sydney (UTS:ARCCIM).
Australia is regarded as a
world leader in this research,
largely due to the work of
centres like ARCCIM. I look
forward to seeing the results
of this ongoing research.
We’ve long held the
belief that knowledge is
the key to better health and
over the past year the work
of the Blackmores Institute
has made a significant
impact. The expansion of
our education program and
collaborations with research
centres and universities all
over the world is building
a strong foundation that
will underpin the future
success of Blackmores,
building on the knowledge
base in our industry and
ultimately leading to better
health outcomes for the
community.
It’s humbling for me
to see that so many of
Blackmores’ opportunities
for the future – research,
education and sharing the
benefits of natural healthcare
– are all richly referenced in
our 86-year heritage.
Stephen Chapman will
retire from the Blackmores
Board after 25 years of
service. Steve has made
a significant contribution
over this time with his strong
financial acumen, strategic
counsel and measured
leadership.
He has been a mentor
to many of our Board
members and to our
Executive Team. Importantly,
he has shared my passion
for our Company purpose
and he is a personal
advocate for healthy living
– he has run the Blackmores
Sydney Marathon and
camped out with our staff
to raise money to support
Sydney’s homeless. He has
been a wonderful colleague
and friend and I thank him
for his contribution and wish
him well.
The best of health
Marcus C Blackmore AM
Executive Director
Blackmores Campus Gardener,
Raphael Maufay and Marcus Blackmore
“
Executive Director Marcus Blackmore was recognised
with two international awards, the first Australian to ever
receive these accolades. Admission into the New Hope
Hall of Legends and recipients of the Nutrition Business
Journal Lifetime Achievement Award are honours
reserved for those who have devoted a significant
proportion of their lives to developing the natural
products industry. We are enormously proud that he
continues to serve on our Board and for the role he plays
in driving the Blackmores culture and championing the
development of the Blackmores Institute.
”
6 B L A C K M O R E S A N N U A L R E P O R T 2 0 1 8
Stephen Chapman,
Chairman of the Board
Chairman’s Introduction
When the Board appointed
Richard Henfrey as
Blackmores’ Chief Executive
Officer a year ago, we had
a clear intention to ensure
a positive leadership
transition, continue our
purpose, develop and
support our people and
build on our growth
strategy and business
capability.
I’m pleased that
tremendous progress has
been made during this last
year. Managing through
leadership transitions
always has the potential
to disrupt the rhythm of a
business and Richard’s first
year in the CEO role has
seen strong profit growth
and the delivery of many
initiatives.
A critical element to what
has been achieved this year
has been the contribution
of the senior executive team
and I congratulate and
thank our senior executive
team, who have taken on
extra responsibilities and
supported Richard and the
Board this year.
In terms of our results,
net profit after tax grew
19% this year to $70 million
and a final dividend of 155
cents per share has been
declared making the total
dividend 305 cents for
the 2018 year, up 13% on
last year. Importantly, our
financial position at June
continued to be strong with
low net debt of $49 million
and solid operating cash
flows.
A key focus of the
Board is to allocate capital
and other resources to
prioritise growth and
investment opportunities.
Two significant items in
progress are the further
development of our
China business and the
acquisition of the Catalent
manufacturing facility.
The Board travelled
to China in June to meet
with e-commerce retailers,
our talented China team
and senior officials at key
organisations. The market in
China is evolving, especially
given positive government
initiatives around “Healthy
China” and innovation and
education. We believe that
Blackmores, as an Australian
company with its unique
naturopathic heritage and
focus on research and
education, is well positioned
to support China’s initiatives
for the benefit of Chinese
consumers. Our refined
China strategy reflects
the importance of the
current opportunity China
presents and we support
our respective governments
creating a positive
environment for trade.
The April announcement
of Blackmores’ agreement
to acquire Catalent’s high
quality manufacturing facility
in Braeside, Victoria, is an
important milestone in our
Company’s history. It will
give us even greater control
of our production and will
propel our research and
development capabilities.
This is important to our core
business in Australia and
also to our markets across
Asia. We are proud to be
showing our commitment
to Australian manufacturing
and Australian jobs and we
look forward to welcoming
the Catalent Australia team
in October 2019.
During the year we
conducted an externally-
led Board review which
reinforced the priority
areas for Board focus. This
includes working with the
Executive Team to further
support Blackmores’
culture, prioritising our
growth opportunities
and strengthening the
governance framework,
particularly as the
Company expands its
business internationally
and integrates the Catalent
facility. As a Board we
strongly believe that
setting the right tone in the
boardroom is essential to
ensure Blackmores’ culture
is aligned to both support
growth and encourage the
right behaviours throughout
the business.
In April we strengthened
our Board and welcomed
Jackie McArthur as a
Non-Executive Director.
Jackie’s strong personal
commitment to natural
health and her deep
experience in supply chain,
logistics and operations
management, as well as
her knowledge of Asia,
will be important as the
Group diversifies both
our operations and our
international footprint.
We have made some
changes to the way we
present our financials in
this Annual Report to make
it easier to read. We made
these changes with an aim
to simplify our reporting to
tell a more comprehensive
story for the readers of the
accounts. As always, we
welcome your feedback
and thank you for your
continued support of our
business.
This upcoming Annual
General Meeting will be
my last as Chairman as I will
retire after 25 wonderful
years on the Blackmores
Board. Our new CEO
has settled in and we
have transitioned to a
non-executive Chairman
structure for our board.
In the coming months, the
Board will progress our
succession plan to appoint a
new Chairman and consider
adding an additional
Non-Executive Director.
I am filled with
confidence in the future
direction of this wonderful
Company, in Richard
Henfrey’s leadership and
in the capability of the
management team and
I thank my fellow Board
members and shareholders
for the honour of serving as
Chairman of the Board.
Stephen Chapman
Chairman of the Board
Stephen Chapman,
Chairman of the Board
7
BLACKMORES ANNUAL REPORT 2018 CEO’s Year in Review
Dear Shareholder
In my nine years with Blackmores, including one as Chief Executive,
I’ve come to understand how uniquely positioned our Group is
within one of the most exciting growth categories globally.
I’d like to share with you some insights on the opportunity for natural healthcare both in Australia and across the
Asia-Pacific region to enable you to understand our plans to expand our operations, invest in product development,
extend our research and education capabilities and to showcase Australian health innovation on a world stage.
Our focus has been on refining our strategic priorities to capture the significant opportunities for our brands and on
restoring stability within the business to enable sustainable growth.
Our results for the year reflect this focus.
I’m pleased to report Blackmores’ strong sales and profit growth, with $601 million in revenue,
up 9% on the prior year, delivering a net profit after tax of $70 million, a 19% increase on the prior year.
Over the last five years, the Group has more than doubled its revenue and almost tripled net profits.
The natural healthcare opportunity
OUR MARKETS
The natural health category
continues to be supported
by some very significant
demographic and societal
trends. Consumers
are increasingly taking
responsibility for their own
health, and proactively
adapting their lifestyles and
embracing natural therapies
and products to maximise
their wellbeing. At the same
time, populations across all
of our markets are ageing
rapidly. In 2015, 7.8% of
Asia’s population was over
65. By 2040 this will have
more than doubled to 16%,
and by 2030 Asia will be
home to more than 60%
of the world’s population
of over 65-year olds. These
demographic changes
come with challenges
and opportunities. Along
with an ageing population
comes an increased focus
on health expectancy,
not just life expectancy. In
developed and developing
markets consumers are
taking steps to optimise
their physical and mental
wellbeing as they age.
However, increasing
disposable income in
many developing markets
is introducing more
westernised diets and a
new burden of chronic
disease. The combination of
demographic change and
economic development,
as well as the increasing
cost and complexity of
medical interventions, see
governments tackling a
seemingly endless increase
in healthcare costs, often
referred to as a “ticking
time bomb”.
OUR APPROACH
Blackmores’ approach to
these issues is grounded
in our deep naturopathic
heritage. We believe that
the body has an enormous
capacity to address
imbalances and heal itself,
given the right conditions.
Early, preventative
intervention to adjust diet,
lifestyle and appropriate
supplementation can
radically alter the body’s
ability to withstand the
impacts of modern living,
and can lead to markedly
improved longer-term
outcomes. In many of the
Asian markets where we
operate, these principles
are well established and
recognised in various forms
of traditional medicine.
Often these work alongside
modern, western medicine
in a way that delivers a
more comprehensive and
responsive healthcare
system. We see this in
China, where traditional
Chinese medicine is
often seen as a first line
of defence in disease
prevention and treatment.
We are building on
the foundations of our
naturopathic philosophy
and extensive experience
in natural health by leading
with research and education
initiatives that will shine
an even stronger light on
the role that natural health
can play in the delivery of
improved health outcomes
across a range of disease
conditions. The investment
we have made in the
Blackmores Institute over the
last six years has provided us
with a genuine differentiator
in the market that has real
value to our retail partners
and our consumers. Over
time, this investment will
also provide insight that
will drive our new product
development program.
OUR PRODUCT
At Blackmores, we go
to enormous lengths to
procure the most evidence-
based, highest quality and
sustainable ingredients.
These ingredient choices
underpin the efficacy and
quality of our finished
products. In the sourcing
and manufacturing
decisions we take, we
never compromise on
these principles, which
apply to products across
all of our brands. Today,
our decision to expand the
scope of our business into
the manufacture of tablets
and capsules supports this
vision by giving us more
direct control over a greater
portion of our value chain.
8
BLACKMORES ANNUAL REPORT 2018 Richard Henfrey,
Chief Executive Officer
Looking ahead, we will
develop global growth
platforms that will become
the focus for innovation,
research and education.
These platforms will be
informed by consumer
insights from across our
markets, ensuring that we
are developing products,
propositions and other
assets that can be efficiently
deployed across the
Blackmores world.
OUR ASIA OPPORTUNITY
The opportunity for us to
grow our business in Asia
remains significant. Chinese
consumers have developed
a strong affinity for high
quality Australian products
and the Blackmores brand
in particular. Our business in
China is primarily based on
sales of Australian vitamin
and dietary supplement
products to consumers via
cross-border e-commerce
platforms. It is currently
growing at more than 20%
per annum, and we see
great scope to continue
to drive brand awareness
and penetration through
these channels. In addition,
we have built an offline
business that sells a small
range of food products,
including fish oil and infant
formula, through bricks and
mortar stores in China.
There is a significant
potential role for
Blackmores to play in
the development of new
healthcare services and a
new healthcare industry
in China. In his Healthy
China 2030 plan, President
Xi Jinping has placed
health reform at the front
and centre of the Chinese
Government’s overall policy
agenda for the next decade.
The planned investment
in primary healthcare, and
the promotion of healthy
lifestyles and physical
fitness have the potential to
significantly improve health
outcomes as the
population ages.
We see plenty of
growth opportunity in
Asia beyond the China
phenomenon. Our joint
venture in Indonesia, Kalbe
Blackmores Nutrition, is
almost two years old and is
already building a winning
position in a market that
is expected to be the 4th
largest economy globally
by 2050 (overtaking
Brazil, Russia, Japan and
Germany). Indonesia is a
young market relatively
speaking, with one of the
highest birth rates in the
region at 20 births annually
per thousand population.
Our Pregnancy and Breast-
Feeding Gold product is
the number one pregnancy
multivitamin in the market
less than a year since
being launched.
We have commenced
a program to invest in the
skills and infrastructure
necessary to support a
business of our new scale
and complexity. Our
investment in the new
Bungarribee distribution
centre will deliver
operational leverage as
the business grows in
the coming years, as well
as a near-term efficiency
saving from combining
the BioCeuticals and
Blackmores distribution
activities under the same
roof. The focus of the
coming year will be to
develop our internal IT
systems to provide a
greater degree of
automation and
sophistication in our
financial and supply
chain capability.
Australia and China
in particular remain
highly competitive
markets, but Blackmores’
leading position and
strong brands, coupled
with further investment in
driving brand awareness
and extending our lead
in research and education
through the Blackmores
Institute, gives us
confidence in the future
growth strategy for the
Group.
9
BLACKMORES ANNUAL REPORT 2018 CEO’s Year in Review
OUR YEAR IN REVIEW
Revenue was a record
for the Group and in the
financial year we sold more
product than ever in our 86-
year history. The strongest
growth continues to come
from our businesses in Asia,
which delivered record
sales in June.
Consumer demand
across all regions and
brands remains strong and
as a result we invested more
in our brands, which will
underpin continued growth.
Gross margins improved
by 4.4 percentage points
driven by lower rebates,
fewer inventory provisions
and operational efficiencies.
In Australia, Blackmores
secured recognition as
the most trusted brand in
our category for the tenth
consecutive year. The retail
environment in Australia
remains subdued though
we exited the year with
improved momentum and
a strong sell-in of immunity
products.
Across the Group,
expenses were tightly
controlled to enable
investment in growth
initiatives. These
investments included
growing the team in
Indonesia, a world-class
education platform, the
fit-out of Blackmores’
distribution centre at
Bungarribee in Western
Sydney, and increased
brand support in China.
Marketing spend
increased by almost 40% in
the second half of the year
compared to the first half,
and was focused on core
markets.
The investment in a
women’s health campaign
in China in April and May
2018 was viewed 280
million times, resulting
in a significant lift on our
three biggest e-commerce
platforms, increasing
Blackmores’ market
share in China.
Our business in
China continues to be
predominately e-commerce
sales and Blackmores has
strong relationships with the
major Chinese platforms.
The Blackmores Board
visited to China in June,
coinciding with our signing
of a joint business plan with
Alibaba. This business plan
demonstrates our shared
vision to grow our presence
on Alibaba’s platforms
including AliHealth, TMall
and Taobao over the
coming year.
In China, health is an
increasingly high priority for
the government, reflecting
the desire of the Chinese
people to improve their
quality of life. Over the
course of the year, there
has been considerable
restructuring of
government departments.
This streamlining
and consolidation of
bureaucracy will positively
impact Blackmores, making
it easier to meet the
growing consumer
demand for our products.
We welcomed the
announcement made by
the Chinese Government
affirming its commitment
to the pilot of cross-border
e-commerce, extending
the existing regulations by
another year and opening
additional free trade zones.
Blackmores arranged
a visit to Australia by
Vice Chairman Mr Zhang
Ming and senior officials
of the China Association
for Quality Inspection
(CAQI) in January 2018 for
meetings with Blackmores,
the Therapeutic
Goods Administration,
Standards Australia,
the NSW Government,
Complementary Medicines
Australia and Austrade to
further advance bilateral
efforts in enhancing product
quality, traceability and
tracking.
Marcus Blackmore and
I subsequently met with
the Chairman of CAQI
in Beijing in June 2018
to further advance this
important relationship.
An important driver of
long-term growth is our
industry-leading education.
Our research and
education program,
spearheaded by the
Blackmores Institute,
has made significant
progress over the year
including a partnership with
Tsinghua University, one
of the leading academic
institutions in China, and
the launch of CMed, an
accredited education
course for pharmacists,
in Asia.
These accredited
healthcare professional
education programs
are hosted on a newly-
implemented learning
management system,
B!Academy, a technology
platform that will enable
further expansion of our
education initiatives.
Blackmores to
acquire Catalent
Australia’s Braeside
complementary
medicines
manufacturing
facility
In April 2018, Blackmores announced
an agreement to acquire 100% of
Catalent’s tablet and soft-gel capsule
manufacturing facility in Braeside,
Victoria for $43.2 million.
The acquisition will support the
Group’s future growth and product
innovation with strong research
and development capabilities and
will provide greater control over
production, strengthening Blackmores’
quality credentials.
This will deliver increased agility to
respond to changing market conditions.
The acquisition enables improved
management of Blackmores’ current
and future portfolio of registered
products in Asia. It demonstrates our
ongoing commitment to invest in
Australian manufacturing.
The transaction will complete in
October 2019 and is expected to be
fully debt funded with a positive impact
on earnings per share from year one.
10
BLACKMORES ANNUAL REPORT 2018 CHINA:
Sales to China, comprising
key export accounts and
in-country sales, were $143
million, up 22% compared
to the prior year.
Consumer demand
remains strong across all
e-commerce platforms,
while Blackmores’ sales
channels in China continue
to evolve.
AUSTRALIA AND
NEW ZEALAND:
Blackmores’ sales in
Australia and New Zealand,
including Pure Animal
Wellbeing, were broadly
flat, contributing $266
million. Blackmores is the
clear number one brand
in Australia. The broader
consumer market remains
subdued and China-
influenced sales through
Australian retailers continue
to move to direct export
channels.
Sales were supported
by successful new product
launches including 99.9%
sugar-free gummy vitamins
and a probiotics range
that does not require
refrigeration.
OTHER ASIA:
Blackmores’ sales in Asia
(excluding China) were
$82 million, up 20%
compared to the prior year.
This includes particularly
strong performances from
Singapore (up 22%) and
Korea (up 91%). Thailand
and Malaysia delivered
continued growth despite
being impacted by supply
constraints. Blackmores’
emerging business in
Indonesia delivered 77%
growth compared to the
prior year. We will continue
to invest in this important
growth market in response
to the encouraging
consumer and healthcare
professional support for our
brand since launching in
September 2016.
BIOCEUTICALS GROUP:
BioCeuticals, Global
Therapeutics and
IsoWhey delivered
sales of $109 million, up
13% compared to the
prior year. BioCeuticals’
branded products lifted
sales by 20%, with Global
Therapeutics sales flat as
a result of stock shortages
impacting our smaller lines.
These constraints eased
significantly in the final
months of the financial year.
BioCeuticals is the
clear market leader in
practitioner-only products
and delivered a strong
pipeline of new products
throughout the year
including acclaimed
education podcasts and
events.
Revenue
$266
million
Revenue
$143
million
Revenue
$82
million
Revenue
$109
million
Chris Sadler and
Jacqui O’Donnell from
PAW by Blackmores
B L A C K M O R E S A N N U A L R E P O R T 2 0 1 8 11
CEO’s Year in Review
EMERGING MARKETS
Blackmores’ growing
Indonesian business
delivered 77% growth
compared to the prior
year. Our brand growth in
this market is supported
by our joint venture with
Kalbe Farma, called Kalbe
Blackmores Nutrition, in
which Blackmores has a
50% holding. Operating
for less than two years,
the business is delivering
strong and steady growth
in line with expectations.
Blackmores Pregnancy
& Breast-Feeding Gold
is already the leading
pregnancy supplement
in Indonesia and more
than 2,000 obstetricians
and gynaecologists have
attended Blackmores
Institute symposia on the
role of micronutrients in
pregnancy.
Blackmores Vietnam
has achieved 12 product
registrations and
commenced selling into
pharmacies through our
distribution partner, Mesa.
CHALLENGES
Supply constraints
impacted sales across many
of Blackmores’ brands and
regions over the course
of the year. These were
caused by a number of
factors including changes
to the Australian contract
manufacturing sector and
were compounded by the
long lead times required to
produce natural healthcare
products
We have high quality
standards that we are not
prepared to compromise
to address short-term
stock requirements. These
factors can make it difficult
for Blackmores to quickly
respond to changes in
demand. We’ve always
had a strong reliance on
our suppliers to assist us in
minimising this lead time,
however this continued to
challenge us throughout
the year.
The number of lines
out of stock was minimal
at the close of the financial
year and Blackmores has
implemented several
strategies and interventions
to mitigate this challenge in
the future. These changes
include introducing
new technology and
processes to assist with
global sales forecasting
and demand planning.
The announcement in
April of Blackmores’ plans
to acquire the Catalent
Australia manufacturing
facility in Victoria will also
give us greater control over
production volumes.
Blackmores’ growing
business in China has
bolstered our sales and
profit significantly since
our launch there in 2012,
though we have also made
substantial provisions for
doubtful debts in China.
We continue to pursue all
appropriate avenues to
recover these debts, which
have negatively impacted
Blackmores’ EBIT by
$5 million.
LEADERSHIP STRUCTURE
With a clear strategic
direction and a desire to
streamline and simplify
operations, Blackmores has
adapted the organisational
structure to best support
the strategy and growth
ambitions.
The Group is now
structured into two clear
geographical regions –
Australia New Zealand,
led by Managing Director
David Fenlon, and Asia,
led by Peter Osborne.
Each geographical region
is resourced to optimise
responsiveness to its
customers and consumers
with strong new product
development, marketing,
customer service and
distribution capabilities.
The centralised functions
have been strengthened
to elevate the growing
importance of technology
and the need for a global
human capital program.
Brett Winn is leading
our technology upgrade
as Chief Information
12
BLACKMORES ANNUAL REPORT 2018 Officer and I’m pleased to
announce Jane Franks will
join Blackmores as Chief
People Officer. Jeremy
Cowan was appointed as
Chief Operations Officer
in the year.
FINANCIAL POSITION
Our financial position
remains strong with good
cash flows and debt
maintained at conservative
levels and well within all
banking covenants.
We are comfortable
with the current levels of
inventory we are carrying
as well as the amount of
stock held by retailers.
Read more about
Blackmores financial
position on page 30 of
this report.
OUTLOOK
Blackmores’ strategy is
focused on delivering
growth across all regions
and brands, underpinned
by our continued
investment in our core
business in Australia. We
will invest to strengthen
our business systems
as we progress towards
ownership of the Catalent
Australia manufacturing
facility in October 2019.
China continues to be a
significant opportunity for
Blackmores and in addition
to our Alibaba agreement,
last week we signed a
strategic co-operation with
NetEase Kaola. Our vision
for China is not limited to
e-commerce sales, and we’re
actively building an offline
business and affirming
our credibility as a leading
natural health advocate.
We will be showcasing
our brand at the China
International Import Expo
in November, which is
expected to be the largest
convention ever held
anywhere in the world. It is
a landmark event hosted by
the Chinese Government
and a demonstration of
China’s determination
to bring the world’s best
products to Chinese
consumers.
We have an active
pipeline of new product
development and brand-
building campaigns in
progress. The Blackmores
Institute is an important
differentiator for Blackmores
in our key Asian markets and
we continue to strengthen
our collaborations with
leading research and
academic institutions.
The Board shares my
confidence in our ability to
continue to deliver sales
and profit growth in the
coming year.
I’d like to thank our
Board for their support
of me in my first year as
Chief Executive Officer. My
sincere gratitude to our
Executive Team who have
navigated the challenges of
the year and defined a clear
strategy for the year ahead,
and to our staff across the
Group for the commitment
to our purpose that they
bring to work every day.
