A N N U A L R E P O R T 2 0 1 9
Lead the
wellness
revolution
About the
Blackmores Group
The Blackmores Group is an ASX 200
publicly-listed company employing
over 1,400 people, with an extensive
presence across the Asia Pacifi c.
Founded by visionary naturopath Maurice Blackmore,
since 1932 we’ve been leading the wellness revolution by
championing innovative natural health solutions and education
services to help improve people’s lives everywhere, every day.
Our high quality, evidence-based range of brands includes
Blackmores – Australia’s No.1 natural health brand; BioCeuticals
– Australia’s leading practitioner range; Impromy – our pharmacy-
based weight management program developed in collaboration
with CSIRO; Fusion Health & Oriental Botanicals – Australia’s
leading providers of Chinese herbal medicine; IsoWhey weight
management range; and Pure Animal Wellbeing – natural health
products for pets.
The Blackmores Institute is the research and education arm of
Blackmores, established with a vision to improve and promote
the quality use of natural medicine.
At the Blackmores Group we never compromise on quality,
always placing the health and safety of our consumers at the
heart of our business. We use premium ingredients from around
the world, with products made to strict Australian manufacturing
standards.
Recognising that you can’t have healthy people without
a healthy planet, we’re strongly committed to embedding
sustainability across our business and giving back to the
communities in which we operate. The Blackmores Group
headquarters and production facility is located on Sydney’s
Northern Beaches; our Asia regional head offi ce is located in
Singapore.
–
COVER
From the lows of a devastating spinal cord injury to becoming the
Women’s World Adaptive Surfi ng Champion, Sam Bloom credits
Blackmores’ long-term support with helping her wellness thrive –
mind, body and spirit. Sam is an inspiration to us all in overcoming
adversity and proving that anything is possible with good health.
Annual
General
Meeting
The 57th Annual General
Meeting of the Company
will be held at 11am on
31 October 2019 at the
Blackmores Campus,
20 Jubilee Avenue,
Warriewood NSW 2102.
Contents
1
OVERVIEW
PAGE 2
4
YEAR IN REVIEW
PAGE 12
2
HIGHLIGHTS
PAGE 4
5
STRATEGIC
PRIORITIES
PAGE 16
7
THE BLACKMORES
DIFFERENCE
PAGE 36
8
FINANCIAL
REPORT
PAGE 48
3
CHAIRMAN &
INTERIM CEO
PAGE 6
6
OPERATING &
FINANCIAL REVIEW
PAGE 26
9
REMUNERATION
REPORT
PAGE 54
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 9 1
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 9 1
Our Purpose
Overview
Lead the
wellness
revolution
Our Vision
A world where people
and nature thrive
together, for the health
and wellness of all.
Our Mission
To champion innovative
natural health solutions to
bring wellness to billions
of people everywhere,
every day.
2 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 9
Overview
Our Values
Four Strategic Priorities
Blackmores’ values are at the heart
of our business. These values, known
as our PIRLS, are both behavioural
and aspirational. They underpin our
work practices and decisions and
are supported by legal policies and
procedures.
1. Passion for Natural Health
2.
Integrity
3. Respect
4. Leadership
5. Social Responsibility
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. People & Performance
INTEGRITY
SOCIAL
RESPONSIBILITY
PASSION FOR
NATURAL HEALTH
RESPECT
LEADERSHIP
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BLACKMORES ANNUAL REPORT 2019
Financial Year 2019
Highlights
4 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 9
Highlights
No.1
Blackmores is the
No.1 vitamin brand in
Australia,1 Thailand,
Singapore and Malaysia
11years
Blackmores has been
voted Australia’s Most
Trusted Brand in vitamins
and supplements2
$55munderlying net profi t
after tax3 (NPAT)
2.9msocial media fans
The Blackmores Group
offers seven innovative
brands with 1,500
natural health solutions
and services.
2.1meducation touchpoints
across the Group
$610m
revenue
71%waste diverted from
landfi ll
142new products
launched across
the Group
4.8b
tablets and capsules
produced
1. Nielsen© & IQVIA™, RMS/Sell Out service, Vitamins and Dietary Supplements,
Australia Grocery Pharmacy, Domestic Sales, MAT 11/05/2019.
2. Australia’s most trusted vitamin and supplement brand as voted by Australians
in the 2009-2019 Readers Digest Most Trusted Brand Survey.
3. $53 million reported NPAT including signifi cant items.
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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 9 5
Chairman’s Introduction
Over the last financial year, the
Blackmores Group sold more
product than ever before – with
record revenue of $610 million.
We achieved domestic sales growth in every market in
which we operate – with the exception of New Zealand
(down 1%).
Despite this, there’s no shying away from the fact that
net profit for the full year does not reflect the level of top
line sales that was achieved. This is due to our operating
expenses growing at a faster rate.
The simple reality is that we need to streamline the
business.
That’s why we are undertaking a program to realise
$60 million in savings over three years. This will enable us
to continue investing in key strategic initiatives, build our
capability and deliver overall margin improvement.
This process is now underway – with some one-off
restructuring costs already reflected in the results.
Underlying net profit was $55 million (excluding
significant items, or $53 million including) and a final
dividend of 70 cents per share has been declared,
making the total dividend 220 cents for 2019.
In addition to reducing costs, we’re focused on growing
our business – with new products and new markets to
diversify our business.