Richard Henfrey
Chief Executive Officer
B L A C K M O R E S A N N U A L R E P O R T 2 0 1 8 13
CEO’s Year in Review
Consumer Connectedness
• Blackmores is the #1 vitamin and supplement
• BioCeuticals FX Medicine podcasts downloaded
brand and Group in Australia
1.5 million times in 50 countries
• Most Trusted Brand in Australia (10 years running)
and key Asian markets including Singapore and
Malaysia (source: Reader’s Digest Most Trusted
Brand annual surveys)
• Blackmores 85th anniversary was celebrated in
Australia, Thailand and China, highlighting our
strong naturopathic heritage
• Strengthened our digital footprint, with 4.9 million
members across our websites and social media in
Asia-Pacific and 15 million online conversations with
Australian consumers
• Expanded our retail footprint, with Blackmores
the number one vitamin brand in Woolworths and
launched on Amazon Australia and in Aldi; and
achieved almost 370 new distribution points for
Fusion Health and Oriental Botanicals
• Sponsored key sporting events in Australia and
Asia, including the Blackmores Sydney Running
Festival, Byron Bay Lighthouse Run, Collingwood
Netball Clinics, the Run & Move event in Thailand
and brand presence at the Australian Open
Delphine Chassagne,
National Account
Manager, Blackmores
Australia
14 B L A C K M O R E S A N N U A L R E P O R T 2 0 1 8
Davina Theodore,
Customer Service
Sales Manager,
BioCeuticals
1
CONSUMER
CONNECTEDNESS
15
BLACKMORES ANNUAL REPORT 2018 CEO’s Year in Review
Innovation and Expertise
• 158 new products across the Group, including
Blackmores’ 99.9% sugar-free kids’ range and
expanded BioCeuticals’ best-selling Armaforce
immunity offering
•
Introduced our flagship Blackmores Pregnancy &
Breast-Feeding Gold, Natural Vitamin E Cream and
Odourless Fish Oil to new markets in Asia
• Launched BioCeuticals Clinical Services for
personalised DNA testing with 700 practitioners
trained
• Rolled out Blackmores Academy, an award-winning
online natural medicine education service in
English, Mandarin, Thai and Indonesian Bahasa
• More than 1.5 million educational touchpoints
including our accredited CMed education program
in Malaysia with 600 pharmacists
• 74 research projects, clinical trials and scholarly
activities, including a study on herbal extracts and
osteoarthritis
• Funded two research fellowships at the Australian
Research Centre in Complementary and Integrative
Medicine (ARCCIM), University of Technology
Sydney with a $1.5 million donation from the
Blackmores Foundation, BioCeuticals and the
Jacka Foundation
• Partnered with China’s leading university, Tsinghua,
to improve public health through a health
journalists’ education program
across the Group, reaching healthcare
professionals, pharmacy students, retailers and vets,
• Advisory teams across the Group responded to
83,325 calls, emails, live chats and web posts
Vladimir Stajic, Head of
Research & Technical Affairs,
Blackmores Institute
16
BLACKMORES ANNUAL REPORT 2018 Karen Latter, Healthcare
Professional Educator &
Trainer, Blackmores Institute
2
INNOVATION
+ EXPERTISE
17
BLACKMORES ANNUAL REPORT 2018 CEO’s Year in Review
Global Advantage
• Leveraged our natural health education expertise
across Asia, including keynote sessions at maternal
health symposia in Indonesia for 2,000 obstetricians
and gynaecologists
• Strengthened our digital platforms and retail
• Significantly expanded our presence with key retail
partners Boots and Olive Young in Korea, with
Blackmores Natural Vitamin E Cream now one of
the highest-selling beauty products in duty free
stores in Korea
partnerships, including a flagship WeChat store and
an exclusive NPD partnership with Kaola.com in
China, and 19 DFS stores in Korea
•
In Thailand, we continued our number 1 brand
position with growing online engagement, new
product launches and community programs
• Grew our relationships with key Chinese influencers
in Australia through daigou training and events
• First year of operations in Vietnam including
registration of 12 products
• Second year of operations in Indonesia through
Kalbe Blackmores Nutrition joint venture; sales up
77% on last year
• Launched Blackmores Natural Vitamin E Cream
into Thailand, Singapore and Malaysia with strong
consumer and retail partner uptake
• Malay consumer targeted campaigns which
delivered a significant contribution to our
Malaysian sales growth.
• Blackmores’ Board visited the Alibaba campus in
China and signed a joint business plan with Alibaba
that defines our enhanced business partnership
Kelli Yao, Finance Director, Blackmores China
18 B L A C K M O R E S A N N U A L R E P O R T 2 0 1 8
Left: Rosa Li, Marketing
Director, Blackmores China
Below: Oliver Liu, Sales
Director, Blackmores China
3
GLOBAL
ADVANTAGE
B L A C K M O R E S A N N U A L R E P O R T 2 0 1 8 19
CEO’s Year in Review
Operational Fitness
• Produced more than 4.6 billion tablets and capsules
and shipped to 40,242 points of distribution globally
• Partnered with CAQI to develop a seal of
authenticity to assure product integrity
• Agreed to the acquisition of the Catalent tablet and
soft-gel manufacturing facility in Victoria, Australia,
to support future growth and product innovation
• Switched to sustainable e-commerce packaging,
resulting in environmental benefits and substantial
cost reduction
• Our Bungarribee Distribution Centre in Western
Sydney is fully operational, with 3,500 orders
shipped weekly
•
Introduced the Australasian Recycling Label on
product packaging to help consumers correctly
sort and increase recycling rates
• Quality checked a record number of products,
passing audits by the Therapeutic Goods
Administration with an A1 rating and the
China CCIC
• Blackmores piloted a program with Alibaba and
PwC Australia as the exclusive partner for the
VDS category on blockchain initiatives to protect
Australian product authenticity
• 71% of waste diverted from landfill
•
Invested in 4,075 learning and development
sessions for employees, including the training
of 50 innovation champions
Blackmores
Distribution
Centre,
Bungarribee
• 3.5K orders
shipped weekly
• 8K pallets (with
room for 5K more)
• 2.5K shippers
packed daily
• Twice the speed
with the same
number of people
• 60 staff
• Delivering to 3K
customers/25K
points of
distribution
20 B L A C K M O R E S A N N U A L R E P O R T 2 0 1 8
Left: Evangeline Manhuyod,
Blackmores Production
Below: Elena Irlandez,
Blackmores Bungarribee
Distribution Centre
4
OPERATIONAL
FITNESS
B L A C K M O R E S A N N U A L R E P O R T 2 0 1 8 21
22 Wes Ipsen, Strategic Sourcing Quality Manager
22
BLACKMORES ANNUAL REPORT 2018 Operating +
Financial
Review
Group Strategy
Group and Divisional Results
Operating Review
Financial Review
Group Risks
24
26
28
30
32
23
BLACKMORES ANNUAL REPORT 2018 Operating +
Financial
Review
Group Strategy
Group and Divisional Results
Operating Review
Financial Review
Group Risks
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, development of education
programs and the marketing, sales and distribution of
products to retail 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 platforms.
Our animal health range is also sold to vets and
wholesalers.
Activities across the Group for the 2018 financial year
were aligned to four key strategic priorities:
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.
24
BLACKMORES ANNUAL REPORT 2018 Dawn Swainston, General Manager,
Global Therapeutics
25
BLACKMORES ANNUAL REPORT 2018 Operating +
Financial
Review
Group Strategy
Group and Divisional Results
Operating Review
Financial Review
Group Risks
Blackmores delivered Group revenue of $601 million
(up 9% compared to the prior year) and a net profit
after tax attributable to shareholders of Blackmores
(NPAT) of $70 million (a 19% increase on the prior year).
In the 2018 financial year, Blackmores achieved strong year-on-year revenue and profit
growth. Following the rebalancing of the 2017 year, it was pleasing that the Group
delivered four quarters of consistent sales growth, representing a return to stability.
01
Australia and
New Zealand
Blackmores’ sales in
Australia and New Zealand,
including Pure Animal
Wellbeing, were broadly
flat, contributing $266
million. Blackmores is the
clear number one brand
in Australia. The broader
consumer market remains
subdued and China-
influenced sales through
Australian retailers continue
to move to direct export
channels.
Sales and market share
gains were supported by
successful new product
launches including 99.9%
sugar-free gummy vitamins
and a probiotics range
that does not require
refrigeration.
The earnings before
interest and tax (EBIT)
result from this segment
was also down year-on-year
by 2% broadly in line with
sales. The result includes
increased investment in our
brands in the second half of
the year.
02
China
03
Other Asia
Sales to China, comprising
key export accounts and
in-country sales, were $143
million, up 22% compared
to the prior year.
Consumer demand
remains strong across all
e-commerce platforms
while Blackmores’ sales
channels in China continue
to evolve.
EBIT of the China
segment grew ahead of
sales, increasing by 28%
compared to last year. This
result included the impact
of a significant level of
expense for doubtful debts.
All appropriate avenues
to recover these debts are
being progressed. The
second half of this year also
saw an increase in the level
of brand investment for this
important growth market.
Blackmores’ sales in Asia
(excluding China) were
$82 million, up 20%
compared to the prior year.
This includes particularly
strong performances
from Singapore (up 22%),
Hong Kong (up 39%) and
Korea (up 91%). Thailand
and Malaysia delivered
continued growth despite
being impacted by supply
constraints. Blackmores’
emerging business in
Indonesia delivered 77%
growth compared to the
prior year. We will continue
to invest in this important
growth market in response
to the encouraging
consumer and healthcare
professional support for our
brand since launching in
September 2016.
The strong growth
combined with a stabilising
Korean business saw EBIT
in this segment much
improved, up 163% despite
continued investment in our
Asia Regional Head Office
capability in Singapore.
04
BioCeuticals
Group
BioCeuticals, Global
Therapeutics and IsoWhey
delivered sales of $109
million, up 13% compared
to prior year. BioCeuticals-
branded products lifted
sales by 20% with Global
Therapeutics sales flat as
the result of stock shortages
impacting our smaller lines.
These constraints eased
significantly in the final
weeks of the financial year.
BioCeuticals is the
clear market leader in
practitioner-only products
and delivered a strong
pipeline of new products
throughout the year
including acclaimed
educational podcasts
and events.
BioCeuticals Group
EBIT grew 14%, slightly
ahead of sales.
26
BLACKMORES ANNUAL REPORT 2018 2018
2017
2016
2015
2014
01
Australia &
New Zealand
02
China
03
Other Asia
04
BioCeuticals
Group
Revenue $millions
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
394
267
270
266
187
143
117
73
2
7
82
68
61
61
54
109
96
68
54
46
27
BLACKMORES ANNUAL REPORT 2018 Operating +
Financial
Review
Group Strategy
Group and Divisional Results
Operating Review
Financial Review
Group Risks
Blackmores is a geographically diverse company and our
operations extend across 17 markets, supporting seven brands.
(See page 4 to learn more about Blackmores’ footprint).
Blackmores manages
41 warehouse locations
and 16 office locations,
employing 1,400* staff
across 252 job roles.
We are accountable to
more than 20 regulatory
authorities, which influence
our product ranges and
how we communicate with
our consumers.
Blackmores is a multi-
channel, multi-market
business. The changes in
the route-to-market and
the influence of resellers in
recent years has changed
our operating expense
profile.
The headquarters for the
Group is the Blackmores
Campus at Warriewood,
a 25,000 square metre
purpose-built facility where
the majority of Blackmores’
products are packaged
and quality checked. The
Campus officially opened
in 2009 and its design
delivers on the vision to be
the physical embodiment
of the brand: the best
environment for employees,
for sustainability and for
operational efficiency.
The Campus created a
wholefoods garden during
the year, highlighting
the value of nutrition in
the Blackmores’ health
philosophy.
Our supply chain deals
with 1,000 ingredients,
600 product formulations
and approximately 1,500
individual product units.
We have a high reliance
on natural resources and,
accordingly, have a strong
sustainability charter.
ADDRESSING
CONTINUITY OF SUPPLY
Supply constraints
impacted sales across many
Blackmores’ brands and
regions over the course
of the year. These were
caused by a number of
factors including changes
to the Australian contract
manufacturing sector and
were compounded by the
long lead times which are
required to produce natural
healthcare products.
We have high quality
standards that we are not
prepared to compromise
to address a short-term
stock-fill, and, though our
ingredients are sourced from
all over the world, we have
a preference for domestic
manufacturing partners.
These factors have
always made it difficult
for Blackmores to quickly
respond to changes in
demand.
The number of inventory
lines out of stock was
greatly reduced at the
close of the financial year.
Blackmores has initiated
a program of changes to
mitigate this challenge in
the future.
These changes include
introducing new technology
and processes to assist with
global sales forecasting and
demand planning which
will be embedded over the
next two years.
The announcement
in April of Blackmores’
agreement to acquire
the Catalent Australia
manufacturing facility in
Victoria in October 2019
will also give us greater
control over production.
ACQUISITION
OF CATALENT
AUSTRALIA’S BRAESIDE
MANUFACTURING
FACILITY
As we approach the
October 2019 acquisition,
this high quality tablet
and soft-gel capsule
manufacturing facility
will support greater
control over production,
strengthening Blackmores’
quality credentials and
new product development
capabilities.
This will deliver
increased agility to
respond to changing
market conditions. The
acquisition will enable
improved management
of Blackmores’ current
and future portfolio of
registered products in Asia.
BLACKMORES’
BUNGARRIBEE
WAREHOUSE
In June 2018, Blackmores
celebrated the official
opening of a 16,000
square metre warehouse
that doubled the Group’s
warehousing footprint and
allows room for further
growth in the future.
Guests at the official
opening toured the facility
to observe the improved
workflows, which are
focused on the same day
shipping of orders.
This facility is critical to
optimise our customer
service proposition. We’ve
adopted higher levels of
automation in our order
picking and packing and
the design of workflow
gives us the ability to be
more agile and responsive.
The location was chosen
for its access to the ports,
the major motorways and
to our logistics partners.
The site is a custom fit-out
developed especially for
our business to optimise
efficiency.
An average of 3,500
orders are shipped from
Blackmores Bungarribee
every week, made possible
by a team of 60 employees.
*Including 400 staff employed by the joint venture in Indonesia.
28
BLACKMORES ANNUAL REPORT 2018 William Li, Account Executive,
Blackmores Export
29
BLACKMORES ANNUAL REPORT 2018 Operating +
Financial
Review
Group Strategy
Group and Divisional Results
Operating Review
Financial Review
Group Risks
GROUP FINANCIAL
POSITION
The financial health of
Blackmores remains in a
strong position at the end
of the 2018 financial year,
providing the Group with
the flexibility and capability
to continue to support the
necessary investments to
grow the business into
the future.
Total net assets increased
by $15 million to $193
million at June 2018, largely
driven by increases in
current assets and partially
offset by a rise in current
liabilities, both reflecting
increasing working capital
requirements to support the
growth of the Group.
Current assets increased
by $44 million in the year,
driven by higher sales and,
in particular, a strong last
quarter impacting both
receivables and inventories.
Inventory at $104 million
reflects a balance $19
million higher than the prior
year due to both the Group’s
increase in size and the
building of increased safety
stock levels following a year
impacted by supply delays
and resulting inventory
shortages. Non-current
assets increased by $9
million to $162 million at
30 June 2018, reflecting
continued investment in
the year as we expanded
our supply chain and
distribution capabilities
along with investments
in our world-class online
learning management
system, B!Academy.
In addition, the Group
acquired a small number of
trademarks and brand rights
in the year to secure its
intellectual property rights
for the future.
Current liabilities have
increased by $32 million to
$174 million, largely due
to the timing and arrival of
raw materials towards the
end of the year, reflecting
improvements in inventory
supply.
Non-current liabilities
at $97 million increased
by $6 million from June
2017, driven by increased
borrowings to fund
higher working capital
requirements.
Net debt at $50 million
increased by $5 million,
marginally lower than the
increase in gross borrowings
due to a higher cash offset.
The net debt position of
the Group remains low
with a 20% gearing ratio,
consistent with the prior
year. We continue to
maintain a conservative
level of headroom against
all debt covenants and are
well supported by a diverse
range of facilities and
banking partners.
Net interest cover at 25.9
times (2017: 20.6 times)
has continued to improve
and reflects a conservative
approach to servicing
the Group’s ongoing
interest commitments.
Cash generated from
operations of $90 million
represented a $5 million
decline on the prior year,
largely attributable to higher
working capital levels. Net
cash flows from operating
activities were $58 million,
representing 27% growth
on 2017 with the prior year
impacted by the timing of
higher income tax payments
relating to the 2016 year.
30
The cash conversion
ratio of 82% represents
a sustainable level of
performance with the
Group’s strong profit growth
and investments made to
support future expansion
opportunities.
Net profit after tax
attributable to Blackmores’
shareholders was $70 million
(2017: $59 million), a 19%
increase on the prior year.
Basic earnings per share
(EPS) increased to 406.4
cents per share from 342.6
cents per share, an increase
of 19%. Dividends per share
were 305 cents (2017: 270
cents), reflecting a 75%
payout ratio. The business
delivered improved and
continued strong investment
returns on the metrics
of return on assets and
shareholders’ equity at 23%
and 36% respectively. Income
tax expense was higher,
reflecting the growth in profit
with a Group effective tax
rate of 29.1%. The Group has
issued a separate voluntary
2018 Taxation Disclosure
report providing further
details on the types and
amount of taxation paid by
the company.
We have made some
changes to the way we
present our financial results
in this 2018 Annual Report
to make the information
easier to read and interpret.
These include changing
our headline Revenue
figure to reflect sales
net of all discounts and
promotional and other
rebates, in accordance with
the latest financial reporting
standards. In addition,
we have reorganised and
streamlined the financial
report sections, with the
inclusion of accounting
policies and related
critical judgement areas
within the financial notes.
Where appropriate, we
have simplified language
and removed duplication
of information. Our aim
has been to simplify our
reporting to enable the
reader to gain a clearer
and more comprehensive
understanding of the
financial performance of
the Group.
Aaron Canning
Chief Financial Officer
BLACKMORES ANNUAL REPORT 2018
RETURN ON SHAREHOLDERS’ EQUITY
RETURN ON ASSETS
14
15
16
17
18
CASH CONVERSION RATIO
%
60
50
40
30
20
10
0
%
120
100
80
60
40
20
0
14
15
16
17
18
%
GEARING
14
15
16
17
18
DIVIDEND PAYOUT RATIO
60
50
40
30
20
10
0
%
90
85
80
75
70
65
60
REVENUE
$601 million
The Group delivered
revenue of $601
million across all
divisions and brands,
a 9% increase on the
prior year.
EBIT
$102 million
Earnings before
interest and taxes of
$102 million was up
18% compared to the
prior year.
NPAT
$70 million
Net profit after tax
(NPAT) attributable
to shareholders of
Blackmores of $70
million, up 19% on
the prior year.
EPS
406 cents
Earnings per share
(EPS) of 406 cents,
was up 19% on the
prior year.
DIVIDENDS
PER SHARE
305 cents
Dividends of 305
cents per share were
13% higher compared
to the prior year.
800
700
600
500
400
300
200
100
160
140
120
100
80
60
40
20
100
80
60
40
20
600
500
400
300
200
100
500
400
300
200
100
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
31
BLACKMORES ANNUAL REPORT 2018 Operating +
Financial
Review
Group Strategy
Group and Divisional Results
Operating Review
Financial Review
Group Risks
The material risks that could affect Blackmores’ future financial performance and their potential impacts are summarised in this table.
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 including our
Supplier Code of Conduct.
Supply
constraints
Blackmores’ high quality and sustainability standards
and limited availability of natural ingredients puts
pressure on the continuous supply of some key
products.
Product quality
issue
Financial loss due to:
• Delay in restoring supply of product for sale.
• Product recall and reformulation costs.
• Reduced industry capacity.
Brand damage
Brand damage caused by a product or industry related
event resulting in loss of share and value.
• 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.
• Acquisition of a manufacturing facility in Victoria to provide
greater control over production volumes.
• Improved demand planning and forecasting technology and
processes.
• Strong sustainability charter.
• Dedicated internal capability focused on sourcing.
• Direct sourcing of key and scarce ingredients.
• Strengthened supplier relationships and contracts balancing
volume requirements.
• 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.
• Crisis training and response plans in place.
• Active program to engage stakeholders on Blackmores’ business
values and ethics practices.
• Consumer advisory line to provide product information.
• Traceability and technology in the supply chain.
Cyber risk
Co-ordinated attacks on critical infrastructure resulting
in system outage or theft of confidential, personal or
financial information.
• Ongoing updating of technology with the incorporation of
security services.
• Compliance program and employee training to prevent a
breach.
Financial and
treasury risk
Financial and credit risks including negative impact
to profit, balance sheet and cash flow. Treasury risks
including change in exchange rates, ingredient prices,
interest rates and funding causes a financial loss.
Regulatory
changes
Government policy and regulation may change and
restrict or limit the ability to sell existing product or
ranges in key markets.
• Diversification of currencies and working with supply partners to
more effectively use these currencies for Group procurement
• Active ongoing reviews and assessment of customer risk.
• 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 Chinese businesses.
• 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 reduced revenue of a key
• Focus on Blackmores’ brand health to drive brand loyalty and
customer or market.
consumption.
• Greater financial cost to serve customers due to
aggressive competitors.
• Financial loss due to a large bad debt.
• Drive category solutions to gain consumer loyalty.
• Close monitoring of customer payments and continued
transparency across markets.
• Diversification of revenues.
32
BLACKMORES ANNUAL REPORT 2018 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.
Syed Ali,
Blackmores Bungarribee
Distribution Centre
33
BLACKMORES ANNUAL REPORT 2018 34Anna Isaac, Edouard Picherit and Leah Boonthanom
training for the Blackmores Sydney Running Festival
34
BLACKMORES ANNUAL REPORT 2018 Sustainability,
Community +
Our People
Sustainability
Community
Our People
36
40
44
35
BLACKMORES ANNUAL REPORT 2018 Sustainability
Healthy People,
Healthy Planet
Material
Prioritisation
s
n
o
i
s
i
c
e
d
d
n
a
s
t
n
e
m
l
s
s
e
s
s
a
r
e
d
o
h
e
k
a
t
s
n
o
e
c
n
e
u
fl
n
I
12
5
1
2
15
11
9
16
10
14
13
4
3
8
6
7
1. Our People
2. Stakeholder
Engagement
3. Corporate Governance
4. Sustainable Supply
Chains
5. Materials
6. Climate Change
7. Our Communities
8. Ethical Supply Chains
9. Energy
10. Water
11. Product Quality
and Safety
12. Work Health and Safety
13. Effluent and Waste
14. Innovation
15. Customer Privacy
and Data Protection
16. Wellness (in the
context of society)
Significance of economic, environmental and/or social impacts
Blackmores’ first full year of
operations at our Bungarribee
Distribution Centre in Western
Sydney has achieved an energy
intensity of 61 kWh/m2, which is
less than half the energy usage
of our other major warehouse
at Eastern Creek. Sustainable
design features include
stormwater reclamation, rooftop
photovoltaics and increased
roof and wall insulation.
Brajesh Kaushal
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 in
the 1930s, whose views
on preventive medicine,
supporting people, the
environment and recycling
were ahead of his time.
These values have
enabled Blackmores to
embed sustainability across
the business and progress
an agenda that focuses on
four key areas:
1. Tread Lightly
2. Source Responsibly
3. Lead the Change
4. Improve Wellbeing
36
BLACKMORES ANNUAL REPORT 2018
Sustainability
1
Tread Lightly
Reduce the environmental
impact of our facilities and
operations through best
practice and continual
improvement.
2
Source
Responsibly
Work collaboratively
to minimise social and
environmental risks, provide
product accountability and
transparency and build a
resilient supply chain to
ensure resources for our
future.
3
Lead the Change
Lead the industry through
innovation, research and
education and drive
sustainable business
standards.
4
Improve
Wellbeing
Focus on wellbeing,
improve community
health and champion a
safe and secure workplace.
TREAD LIGHTLY
SOURCE RESPONSIBLY
LEAD CHANGE
IMPROVE WELLBEING
71%
waste diverted from
landfill
Modern slavery
compliance action plan
developed
74
research projects,
clinical trials and
scholarly activities
7,543
pairs of shoes donated
to needy school children
in Thailand
Richard Henfrey, a
passionate champion for
sustainability, and his bee
hive, which contributes to
the biodiversity of the local
environment
37
BLACKMORES ANNUAL REPORT 2018 Sustainability Case studies
Solar energy at the Blackmores Campus
01 Tread lightly
A CLEAN ENERGY FOCUS
Blackmores completed
a full review of energy
options at the Blackmores
Campus at Warriewood to
align our practices to the
United Nations’ Sustainable
Development Goals around
clean energy.
The Blackmores
Clean Energy Strategy
is divided into two time
frames: Practical Strategy
(2018-2024) and Visionary
Strategy (2024-2030),
focused on:
1. Energy Productivity:
Maximise the energy
efficiency potential
of our production,
distribution and retail
facilities.
2. Energy Supply:
Deploy a mix of
clean, renewable and
reliable energy supply
solutions that are cost-
effective and reduce
our exposure to an
increasingly volatile
energy market.
3. Energy Management
Systems: Adopt
energy management
procedures and
systems to support
decision-making,
enable best practice,
and achieve continuous
improvement.
4. Communications &
Partnerships: Establish
win-win relationships
with key suppliers
and stakeholders, and
establish our position
as a thought leader in
sustainability.
Outcomes will be reported
in the 2019 Sustainability
Report.
Anna Bearpark
02
Source responsibly
STRONG SUPPLIER PARTNERSHIPS
We strive to partner with
suppliers who share our
values, have the ability
to consistently meet our
high quality standards,
are committed to best
practice and continuous
improvement, and take a
collaborative approach to
sustainability.
In partnership with
marine oil supplier TASA
Omega, we have been able
to improve the sustainability
and traceability program
for our fish oil supply chain
from catch to capsule.
Blackmores Fish Oil
comes from wild caught
sardines and anchovies
harvested in pristine waters
off the coast of Peru from
fisheries with independently
set quotas. Fish are caught
using responsible methods
to protect the eco-
system. Electronic ‘Catch
Certificates’ enable us to
track the origin of each
batch and provide details
of the harvest such as the
time and date the fish were
caught, the quantity and
species, the GPS location of
the harvest, and the vessel
name and licence number.
In recognition of this
successful collaborative
partnership, TASA Omega
received the 2018
Blackmores Sustainability
Award at the Blackmores
Supplier Conference which
brought together more
than 100 suppliers from
around the globe.
38
BLACKMORES ANNUAL REPORT 2018
Sustainability Case studies
03 Lead the change
ACCREDITED EDUCATION PROGRAMS
With widespread use of
complementary medicine in
Australia and Asia, patients
are increasingly expecting
their health practitioners
to provide expert advice
on the safety, efficacy and
appropriateness of natural
health supplements as
a standalone or adjunct
therapy.
about complementary
medicines. The structured
learning program includes
six online modules
covering vitamins, minerals,
nutritional oils and herbal
medicines, as well as
face-to-face Masterclass
sessions with case studies
developed by pharmacists
for pharmacists.
Monitar Tan, Senior
Asia Educator
In Malaysia, the
Blackmores Institute and the
Malaysian Pharmaceutical
Society have developed a
Complementary Medicine
Education (CMEd)
program to help build this
knowledge base, so far
engaging more than 600
pharmacists, especially
community pharmacists.
CMEd aims to improve
pharmacists’ knowledge
and confidence in advising
The accredited program
allows pharmacists
to receive continuing
professional development
points upon completion.
CMEd sits alongside
Blackmores Institute’s
range of complementary
medicine e-learning
modules for healthcare
professionals and pharmacy
staff. These are available in
English, Thai, Mandarin and
Indonesian Bahasa.
04
Improve wellbeing
HEALTHY COMMUNITIES
Edo Kahn,
co-founder of
A Sound Life
Blackmores is dedicated
to making a difference and
achieving long-lasting,
sustainable outcomes
for the communities in
which we operate through
grassroots collaborations.
In Australia, Blackmores
is a key sponsor of
The Growth Project,
which brings together
individuals, companies and
philanthropists with charity
leaders for growth and
leadership mentoring.
By providing one-on-
one coaching to charities
wanting to maximise the
positive impact they have
on the world, our team has
not only given back but also
benefited from this two-way
relationship, gaining an
improved understanding of
leadership and purpose.
“Mentoring has provided
an enriching opportunity
to connect with a diverse
network of people and
do something outside the
norm with meaning and
purpose,” said David Tuffin,
Blackmores National Sales
& Education Manager
ANZ, who partnered with
Edmund Rice Foundation.
“The amazing thing
is, you have no idea how
much you will learn and
grow in the process –
both personally and
professionally,” said Nicole
Steven, Blackmores Head
of Business Development
ANZ, who partnered with
A Sound Life.
39
BLACKMORES ANNUAL REPORT 2018 Community
Giving back – from leadership mentoring to soup kitchens
The Blackmores Group
is committed to giving
back to the communities
in which we operate
across Asia-Pacific. We
strive to make a difference
by building healthier
communities, supporting
charitable organisations
and inspirational individuals
who are helping to create a
brighter future.
In Australia, the
Blackmores Mercie Whelan
Women & Wellbeing Awards
in partnership with CCNB
celebrated women making
an outstanding contribution
to their local communities.
Marcus and Caroline
Blackmore donated a
revolutionary surf rescue
drone to Bilgola Surf Life
Saving Club.
As a key sponsor of The
Growth Project, we provided
one-on-one leadership
mentoring to charities
wanting to maximise their
positive impact on the world.
In Asia, our staff rolled
up their sleeves to drive
key grassroots initiatives.
This included our Malaysia
team’s Project Kindness,
which served 7,500 meals
to the homeless; our
Thailand team’s Keep
Running Keep Wellbeing
program, which donated
7,543 pairs of shoes to
needy school children; and
our continued support of
Bumi Sehat Foundation
in Indonesia to improve
maternal and child health in
rural communities.
Recognising that charity
starts at home, Group
employees gave $167,000
to a further 105 registered
charities of their choice
through our matched
donations scheme, whereby
0.5% of their taxable pay is
donated with Blackmores
matching this amount.
A CLEAN ENERGY FOCUS
40
BLACKMORES ANNUAL REPORT 2018 Community
Key organisations and charitable events proudly supported by Blackmores
Alice Springs School of
the Air
Delivering excellence
in education to school
children in remote Australia.
Auckland City Mission
Unique and specialised
health and social services to
marginalised Aucklanders.
Blackmores Sydney
Running Festival
More than 33,000
participants and $1.5
million raised for numerous
charities in 2017.
Biggest Morning Tea
Working towards a cancer
free future.
Bilgola Surf Life Saving
Club and Bilgola Big Swim
Proudly serving the
community.
Bumi Sehat Foundation,
Indonesia
Delivering community
health services in rural
Indonesia with a focus on
maternal-child health.
Byron Bay Lighthouse Run
An annual charity fun run,
raising $13,500 for Lismore
Base Hospital United
Hospital Auxiliary in 2017.
The Cardiac Children
Foundation, Thailand
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
(supported by Blackmores
Thailand’s Run & Move
events).
CCNB
Supporting people living
with mental health issues,
disability or ageing and
their carers.
Collingwood Netball
Community Clinics:
Encouraging health and
wellbeing in local schools.
Gotcha 4 Life
Saving lives and making a
significant impact in raising
the mental state of boys,
men and their families.
Hands-on-Health Australia
Delivering quality inter-
disciplinary healthcare
through training, education,
research and treatment in
Australia and overseas.
HBF Run for a Reason
More than 35,000
participants and over $1
million raised for WA health
charities in 2017.
Pit Stop Community Café,
Malaysia
Soup kitchen providing
meals for the urban
homeless and needy
(supported by Blackmores
Malaysia’s Project Kindness).
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.
Royal Guide Dogs Australia
Assisting people who are
blind to gain to freedom
and independence.
Royal Hospital for Women
Foundation
Innovation in women’s
healthcare services,
teaching and research.
Salvation Army Christmas
Appeal
Giving hope to Australians
battling tough times.
Special Olympics Australia
Transforming the lives of
people with an intellectual
disability.
Tender Loving Community
Providing practical support
to families affected by
serious illness or injury.
The Growth Project
Bringing together
individuals, companies and
philanthropists with charity
leaders to help maximise
their positive impact on the
world.
Thoroughbred
Rehabilitation Trust
Assisting the rehabilitation
and re-education of former
NSW Thoroughbred
racehorses.
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.
Individuals
Holly Wawn – pro surfer
Sam Bloom – para surfer
A CLEAN ENERGY FOCUS
41
BLACKMORES ANNUAL REPORT 2018 Community
Project Kindness –
paying it forward
in Malaysia
Project Kindness is Blackmores’ way of giving back
to the local community in Malaysia, through charity
drives and pay-it-forward collaborative efforts with a
focus on health, wellbeing and nutrition.
Led by our 91 employees in Kuala Lumpur,
Blackmores teamed up with Pit Stop Community Café
to serve 7,500 meals to the homeless and hungry
– with an incredible 350 Facebook fans stepping
forward to help.
“Sometimes all we need is a little kindness – not
just one day a year, but 365 days. It is our hope this
idea is embraced by individuals and companies alike.
We are grateful and happy for our partnership with
Blackmores Malaysia,” said Joycelyn Lee, Pit Stop
Community Café Manager.
“The project motto – If you can choose to be one
thing today, choose to be kind – inspired our desire
to re-awaken the essential goodness at the heart of
everyone and make a difference,” said Eddy Ong,
Blackmores Malaysia Country Director.
Other Project Kindness activities included helping
victims of the Typhoon Damrey floods (that left more
than 5,000 people homeless) to clean-up and repair
their homes and get back on their feet to recovery and
wellbeing.
Supporting research
into complementary
medicine
Blackmores has an unwavering commitment to growing
the knowledge base of complementary medicine and
is proud of its ongoing partnerships with world-leading
research institutions.
This year, the Blackmore Foundation (Marcus and
Caroline Blackmore’s personal philanthropic fund),
BioCeuticals and the Jacka Foundation donated $1.5
million to support two new research fellowships at the
Australian Research Centre in Complementary and
Integrative Medicine (ARCCIM) at the University of
Technology Sydney.
ARCCIM is a world-leading, critical public health and
health services research centre focusing on traditional,
complementary and integrative healthcare. It brings
together experts in epidemiology and health economics,
led by Distinguished Professor of Public Health and
Australian Research Council Professorial Future Fellow,
Jon Adams.
This research is all the more important considering
today’s major health challenges of an ageing population,
chronic illness and a health system under stress.
“The complementary and integrative medicine
landscape involves an array of medicines and
practitioners and the work of ARCCIM will help to build
the broad evidence base needed to inform policy
development in this significant area of healthcare,” said
Eyal Wolstin, Managing Director of BioCeuticals.
“People like Marcus Blackmore and the team at
BioCeuticals are making a significant contribution
through their funding of Australian research centres,
giving us a better understanding of natural therapies,”
said Health Minister Greg Hunt.
42
BLACKMORES ANNUAL REPORT 2018 Community
Awards
Partnerships
(Malaysia)
Thailand
• University of Technology
The Blackmores Group
has been recognised
with numerous awards
for product innovation,
industry leadership and
our commitment to
sustainability. They include
Executive Director Marcus
Blackmore being inducted
into the New Hope
Network Hall of Legends
and receiving the Nutrition
Business Journal Lifetime
Achievement Award, and
Blackmores’ induction into
the Queensland Business
Leaders Hall of Fame.
OUR BEST IN CLASS
AWARDS INCLUDE:
• Reader’s Digest Most
Trusted Brand – 10 years
running (Australia)
• Reader’s Digest Most
Trusted Brand – 4 years
running (Singapore)
• Reader’s Digest Most
Trusted Brand – Platinum
(Malaysia)
• Brand Laureate Award
• Superbrand Award – 7
years running (Thailand)
WE ARE ALSO
ESPECIALLY PROUD
OF THE FOLLOWING
RECOGNITION:
• Australian Packaging
Covenant Organisation
2017 – Medium
Pharmaceutical, Personal
Care and Medical
• Guardian Health and
Beauty Awards 2018
• LearnX Impact Awards
2018 – Best Bite Size
eLearning Course
• LearnX Impact Awards
2018 – Best Free
eLearning Resource
• Nature & Health Natural
Baby Awards 2018
• Sigma Healthcare
Awards 2018 – Health
and Wellbeing Supplier
of the Year
• Watsons Health &
Wellbeing Awards 2018
ACADEMIC
• Australasian College of
Natural Therapies
• Australasian College
of Nutritional and
Environmental Medicine
• Chulabhorn Research
Institute, Thailand
• Chulalongkorn
University, Thailand
• Commonwealth
Scientific and Industrial
Research Organisation
(CSIRO), Australia
• Deakin University,
• Royal Melbourne
Institute of Technology,
Australia
• Rangsit University,
Thailand
• Southern School of
Natural Therapies,
Australia
• Swinburne University,
Australia
INDUSTRY
• Australian Register
of Naturopaths and
Herbalists (ARONAH)
• Australasian Integrative
Medicine Association
• Australian Traditional
Medicine Society
• China Association for
Quality Inspection
• Taylor’s University,
• China Medical
Malaysia
• Thammasat University,
Thailand
• Tsinghua University,
Pharmaceutical Material
Association
• Chiropractors
Association of Australia
• Community Pharmacy
Association, Thailand
• Complementary
Medicines Australia
• FODMAP Friendly
• Global Organisation for
EPA and DHA Omega-3
(GOED)
• Informed Sport
• International Probiotics
Association
• Malaysian
Pharmaceutical Society
• Medicines Australia
• MINDD Foundation
• Naturopaths & Herbalists
Association of Australia
• Pharmaceutical Society
of Australia
• Pharmaceutical Society
of Hong Kong
• Sydney University
Glycemic Index Research
Service (SUGiRS)
• World Wide Fund for
Nature
Australia
China
• Endeavour College of
Natural Health, Australia
• UCSI University, Malaysia
• University of Canberra,
• Griffith University
Australia
School of Pharmacy and
Pharmacology, Australia
• International Medical
University, Malaysia
• Khon Kaen University,
Thailand
• Laureate Australia
• Monash University,
Australia
• MTHFR Support Australia
• Naresuan University,
• University of Hawaii, USA
• University of Indonesia
(Universitas Indonesia)
• University of Malaya,
Malaysia
• University of Newcastle
and Hunter Medical
Research Institute,
Australia
• University of Sydney,
Australia
• National Institute
of Complementary
Medicine (NICM)
at Western Sydney
University, Australia
• National University of
Malaysia (Universiti
Kebangsaan Malaysia)
• National University of
Singapore
Sydney:
- Australian
Research Centre in
Complementary and
Integrative Medicine
(ARCCIM)
- Graduate School of
Health
- Pharmacy
“
I have recently been honoured with a number of awards
recognising lifetime achievements. Those awards rightfully
belong to my father, Maurice Blackmore, Australia’s
pioneering naturopath. But in his time he was oft referred
to as a quack, a charlatan or a snake oil salesman, so it was
difficult for the establishment to recognise his contributing
to natural health and to natural medicine. To see so many
of his teachings now accepted as mainstream is immensely
rewarding for those of us who continue his life’s work in the
very company he created. He was ahead of his time.
MARCUS C. BLACKMORE AM
”
• EY Entrepreneur of the Year – 2018 Eastern Region Champion
• Natural Products Industry, Hall of Legends by the New Hope Network, USA, Inductee
• Nutrition Business Journal Lifetime Achievement Award 2018, USA
43
BLACKMORES ANNUAL REPORT 2018
Our People
Wellness at work
The wellbeing of
Blackmores’ employees
is a key enabler of culture.
In the 2018 financial year,
the Blackmores Workplace
Health and Safety (WHS)
Committee doubled down
on employee training,
communications and
engagement across the
business. There were a total
of 12,411 WHS training
experiences across the
Group in the 2018 financial
year. As a direct result of this
increased focus, it has been
encouraging to see incident
severity decline this year,
with:
• Workforce recordable
injury rate is down on last
year from 0.92% to 0.7%
• 11% decrease on total
reported incidents
compared to last year
– 87% resulted in no
impairment and 12%
experienced short-term
impairment only, with no
permanent impairment
or fatalities.
Our global program, B!Safe
B!Healthy leverages the
expertise of our Australian
staff to drive safe work
practices across all markets.
Other training focus
areas in financial year 2018
included ergonomics and
manual handling, and slips,
trips and falls. In order
to ensure the takeaways
were well understood
by employees, training
moments were designed as
a combination of face-to-
face sessions and videos
featuring real employees.
At Blackmores, a strong
WHS culture covers more
than just the physical, but
also addresses the work
life balance, mental health
and overall wellbeing of
employees.
In May, the WHS
Committee ran its “Making
your head a space you
want to be” campaign,
aimed at promoting good
mental health and reducing
the stigma around mental
health conditions. An
awareness presentation
was cascaded through
team meetings and
huddles, followed up by
an eLearning test module.
This activity coincided with
the launch of Benestar and
the ‘Best You’ program,
Blackmores’ new Employee
Assistance Program (EAP).
The focus on WHS
commitments is reflected
in the bi-annual Climate
Survey data, which showed
an overall favourable
rating of 87% for WHS at
Blackmores. Highest ratings
(89%) were given to the
statements “Workplace
Health and Safety is a
priority at Blackmores” and
“Staff are aware of their
work health and safety
responsibilities”. This is
a good indication that
the work the Committee
has been doing on
communication and training
this financial year has been
relevant and valuable.
No barriers to realising
career goals
The Blackmores Group is a leader
in diversity and we are committed
to championing it at all levels
of the organisation. We believe
that utilising and developing
the collective skills and diverse
experiences and attributes of
everyone positively impacts
employee engagement and
improves business performance.
Shanna Colver, Blackmores
Group Head of Building
Infrastructure & Services, is a great
example of this. At high school she
dreamed of landing a carpentry
apprenticeship, but instead took
a legal secretary traineeship. She
later moved into project and
change management, before
joining Blackmores in 2010 as a
Project Manager for New Product
Development.
Valued for her technical and
organisational skills on site, Shanna
is also a busy mum to two children
and President of her local Little
Athletics organisation.
Her advice for other women –
and men – considering a career shift
but unsure they have everything
the role requires? “Go for it – know
that you will have other skills sets
and experiences you can offer your
team and gain new experiences for
yourself.”
Blackmores supported
Shanna’s aspirations to upskill
into operations, and today she
is making her professional – and
uniquely personal – mark in a
traditionally male-dominated role
running site operations across the
Group, focused on maximising
functionality, safety, sustainability
and innovation.
“I finally feel at home in this role
and I’m looking forward to going
from strength to strength,” said
Shanna, who is one of two women
on her team. “My colleagues and
external contractors treat me no
differently to how they would treat a
male doing this job.”
“
I finally feel at home in this role and I’m looking
forward to going from strength to strength.
”
44
BLACKMORES ANNUAL REPORT 2018
Investor App
Blackmores offers shareholders a free app that
integrates with the Computershare platform to give
shareholders and brokers mobile access to manage
their shareholdings. It allows them to:
• View live share price updates
• View dividend history
• Obtain dividend or tax statements
• Receive news, announcements, key dates and
invitations to shareholder events.
The Blackmores Investor app is downloadable at
https://blackmores.computershareapps.com or by texting
the word ‘Blackmores’ to 0400 813 813 (Aust and NZ).
The app is compatible with all mobile devices, and
gives all shareholders easy access to their holdings and
all relevant Blackmores investor announcements and
Company information. Access is via a secure login using
a Securityholder Reference Number (SRN) or Holder
Identification Number (HIN) and postcode.
Shanna Colver,
Blackmores Head of Building
Infrastructure & Services
45
BLACKMORES ANNUAL REPORT 2018 Executive Team
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, and is on the
course advisory committees for
nutrition courses at Endeavour
College and the Think Group.
She is the main author of four
best-selling textbooks including
Herbs and Natural Supplements
– an evidence based guide,
founding Editor-in-Chief of the
journal Advances in Integrative
Medicine, and was a regular
columnist for the Australian
Journal of Pharmacy for 20 years.
03
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 multi-national
organisations in Asia, Australia
and New Zealand, the UK
and the US. Prior to joining
Blackmores in December 2014,
Aaron worked at Goodman
Fielder, Westfield and Diageo
plc. At Goodman Fielder he
held several leadership roles
including Managing Director
Grocery Category, Managing
Director Asia-Pacific, and
Finance Director Asia-Pacific.
Aaron has a Bachelor
of Commerce degree in
Marketing and Management
and Postgraduate First Class
Honours in Management. He is
a qualified accountant, a Fellow
of the Association of Chartered
Certified Accountants, a member
of Chartered Accountants
Association of Australia and New
Zealand and a graduate of the
Australian Institute of Company
Directors. Aaron was named
CEO Magazine’s 2016 CFO of
the Year (runner-up).
01
Richard Henfrey
Chief Executive Officer
Richard Henfrey began as Chief
Executive Officer on 17 August
2017 after more than eight
successful years on Blackmores’
Leadership Team including three
years as Chief Operating Officer.
He was Board President of
Complementary Medicines
Australia from June 2011 until
December 2015, leading the
industry association’s input
into the most comprehensive
review into regulation of
complementary medicine
since the system was
established in 1989.
Prior to Blackmores, he
worked for Telstra Corporation
in roles including Director of
Technical Sales, Telstra Business.
General Manager, Business Sales
NSW; and General Manager
of Marketing Strategy, Telstra
Business and Government.
Prior to emigrating to Australia
from the UK in 2003 with his
Australian wife and children,
Richard was Director of Strategy
and Market Intelligence for
Energis plc and played a key
role in the financial restructuring
of the business.
Richard graduated from the
University of Cambridge with
honours in Natural Sciences,
specialising in genetics and
molecular and cell biology.
He passionately supports the
molecular cardiology work of
the Centenary Institute, Quest
for Life Foundation and Bear
Cottage.
02
Adjunct Associate Professor
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
46
04
Cecile Cooper
Company Secretary & 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, 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.
05
Jeremy Cowan
Chief Operations Officer
Jeremy joined Blackmores
in July 2018 and brings
strong technical acumen
across the end-to-end supply
chain encompassing sales
and operations planning,
manufacturing, logistics and
procurement. He has a proven
record of generating value
through supply chain strategies
and continuous improvement.
He was the Asia-Pacific
Procurement Director of Nando’s
for 18 months prior to joining
Blackmores, and before this he
had a 20-year career with Mars
Inc. across the chocolate, sugar
and coffee segments in multiple
supply chain and procurement
leadership roles in both Australia
and the US.
Jeremy has delivered results
in both business and functional
leadership through developing
high performing teams and
nurturing a positive culture
through his communication and
interpersonal skills.
06
David Fenlon
Managing Director, Australia
& NZ
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. He
previously served on the Board
of ASX-listed The PAS Group,
is a member of the Australian
Institute of Company Directors,
a Director of the Quest For Life
Foundation, and on the Board of
the Special Olympics.
07
Peter Osborne
Managing Director, Asia
Peter is a former Australian
trade diplomat with extensive
experience in business
development, sales and
marketing, trade development,
and export and investment
facilitation and promotion. He is
responsible for Blackmores’ Asia
business, including subsidiary
companies in Singapore,
Thailand, Malaysia, Taiwan, Hong
Kong, Korea, China and Japan;
joint venture Kalbe Blackmores
Nutrition in Indonesia;
distribution partnerships
including Vietnam, Cambodia,
Kazakhstan and Mongolia; and
overall strategy for Blackmores’
growth objectives in Asia.
Prior to joining Blackmores in
2009, Peter was one of Australia’s
most senior trade diplomats
working with the Australian
Trade Commission in China,
Taiwan, and Hong Kong. He also
spent several years in Fiji as the
Trade and Investment Director
of the South Pacific Forum
Secretariat and served as Expert
Adviser to the UN Conference
on Trade and Development
and the UN Commission for
Sustainable Development.
Peter has lived and worked
in Asia for nearly 30 years and
speaks Mandarin-Chinese. Peter
is a graduate of the Australian
BLACKMORES ANNUAL REPORT 2018 02
04
06
08
01
03
05
07
09
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 (CAQI) in Beijing.
08
Brett Winn
Chief Information Officer
Brett has 25 years’ experience
delivering innovative, customer-
obsessed technology solutions
across a range of industries
throughout Asia-Pacific. Prior
to joining Blackmores in 2016,
Brett was Chief Information
Officer at Medibank where he
created leading telehealth and
population health initiatives to
improve access to services and
reduce stress on the Australian
health system. Brett has also
held executive IT positions
at CitiPower, PageGroup,
Saatchi & Saatchi and McCann
Worldgroup.
As Blackmores’ Chief
Information Officer, Brett is
responsible for technology
and digital solutions aimed
at customer outcomes and
innovation, while driving
operational efficiencies across
the Group. He has an MBA from
the University of Technology,
Sydney, and is passionate about
championing company culture
to achieve world-class outcomes.
09
Eyal Wolstin
Managing Director, BioCeuticals
Eyal brings more than 25
years of sales and marketing
experience to the Blackmores
Group as Managing Director
of BioCeuticals.
Armed with strong leadership
skills and a deep industry
knowledge of FMCG and
complementary medicines,
Eyal has consistently delivered
high performance results,
innovation initiatives and
change management.
He advocates BioCeuticals’
reputation for integrity,
innovation, quality and reliable
practitioner support, and
was appointed Managing
Director in 2018. Eyal holds
an MBA (Marketing) from the
University of Manchester and
a BA in Political Science and
Management from Open
University in Israel.
47
BLACKMORES ANNUAL REPORT 2018 2018
Financial
Report
49
50
52
56
74
75
79
80
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
81
82
83
84
127 Company Information
48
BLACKMORES ANNUAL REPORT 2018
Five Year History
$’000
Revenue
2018
2017
2016
2015
2014
601,136
552,160
598,659
388,366
287,458
Earnings before interest, tax, depreciation and
amortisation (EBITDA)
Depreciation and amortisation
Earnings before interest and tax (EBIT)
Net interest expense
Net profit before tax
Income tax expense
(Loss)/gain attributable to non-controlling interests
Profit after tax attributable to shareholders of
Blackmores Limited (NPAT)
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 ratio1
Return on shareholders’ equity2
Return on assets3
Dividend payout ratio
Gearing ratio4
EBIT to revenue ratio
Effective tax rate
Current assets to current liabilities (times)
Net interest cover (times)
Gross interest cover (times)
% change on prior year
Revenue
EBITDA
EBIT
NPAT
EPS
Ordinary dividends per share
110,552
8,940
101,612
3,930
97,682
28,459
(782)
94,642
8,411
86,231
4,180
82,051
24,023
(985)
152,266
7,045
145,221
1,810
143,411
43,391
12
78,655
6,391
72,264
3,432
68,832
22,276
-
46,055
6,266
39,789
4,826
34,963
9,534
-
70,005
59,013
100,008
46,556
25,429
49,532
192,875
464,850
302,507
174,467
111,279
90,131
17,227
406.4
305
$142.50
$6.46
81.5%
36.3%
23.2%
75.0%
20.4%
16.9%
29.1%
1.73
25.9
23.4
8.9
16.8
17.8
18.6
18.6
13.0
44,717
177,541
412,174
258,662
142,556
107,369
95,310
17,226
342.6
270
$95.84
$6.23
100.7%
33.2%
20.2%
78.8%
20.1%
15.6%
29.3%
1.81
20.6
18.9
(7.8)
(37.8)
(40.6)
(41.0)
(41.0)
(34.1)
17,793
178,263
443,362
294,624
192,279
116,484
123,022
17,225
580.6
410
$131.39
$6.76
80.8%
56.1%
39.4%
70.6%
9.1%
24.3%
30.3%
1.53
80.2
63.9
54.1
93.6
101.0
114.8
114.5
102.0
7,069
132,915
293,407
187,844
114,998
90,809
89,791
54,401
104,226
236,594
131,376
58,040
65,185
49,507
17,224
270.7
203
$75.27
$5.27
114.2%
35.0%
27.3%
75.0%
5.1%
18.6%
32.4%
1.63
21.1
18.8
35.1
70.8
81.6
83.1
81.4
60.0
17,113
149.2
127
$27.20
$3.81
107.5%
24.4%
17.0%
85.1%
34.3%
13.8%
27.3%
2.25
8.2
7.7
6.0
3.1
2.8
1.8
0.9
0.0
1. Calculated as cash generated from operations divided by EBITDA.
2. Calculated as NPAT attributable to shareholders of Blackmores Limited divided by closing shareholders’ equity.
3. Calculated as EBIT divided by average total assets.
4. Gearing ratio is calculated as net debt divided by the sum of net debt and shareholders’ equity.
49
BLACKMORES ANNUAL REPORT 2018
Directors’ Profiles
01
Stephen Chapman
BCOMM, MBA, CA, FAICD
03
Richard Henfrey
MA, GAICD
Chairman
Mr Chapman is an investment
banker and experienced
company director who joined
the Board in September
1993. Mr Chapman has broad
commercial and investment
experience gained in Australia
and internationally, from both his
executive and board roles. He
was an international director of
Morgan Grenfell & Co and was a
founder and Chairman of Baron
Partners Limited, an Australian
investment bank.
Mr Chapman is a Non-
Executive Director of several ANZ
Bank Wealth division subsidiaries,
including Chairman of One Path
Funds Management Limited, and
was previously Deputy Chairman
of Perpetual Limited.
Mr Chapman held the
position of Blackmores Deputy
Chairman from 24 October 2007
to 1 March 2017. He was then
Acting Chairman until 27 June
2017 when he was appointed
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.
Mr Blackmore 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.
Chief Executive Officer and
Managing Director
Richard Henfrey commenced
as Chief Executive Officer on
17 August 2017 after more
than eight successful years on
Blackmores’ Leadership Team
including three years as Chief
Operating Officer.
He was Board President of
Complementary Medicines
Australia from June 2011 until
December 2015, leading the
industry association’s input
into the most comprehensive
review into regulation of
complementary medicine
since the system was
established in 1989.
Prior to Blackmores, he
worked for Telstra Corporation
in roles including Director of
Technical Sales, Telstra Business;
General Manager, Business Sales
NSW; and General Manager
of Marketing Strategy, Telstra
Business and Government.
Prior to emigrating to Australia
from the UK in 2003 with his
Australian wife and children,
Richard was Director of Strategy
and Market Intelligence for
Energis plc and played a key role
in the financial restructuring of
the business.
Mr Henfrey graduated from
the University of Cambridge with
honours in Natural Sciences,
specialising in genetics and
molecular and cell biology.
He passionately supports the
molecular cardiology work of
the Centenary Institute, Quest
for Life Foundation and Bear
Cottage.
04
Brent W Wallace
BCOMM (MARKETING), FAICD
Independent Director
Mr Wallace joined the Board
in October 2005 and has been
Chair of the Audit and Risk
Committee since 2015. He is
a co-founder and Chairman of
Galileo Kaleidoscope (Galkal),
an Asia-Pacific company known
for its strategic marketing, brand
and consumer insight solutions
that drives growth for clients.
Mr Wallace has held senior
positions in London and Sydney
advertising agencies and until
1996 was Managing Director
of Ogilvy & Mather in Australia.
Mr Wallace has more than 30
years of international experience
in marketing, advertising and
research insights across a wide
variety of organisations and
consumer categories.
Mr Wallace is a former Board
Director (2005-2017) and has
been a Governor of the World
Wide Fund for Nature, the global
environmental group since 1993.
He has also held board positions
on ASX-listed and unlisted
technology companies in online
procurement, education and
information.
05
Helen Nash
BA (HONS) GAICD
Independent Director
Ms Nash joined the Board in
October 2013. Ms Nash has
more than 20 years’ experience
across 3 diverse industries:
Consumer Packaged Goods,
Media, and Quick Service
Restaurants.
Ms Nash brings robust
financial skills to her role
having initially trained in the
UK as a Certified Management
Accountant. Her 17+years in
brands and marketing allow
her to bring a strong consumer
lens to the Board. Before
transitioning to a NED career
she held the position of Chief
Operating Officer at McDonalds
Australia, overseeing business
and corporate strategy,
restaurant operations, marketing,
menu, insights and research
and information technology.
This extensive strategic and
operational experience allows
Ms Nash to bring rounded
commercial skills to the Board.
Ms Nash is currently a Non-
Executive Director of Metcash
Limited (since October 2015),
a Non-Executive Director of
Southern Cross Media Group
(since April 2015), a Non-
Executive Director of Inghams
Group Limited (since May 2017),
and a former Non-Executive
Director of Pacific Brands Limited
(2013-2016).
06
David Ansell
BA (COMMUNICATION), GAICD
Independent Director
Mr Ansell joined the Board in
October 2013, following a highly
successful career in consumer-
facing organisations in Australia,
Asia and the United States.
Mr Ansell played a pivotal role
in the start-up years of Foxtel
and was CEO of advertising
agency Saatchi & Saatchi. He
was Managing Director of Mars
Incorporated in Australia and
President of a global Mars unit
in the United States. Mr Ansell
has a strong operating and
supply chain skill set and a deep
understanding of customer
strategy. He is also Managing
Director and Chairman of
Jacobs Douwe Egberts ANZ,
Australasia’s largest pureplay
coffee company, where he
recently led a major acquisition
and integration project.
Mr Ansell is also a board
member of the peak body of
cycling in this country, Cycling
Australia.
07
John Armstrong
BBUS, MBA, MAICD
Independent Director
Mr Armstrong joined the Board
in May 2015. Mr Armstrong has
more than 30 years’ experience
in various financial and
commercial management roles.
His most recent executive role
was at SEEK Limited, an ASX 50
listed leading recruitment and
education provider, where he
was Chief Financial Officer for
over 12 years.
Mr Armstrong’s focus was
on SEEK’s Asian operations
and investments, mergers
& acquisitions, 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 has previous
ASX listed experience as a
Non-Executive Director with
Melbourne IT and iProperty
Group.
50
BLACKMORES ANNUAL REPORT 2018 08
Jackie McArthur
BENG (AERONAUTICAL), MAICD
Independent Director
Ms McArthur joined the Board
in April 2018 with more than 20
years’ experience in operations,
supply chain, manufacturing,
logistics and global procurement
functions. She was most recently
the Managing Director ANZ for
Martin-Brower, a leading global
player in logistics, distribution
and transport operations as
well as end to end supply chain
solutions.
Previously, Ms McArthur
enjoyed a long career at
McDonalds where she held
roles such as Vice President
Supply Chain for Asia Pacific,
Middle East and Africa, a role
that covered 38 countries.
She also was the McDonalds
Australia Senior Vice President
Chief Restaurant Support
Officer and outside of supply
chain, was also responsible
for real estate, construction,
menu development and crisis
management.
Ms McArthur was the 2016
Telstra NSW Business Woman
of the Year and overall 2016
Telstra Business Women’s
Awards - Corporate and Private
National Winner. Ms McArthur is
also a Non-Executive Director of
Inghams Group Limited (since
September 2017).
01
03
05
07
02
04
06
08
51
BLACKMORES ANNUAL REPORT 2018 2018
Directors’
Report
52
BLACKMORES ANNUAL REPORT 2018 Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
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
Richard Henfrey
Jackie McArthur
Helen Nash
Brent Wallace
Total
FULLY PAID ORDINARY SHARES
SHARE RIGHTS
1,000
800
4,001,835
20,028
11,936
-
1,487
12,302
4,049,388
-
-
-
-
17,809
-
-
-
17,809
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 56 to 73
for more details. During the year, the following rights to shares were granted:
Executive Director
Richard Henfrey
Aaron Canning2
Dave Fenlon
Peter Osborne2
Total
1, 2
2018
NUMBER
12,852
3,849
3,716
2,960
23,377
1. Rights granted during FY18 vest provided specific performance objectives and hurdles are met over the three-year period commencing 1 July 2017 to the year ending 30 June 2020.
2. Includes rights granted during FY18 under the Staff Share Plan. Rights to 25 shares for these Senior Executives will vest in the 2019 financial year (FY19).
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 56 to 73.
COMMITTEE MEMBERSHIPS
As at the date of this report, the Company has 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
Jackie McArthur
(appointed 27 August 2018)
Stephen Chapman, Chairman
David Ansell
John Armstrong
Marcus Blackmore
Richard Henfrey
Jackie McArthur
Helen Nash
Helen Nash, Chairman
Stephen Chapman
Jackie McArthur
(appointed 27 August 2018)
Brent Wallace
53
BLACKMORES ANNUAL REPORT 2018
Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
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 US and Australia from ASX-listed and multi-
national 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 graduate 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 2018 and 30 June 2017 and the results herein have been prepared in accordance
with Australian Accounting Standards.
The net profit after tax attributable to shareholders (NPAT) for the financial year was $70 million (2017: $59 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 23 to 33.
DIVIDENDS
The amounts paid or declared by way of dividend since the start of the financial year are:
• a final dividend of 140 cents per share fully franked in respect of the year ended 30 June 2017, as detailed in the Directors’ Report
for that financial year, was paid on 26 September 2017
• an interim dividend of 150 cents per share fully franked in respect of the year ended 30 June 2018 was paid on 22 March 2018
• on 28 August 2018, the Directors declared a final dividend for the year ended 30 June 2018 of 155 cents per share fully franked,
payable on 12 October 2018 to shareholders registered on 27 September 2018.
This will bring total ordinary dividends to 305 cents per share fully franked (2017: 270 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 2018.
SUBSEQUENT EVENTS
There has not been any matter or circumstance, other than that referred to in the Consolidated 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 Limited
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.
54
BLACKMORES ANNUAL REPORT 2018 Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
DIRECTORS’ MEETINGS
The number of Directors’ meetings held (including meetings of Committees of Directors) during the financial year are as follows:
DIRECTORS
David Ansell
John Armstrong
Marcus Blackmore2
Stephen Chapman
Richard Henfrey2
Christine Holgate2
Jackie McArthur2
Helen Nash
Brent Wallace
BOARD OF
DIRECTORS
AUDIT & RISK
COMMITTEE
NOMINATIONS
COMMITTEE
PEOPLE AND
REMUNERATION
COMMITTEE
HELD1
ATTENDED
HELD1
ATTENDED
HELD1
ATTENDED
HELD1
ATTENDED
10
10
10
10
7
3
2
10
10
10
10
10
10
7
3
2
10
10
4
4
N/A
4
N/A
N/A
N/A
-
4
3
4
1
4
3
1
1
-
4
2
2
2
2
2
-
-
2
2
2
2
2
2
2
-
-
2
2
-
-
N/A
4
N/A
N/A
N/A
4
4
-
-
3
4
3
1
1
4
4
1. Reflects the number of meetings held during the time that the Director held office during the year.
2. Attendance at Committee meetings 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 7.2 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 74 of this Annual Report.
ROUNDING OFF AMOUNTS
In accordance with the Australian Securities and Investments Commission (ASIC) Corporations Instrument 2016/191, the amounts in
the Directors’ Report and the Financial Report are rounded off to the nearest thousand dollars, unless otherwise indicated.
55
BLACKMORES ANNUAL REPORT 2018
2018
Remuneration
Report
Key points
• Blackmores’ remuneration structure aligns Senior
Executive remuneration to Group performance.
responsibilities and alignment to appropriate
benchmarking.
• Blackmores’ long-standing profit share scheme
aligns the remuneration of all employees to
profits of the Group.
• FY18 short-term incentives (STI) were paid ‘at
target’ to the Executive Directors and Senior
Executives.
• Non-Executive Director fees were not increased
in FY18.
• An externally facilitated Board review was
conducted during the year.
• A new CEO was appointed in the year and
remuneration benchmarked accordingly.
• Long-term incentive (LTI) awards in the year
reflect achievement of the three-year EPS growth
targets for the FY16 plans, granted in July 2015.
• No LTI vested in relation to FY17 or FY18 plans.
• The appointment of Jackie McArthur as a Non-
Executive Director in April 2018 brings new
skills to the Board and supports our continued
commitment to diversity.
• Senior Executives received increases to Fixed
Annual Remuneration (FAR) during the year due
to organisational changes, expanded roles and
• Jane Franks accepted the role as Chief People
Officer and will commence with the Group in
October 2018.
Introduction from the Chairman of the People and Remuneration Committee
Dear Shareholder,
I am pleased to present to you our 2018 Remuneration Report.
This report outlines FY18 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.
FY18 was a return to solid sales and profit growth following
the prior year’s challenges caused by changes in the operating
environment particularly in servicing Chinese consumers from
the Australian retail channel. Record Net Sales for the Group
was achieved, notwithstanding the impact of supply challenges
during the year due to structural changes in the manufacturing
sector which affected sales across the Group. Net Sales were up
9% and NPAT up 19% on the prior year The share price increased
49% during the year. Blackmores’ total shareholders return (TSR)
was an increase of 52%, ROE of 36%, EPS increase of 19% and
dividend increase of 13%.
As a result, I am pleased to advise that the Executive Directors
and Senior Executives received an “at target” award (prior to
individual modifiers) under the short-term incentive (STI) plan.
Additionally, shares vested under the three-year long-term
incentive (LTI) plan. Executive Directors and Senior Executives
were awarded 78% of the maximum potential under this plan
due to the achievement of strong earnings per share (EPS)
growth during the FY16 to FY18 performance period.
ALIGNING REMUNERATION WITH BUSINESS
PERFORMANCE AND STRATEGY
There has been exceptional growth in the business since
FY14 and during this period the Committee has focused on
ensuring that Senior Executives fixed and performance-based
remuneration was both aligned to delivery of the strategy and
that the remuneration outcomes were aligned with shareholder
returns. The benchmarking reviews of the CEO, Senior Executive
and Non-Executive Director remuneration conducted in FY17
and FY18 have ensured that remuneration was commensurate
with the size and scale of the organisation along with the
retention of key personnel.
KEY OUTCOMES FOR FY18 REMUNERATION
1. Consistent with our ‘One Blackmores’ philosophy, whereby
we strive to create a unified culture and set of goals, the FY18
STI plan included a strategic measure component of Net Sales
performance over the prior year in addition to the current
measure of NPAT growth performance over the prior year.
2. The current hurdle requires positive NPAT growth before any
component of the STI can be awarded to a Senior Executive.
3. 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 rights in the LTI plan
at maximum potential calculated at 150% of FAR.
4. Following the internal appointment of a new CEO and a
change to the organisational structure better aligned to the
delivery of the strategic goals, the roles and responsibilities
of MD Asia, MD ANZ and CFO were expanded and then
externally benchmarked versus relevant comparative
roles. Accordingly, these Senior Executives’ FAR was
56
BLACKMORES ANNUAL REPORT 2018 2018
Remuneration
Report
increased between 16% and 30%. Full details are on page
67. Additionally, the number of Senior Executives in Key
Management Personnel roles included in the Remuneration
Report was redefined at the start of FY18.
5. The FY18 Net Sales increase of 9% and NPAT increase of 19%
were “on target” set by the Board for FY18 and as a result
“on target” STIs were awarded to Senior Executives. This is
in contrast to the FY17 payments, where NPAT decrease
of 42% was below the hurdle rate and as such the CEO
and Senior Executives did not receive an STI payment in
that year. The Board considers the STI outcomes for FY18
and FY17 highlight the strong alignment between financial
performance, shareholders’ interests and remuneration
outcomes. The STI calculation was based on statutory Net
Sales and NPAT and the Board did not exercise discretion
in changing the calculation for purposes of determining the
financial achievement of targets.
6. Under the long-standing profit share scheme, 10% of NPAT
was paid to employees of Blackmores being equivalent to
26 days’ incremental salary. The conditional requirement of
achieving year-on-year growth was met whereby an additional
2.5% of NPAT was included in the amount distributed.
This compares to FY17 which did not meet the conditional
requirement of achieving year-on-year growth, resulting in
the distribution of 7.5% NPAT in a total payment of 16 days’
incremental salary in that year.
7. Long-term incentive (LTI) awards were eligible to vest in FY18.
The LTI plan has a three-year performance period and the
Board is pleased that the FY16 plan vested at 78% of the
maximum potential. This was based on the performance
metric of 15% three-year compound annual growth rate
(CAGR) in EPS and reflects the strong growth over this period.
The FY17 and FY18 LTI plans are three-year plans. The total
remuneration for the financial year, the details of which are
shown on page 67, 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.
8. The FY18 LTI plan has a threshold hurdle of 5% three-year
CAGR in EPS. In order to receive the maximum award under
the plan an achievement of 25% CAGR is required. The
hurdles ensure that Senior 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.
9. As outlined in the 2017 Report, the Non-Executive Director
fee increases were staged over several years in line with the
Company’s market capitalisation growth over the period and
a review of relevant external benchmarks. The last staged
increase was deferred to the fourth quarter of FY17. There was
no further increase in FY18 other than increases to statutory
superannuation. An additional Non-Executive Director, Jackie
McArthur, was appointed during the year.
10. During the year an external Board review was conducted.
All Board members and the senior management team were
involved. This has provided the Directors with both collective
and individual feedback. The board strongly believes that
a high performance culture starts in the Boardroom and is
committed to a journey of continuous improvement and in
holding themselves to the highest standards. The review has
helped provide the Board and Senior Management team with
some focus areas to action over the coming two years
FY19 CHANGES
Commencing in October 2018, Jane Franks has been appointed
to the new role of Chief People Officer reporting to the CEO. The
creation of this new role is the start of a more strategic people
function that will ensure a strong link between our business
strategy and the organisational structure, skills, capability and
culture we need to build. Jane has a proven track record as
an experienced HR executive and we look forward to her
contribution to Blackmores’ continued success.
In our continued move towards a simple balanced scorecard
approach for STI awards, the FY19 STI plan will include two
additional strategic measures: a China growth measure and
a delivery performance measure. These will sit alongside the
current measure of NPAT growth performance over the prior
year and the strategic measure of Group Net Sales growth
performance over the prior year.
The FY19 STI plan will be further enhanced to ensure Senior
Executives are only rewarded for achievement of outcomes if
they have displayed leadership behaviours during the year in
line with Blackmores’ values. This will act as a gateway for the
FY19 STI.
Non-Executive Director fees will increase by 18% from July 1
2018. The previous increase was April 2017. The FY19 increase
represents the final step in closing the significant gap to the
median of the comparable benchmark group that opened up
as a result of the increase in size and scale of the company in
recent years. The Board expects any future increases to fees to
be in line with CPI. The total Directors’ pool is now $1,000,000.
Shareholder approval to increase the pool to $1,300,000 will be
included in the 2018 AGM. The projected FY19 annualised Non-
Executive Director fees are $1,090,000. Details of Directors’ fees
are on page 70.
On behalf of the Board and Committee, I invite you to read the
2018 Remuneration Report and welcome your feedback on
our approach to and disclosure of Blackmores’ remuneration
arrangements.
Helen Nash
Chairman, People and Remuneration Committee
57
BLACKMORES ANNUAL REPORT 2018 2018
Remuneration
Report
1. Introduction
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 for the Blackmores Group. The report outlines Blackmores’
remuneration framework and the outcomes for the year ended 30 June 2018 (FY18) 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 2018:
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
Jackie McArthur
Non-Executive Director and member of the Nominations Committee (joined 24 April 2018)
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 and member of the Nominations Committee
Richard Henfrey
Chief Executive Officer, Managing Director and member of the Nominations Committee
(effective 29 September 2017)
Senior Executives
Aaron Canning
Chief Financial Officer
David Fenlon
Managing Director Australia and New Zealand
Peter Osborne
Managing Director Asia
58
BLACKMORES ANNUAL REPORT 2018 2018
Remuneration
Report
2.
SENIOR EXECUTIVE REMUNERATION OUTCOMES TABLE
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 FY18 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 67 of the report. The totals in the statutory remuneration table on page 67 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 FY18 portion of the fair value of rights granted in FY16, FY17 and FY18 under the LTI plan. Vesting of the FY17 and FY18
rights remains subject to performance and service conditions being met in the future.
The FY16 rights have vested and were valued at $147.49 in the statutory remuneration table. This differs to the following outcomes
table, which includes the FY16 LTI awards valued at $142.50, which was the share price on the 30 June 2018 vesting date.
SALARY AND
FEES
STI AND PROFIT
SHARE
NON-
MONETARY1
OTHER2 SUPERANNUATION
$
$
$
$
$
TOTAL
$
EQUITY THAT
TOTAL
VESTED REMUNERATION
RECEIVED
DURING 20183
$
$
Executive Directors
Marcus Blackmore
2018
2017
Richard Henfrey
2018
2017
110,000
304,573
866,418
420,586
Senior Executives
Aaron Canning
2018
2017
David Fenlon
2018
2017
Peter Osborne
2018
2017
Lesley Braun4
2017
Nathan Cheong4
2017
Cecile Cooper4
2017
521,657
474,542
558,750
432,349
511,769
363,629
279,876
316,771
284,765
29,128
17,356
16,677
20,521
265,513
26,482
9,401
8,060
135,769
28,433
-
5,815
122,613
26,482
46,345
111,650
106,534
29,014
17,119
-
-
-
20,326
18,701
2,098
3,260
2,693
1,784
2,124
1,675
2,085
1,587
-
-
-
-
15,416
17,708
173,319
363,418
232,572
712,830
405,891
1,076,248
23,990
26,124
1,168,015
483,036
272,390
767,899
1,440,405
1,250,935
23,032
27,616
682,582
538,081
278,451
492,918
961,033
1,030,999
20,049
19,625
749,842
591,693
-
821,128
749,842
1,412,821
-
-
618,303
392,643
220,883
625,619
839,186
1,018,262
19,618
316,613
586,519
903,132
19,622
375,420
553,324
928,744
18,222
11,652
1,882
20,384
336,905
452,776
789,681
Former Executive Director
Christine Holgate5
2018
2017
626,089
931,443
-
60,596
17,924
9,550
-
-
5,012
19,616
649,025
1,021,205
-
3,300,349
649,025
4,321,554
Total
2018
2017
3,194,683
3,808,534
659,557
244,030
90,347
185,949
9,000
10,188
87,499
170,313
4,041,086
4,419,014
5,045,382
1,004,296
8,313,362 12,732,376
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 FY18 relates to the FY16 LTI grant. The value disclosed is based on the share price on the vesting date 30 June 2018. Mr Blackmore received his LTI as a cash equivalent
in lieu of shares.
4. Lesley Braun, Nathan Cheong and Cecile Cooper were Senior Executives during FY17. Lesley Braun and Cecile Cooper remained members of the Executive Team in FY18.
5. Christine Holgate resigned 29 September 2017.
59
BLACKMORES ANNUAL REPORT 2018
2018
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 Director Fees, executive remuneration
and short-term incentive (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 FY18 were Helen Nash (Committee
Chairman), Stephen Chapman and Brent Wallace.
Advisors to the Committee
The People and Remuneration Committee has established
protocols for engaging and dealing with external advisors and
these are 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.
During the financial year, the Committee used KPMG to provide
advice on performance based remuneration. The Board was
satisfied that the advice received was free from any undue
influence by KMP to whom the advice may relate, as the
established protocols were observed and complied with and
all remuneration advice and recommendations were provided
to the Committee Chairman. The fee paid for the service was
$30,000.
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:
60
Blackmores’ Remuneration Framework
Rewards for the achievement of strategic goals, financial
targets and operational performance
Attracts and retains talented Senior Executives and Directors
Aligns Senior Executives to the enhancement of Blackmores’
earnings and shareholder wealth
BLACKMORES REMUNERATION STRUCTURE
Fixed Remuneration – Not at Risk Component
Fixed Remuneration – It is targeted to be reasonable and
fair, taking into account Senior Executives’ responsibilities
and experience benchmarked 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 the 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 staff. Under the plan, staff can elect
annually to participate and purchase shares. At the end of
the financial year, Blackmores provides 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 staff. The scheme allocates up to 10% of 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 addition to the LTI. There are currently
no SLTIs in place.
BLACKMORES ANNUAL REPORT 2018 2018
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 FY18 is as follows:
On Target Remuneration Mix
Fixed Remuneration1
STI / Profit Share
LTI2
CEO
55%
18%
27%
Senior
Executives
At maximum levels of STI and LTI the mix of remuneration elements expressed as a % of total remuneration3 is as follows:
Remuneration Mix at Maximum Reward
CEO
27%
32%
41%
Senior
Executives
70%
16%
14%
34%
39%
27%
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 conduct an annual review of remuneration at the end of each financial year for Senior Executives. The
process incorporates a comprehensive assessment of market benchmarking, and individual and Company performance. In addition to
the annual review of remuneration, Senior Executives received increases during the year due to organisation changes and redefined
roles and responsibilities.
61
BLACKMORES ANNUAL REPORT 2018
2018
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 68.
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
FY18?
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.
Executive Director
Chief Executive Officer
Senior Executives
Year-on-year Net Sales /NPAT
Growth
% of FAR
Threshold
0%
0%
0%
Maximum
Measures
Sliding scale
Sliding scale
Sliding scale
80%
100%
100%
Executive Director
Chief Executive Officer
Senior Executives
Financial measures:
Group NPAT achievement of
growth over prior year
Group Net Sales achievement
of growth over prior year
80%
20%
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)
80%
20%
80%
20%
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.
In FY18, the Directors added a strategic measure in the STI plan. For FY18, the measure that was considered most
important was Net Sales growth over prior year.
Using both NPAT and Net Sales 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 and Net Sales growth over prior year aligns remuneration outcomes with shareholders’
expectations.
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 Net Sales are calculated by Blackmores at the end of the financial year, verified by Blackmores’
auditors and published in the Group’s Financial Statements before any payment is made. This method was
chosen to ensure transparency and consistency with disclosed information.
The person to whom a Senior Executive reports assesses that individual’s performance by reviewing his or her
individual objectives, key tasks and performance indicators and the extent to which they have been achieved.
Individual objectives are set at the start of each financial year and are formally reviewed every six months. The
Board reviews performance assessments for KMP.
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Report
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 withhold the payment or allocation of
all or a part of an unpaid STI.
Staff Share Plan – Performance Conditions and Operation
Specific information relating to the actual annual performance awards is set out in the table on page 68.
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
Senior 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 FY18?
For FY18, the Company will match one share for every three shares purchased during the financial
year. For FY18 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 2018 and have purchased
shares during the year which remain in the plan.
Why were these
performance measures
chosen?
When are performance
conditions tested?
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 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 68.
What is the annual
incentive and who is
eligible to participate?
All eligible permanent staff in the Group, including Senior Executives, participate in a profit share
plan, whereby up to 10% of 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
Senior 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
FY18?
Under the Company’s Collective Agreement, 7.5% of Group NPAT is allocated and an additional
2.5% of Group NPAT is allocated conditional on the achievement of Group NPAT growth on the prior
financial year.
Why were these
performance measures
chosen?
NPAT is a well-recognised measure of financial performance and a key driver of shareholder returns.
Using NPAT as an incentive performance measure ensures that incentive payments are aligned with
Blackmores’ business strategy and objectives.
When are performance
conditions tested?
Profit share is paid twice a year based on Blackmores’ NPAT calculation.
All employees, including Senior Executives, may purchase up to $1,000 of Blackmores shares each
year under the Staff Share Acquisition Plan with money that would have otherwise been received
under the profit share plan.
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Report
Long-term Incentives (LTI) – Performance Conditions
Specific information relating to the actual annual performance awards is set out in the table on page 68.
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
Executive Director 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
150%
0%
10%
Sliding scale
20%
Sliding scale
80%
What was the performance
condition for FY18?
The performance condition is the three-year CAGR in EPS. The performance period for measuring EPS
growth is three years (FY18 to FY20).
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.
The rights will automatically exercise following vesting, audit clearance of the 2020 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.
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BLACKMORES ANNUAL REPORT 2018
2018
Remuneration
Report
5.
PERFORMANCE AND REMUNERATION OUTCOMES
Performance Incentives – Actual Performance 2018
Financial Year
The actual performance is illustrated in the charts below:
SHARE PRICE ($)
142.50
150
120
90
60
30
0
DIVIDEND PER SHARE (CENTS)
305
2014
2015
2016
2017
2018
RETURN ON EQUITY (%)
36.3
500
400
300
200
100
0
60
50
40
30
20
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Short-term Incentives (STI)
Similar to previous years, NPAT achievement was selected as the Group performance measure for the STI awards in respect of
FY18. Commencing in FY18, the Directors included an additional strategic measure for the STI awards to align with the key strategic
objectives in a year. In respect of FY18 the Directors selected Net Sales achievement as the strategic measure.
Blackmores FY18 NPAT of $70 million represented a 19% increase on prior year and FY18 Net Sales of $601 million represented a
9% increase on prior year and were “on target” set by the Board for FY18.
As a result, “on target” STIs were awarded to the Senior Executives. The amount awarded for the FY18 STI was $400,991 (2017: $nil).
This award is included under the ‘STI and Profit Share’ column in the remuneration disclosures table on page 67.
Blackmores’ NPAT and Net Sales over the past five years are shown in the following graphs:
NET SALES ($M)
NPAT ($M)
700
600
500
400
300
200
100
0
601
100
80
60
40
20
0
70
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
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BLACKMORES ANNUAL REPORT 2018 2018
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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 FY18.
The LTI plan includes a three-year performance period. The FY16
LTI awards were eligible to vest in FY18 at 78% of the maximum
potential. The FY17 and FY18 awards were not eligible to vest in
the current year.
The total remuneration for the financial year, the details of which are
shown on page 67, includes an accounting expense of $935,849
(2017: $960,764) 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
paid in cash.
Blackmores’ EPS over the past five years is shown in this graph.
600
500
400
300
200
100
0
EPS (CENTS)
406
2014
2015
2016
2017
2018
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. Richard Henfrey was
appointed CEO during FY18. The FY18 LTI award is the incentive plan for his prior role as a Senior Executive.
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
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Net profit after tax (NPAT)
Earnings per share (EPS)
STI
LTI
$m
120
100
80
60
40
20
0
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BLACKMORES ANNUAL REPORT 2018 2018
Remuneration
Report
6.
SENIOR EXECUTIVE REMUNERATION TABLES – STATUTORY
Statutory Remuneration Table
The following table discloses the remuneration outcomes of the Senior Executives of Blackmores for the financial year ended 30 June
2018. The table has been prepared in accordance with Section 300A of the Corporations Act 2001 and has been audited.
The amounts in the statutory tables differ to the remuneration table on page 59 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 FY16 which have vested, and FY17 and FY18, 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
2018
2017
Richard Henfrey
2018
2017
Senior Executives
Aaron Canning
2018
2017
David Fenlon
2018
2017
Peter Osborne
2018
2017
Lesley Braun7
2017
Nathan Cheong7
2017
Cecile Cooper7
2017
Former Executive Director
Christine Holgate8
2018
2017
Total
2018
2017
110,000
169,165
29,128
17,356
16,677
20,521
2,098
23,537
15,416
17,708
-
2,599
148,130
582,116
321,449
833,002
826,959
391,626
265,513
26,482
9,401
8,060
73,899
34,823
23,990
26,124
99,270
9,700
390,989 1,690,021
627,248
130,433
475,777
435,717
135,769
28,433
-
5,815
43,697
38,551
23,032
27,616
4,544
2,023
180,676
113,941
863,495
652,096
522,042
409,158
122,613
26,482
46,345
111,650
53,043
34,627
20,049
19,625
7,966
2,989
71,306
72,026
843,364
676,557
471,473
346,485
106,534
29,014
265,998
17,119
-
-
-
55,466
27,611
-
-
-
-
144,748
99,415
778,221
502,525
27,693
19,618
1,949
93,140
425,517
312,613
20,326
18,701
35,537
19,622
4,383
94,564
505,746
260,630
18,222
11,652
32,011
20,384
22,119
81,841
446,859
520,384
856,348
-
60,596
17,924
9,550
50,941
86,323
5,012
19,616
(89,729)
18,183
-
(306,712)
504,532
743,904
2,926,635
3,447,740
659,557
244,030
90,347
185,949
279,144
340,713
87,499
170,313
22,051
63,945
935,849 5,001,082
5,413,454
960,764
1. STI and Profit Share includes amounts paid by way of profit share on 13 December 2017 and 13 June 2018.
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. FY18 share-based payments includes the LTI plan and represent the FY18 portion of the fair value of rights granted in FY16, FY17 and FY18. The FY16 rights have vested. Vesting of the FY17
and FY18 rights remains subject to performance and service conditions as outlined on page 64. Marcus Blackmore’s LTI plan is paid as a cash equivalent in lieu of shares. Mr Blackmore’s
performance rights are proportionately lower than other KMP as his rights are valued on the share price at 30 June 2018 ($142.50). The rights of 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. FY18 share-based payments include the Staff Share Plan and represent the FY18 portion of the fair value of rights granted in FY17 and FY18. Vesting of the FY18 plan remains subject to service
conditions as outlined on page 64.
7. Lesley Braun, Nathan Cheong and Cecile Cooper were Senior Executives during FY17. Lesley Braun and Cecile Cooper remained members of the Executive Team in FY18.
8. Christine Holgate resigned 29 September 2017. Ms Holgate’s FY17 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 was not 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.
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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
FY18 remuneration mix detailed in the Statutory Remuneration table.
NON-PERFORMANCE
RELATED REMUNERATION1
%
STI AND
PROFIT SHARE
%
PERFORMANCE
TOTAL PERFORMANCE
RIGHTS2,3 RELATED REMUNERATION
%
%
343
Executive Directors
Marcus Blackmore
2018
2017
Richard Henfrey
2018
2017
Senior Executives
Aaron Canning
2018
2017
David Fenlon
2018
2017
Peter Osborne
2018
2017
Lesley Braun4
2017
Nathan Cheong4
2017
Cecile Cooper4
2017
Former Executive Director
Christine Holgate5
2017
Total
2018
2017
44.9%
28.0%
61.2%
75.0%
63.4%
78.2%
77.0%
85.4%
67.7%
74.4%
74.1%
77.3%
77.6%
9.1%
2.1%
15.7%
4.2%
15.7%
4.4%
14.5%
3.9%
13.7%
5.8%
4.0%
4.0%
4.1%
46.1%
69.9%
23.1%
20.8%
20.9%
17.5%
8.5%
10.6%
18.6%
19.8%
21.9%
18.7%
18.3%
55.1%
72.0%
38.8%
25.0%
36.6%
21.8%
23.0%
14.6%
32.3%
25.6%
25.9%
22.7%
22.4%
133.1%
8.1%
-41.2%
-33.1%
68.1%
77.7%
13.2%
4.5%
18.7%
17.7%
31.9%
22.3%
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 FY18 accounting expense of the FY18 portion of the rights granted in FY16, FY17 and FY18.
3. Performance Rights includes the Staff Share Plan and represents the FY18 accounting expense of the FY18 portion of the rights granted in FY18.
4. Lesley Braun, Nathan Cheong and Cecile Cooper were Senior Executives during FY17. Lesley Braun and Cecile Cooper remained members of the Executive Team in FY18.
5. Christine Holgate resigned 29 September 2017.
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Remuneration
Report
Short-term Incentives
The following tables show the details of the STI cash bonuses awarded as remuneration to Executive Directors for the financial year
ended 30 June 2018.
Executive Directors
Marcus Blackmore
Richard Henfrey
Senior Executives
Aaron Canning
David Fenlon
Peter Osborne
STI1,2
INCLUDED IN
REMUNERATION3
PERSONAL
MULTIPLIER
% OF STI AWARD
AS A MAXIMUM
STI AWARD
% OF MAXIMUM
STI AWARD
FORFEITED4
18,128
172,518
82,012
69,349
58,984
1.0
0.8
1.0
0.8
0.8
15
19
15
12
12
85
81
85
88
88
1. The awards are paid according to the table on page 62.
2. The maximum potential award was not achieved in respect of Group financial measure being Group NPAT achievement over prior year and Net Sales achievement of prior year. Senior
Executives have the ability to earn a personal multiplier on the achievement of individual objectives. The maximum multiplier is 1.25.
3. Amounts included in remuneration for the financial year represent the amount related to the financial year based on achievement of personal goals and satisfaction of performance criteria. The
Committee approved these amounts on 7 August 2018.
4. Amounts forfeited are due to the performance or service criteria not being met in relation to the current financial year.
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 FY18 and FY17. The fair value of awards is calculated in accordance with AASB 2 Share-based Payments.
(a) LTI Plan
NAME
GRANT
VESTED
EXERCISED6
END OF
HOLDING
LOCK
NUMBER OF
RIGHTS
DATE
FAIR VALUE
PER RIGHT
$
TOTAL FAIR
VALUE1
$
SHARE
PRICE
$
MAXIMUM
VALUE2
$
NUMBER
% OF
OF NUMBER
RIGHTS3 GRANTED
DATE
NUMBER
OF RIGHTS
VALUE4
$
VALUE5
DATE
Executive Director
Richard Henfrey
7/11/14
8,012
25.22
202,063
32.22
258,147
-
-
-
-
8,012
877,314
24/11/15
2,452
147.49
361,645
179.50
440,134
30/6/18
1,912
78% 282,001
17/11/16
3,045
99.19
302,034
113.90
346,825
17/11/17
12,852
144.39
1,855,700
162.13
2,083,695
Senior Executives
Aaron Canning
10/12/14
5,143
28.92
148,736
32.65
167,919
-
-
-
-
-
-
-
-
-
-
-
-
24/11/15
2,507
147.49
369,757
179.50
450,007
30/6/18
1,954
78% 288,195
17/11/16
3,383
99.19
335,560
113.90
385,323
17/11/17
3,824
144.39
552,147
162.13
619,985
David Fenlon
7/11/14
17/11/16
8,568
3,045
25.22
99.19
216,085
32.22
276,061
302,034
113.90
346,825
17/11/17
3,716
144.39
536,553
162.13
602,475
Peter Osborne
7/11/14
6,528
25.22
164,636
32.22
210,332
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24/11/15
1,986
147.49
292,915
179.50
356,487
30/6/18
1,550
78% 228,610
17/11/16
2,352
99.19
233,295
113.90
267,892
17/11/17
2,935
144.39
423,785
162.13
475,851
Former Executive Director
Christine Holgate
7/11/14
34,436
25.22
868,476
32.22
1,109,528
-
-
-
-
-
-
-
-
-
-
-
-
VALUE OF
RIGHTS NOT
VESTED
$
-
-
346,825
2,083,695
-
-
385,323
619,985
-
346,825
602,475
-
-
267,892
475,851
-
-
-
-
-
-
5,143
563,159
-
-
-
-
-
-
8,568
938,196
-
-
-
-
6,528
714,816
-
-
-
-
-
-
08/17
08/18
08/19
08/20
08/17
08/18
08/19
08/20
08/17
08/19
08/20
08/17
08/18
08/19
08/20
34,436 3,770,742
08/17
-
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. FY18 grant over 1
July 2017 to 30 June 2020).
2. Disclosure of maximum value is required under Section 300A 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.
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. Rights were exercised under the FY15 plan in August 2017.
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Remuneration
Report
(b) Staff Share Plan
GRANT
VESTED
EXERCISED
NAME
DATE
NUMBER OF
RIGHTS
FAIR VALUE
PER RIGHT
$
TOTAL FAIR
VALUE1
$
NUMBER OF % OF NUMBER
NUMBER
GRANTED OF RIGHTS
DATE
RIGHTS2
VALUE
$
Executive Director
Richard Henfrey
Senior Executives
Aaron Canning
Peter Osborne
31/7/16
31/7/16
31/7/17
31/7/17
31
31
25
25
152.58
4,730
31/7/17
31
100%
31
2,744
152.58
86.21
86.21
4,730
2,155
2,155
31/7/17
31/7/18
31/7/18
31
-
-
100%
-
-
31
-
-
2,744
-
-
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. FY18 grant over 1
July 2017 to 31 July 2018).
2. Rights were exercised under the FY15 plan in August 2017.
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
Richard Henfrey1
Six months’ notice (or payment in lieu) including redundancy.
May be terminated immediately for serious misconduct.
Executive Director
and Senior
Executives2
Three months’ notice (or payment in lieu).
May be terminated immediately for serious misconduct.
Redundancy Payments
Years of continuous service
Notice periods/Termination payments.
Up to one year
Two weeks’ pay.
Between one and 10 years
Two weeks’ pay plus an additional three weeks of pay for each completed
year of service.
10 years or more
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 the amount payable for 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.
2. 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 Director 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. As reported in the FY17 report, the Company has grown significantly in size, scope and complexity
over recent years. As a result, salary and fee levels were adjusted in a staged approach over several years.
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. There was no increase in FY18. Fees are below the
50th percentile of companies of comparable market capitalisation.
70
BLACKMORES ANNUAL REPORT 2018
2018
Remuneration
Report
Non-Executive Director fees for FY18 include:
FEES
Board
Audit and Risk
People and Remuneration
Nominations
CHAIRMAN1
$
240,049
16,425
16,425
-
2018
MEMBER
$
120,450
9,855
9,855
-
CHAIRMAN
$
239,615
16,425
16,425
-
20172,3
MEMBER
$
120,450
9,855
9,855
-
1. The FY18 Chairman increase relates to the increase in Superannuation Guarantee Levy cap.
2. FY17 Non-Executive Director fees are as at 1 April 2017, and the Chairman’s fees as at 1 March 2017.
3. Effective 1 March 2017, the Chairman’s fees were set at double Board member fees with no additional Committee fees payable.
The total annual Non-Executive Director remuneration for the Board of six (2017: five) Non-Executive Directors for FY18 was $806,307
(2017: $663,565).
The following table discloses the remuneration of the Non-Executive Directors for the financial year ended 30 June 2018.
SHORT-TERM
EMPLOYMENT
BENEFITS
POST
EMPLOYMENT
BENEFITS
FEES AND ALLOWANCES
$
NON-MONETARY1
$
SUPERANNUATION
$
TOTAL
$
Non-Executive Directors
David Ansell
2018
2017
John Armstrong
2018
2017
Stephen Chapman2
2018
2017
Jackie McArthur3
2018
2017
Helen Nash
2018
2017
Brent Wallace
2018
2017
Total
2018
2017
119,000
102,002
119,000
102,002
220,000
172,631
20,493
-
125,000
107,983
134,000
116,954
737,493
601,572
-
4,827
-
-
-
-
-
-
-
-
-
-
11,305
9,689
11,305
9,689
19,670
16,421
1,929
-
11,875
10,257
12,730
11,110
130,305
116,518
130,305
111,691
239,670
189,052
22,422
-
136,875
118,240
146,730
128,064
-
4,827
68,814
57,166
806,307
663,565
1. Non-monetary includes benefits and any applicable fringe benefits tax.
2. Stephen Chapman was in the role of Chairman from 1 March 2017.
3. Jackie McArthur joined as a Non-Executive Director on 24 April 2018.
4. There were no increases to the Non-Executive Director fees in FY18 other than an increase in superannuation guarantee levy increase cap.
71
BLACKMORES ANNUAL REPORT 2018
2018
Remuneration
Report
9.
NON-EXECUTIVE DIRECTOR AND SENIOR EXECUTIVE TRANSACTIONS
EQUITY HOLDINGS
During FY18 and FY17 there were no share options in existence. There have been no share options issued since the end of the financial
year.
343
SHARES
The table below outlines the fully paid ordinary shares of Blackmores Limited held by KMP:
FULLY PAID ORDINARY SHARES OF BLACKMORES LIMITED
Non-Executive Directors
David Ansell
John Armstrong
Stephen Chapman
Jackie McArthur
Helen Nash
Brent Wallace
Executive Directors
Marcus Blackmore
Richard Henfrey
Senior Executives
Aaron Canning
David Fenlon
Peter Osborne
Former Executive Director
Christine Holgate2
Total
BALANCE AT
1/7/17
NUMBER
RECEIVED ON
SETTLEMENT
OF RIGHTS
NUMBER
NET CHANGE
OTHER1
NUMBER
BALANCE AT
30/6/18
NUMBER
1,000
800
20,028
-
1,487
12,302
-
-
-
-
-
-
-
-
-
-
-
-
1,000
800
20,028
-
1,487
12,302
4,219,835
7,641
-
8,043
(218,000)
(3,748)
4,001,835
11,936
15,613
-
590
5,174
8,568
6,528
73
(8,369)
45
20,860
199
7,163
46,002
4,325,298
34,436
62,749
-
(229,999)
80,438
4,158,048
1. Includes shares issued under the Company’s Staff Share Plans.
2. Christine Holgate resigned on 29 September 2017 and her share balance reflects holdings on date of resignation.
RIGHTS TO SHARES
The table below outlines the rights to fully paid ordinary shares of Blackmores Limited held by KMP:
GRANTED AS
COMPEN-
BALANCE
AS AT 1/7/17
SATION EXERCISED
NET OTHER BALANCE AS
CHANGE AT 30/6/18
BALANCE
VESTED AT
VESTED
BUT NOT
30/6/18 EXERCISABLE
VESTED
AND
RIGHTS
VESTED
EXERCISABLE DURING YEAR
Executive Director
Richard Henfrey
Senior Executives
Aaron Canning
David Fenlon
Peter Osborne
Former Executive Director
Christine Holgate1
Total
1. Christine Holgate resigned 29 September 2017.
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
13,540
12,852
(8,043)
(540)
17,809
1,912
1,912
-
8,043
11,064
11,613
10,866
3,849
3,716
2,960
(5,174)
(8,568)
(6,528)
(553)
-
(436)
9,186
6,761
6,862
1,954
-
1,550
1,954
-
1,550
-
-
-
5,174
8,568
6,528
34,436
81,519
-
(34,436)
23,377 (62,749)
-
(1,529)
-
40,618
-
5,416
-
5,416
-
-
34,436
62,749
72
BLACKMORES ANNUAL REPORT 2018
2018
Remuneration
Report
LOAN DISCLOSURES
There were no loan balances exceeding $100,000 due from KMP during or at the end of the financial year (2017: $nil).
OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Transactions entered into during the year with KMP of Blackmores Limited and the Group are on the same terms and conditions as
employees or customers dealing on an arms-length basis which includes:
• 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 Section 298(2) of the Corporations Act 2001.
On behalf of the Directors
Stephen Chapman
Chairman
Dated in Sydney, 28 August 2018
“Make people happy. Be the employer of choice.” Marcus Blackmore
Employees receive substantial
discounts on all Blackmores Group
products and access to naturopathic
consultations.
ALIGNMENT TO OUR VALUES
Permanent staff are entitled to one
Community Day each year to take a
day out of the office to participate in
volunteer work with their favourite
charitable community organisation.
Employees are encouraged to
participate in a charitable scheme
whereby 0.5% of their taxable pay is
matched by Blackmores and paid to
their chosen registered charity.
Marcus C. Blackmore AM
Influenced by my father, I have
long held the belief that the
wellbeing of our employees
extends beyond their financial
security. The provision of a range
of staff benefits and a healthy
workplace underpin
our approach to employment
across all our markets.
FINANCIAL WELLBEING
At Blackmores, we have developed a
suite of ways to support employees
at various stages of their employment
or place in life. This includes ‘no cost’
superannuation, financial support
when sick, and share acquisition plans.
Insurance plans include a salary
continuance program and automatic
cover for death and total and
permanent disablement for
eligible employees.
The provision of staff share acquisition
plans in our Company encourages
long-term thinking and high
engagement.
All permanent employees are eligible
to participate in Blackmores’ Profit
Share Scheme whereby up to 10% of
the Group’s profits are shared by staff
twice a year.
FAMILY FRIENDLY
A flexible and family-friendly
workplace including paid parental
leave (12 weeks) and paid short
paternity leave (two weeks) for eligible
permanent staff across Australia and
New Zealand.
The opportunity to explore flexible
working, job-share arrangements and
career breaks of up to 12 months.
An Employee Assistance Program
(EAP) for employees and their
immediate family to obtain
independent, professional,
confidential counselling to assist with
personal problems and difficulties.
A HEALTHY ENVIRONMENT
Our worksites across the region are
carefully planned and fitted out to
encourage collaboration, productive
work practices with areas for social
interaction and heathy activities.
A subsidised café at the Blackmores
Campus in Warriewood features a
wide range of nutritious meals and
refreshments for staff.
The Wellness Centre is at the heart
of the Blackmores Campus and
incorporates treatment rooms for
massage and naturopathy, a yoga
and pilates area, a staffed gym and
20 metre lap pool.
73
BLACKMORES ANNUAL REPORT 2018 Auditor’s Independence Declaration
74
BLACKMORES ANNUAL REPORT 2018 Independent Auditor’s Report
75
BLACKMORES ANNUAL REPORT 2018 Independent Auditor’s Report
76
BLACKMORES ANNUAL REPORT 2018 Independent Auditor’s Report
77
BLACKMORES ANNUAL REPORT 2018 Independent Auditor’s Report
78
BLACKMORES ANNUAL REPORT 2018 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 1.2 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 6.2 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
Signed in Sydney on 28 August 2018
79
BLACKMORES ANNUAL REPORT 2018 Consolidated Statement of Profit or Loss
and Other Comprehensive Income
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
NOTES
2018
$’000
2017
$’000
2.1
2.3
2.4.3
2.5.1
601,136
718
601,854
232,374
137,135
59,229
8,940
9,306
11,647
7,014
13,546
1,141
2,035
1,872
5,686
10,317
500,242
101,612
416
(4,346)
(3,930)
97,682
(28,459)
69,223
552,160
545
552,705
237,495
120,209
51,306
8,411
9,027
8,923
5,172
12,726
1,300
1,171
1,267
128
9,339
466,474
86,231
384
(4,564)
(4,180)
82,051
(24,023)
58,028
70,005
(782)
69,223
59,013
(985)
58,028
2,625
603
3,228
(1,922)
(39)
(1,961)
72,451
56,067
73,274
(823)
72,451
57,119
(1,052)
56,067
4.5.1
4.5.1
406.4
405.7
342.6
340.1
Revenue
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
Research expenses
Licences and registrations
Impairment of financial assets
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/(loss) 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 gain/(loss) on hedging instruments entered into for cash flow hedges (net of tax)
Other comprehensive expense for the period (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 84 to 125.
80
BLACKMORES ANNUAL REPORT 2018
Consolidated Statement of
Financial Position
AS AT 30 JUNE 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Other assets
Derivative assets
Total current assets
NON-CURRENT ASSETS
Property, plant and equipment
Investment property
Goodwill and intangible assets
Deferred tax assets
Other financial assets
Amounts advanced to related parties
Total non-current assets
Total assets
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Current tax liability
Provisions
Other liabilities
Derivative liabilities
Total current liabilities
NON-CURRENT LIABILITIES
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
CAPITAL AND RESERVES
Issued capital
Reserves
Retained earnings
Equity attributable to shareholders of Blackmores Limited
Equity attributable to non-controlling interests
Total equity
Notes to the Consolidated Financial Statements are included on pages 84 to 125.
NOTES
2018
$’000
2017
$’000
2.4.1
2.4.3
2.4.4
3.1
3.2
3.3
2.5.2
2.4.5
2.6
4.3
2.5.2
2.6
4.4
36,468
150,788
103,965
10,811
475
302,507
76,261
2,160
66,212
12,590
1,520
3,600
162,343
464,850
157,868
4,246
8,065
4,085
203
174,467
86,000
9,341
1,229
483
97,053
271,520
193,330
34,251
132,146
84,794
7,463
8
258,662
74,207
2,160
61,754
9,960
1,320
4,111
153,512
412,174
124,365
1,811
11,549
4,346
485
142,556
78,968
10,224
1,372
235
90,799
233,355
178,819
37,753
5,926
149,196
192,875
455
193,330
37,753
4,085
135,703
177,541
1,278
178,819
81
BLACKMORES ANNUAL REPORT 2018
Consolidated Statement
of Cash Flows
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers1
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
Proceeds from disposal of property, plant and equipment
Payments for property, plant and equipment
Payments for intangible assets
Dividends received
Amounts received from/(advanced) to related parties
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank borrowings
Repayments of bank borrowings
Proceeds from other borrowings
Dividends paid
Net cash used in financing activities
NOTES
2018
$’000
2017
$’000
2.4.2
3.1
3.3
666,548
(576,417)
90,131
623,376
(528,066)
95,310
(5,634)
(26,467)
58,030
(5,897)
(43,779)
45,634
417
29
(10,773)
(5,055)
87
511
(14,784)
384
30
(14,498)
(69)
92
(151)
(14,212)
386,000
(378,968)
379
(49,957)
(42,546)
359,533
(335,806)
1,100
(58,568)
(33,741)
Net decrease 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
2.4.1
2.4.1
700
34,251
1,517
36,468
(2,319)
37,653
(1,083)
34,251
Notes to the Consolidated Financial Statements are included on pages 84 to 125.
1. Net of promotional and other rebates.
82
BLACKMORES ANNUAL REPORT 2018
Consolidated Statement of
Changes in Equity
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
EQUITY-SETTLED
EMPLOYEE CASH FLOW
BENEFITS
RESERVE
FOREIGN
CURRENCY
HEDGING TRANSLATION
RESERVE
RESERVE
ATTRIBUTABLE
TO OWNERS OF
NON-
RETAINED BLACKMORES CONTROLLING
INTEREST
EARNINGS
LTD
TOTAL
EQUITY
$’000
$’000
$’000
$’000
$’000
$’000
$’000
ISSUED
CAPITAL
$’000
Balance as at 1 July 2016
37,753
4,440
(376)
1,188 135,258
178,263
2,330 180,593
Profit/(loss) for the year
Other comprehensive income/(expense)
for the year (net of tax)
Total comprehensive income for the year
Dividends paid
Share-based payments expense
-
-
-
-
-
-
-
-
-
727
-
- 59,013
59,013
(985) 58,028
(39)
(39)
(1,855)
-
(1,855) 59,013
(1,894)
57,119
(67)
(1,961)
(1,052) 56,067
-
-
- (58,568)
(58,568)
- (58,568)
-
-
727
-
727
Balance as at 30 June 2017
37,753
5,167
(415)
(667) 135,703 177,541
1,278 178,819
Balance as at 1 July 2017
37,753
5,167
(415)
(667) 135,703 177,541
1,278 178,819
Profit/(loss) for the year
Other comprehensive income/(expense) for the
year (net of tax)
Total comprehensive income for the year
Dividends paid
Share-based payments expense
Issue of shares under employee long-term
incentive plans (net of on market purchases and tax)
Balance as at 30 June 2018
-
-
-
-
-
-
-
-
-
- 70,005
70,005
(782) 69,223
603
603
2,666
2,666
-
70,005
3,269
73,274
(41)
3,228
(823) 72,451
-
1,259
-
-
- (49,957)
-
-
(49,957)
1,259
- (49,957)
1,259
-
-
37,753
(2,687)
3,739
-
188
- (6,555)
1,999 149,196
(9,242)
192,875
- (9,242)
455 193,330
Notes to the Consolidated Financial Statements are included on pages 84 to 125.
83
BLACKMORES ANNUAL REPORT 2018
NOTES
TO THE FINANCIAL
STATEMENTS
––––
FOR THE FINANCIAL YEAR ENDED
30 JUNE 2018
84 B L A C K M O R E S A N N U A L R E P O R T 2 0 1 8
01
GENERAL
INFORMATION
PAGE 86
02
OUR
OPERATIONS
PAGE 90
03
OUR
INVESTMENTS
PAGE 102
04
OUR
FINANCING
PAGE 108
1.1 Reporting entity
1.2 Statement of compliance
1.3 Basis of preparation
1.4 Basis of consolidation
1.5 Application of new and revised standards
2.1 Revenue and other income
2.2 Segment information
2.3 Profit for the year
2.4 Working capital
2.5 Income taxes
2.6 Provisions
2.7 Remuneration structure
3.1 Property, plant and equipment
3.2 Investment property
3.3 Goodwill and intangible assets
3.4 Commitments for expenditure
4.1 Capital management
4.2 Financing facilities
4.3 Interest-bearing liabilities
4.4 Issued capital
4.5 Shareholder returns
05
OUR FINANCIAL
RISK MANAGEMENT
PAGE 112
5.1 Categories of financial instruments
5.2 Financial risk management objectives
5.3 Foreign currency risk management
5.4 Interest rate risk management
5.5 Credit risk management
5.6 Liquidity risk management
5.7 Fair value measurements
06
OUR GROUP
STRUCTURE
PAGE 118
07
OTHER
PAGE 124
6.1 Parent entity information
6.2 Subsidiaries
6.3 Joint operations
6.4 Business combinations
6.5 Contingent liabilities
7.1 Related party and key management personnel disclosures
7.2 Remuneration of auditor
7.3 Events after the reporting period
7.4 Approval of Financial Statements
85
BLACKMORES ANNUAL REPORT 2018 01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
GENERAL
INFORMATION
01
Blackmores Limited (the Company) is a public company listed on the Australian
Securities Exchange (trading under the symbol ‘BKL’), incorporated in Australia
and operating across Australia, New Zealand and Asia.
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, and herbal and mineral
nutritional supplements.
1.1 REPORTING ENTITY
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 2018 comprises Blackmores and its subsidiaries (the Group).
The Consolidated Annual Financial Report of the Group as at and for the year ended 30 June 2018 is available upon request from the
registered office of Blackmores at 20 Jubilee Avenue, Warriewood, NSW 2102 or online at blackmores.com.au.
1.2 STATEMENT OF COMPLIANCE
These Financial Statements are General Purpose Financial Statements which have been prepared in accordance with the Corporations
Act 2001, Accounting Standards and Interpretations and comply with other requirements of the law.
The Financial Statements comprise the Consolidated Financial Statements of the Group. For the purposes of preparing the
Consolidated Financial Statements, the Company is a for-profit entity.
Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the
Financial Statements and notes of the Company and the Group comply with International Financial Reporting Standards (‘IFRS’).
The Financial Statements were authorised for issue by the Directors on 28 August 2018.
1.3 BASIS OF PREPARATION
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 2017, unless otherwise stated.
The Company is a company of the kind referred to in ASIC Corporations Instrument 2016/191, and in accordance with that Instrument
amounts in the Financial Statements are rounded off to the nearest thousand dollars, unless otherwise indicated.
86
BLACKMORES ANNUAL REPORT 2018 01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
1.3 BASIS OF PREPARATION (CONT.)
Accounting policies
Goods and services tax
Revenues, expenses and assets are recognised excluding goods and services tax (GST), or equivalent. The net amount of GST
recoverable from, or payable to, the taxation authorities is included within receivables or payables. Operating cash flows are
included in the Consolidated Statement of Cash Flows inclusive of GST. GST in relation to investing or financing activities which
is recoverable from, or payable to, the taxation authorities is classified within operating cash flows.
Foreign currencies
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.
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.
Foreign operations
For the purpose of presenting Consolidated Financial Statements, the assets and liabilities of the Group’s foreign operations
are translated at exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the
average exchange rates for the period, unless exchange rates fluctuate significantly, in which case the exchange rates at the
dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and
accumulated in equity (attributed to non-controlling interests as appropriate).
1.2 STATEMENT OF COMPLIANCE
1.4 BASIS OF CONSOLIDATION
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.
87
1.1 REPORTING ENTITY
1.3 BASIS OF PREPARATION
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
GENERAL
INFORMATION
01
1.5 APPLICATION OF NEW AND REVISED STANDARDS
(i) AASB 15 Revenue from Contracts with Customers
AASB 15 Revenue from Contracts with Customers establishes a principle-based approach for goods, services and construction
contracts which requires identification of discrete performance obligations within a transaction and an associated transaction price
allocation to these obligations. Revenue is recognised only when the performance obligations are satisfied and the control of goods or
services is transferred, typically at the point of sale.
AASB 15 is effective for annual reporting periods beginning on or after 1 January 2018. The Group will apply AASB 15 in the financial
year beginning 1 July 2018. An initial assessment has been performed on existing revenue streams. Based upon this assessment, it
is not expected that AASB 15 will have a material impact to the Group’s Consolidated Statement of Profit or Loss. The Group is yet to
conclude which transition method will be applied.
(ii) AASB 9 Financial Instruments
AASB 9 Financial Instruments is a new standard which replaces AASB 139 Financial Instruments: Recognition and Measurement. AASB
9 is effective for annual reporting periods beginning on or after 1 January 2018. The Group will apply AASB 9 in the financial year
beginning 1 July 2018. An assessment has been performed and the impact of the credit loss model is not expected to be material to
the Group. The Group does not hold any investments in debt securities at the end of the reporting period and, as a result, does not
expect to be impacted by the introduction of the new measurement category.
(iii) AASB 16 Leases
AASB 16 Leases will replace existing accounting requirements for leases under AASB 117 Leases. Under current requirements,
leases are classified based on their nature as either finance leases, which are recognised on the Consolidated Statement of Financial
Position, or operating leases, which are not recognised on the Consolidated Statement of Financial Position. The Group’s accounting
for operating leases as a lessee will result in the recognition of a right-of-use (ROU) asset and an associated lease liability on the
Consolidated Statement of Financial Position. The lease liability represents the present value of future lease payments, with the
exception of short-term leases. An interest expense will be recognised on the lease liabilities and a depreciation charge will be
recognised for the ROU assets. There will also be additional disclosure requirements under the new standard. The Group’s accounting
for leases as a lessor remains unchanged under AASB 16. AASB 16 is effective for annual reporting periods beginning on or after 1
January 2019. The Group will apply AASB 16 in the financial year beginning 1 July 2019.
As at the end of the reporting period, the Group has non-cancellable undiscounted operating lease commitments of $16.6 million
as disclosed in note 3.4. These commitments predominantly relate to its retail premises, warehousing facilities, distribution centres,
and support offices, which will require recognition of ROU assets and associated lease liabilities. The Group is currently assessing the
impact of the new requirements on the Group’s Consolidated Financial Statements; however the impact is expected to materially
‘gross-up’ the Group’s Consolidated Statement of Financial Position, impacting key financial ratios. As the assessment develops further,
quantitative and qualitative disclosure will be provided.
1.5.1 Standards and interpretations in issue, not yet adopted
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
AASB 9 ‘Financial Instruments’
AASB 16 ‘Leases’
AASB 2016-5 Amendments to Australian Accounting Standards – Classification and
Measurement of Share-based Payment Transactions
1.5.2 Standards and interpretations adopted
EFFECTIVE FOR
ANNUAL PERIODS
BEGINNING
ON OR AFTER
EXPECTED TO BE
INITIALLY APPLIED
IN THE FINANCIAL
YEAR ENDING
1-Jan-18
1-Jan-18
1-Jan-19
30-Jun-19
30-Jun-19
30-Jun-20
1-Jan-18
30-Jun-19
AASB 2016-2 Amendments to Australian Accounting standards – Disclosure initiative:
Amendments to AASB 107
1-Jan-17
30-Jun-18
88
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
1.5 APPLICATION OF NEW AND REVISED STANDARDS
89
BLACKMORES ANNUAL REPORT 2018 01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
OPERATIONS
02
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 and the marketing, sales
and distribution of products to customers and consumers.
2.1 REVENUE AND OTHER INCOME
Sales (net of discounts)
Promotional and other rebates
Revenue
Other income
Revenue and other income
Accounting policies
2018
$’000
2017
$’000
746,681
(145,545)
601,136
692,790
(140,630)
552,160
718
545
601,854
552,705
Revenue
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for discounts, estimated
customer returns, and promotional and other rebates.
Sale of goods
Revenue from the sale of goods is recognised when the Group has transferred to the buyer the significant risks and rewards of
ownership of the goods, and when the amount of revenue can be measured reliably and when it is probable that the economic
benefits associated with the transaction will flow to the Group. Specifically, revenue from the sale of goods is recognised when
goods are delivered and legal title is passed.
Sale of goods on consignment
Revenue from the sale of goods on consignment is recognised upon the sale of the goods by the consignee. The risks and
rewards of ownership remains with Blackmores until such time as the goods are sold by the consignee.
Discounts, promotional and other rebates
The amount of revenue recognised for a transaction is net of any discounts, promotional and other rebates, which include growth
rebates, and/or contributions to customers towards promotional activities (known as case deals).
Key estimates and judgements
Promotional and other rebates
Recognition of rebate accruals at balance date requires management to exercise significant judgement with respect to the
amount of required accruals, which are based on customers’ sales volumes for the period as well as growth and/or contributions
to customers towards promotional activities, known as case deals.
For the year ended 30 June 2018, the Group recognised promotional and other rebates of $145,500 thousand (2017: $140,600
thousand) 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 2018 are included within other creditors and accruals in note 2.4.5.
90
BLACKMORES ANNUAL REPORT 2018
2.1 REVENUE AND OTHER INCOME
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
2.2 SEGMENT INFORMATION
Information reported to the Group’s Chief Operating Decision Maker for the purpose of resource allocation and assessment of
segment performance is largely focused on geographical regions. The reportable segments under AASB 8 are as follows:
ANZ
Comprising the sales
of the Blackmores and
Pure Animal Wellbeing
brands across Australia
and New Zealand,
also including the
benefit of sales made
to customers which are
ultimately intended for
Asian markets.
CHINA
Comprising the sales
of the Blackmores and
Pure Animal Wellbeing
brands in China (in
country) and China
Export Division.
BIOCEUTICALS GROUP
Comprising the
BioCeuticals
practitioner brands,
Isowhey, Wheyless,
Oriental Botanicals and
Fusion Health brands.
OTHER ASIA
Comprising the
Blackmores and Pure
Animal Wellbeing
brands in Thailand,
Malaysia, Singapore,
Hong Kong, Taiwan,
Korea, Indonesia,
Vietnam, Cambodia
and Kazakhstan.
OTHER
Comprises Bemore
Partnership.
CORPORATE COSTS
Costs which cannot
be reliably allocated
to a specific segment,
or which have been
incurred for long-term
growth opportunities.
2.2.1 Revenue by segment
ANZ
China
BioCeuticals Group
Other Asia
Other
2018
$’000
266,394
143,287
108,533
82,394
528
601,136
2017
$’000
269,786
117,074
95,911
68,411
978
552,160
The Group has one customer who contributed more than 10% of the Group’s revenue in the year (2017: one).
Included in revenue of the Group is revenue of $141,202 thousand (2017: $126,754 thousand) which arose from sales to the
Group’s largest customer. This customer serves both the ANZ and BioCeuticals Group segments.
2.2.2 EBIT by segment
ANZ
China
BioCeuticals Group
Other Asia
Other
Corporate costs
2.2.3 Revenue history by segment
S
N
O
I
L
L
I
M
$
300
250
200
150
100
50
0
2018
$’000
61,562
35,627
16,339
2,353
571
(14,840)
101,612
2017
$’000
62,912
27,904
14,316
895
(6,965)
(12,831)
86,231
2017
2018
ANZ
China
BioCeuticals
Group
Other Asia
91
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
OPERATIONS
02
2.3 PROFIT FOR THE YEAR
PROFIT FOR THE YEAR HAS BEEN ARRIVED AT AFTER CHARGING:
Employee benefits expense
Post-employment benefits:
Defined contribution plans
Share-based payments:
Equity-settled share-based payments
Cash-settled share-based payments
Other employee expenses
Provision for stock obsolescence
Net foreign exchange losses
2.4 WORKING CAPITAL
2.4.1 Cash and cash equivalents
Cash and bank balances
Accounting policy
2018
$’000
2017
$’000
7,184
6,632
1,259
397
727
614
128,295
112,130
7,662
17,917
943
1,816
2018
$’000
2017
$’000
36,468
34,251
Cash and cash equivalents comprise cash on hand, cash at bank, call deposits and overdrafts with an original maturity of three
months or less.
92
BLACKMORES ANNUAL REPORT 2018
2.3 PROFIT FOR THE YEAR
2.4 WORKING CAPITAL
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
2.4 WORKING CAPITAL (CONT.)
2.4.2 Reconciliation of profit after tax to net cash flows from operating activities
Profit after tax
Non-cash expenses
Depreciation and amortisation
Net loss on disposal of property, plant and equipment
Non-cash income
Revaluation of investments
Investing cash flow items
Interest revenue
Dividend income
Proceeds from disposal of property, plant and equipment
(Increase)/decrease in assets
Receivables
Inventories
Other current assets
Deferred tax assets
Amounts advanced to related parties
Increase/(decrease) in liabilities
Trade and other payables
Current tax liability
Current provisions
Other current liabilities
Non-current provisions
Other non-current liabilities
Deferred tax liabilities
Increase/(decrease) in equity
Foreign exchange translation of controlled entities
Equity-settled share-based payments expense
Payment for on market share purchase
Gain/(loss) recognised on cash flow hedges, net of tax
Other
Net cash inflows from operating activities
2018
$’000
2017
$’000
69,223
58,028
8,940
357
8,411
30
(130)
(724)
(417)
(87)
(29)
(384)
(92)
(30)
(18,642)
(19,171)
(3,348)
(2,630)
511
33,503
2,435
(3,484)
(261)
(143)
248
(883)
2,625
1,259
(12,293)
603
(156)
58,030
2,490
31,692
(1,622)
2,297
(151)
(36,113)
(22,393)
3,961
4,822
238
(3,420)
(31)
(1,922)
727
-
(39)
(141)
45,634
93
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
OPERATIONS
02
2.4 WORKING CAPITAL (CONT.)
2.4.3 Receivables
Trade receivables
Allowance for doubtful debts
Allowance for claims
Other debtors
Goods and services tax recoverable
Ageing of trade receivables past due, 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
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
Allowance for doubtful debts
Balance at the beginning of the financial year
Increase to provision
Amounts written off as uncollectable
Balance at the end of the financial year
2018
$’000
2017
$’000
153,208
(6,173)
(1,249)
2,405
2,597
150,788
22,245
1,484
440
3,265
27,434
18
12
18
7,370
7,418
1,059
5,686
(572)
6,173
131,583
(1,059)
(1,061)
1,033
1,650
132,146
26,698
8,035
254
1,704
36,691
14
198
14
925
1,151
1,218
128
(287)
1,059
As at 30 June 2018, the Group has two customers (2017: three customers) each comprising amounts greater than 5% (2017: 5%) of
the total trade receivables balance. These customers owe the Group more than $52,000 thousand (2017: $51,000 thousand) and
accounted for approximately 35% (2017: 39%) of all receivables owing.
Accounting policy
Trade and other receivables are recognised initially at fair value and are subsequently measured at amortised cost using the
effective interest method, less an allowance for impairment. They generally have terms of up to 60 days.
Refer note 5.5 for more information on how the Group manages credit risk.
Customers who wish to trade on credit terms are subject to extensive credit verification procedures. Receivables balances
are monitored closely and management takes appropriate steps if a receivable becomes overdue and/or impaired.
94
BLACKMORES ANNUAL REPORT 2018
2.4 WORKING CAPITAL (CONT.)
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
2.4 WORKING CAPITAL (CONT.)
2.4.4 Inventories
Ingredients
Raw materials
Finished goods
2018
$’000
2017
$’000
21,274
30,759
51,932
103,965
13,524
27,784
43,486
84,794
The provision at balance date to cover inventory write downs is $11,611 thousand (2017: $14,141 thousand) and is included in the
balance above.
Accounting policy
Inventories are stated at the lower of cost and net realisable value. Costs, including an appropriate proportion of fixed and
variable overhead expenses, are assigned to inventory on hand by the method most appropriate to each 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.
Key estimates and judgements
Management must exercise judgement regarding the provision for inventory write downs. Management assesses slow
moving or obsolete inventory on a regular basis and a provision is raised to write down inventory to its net realisable value.
Significant judgement is required in estimating the value of slow moving and potentially obsolete inventory as many items
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. This could have an impact on the level of inventory provision
required. In addition, there is a recoverability risk associated with new product launches regarding forecasting of demand,
including the possible change in demand between the time the inventory order is placed with the supplier and the ultimate
date of sale of the inventory to the customer.
2.4.5 Trade and other payables
Trade payables1
Other creditors and accruals
Goods and services tax (GST) payable
2018
$’000
2017
$’000
98,723
56,144
3,001
157,868
75,820
44,937
3,608
124,365
1. The average credit period on purchases ranges from 30 to 90 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.
Accounting policy
Refer to note 5, Our Financial Risk Management.
95
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
OPERATIONS
02
2.5 INCOME TAXES
2.5.1 Income tax recognised in profit or loss
Current tax
Current tax expense in respect of the current year
Current year adjustments in relation to prior years’ current tax
Deferred tax
Benefit relating to the origination and reversal of temporary differences
Current year adjustments in relation to prior years’ deferred tax
Total income tax expense
2018
$’000
2017
$’000
25,257
(171)
27,239
(968)
3,242
131
28,459
(3,092)
844
24,023
Reconciliation of prima facie income tax expense to income tax expense recognised in profit or loss
Profit before tax
Income tax expense calculated at 30%
97,682
29,305
82,051
24,615
Tax effect of reconciling items
Non-deductible expenses
Tax concessions
Withholding tax on intercompany dividend
Tax losses recognised
Tax losses not recognised
Rate differential on overseas operations
Other
Over-provision of income tax in previous year
Income tax expense recognised in profit or loss
473
(229)
-
(1,089)
4
(101)
136
28,499
(40)
28,459
288
(290)
155
(4)
1,086
(1,541)
(162)
24,147
(124)
24,023
The tax rate used for the 2018 and 2017 reconciliations is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law.
Accounting policy
Income tax payable represents the amount expected to be paid to taxation authorities on taxable income for the period,
using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of
previous years.
96
BLACKMORES ANNUAL REPORT 2018
2.5 INCOME TAXES
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
2.5 INCOME TAXES (CONT.)
2.5.2 Deferred tax balances
Deferred tax balances arise from the following:
Temporary differences 2018
Property, plant and equipment
Prepayments and other
Provisions
Accruals
Cash flow hedges1
Foreign currency monetary items
Capitalised expenses
Indefinite life intangible assets
Carried forward tax losses2
Other
OPENING
BALANCE
$’000
FILING
MOVEMENT DIFFERENCES
$’000
$’000
CLOSING
BALANCE
$’000
(32)
103
3,537
3,305
146
(542)
(20)
(9,339)
-
2,578
(264)
(132)
(129)
2,493
34
140
(12)
(17)
-
1,788
(783)
3,382
(358)
-
212
181
-
13
23
-
-
60
131
(522)
(26)
6,242
3,520
286
(541)
(14)
(9,339)
1,788
1,855
3,249
1. Cash flow hedges movement was recognised in other comprehensive income.
2. Unutilised tax losses were recognised as deferred tax assets during 2018. The recognition was dependent on future taxable profits of the relevant entities in excess of the profits arising from the
reversal of existing taxable temporary differences. The likelihood of sufficient future taxable profits is supported by historic increases in sales and operating profits of the relevant entities and
further projected increases prior to expiry of the losses.
Temporary differences 2017
Property, plant and equipment
Prepayments and other
Provisions
Accruals
Cash flow hedges1
Foreign currency monetary items
Capitalised expenses
Indefinite life intangible assets
Other
1. Cash flow hedges movement was recognised in other comprehensive income.
Presented in the Consolidated Statement of Financial Position as follows:
Deferred tax asset
Deferred tax liability
OPENING
BALANCE
$’000
FILING
MOVEMENT DIFFERENCES
$’000
$’000
CLOSING
BALANCE
$’000
(69)
(62)
3,820
6,638
163
(351)
(4)
(9,339)
1,205
2,002
16
165
(10)
(3,595)
(17)
(191)
(20)
-
543
(3,109)
21
-
(273)
262
-
-
4
-
830
844
(32)
103
3,537
3,305
146
(542)
(20)
(9,339)
2,578
(264)
2018
$’000
12,590
(9,341)
3,249
2017
$’000
9,960
(10,224)
(264)
97
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
OPERATIONS
02
2.5 INCOME TAXES (CONT.)
2.5.3 Unrecognised deferred tax assets
The following tax losses have not been brought to account as deferred tax assets:
Capital (no expiry date)
Revenue (expiry: 2018-2027)
2018
$’000
1,230
327
1,557
2017
$’000
1,230
1,035
2,265
Accounting policy
Deferred tax arises when there are temporary differences between the carrying amount of assets and liabilities and the
corresponding tax base of those items. Deferred taxes are not recognised for temporary differences relating to:
• the initial recognition of assets and liabilities that are not a business combination that affects neither taxable income nor
accounting profit;
• the initial recognition of goodwill; and
• investments in subsidiaries where the Group is able to control the timing of the reversal of the temporary difference and it is
probable that they will not reverse in the foreseeable future.
Deferred tax assets are recognised to the extent that it is probable that future taxable amounts will be available against which the
assets can be utilised. During the year ended 30 June 2018, tax losses of $658 thousand and $1,130 thousand were recognised
with respect to Blackmores Korea and Kalbe Blackmores Nutrition, respectively.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the periods when the asset is realised
or the liability is settled based on tax rates and tax laws that have been enacted or substantively enacted by reporting date.
Deferred tax assets and liabilities are offset 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.
98
BLACKMORES ANNUAL REPORT 2018
2.5 INCOME TAXES (CONT.)
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
2.6 PROVISIONS
Current
Employee benefits
Other
Directors’ retirement
Non-current
Employee benefits
2018
$’000
2017
$’000
7,917
-
148
8,065
8,566
2,835
148
11,549
1,229
1,372
Accounting policy
Provisions are recognised when the Group has:
• a present obligation (legal or constructive) as a result of a past event and
• it is probable that the Group will be required to settle the obligation, and
• when 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. When 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 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.
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.
2.7 REMUNERATION STRUCTURE
2.7.1 Key management personnel compensation
The aggregate compensation made to Key Management Personnel of the Group and Company is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
2018
$
2017
$
4,693,176
156,313
22,051
935,849
5,807,389
4,824,831
227,479
63,945
960,764
6,077,019
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.
99
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
OPERATIONS
02
2.7 REMUNERATION STRUCTURE (CONT.)
Accounting policy
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 the Black-Scholes 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. The inputs used to value the shares granted during the year included a
risk free rate of 2.6%, expected volatility of 43.4% and a dividend yield of 3.8%. 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.
2.7.2 Share-based payments
Executive and Employee Share Option Plan
The Executive Performance Share Plan was approved at the Blackmores Annual General Meeting in October 2017. 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 2017 to the year ending 30 June 2020.
If the performance and employment vesting conditions are met, the minimum number of rights that could be vested under the
entitlement is 6,724 (2017: 6,481) and the maximum number of rights that could be vested is 49,487 (2017: 51,851). 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 2018 year
Granted
Grants in the 2017 year
Granted
NUMBER
OF RIGHTS
GRANT
DATE
EXPIRY
DATE
EXERCISE FAIR VALUE AT
GRANT DATE
PRICE
49,487 17-Nov-17
30-Jun-20
N/A
144.39
51,851
17-Nov-16
30-Jun-19
N/A
99.19
The following reconciles the share-based arrangements outstanding at the beginning and end of the year:
Balance at the beginning of the year
Granted
Forfeited
Exercised
Expired
Balance at the end of the year
Exercisable at the end of the year
2018
WEIGHTED
AVERAGE
OF RIGHTS EXERCISE PRICE
NUMBER
2017
WEIGHTED
AVERAGE
OF RIGHTS EXERCISE PRICE
NUMBER
175,463
49,487
(10,722)
(114,756)
-
99,472
99,472
N/A
157,999
51,851
(34,387)
-
-
175,463
175,463
N/A
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 2018 financial year will be
determined in September 2020.
100
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
2.7 REMUNERATION STRUCTURE (CONT.)
The allocation is based on a percentage of the Senior Executives’ and Senior Managers’ base remuneration and the allocation varies
depending on the actual EPS growth delivered for the relevant year as follows:
2.7 REMUNERATION STRUCTURE (CONT.)
2018 rate of EPS growth
Percentage of participant’s base remuneration
5.0%
5.0% to 10.0%
10.0%
10.0% to 25.0%
25.00%
Greater than 25.0%
2017 rate of EPS growth
Percentage of participant’s base remuneration
5.0%
5.0% to 10.0%
10.0%
10.0% to 25.0%
25.00%
Greater than 25.0%
Share-based conditions
pro-rata between
pro-rata between
pro-rata between
pro-rata between
CHIEF
EXECUTIVE
OFFICER
OTHER SENIOR
COMPANY
EXECUTIVES MANAGEMENT
SENIOR
25.0
10.0
25.0 to 50.0 10.0 to 20.0
20.0
5.0
5.0 to 10.0
10.0
50.0 to 150.0 20.0 to 80.0 10.0 to 40.0
40.0
40.0
150.0
150.0
80.0
80.0
50.0
CHIEF
EXECUTIVE
OFFICER
OTHER SENIOR
COMPANY
EXECUTIVES MANAGEMENT
SENIOR
25.0
10.0
25.0 to 50.0 10.0 to 20.0
20.0
5.0
5.0 to 10.0
10.0
50.0 to 200.0 20.0 to 80.0 10.0 to 40.0
40.0
40.0
200.0
200.0
80.0
80.0
50.0
The number of shares to be issued to a Senior Executive is determined by dividing the percentage amount of base remuneration
calculated in accordance with the above by:
• the weighted average price of the shares for the five day trading period commencing seven days after Blackmores’ results in respect
of the prior financial year are announced to the ASX, less
• the amount of any final dividend per share declared as payable for the prior financial year.
Staff share acquisition plan
The Group has established 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. 812
shares were issued during the year ended 30 June 2018 (2017: 651 shares). In July 2018, 511 shares (2017: 726 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 2018.
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 conditions and capping applied under the plan, the Company will provide
one extra share. The vesting date for the year ended 30 June 2018 is 31 July 2018. The maximum cost of the shares provided by the
Company for the 2018 financial year has been set at $500,000.
Options plan
At 1 July 2017 and at 1 July 2016 there were no share options outstanding. None were issued during the years ended 30 June 2018
(2017: nil) and as at 30 June 2018 (2017: nil) there were no unexercised share options.
The compensation of each member of the Key Management Personnel of the Group and a discussion of the compensation policies of
the Company are detailed in the Remuneration Report on pages 56 to 73.
101
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
INVESTMENTS
03
The Blackmores Group carries investments in property, plant and equipment,
investment property, and goodwill and intangible assets.
3.1 PROPERTY, PLANT AND EQUIPMENT
Year-ended 30 June 2017
Cost
Accumulated depreciation
Net book value
Movement
Net book value at the beginning of the year
Additions
Disposals and write offs
Depreciation
Other (including foreign exchange movements)
Net book value at the end of the year
FREEHOLD LAND
AND BUILDINGS1
$’000
PLANT AND
LEASEHOLD
EQUIPMENT IMPROVEMENTS
$’000
$’000
TOTAL
$’000
49,847
(7,791)
42,056
69,726
(40,775)
28,951
4,597
(1,397)
3,200
124,170
(49,963)
74,207
42,971
16
-
(931)
-
42,056
23,523
11,516
(38)
(6,093)
43
28,951
1,132
2,966
(21)
(877)
-
3,200
67,626
14,498
(59)
(7,901)
43
74,207
Assets under construction included above:
-
6,341
94
6,435
Year-ended 30 June 2018
Cost
Accumulated depreciation
Net book value
Movement
Net book value at the beginning of the year
Additions
Disposals and write offs
Depreciation
Other (including foreign exchange movements)
Net book value at the end of the year
49,847
(8,730)
41,117
78,206
(45,740)
32,466
4,519
(1,841)
2,678
132,572
(56,311)
76,261
42,056
-
-
(939)
-
41,117
28,951
10,142
(119)
(6,472)
(36)
32,466
3,200
631
(268)
(959)
74
2,678
74,207
10,773
(387)
(8,370)
38
76,261
Assets under construction included above:
-
3,382
-
3,382
1. Freehold land and buildings includes $12,848 thousand of non depreciable land.
102
BLACKMORES ANNUAL REPORT 2018
3.1 PROPERTY, PLANT AND EQUIPMENT
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
3.1 PROPERTY, PLANT AND EQUIPMENT (CONT.)
Accounting policies
Carrying value
The Group’s property, plant and equipment are measured at cost less accumulated depreciation/amortisation and accumulated
impairment losses. The cost of property in the course of construction includes borrowing, holding and development costs until
the asset is complete.
Depreciation
Assets are depreciated on a straight-line basis over their estimated useful lives. Leasehold improvements are amortised over the
shorter of the remaining period of the individual leases or the estimated useful life of the improvement to the Group. Useful lives
are reassessed each period.
Freehold land and buildings in the course of construction are not depreciated. The expected useful lives are as follows:
Buildings
Plant and equipment
Leasehold improvements
25-40 years
3-20 years
3-13 years
Proceeds from sale of assets
The gross proceeds from asset sales are recognised at the date that an unconditional contract of sale is exchanged with the
purchaser. The net gain/(loss) is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
Impairment
Property, plant and equipment are tested for impairment in accordance with the policy for impairment of non-financial assets
disclosed in note 3.3.
3.2 INVESTMENT PROPERTY
Cost
2018
$’000
2017
$’000
2,160
2,160
Investment property relates to land at 15 Jubilee Avenue, Warriewood, NSW 2102, which was acquired during the financial year ended
30 June 2010.
Accounting policies
Investment property is defined as property held to earn rental income and/or for capital appreciation. It is measured initially
at its cost, including transaction costs such as legal fees and property transfer taxes. Subsequent to initial recognition, the
investment property continues to be measured at cost. Depreciation is not charged on Blackmores’ investment property as it
relates to non-depreciable land. The investment property is tested annually for impairment. No impairment losses have been
recognised on the investment property and the Directors are confident that the carrying amount of the investment property
will be recovered in full. Investment property is derecognised upon disposal with any resulting gain or loss being recognised
in profit or loss in the period in which the property is derecognised.
103
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
INVESTMENTS
03
3.3 GOODWILL AND INTANGIBLE ASSETS
Year-ended 30 June 2017
Cost
Accumulated amortisation
Net carrying amount
Net carrying amount at the beginning of the year
Adjustment to provisional accounting
Additions
Amortisation
Other (including foreign exchange revaluation)
Net carrying amount at the end of the year
Allocated to cash generating unit
BioCeuticals
Global Therapeutics
Pure Animal Wellbeing
Unallocated
Year-ended 30 June 2018
Cost
Accumulated amortisation
Net carrying amount
Net carrying amount at the beginning of the year
Additions
Amortisation
Other (including foreign exchange revaluation)
Net carrying amount at the end of the year
Allocated to cash generating unit
BioCeuticals
Global Therapeutics
Pure Animal Wellbeing
Unallocated
OTHER
INDEFINITE LIFE
INTANGIBLE
ASSETS1
$’000
BRANDS
$’000
OTHER
INTANGIBLE
ASSETS2
$’000
GOODWILL
$’000
29,461
-
29,461
29,371
90
-
-
-
29,461
28,613
-
28,613
28,613
-
-
-
-
28,613
20,849
7,597
1,015
-
29,461
15,313
13,300
-
-
28,613
29,461
-
29,461
29,461
-
-
-
29,461
28,613
-
28,613
28,613
-
-
-
28,613
20,849
7,597
1,015
-
29,461
15,313
13,300
-
-
28,613
TOTAL
65,285
(3,531)
61,754
62,107
90
69
(510)
(2)
61,754
4,598
(3,531)
1,067
1,510
-
69
(510)
(2)
1,067
680
-
-
387
1,067
37,106
22,057
2,204
387
61,754
6,674
(4,026)
2,648
1,067
2,178
(571)
(26)
2,648
70,238
(4,026)
66,212
61,754
5,055
(571)
(26)
66,212
680
-
-
1,968
2,648
37,106
22,057
2,204
4,845
66,212
2,613
-
2,613
2,613
-
-
-
-
2,613
264
1,160
1,189
-
2,613
5,490
-
5,490
2,613
2,877
-
-
5,490
264
1,160
1,189
2,877
5,490
1. Other indefinite life intangible assets relates to registrations, trademarks, and formulations.
2. Other intangible assets relates to patents, capitalised website costs and royalty streams.
104
BLACKMORES ANNUAL REPORT 2018
3.3 GOODWILL AND INTANGIBLE ASSETS
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
3.3 GOODWILL AND INTANGIBLE ASSETS (CONT.)
Accounting policies
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the share of the net identifiable assets
acquired. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Intangible assets
Intangible assets are measured at cost less accumulated amortisation and impairment losses (if any).
Where acquired in a business combination, cost represents the fair value at the date of acquisition. Intangible assets with finite
lives are amortised on a straight-line basis over their estimated useful lives.
An internally-generated intangible asset arising from development is only recognised once the feasibility, intention and ability
to complete the intangible asset can be demonstrated. Any expenditure on research activities is recognised as an expense
when incurred.
Useful lives are reassessed each period. The useful lives of intangible assets have been assessed as follows:
Patents
Royalty stream
Capitalised website development
20 years
5 years
3 years
Impairment
Intangible assets are tested for impairment in accordance with the policy for impairment of non-financial assets disclosed in this
note.
Impairment of non-financial assets
The carrying amounts of the Group’s property, plant and equipment (refer to note 3.1), goodwill and intangible assets (refer to
note 3.3) are reviewed for impairment as follows:
Property, plant and equipment and finite life intangibles – when there is an indication that the asset may be impaired (assessed
at least each reporting date) or when there is an indication that a previously recognised impairment may have changed.
Goodwill and indefinite life intangibles – at least annually and when there is an indication that the asset may be impaired.
Calculation of recoverable amount
In assessing impairment, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss
(if any).
The recoverable amount of an asset is the greater of its value in use (VIU) and its fair value less costs to dispose (FVLCTD). For an
asset that does not generate largely independent cash inflows, the recoverable amount is assessed at the cash generating unit
(CGU) level, which is the smallest group of assets generating cash inflows independent of other CGUs that benefit from the use
of the respective asset. Goodwill is allocated to those CGUs or groups of CGUs that are expected to benefit from the business
combination in which the goodwill arose, identified according to operating segments and grouped at the lowest levels for
which goodwill is monitored for internal management purposes.
An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount.
Impairment losses are recognised in the Consolidated Statement of Profit or Loss.
Impairment losses recognised in respect of a CGU will be allocated first to reduce the carrying amount of any goodwill
allocated to the CGU and then to reduce the carrying amount of other assets in the CGU on a pro-rata basis to their carrying
amounts.
Reversal of impairment
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has
been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
105
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
INVESTMENTS
03
3.3 GOODWILL AND INTANGIBLE ASSETS (CONT.)
Critical judgements and estimates
The ranges of rates used in determining recoverable amounts are set out below:
Long-term growth rate
Post-tax discount rate
2018
%
2.0
8.4
2017
%
2.0
8.0
The Group believes that any reasonably possible change in the key assumptions applied would not cause the carrying value of
assets to exceed their recoverable amount and result in a material impairment based on current economic conditions and CGU
performance.
The key assumptions used in the “value in use” calculation were applied consistently across all CGUs
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 uses a terminal
value calculation. Budgeted sales growth is expected to be in line with sales growth in the category. Budgeted margins are
expected to remain consistent.
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 the
recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of
the cash-generating unit.
106
BLACKMORES ANNUAL REPORT 2018
3.3 GOODWILL AND INTANGIBLE ASSETS (CONT.)
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
3.4 COMMITMENTS FOR EXPENDITURE
Catalent Transaction1
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Operating leases2
Not longer than 1 year
Longer than 1 year and not longer than 5 years
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
Longer than 5 years
Sponsorship
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Research and development contracts
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
2018
$’000
2017
$’000
-
43,200
-
43,200
6,286
10,212
95
16,593
3,152
3,152
2,558
-
-
2,558
131
-
-
131
1,414
4,035
600
6,049
-
-
-
-
4,642
8,374
-
13,016
8,190
8,190
3,416
2,760
-
6,176
748
137
-
885
320
4,020
1,200
5,540
1. Blackmores Limited is committed to the acquisition of Catalent Australia on or before 31 October 2019.
2. 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.
107
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
FINANCING
04
The Group manages its capital to ensure that each entity 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 capital management strategy remains unchanged since 2017.
4.1 CAPITAL MANAGEMENT
The capital structure of the Group consists of net debt and equity.
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’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 financial year was as follows:
Debt
Cash and cash equivalents
Net debt
Shareholders’ equity
Total capital
Gearing ratio
(Net debt as a % of total capital)
2018
$’000
2017
$’000
86,000
(36,468)
49,532
192,875
242,407
78,968
(34,251)
44,717
177,541
222,258
20.4%
20.1%
108
BLACKMORES ANNUAL REPORT 2018
4.1 CAPITAL MANAGEMENT
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
4.2 FINANCING FACILITIES
Unsecured bank overdraft facility, reviewed annually and payable at call
Unsecured revolving term debt facility under Common Terms Deed
Unrestricted access was available to the Group at the reporting date to the following unused lines of credit:
Bank loan facilities
Bank overdrafts and bank bill facility
2018
$’000
-
86,000
86,000
2017
$’000
-
78,968
78,968
134,000
10,000
144,000
152,933
10,000
162,933
Debt facilities
Total debt facilities as at 30 June
2018 are as follows:
Undrawn Facilities
$144 million
63%
37%
Drawn Facilities
$86 million
Maturity profile
The maturity profile of existing bank loan facilities by financial year is as follows:
S
N
O
I
L
L
I
M
$
140
120
100
80
60
40
20
0
2019
2020
2021
2022
Facility expires by Financial Year
Bank loan facilities may be drawn at any time, subject to the terms of the lending agreements. The bank overdraft facilities
may be drawn at any time. The above facilities are subject to certain financial covenants and undertakings. No covenants
have been breached during the financial year (2017: nil).
109
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR
FINANCING
04
4.3 INTEREST-BEARING LIABILITIES
Non-current
Unsecured at amortised cost
Bank loan
2018
$’000
2017
$’000
86,000
78,968
Funding activities
On 9 November 2017, Blackmores Limited entered into a $30 million revolving facility with Westpac Banking Corporation with a
maturity date of 1 January 2022. The funds are available for general corporate purposes.
4.3.1 Reconciliation of liabilities arising from financing activities
Interest-bearing liabilities
Balance at the start of the year
Net cash inflow
Foreign exchange translation
Balance at the end of the year
Accounting policies
2018
$’000
2017
$’000
78,968
7,032
-
86,000
55,446
23,727
(205)
78,968
All bank loans are initially recognised at the fair value of the consideration received, less directly attributable transaction costs.
After initial recognition, interest bearing loans are subsequently measured at amortised cost, using the effective interest method,
with interest expense recognised on an effective yield basis.
4.4 ISSUED CAPITAL
2018
ISSUED
CAPITAL
$’000
2017
NUMBER
2017
ISSUED
CAPITAL
$’000
2018
NUMBER
Fully paid ordinary shares
Balance at beginning of financial year
Issue of shares under Executive and employee share plans (note 2.7)
Balance at end of financial year
17,225,807
812
17,226,619
37,753
-
37,753
17,225,156
651
17,225,807
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 2.7 to the Consolidated Financial Statements.
110
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
4.5 SHAREHOLDER RETURNS
4.5.1 Earnings per share
Profit attributable to shareholders of Blackmores Limited
WANOS1 used in the calculation of basic EPS2
WANOS1 used in the calculation of diluted EPS2
Basic EPS
Diluted EPS
2018
$’000
2017
$’000
70,005
59,013
Number
17,226,563
17,254,843
Number
17,225,802
17,351,881
Cents
406.4
405.7
Cents
342.6
340.1
1. Weighted average number of ordinary shares.
2. The variance in the WANOS used in the calculation of the basic EPS and the diluted EPS is attributable to employee share plans.
4.5.2 Dividends
Recognised amounts
Fully paid ordinary shares
Final dividend for year ended 30 June 2017 (2017: 30 June 2016)
– fully franked at 30% corporate tax rate
Interim dividend for year ended 30 June 2018 (2017: 30 June 2017)
– fully franked at 30% corporate tax rate
Unrecognised amounts
Fully paid ordinary shares
2018
CENTS PER
SHARE
TOTAL
$’000
2017
CENTS PER
SHARE
TOTAL
$’000
140
24,117
210
36,174
150
290
25,840
49,957
130
340
22,394
58,568
Final dividend – fully franked at 30% corporate tax rate
155
26,702
The final dividend in respect of ordinary shares for the year ended 30 June 2018 has not been recognised in these Consolidated
Financial Statements because the final dividend was declared subsequent to 30 June 2018.
4.5.3 Franking account balance
Adjusted franking account balance
4.5.4 Shareholder returns history
S
T
N
E
C
600
500
400
300
200
100
0
2014
2015
2016
2017
2018
COMPANY
2018
$’000
2017
$’000
32,350
28,538
Earnings per share
Dividends per share
Dividend payout ratio
%
100
90
80
70
60
50
40
30
20
10
0
111
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR FINANCIAL
RISK MANAGEMENT
05
5.1 CATEGORIES OF FINANCIAL INSTRUMENTS
CLASSIFICATION
Amortised cost
Amortised cost
Available-for-sale
Fair value through profit or loss
Fair value through profit or loss
Amortised cost
Amortised cost
NOTE
2.4.1
2.4.3
7.7
5.7
5.7
4.3
2.4.5
2018
$’000
2017
$’000
36,468
150,788
1,355
475
34,251
132,146
1,165
8
203
86,000
157,868
485
78,968
124,365
Financial assets
Cash and cash equivalents
Loans and receivables
Unquoted equity investments
Derivative financial assets
Financial liabilities
Derivative financial liabilities
Interest-bearing borrowings
Trade payables
Accounting policies
Financial instruments
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.
5.1.1 Financial assets
Non-derivative financial assets are classified into the following specified categories: 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.
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. 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.
Impairment of financial assets
Non-derivative financial assets are assessed for indicators of impairment at each reporting period. Financial assets are considered
to be impaired when there is objective evidence that, as a result of one or more events that occurred after initial recognition
of the financial asset, the estimated future cash flows of the investment have been affected. Trade receivables are assessed for
impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment
for a portfolio of receivables could include the Group’s past experience of collecting payments or an increase in the number
of delayed payments in the portfolio past the average credit period. For trade receivables, the amount of the impairment loss
recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted
at the financial asset’s original effective interest rate. The carrying amount of trade receivables is reduced through the use of an
allowance account. When a trade receivable is considered uncollectable, it is written off against the allowance account
Derecognition of financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers
the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
112
BLACKMORES ANNUAL REPORT 2018
5.1 CATEGORIES OF FINANCIAL INSTRUMENTS
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
5.1 CATEGORIES OF FINANCIAL INSTRUMENTS (CONT.)
5.1.2 Financial liabilities and equity instruments
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.
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.
Financial liabilities
Non-derivative financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and
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.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have
expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and
payable is recognised in profit or loss.
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 notes 5.3 and 5.4 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.
Hedge accounting
The Group designates certain hedging instruments, which include derivatives and non-derivatives in respect of foreign currency
risks, as either fair value hedges, cash flow hedges or hedges of net investments in foreign operations. Hedges of foreign exchange
risk on firm commitments are accounted for as cash flow hedges. At the inception of the hedge relationship the entity documents
the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy
for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group
documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item
attributable to the hedged risk. Notes 5.3 and 5.4 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.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised
in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating
to the ineffective portion is recognised immediately in profit or loss, and is included in the ‘other gains and losses’ line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in
the periods when the hedged item is recognised in profit or loss, in the same line of the Consolidated Statement of Profit or Loss
and Other Comprehensive Income as the recognised hedged item. However, when the hedged forecast transaction results in the
recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive
income and accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-
financial asset or non-financial liability. Hedge accounting is discontinued when the Group revokes the hedging relationship, when
the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain
or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur,
the gain or loss accumulated in equity is recognised immediately in profit or loss.
5.2 FINANCIAL RISK MANAGEMENT OBJECTIVES
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.
113
BLACKMORES ANNUAL REPORT 2018 01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR FINANCIAL
RISK MANAGEMENT
05
5.3 FOREIGN CURRENCY RISK MANAGEMENT
Sources of risk
The Group undertakes transactions denominated in foreign currencies; consequently, exposures to
exchange rate fluctuations arise.
Risk management
Exchange rate exposures are managed within approved policy parameters utilising forward
exchange contracts.
The Group’s material exposure to foreign currencies includes New Zealand Dollar (NZD), United States Dollar (USD), Euro (EUR) and
Canadian Dollar (CAD). Other currencies include Swiss Franc (CHF), British Pound (GBP), Japanese Yen (JPY), Malaysian Ringgit (MYR),
Thai Baht (THB), and Taiwan Dollars (TWD); however the exposure to these currencies is immaterial.
USD
NZD
CAD
EUR
Other
LIABILITIES
2018
$’000
LIABILITIES
2017
$’000
17,980
4,549
836
350
198
12,380
2,132
934
248
46
ASSETS
2018
$’000
2,509
912
-
-
216
ASSETS
2017
$’000
790
-
-
-
2
The table above excludes the impact of derivatives.
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
CAD impact
EUR impact
Other
PROFIT / (LOSS)
10% INCREASE
10% DECREASE
2018
$’000
1,406
331
76
32
(2)
2017
$’000
1,117
194
85
23
4
2018
$’000
(1,719)
(404)
(93)
(39)
2
2017
$’000
(1,211)
(237)
(104)
(28)
(5)
The following forward foreign exchange contracts were still open at the reporting date, in local currency:
CURRENCY
USD
MYR
THB
NZD
CAD
NOTIONAL PRINCIPAL AMOUNT
FAIR VALUE
2018
$’000
2017
$’000
10,952
1,457
2,776
4,267
307
10,730
2,392
6,075
-
-
2018
$’000
547
(45)
(5)
(82)
2
2017
$’000
(320)
(32)
(72)
-
-
In 2018, there was hedge ineffectiveness of $7 thousand (2017: $182 thousand) which was included within other expenses in the
Consolidated Statement of Profit or Loss and Other Comprehensive Income.
114
BLACKMORES ANNUAL REPORT 2018
5.3 FOREIGN CURRENCY RISK MANAGEMENT
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
5.4 INTEREST RATE RISK MANAGEMENT
Sources of risk
The Group is exposed to interest rate risk as it borrows funds on a floating interest rate basis.
Risk management
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 swaps1
Net exposure
1. Represents the notional amount of the interest rate swaps.
2018
$’000
2017
$’000
(86,000)
75,000
(11,000)
(78,968)
75,000
(3,968)
The following table details the notional amounts and remaining terms of interest rate swap contracts outstanding as at reporting date:
Outstanding fixed or 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
2018
%
1.86
2.16
0.00
0.00
2.02
2017
%
2018
$’000
2017
$’000
2018
$’000
2017
$’000
0.00
1.86
2.16
0.00
2.02
35,000
40,000
-
-
75,000
-
35,000
40,000
-
75,000
19
(31)
-
-
12
-
(14)
(150)
-
(164)
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.
The sensitivity analysis below has 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 2018, 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 $575 thousand (2017: $677 thousand) or increase by $575 thousand (2017: $677 thousand)
respectively as a result of changes in the interest rates applicable to commercial bank bills.
For the year ended 30 June 2018, 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 $365 thousand or decrease by $369 thousand respectively (2017: increase by
$502 thousand or decrease by $683 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 no new interest rate swaps during the 2018 financial year (2017: $75,000 thousand), nil matured during the
year (2017: $5,000 thousand) and nil were terminated during the 2018 financial year (2017: $15,000 thousand).
115
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR FINANCIAL
RISK MANAGEMENT
05
5.5 CREDIT RISK MANAGEMENT
Sources of risk
The Group is exposed to counterparty credit risk from trade and other receivables.
Risk management
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. 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. The Group’s increased exposure to credit risk is commensurate with the continued strong
growth of the China segment. The China business has continued to evolve with a relatively high
concentration of customers operating in a dynamic and high growth environment. This has resulted in an
increased level of payment default risk in comparison to prior years.
There has been no fundamental change to the manner in which the Group manages and measures risk,
with the company taking a conservative approach to the collectability of all receivables.
5.6 LIQUIDITY RISK MANAGEMENT
Sources of risk
Exposure to liquidity risk derives from the Group’s operations and from the external interest-bearing
liabilities that it holds.
Risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has
established an appropriate liquidity risk management framework for 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 tables
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
2018
Trade and other payables
Borrowings
2017
Trade and other payables
Borrowings
0.00
3.05
0.00
2.05
-
-
-
-
-
-
157,868
-
157,868
124,365
-
124,365
-
-
-
-
-
-
-
86,000
86,000
-
78,968
78,968
-
-
-
-
-
-
157,868
86,000
243,868
124,365
78,968
203,333
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.
116
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
5.6 LIQUIDITY RISK MANAGEMENT (CONT.)
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 instruments 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.
2018
Net settled
Interest rate swaps
2017
Net settled
Interest rate swaps
1 MONTH
$’000
1-3 MONTHS
$’000
3 MONTHS
TO 1 YEAR
$’000
1-5 YEARS
$’000
5 YEARS
$’000
TOTAL
$’000
(55)
(49)
-
-
(97)
(25)
(152)
(155)
-
-
(177)
(355)
5.7 FAIR VALUE MEASUREMENTS
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 is
determined with reference to quoted market prices;
• the fair value of derivative instruments is 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) is 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).
Financial assets
Unquoted equities
Foreign exchange derivatives
Interest rate derivatives
Financial liabilities
Foreign exchange derivatives
Interest rate derivatives
2018
$’000
2017
$’000
1,355
449
26
1,830
(60)
(143)
(203)
1,165
-
8
1,173
(313)
(172)
(485)
Level 3
Level 1
Level 1
Level 1
Level 1
117
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR GROUP
STRUCTURE
06
6.1 PARENT ENTITY INFORMATION
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
6.1.1 Commitments for expenditure – parent entity
Catalent Transaction1
Longer than 1 year and not longer than 5 years
Operating leases2
Not longer than 1 year
Longer than 1 year and not longer than 5 years
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
Research and Development Contracts
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
2018
$’000
2017
$’000
189,113
159,631
348,744
175,691
156,829
332,520
125,618
107,448
233,066
114,732
94,669
209,401
37,753
74,699
3,225
115,677
37,753
81,180
4,186
123,119
52,191
603
52,794
40,938
(39)
40,899
43,200
43,200
-
-
4,373
8,301
95
12,769
3,478
7,457
-
10,935
3,152
3,152
8,190
8,190
2,550
-
2,550
2,739
2,751
5,490
-
-
93
93
996
3,660
600
5,256
320
4,020
1,200
5,540
1. Blackmores Limited is committed to the acquisition of Catalent Australia on or before 31 October 2019.
2. 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.
118
BLACKMORES ANNUAL REPORT 2018
6.1 PARENT ENTITY INFORMATION
6.2 SUBSIDIARIES
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
6.1 PARENT ENTITY INFORMATION (CONT.)
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 Pte. Ltd 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.
NAME OF ENTITY
Blackmores Nominees Pty Limited2
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 Nutrition1
FIT-BioCeuticals Limited
FIT BioCeuticals (NZ) Limited2
PharmaFoods Pty Limited2
FIT-BioCeuticals Limited
FIT-BioCeuticals (HK) Limited
Hall Drug Technologies Pty Limited2
Blackmores SPV Co Pty Limited
New Century Herbals Pty Limited2
Global Therapeutics Pty Limited2
Blackmores Japan Limited
COUNTRY OF
INCORPORATION
OWNERSHIP INTEREST
2017
2018
%
%
PRINCIPAL ACTIVITY
Australia
Hong Kong
China
100
100
100
100
China
100
Taiwan
100
Australia
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
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 PAW
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. PT Kalbe Blackmores Nutrition is consolidated into the Group at 100%, and the 50% of profit or loss attributable to non-controlling interests is recognised in equity.
2. 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.
119
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR GROUP
STRUCTURE
06
6.2 SUBSIDIARIES (CONT.)
6.2.1 Financial support
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:
Revenue
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
Impairment of loan to related party
Research expenses
Licences and registrations
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
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Net gain/(loss) on hedging instruments entered into for cash flow hedges (net of tax)
Other comprehensive expense for the period (net of tax)
Total comprehensive income for the period
2018
$’000
2017
$’000
518,861
631
519,492
225,817
106,718
34,084
7,939
7,321
8,471
5,856
8,641
1,042
-
1,735
1,698
12,039
421,361
98,131
209
(4,198)
(3,989)
94,142
(29,291)
64,851
486,143
3,497
489,640
230,725
94,527
32,395
7,683
7,170
7,062
4,138
7,253
1,239
7,200
1,146
1,129
12,727
414,394
75,246
166
(4,366)
(4,200)
71,046
(19,420)
51,626
603
603
(39)
(39)
65,454
51,587
120
BLACKMORES ANNUAL REPORT 2018
6.2 SUBSIDIARIES (CONT.)
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
6.2 SUBSIDIARIES (CONT.)
6.2.1 Financial support (cont.)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Other assets
Total current assets
NON-CURRENT ASSETS
Property, plant and equipment
Investment property
Goodwill and intangible assets
Deferred tax assets
Other financial assets
Total non-current assets
Total assets
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Current tax liability
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
Total equity
2018
$’000
2017
$’000
2,713
145,522
89,194
8,916
246,345
12,565
117,952
70,950
6,544
208,011
74,224
2,160
63,092
7,166
10,752
157,394
403,739
72,291
2,160
59,457
9,136
10,883
153,927
361,938
141,023
4,103
7,704
150
152,980
113,635
1,435
11,878
481
127,429
86,000
1,229
108
10,096
97,433
250,413
153,326
75,000
1,372
199
9,825
86,396
213,825
148,113
37,753
3,152
112,421
153,326
37,753
4,115
106,245
148,113
121
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OUR GROUP
STRUCTURE
06
6.3 JOINT OPERATIONS
Blackmores’ joint operation is a 50:50 partnership with Bega Cheese Limited, Bemore Partnership Pty Ltd, which was set up in 2016 to
facilitate the Group’s entry into the nutritional foods category.
In October 2017, the partners announced the suspension of the operations. Since this time, Bega Cheese Limited has continued to
supply Blackmores Group with infant formula and the Blackmores Group has continued to market and sell infant formula through its
subsidiaries, the sales of which are recorded in the relevant segments’ revenues.
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:
Revenue
Raw materials and consumables
Operating expenses
Profit/(loss) before interest
Interest income
Net profit/(loss) for the year
Cash and cash equivalents
Receivables
Total assets
Other payables
Provisions
Payables to joint operators
Loans from joint operators
Total liabilities
Net liabilities
Accumulated losses
Accounting policies
2018
$’000
531
-
41
572
1
573
2018
$’000
-
-
-
-
-
-
7,200
7,200
2017
$’000
981
(6,433)
(1,513)
(6,965)
6
(6,959)
2017
$’000
217
556
773
97
567
682
7,200
8,546
(7,200)
(7,773)
(7,200)
(7,773)
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 liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control
of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties
sharing control.
When a Group entity undertakes its activities under joint operations, the Group, as a joint operator, recognises its share of
assets, liabilities, revenue and expenses in its Financial Statements.
122
BLACKMORES ANNUAL REPORT 2018
6.3 JOINT OPERATIONS
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
6.4 BUSINESS COMBINATIONS
2018
No subsidiaries were acquired during the financial year ended 30 June 2018.
2017
No subsidiaries were acquired during the financial year ended 30 June 2017.
In 2019, Blackmores Limited will acquire 100% of Catalent Australia, a tablet and soft-gel capsule manufacturing facility in
Victoria for $43.2 million.
Accounting policies
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 acquiree 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.
6.5 CONTINGENT LIABILITIES
Blackmores has continued to review the exemption claims available to the company under various free trade agreements in place
between Australia and some of the countries with which Blackmores trades. This review included an assessment of potential risks
pertaining to the use of, and compliance to, export classification codes. At the signing date, no conclusions have been reached in
relation to discussions with any relevant country’s regulatory bodies pertaining to any potential risks relating to compliance to free trade
agreements. A reliable estimate of potential risks or probable outflows as an outcome of this ongoing review cannot be determined.
Accordingly, no liability has been recorded in the accounts for 30 June 2018.
123
BLACKMORES ANNUAL REPORT 2018 01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
OTHER
07
7.1 RELATED PARTY AND KEY MANAGEMENT PERSONNEL DISCLOSURES
7.1.1 Equity interests in subsidiaries
Details of the percentage of ordinary shares held in controlled entities are disclosed in note 6.2 to the Consolidated Financial
Statements.
7.1.2 Loan disclosures
There were no loan balances exceeding $100,000 due from Key Management Personnel during or at the end of the financial
year (2017: nil).
7.1.3 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.
7.1.4 Related party transactions
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
(2017: $nil).
Other related party transactions
During the financial year ended 30 June 2018, 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 $72,525 (2017: $48,400) were charged.
Balances with related parties
No balances are outstanding at the end of the financial year with related parties that are not members of the Group (2017: $nil).
124
BLACKMORES ANNUAL REPORT 2018
01
GENERAL
INFORMATION
02
OUR
OPERATIONS
03
OUR
INVESTMENTS
04
OUR
FINANCING
05
OUR FINANCIAL
RISK MANAGEMENT
06
OUR GROUP
STRUCTURE
07
OTHER
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – FINANCIAL YEAR ENDED 30 JUNE 2018
7.2 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 or reviewing the Financial Statements
The auditor of Blackmores Limited is Deloitte Touche Tohmatsu.
1. Other non-audit services is comprised of fees in relation to consulting and assurance services.
7.3 EVENTS AFTER THE REPORTING PERIOD
2018
$
2017
$
325,944
112,398
149,500
587,842
322,672
90,000
512,000
924,672
246,493
219,793
Final dividend
The Directors declared a fully franked final dividend of 155 cents per share on 28 August 2018 as described in note 4.5.2.
Acquisition
On 28 August 2018, Blackmores announced it will acquire the Impromy™ weight management product portfolio, including related
assets and liabilities, for $9 million in November 2018 from Probiotec Limited. Impromy™ is a pharmacy-only, consultation-based
weight management program that was co-developed by Probiotec and the CSIRO and is supported by strong research and clinical
studies by CSIRO and Griffith University. This acquisition supports our strategic priority to drive innovation and leverage expertise in
areas of chronic disease. The acquisition is expected to be earnings accretive in the first year.
7.4 APPROVAL OF FINANCIAL STATEMENTS
The Consolidated Financial Statements were approved by the Board of Directors and authorised for issue on 28 August 2018.
125
BLACKMORES ANNUAL REPORT 2018
ADDITIONAL INFORMATION
Number of Holders of Equity Securities as at 31 July 2018
Ordinary Share Capital
17,227,130 fully paid ordinary shares are held by 15,377 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
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
Marcus C Blackmore
NO. OF ORDINARY SHAREHOLDERS
13,892
1,297
97
77
14
15,377
178
NUMBER
PERCENTAGE
4,001,835
23.23%
Twenty largest holders of quoted equity securities as at 31 July 2018
FULLY PAID ORDINARY SHAREHOLDERS
NUMBER
PERCENTAGE
Mr M C Blackmore
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
National Nominees Limited
JP Morgan Nominees Australia Limited
Dietary Products Aust Pty Limited
Milton Corporation Limited
Blackmore Foundation Pty Limited
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
Mrs E M Whellan
BNP Paribas Nominees Pty Ltd (DRP)
Mrs P G Wright
Mr R Shepherd
Rathvale Pty Limited
Blackmore Superannuation Fund
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Marich Nominees Pty Ltd (R Marich Superannuation A/C)
AMP Life Limited
HSBC Custody Nominees (Aust) Ltd (NT-Comnwlth Super Corp A/C)
Ms C Holgate
Total
3,151,401
2,012,280
881,618
731,443
647,182
601,270
367,014
328,200
173,057
149,934
133,022
116,812
115,000
103,205
99,230
88,844
57,440
56,065
53,968
40,438
9,907,423
18.29
11.68
5.12
4.25
3.76
3.49
2.13
1.91
1.00
0.87
0.77
0.68
0.67
0.60
0.58
0.52
0.33
0.33
0.31
0.23
57.51
126
BLACKMORES ANNUAL REPORT 2018
ADDITIONAL INFORMATION
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 Blackmore
Richard Henfrey (Chief Executive Officer)
Directors who are not Executives of the Group:
David Ansell
John Armstrong
Stephen Chapman (Chairman of Directors)
Jackie McArthur (appointed 24 April 2018)
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.
The Blackmores Investor App is downloadable by texting the
word ‘Blackmores’ to 0400 813 813 (Aust and NZ).
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BLACKMORES ANNUAL REPORT 2018 NOTES
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BLACKMORES ANNUAL REPORT 2018 Michael Evans and Cirby Denneman
in the wholefoods garden at the
Blackmores Campus
Design: xandercreative.com.au
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