Another pillar to the diversification of our business is
our move into manufacturing, with the acquisition of the
Braeside facility in October. This will change the shape of
our business as we become vertically integrated.
During the year, we entered Pakistan and are achieving
significant growth in some of our newer markets – including
Vietnam up 157% and Indonesia up 90%.
Many of our more established markets also achieved
high levels of growth – including Korea up 28% and
Malaysia up 20%.
Our financial position remains solid, with net debt of $94
million and strong operating cash flows.
6
With a move to half and full-year reporting, we’re
reinforcing a longer-term growth mindset rather than short-
term thinking. We will, of course, continue to update our
shareholders at our annual ‘Meet the Management’ event in
May and our Annual General Meeting in October.
At the upcoming AGM, our shareholders will have the
opportunity to meet our new CEO – Alastair Symington.
We look forward to welcoming Alastair when he joins the
business on 16 September.
During the year, we welcomed Christine Holman to the
Board. Christine brings more than 20 years of extensive
commercial and Board experience across a variety of
areas including mergers and acquisitions, finance, sales,
technology, digital transformations and marketing.
The Board expects to shortly finalise the appointment of
a new Managing Director for Australia and New Zealand.
My first year as Chairman of this great company has
certainly had its challenges, but I am looking forward to
working with Alastair, the Executive Team and the Board to
implement our ambitious strategy for growth and achieve
strong returns for you – our shareholders.
Brent W Wallace
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Brent Wallace, Chairman of the Board
BLACKMORES ANNUAL REPORT 2019
Interim CEO Report
Despite a challenging year, I am fi lled with
optimism and confi dence in the ability of the
Blackmores Group to seize the enormous
growth opportunities in front of us.
For more than 87 years, Blackmores has been Australia’s
leading natural health company.
Our journey started in Queensland in 1932 when my
father, Maurice Blackmore, had a vision for better health for
all Australians.
His belief in the health-giving property of herbs and
minerals led him to develop a whole system of healthcare
based on naturopathic principles.
Today, our business looks very different but what we
stand for hasn’t changed.
This includes our unwavering commitment to
education and research. The Blackmores Institute is
without peer in the industry.
With a focus on research and education, the Institute’s
team of researchers, academics, healthcare professionals
and educators offers practical healthcare education and
resources.
This sets us apart from our competitors. It allows us to
better engage with governments and academic institutions,
and it reinforces our enviable reputation as the leader of
natural health in Australia.
Later this year we will embark on a new chapter for
the Blackmores Group with the acquisition of our own
manufacturing facility in Braeside, Victoria.
It will give us greater control over our production and
will signifi cantly enhance our research and development
capabilities.
It will also provide us with greater security over our
supply chain – an important step in a constantly evolving
industry where a number of manufacturers are being taken
over and consolidated.
As Brent has mentioned, there is no denying that the
last year has presented a number of challenges for the
Blackmores business.
Changes to e-commerce regulations in China have
impacted sales made in Australia to overseas consumers.
That’s why we are focused on growing our China
business through increased engagement with the cross
border e-commerce platforms and establishing stronger
connections with our customers in China.
This has always been a key part of our China strategy as
it delivers higher margins than sales to customers through
domestic Australian retailers.
While some companies fear regulatory change both in
Australia and abroad, our approach is to embrace it.
We believe Australia’s highly regulated environment
provides us with an advantage over foreign competitors.
8 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 9
Marcus Blackmore
In our overseas markets, Australia’s strict safety
protections are recognised and make our products
more appealing than products from countries with fewer
safeguards.
When I took on the interim CEO role earlier this year,
I said that one of the key measures of my success will be
how quickly I fi nd a permanent replacement.
I am absolutely delighted that Alastair Symington is
joining the Company next month.
Alastair’s strong business acumen, combined with his
passion for natural health and dynamic personality, makes
him the perfect choice to lead Blackmores into the future.
In the meantime, I will continue in the interim CEO role,
supported by the strong Executive Team.
Thank you for your support.
The best of health
Marcus C Blackmore AM
ALASTAIR SYMINGTON
OUR NEW CHIEF EXECUTIVE OFFICER
Alastair will join Blackmores on 16 September
2019, bringing more than 23 years of consumer
experience in both senior leadership and sales
and marketing roles for some of the world’s
leading consumer companies.
He has a proven track record of achieving
significant sales growth throughout the Asia
region, in particular China, with a strong focus on
new product development and innovation.
Alastair brings the right mix of knowledge,
experience and skill that is required to drive the
Blackmores Group’s growth strategy and seize on
the opportunities available to our business across
the Asia Pacific region.
Alastair Symington
“I am committed to delivering on the
Company’s strategy to drive substantial top-line
growth via a greater presence of Blackmores
throughout the region and ensuring that we
are more efficient as a business, delivering
superior results for shareholders.”
– ALASTAIR SYMINGTON
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BLACKMORES ANNUAL REPORT 2019
Directors’ Profiles
Brent W Wallace
BCOMM (MARKETING), FAICD
Chairman and Independent Non-Executive Director
Mr Wallace joined the Board in October 2005. He is a co-founder and Chairman of Galileo Kaleidoscope
(Galkal), which recently merged with Fiftyfive5 to create one of Asia Pacific’s biggest independent strategic
marketing, brand and consumer insight consulting firms 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 was Chairman of the Audit and Risk Committee from 2015 until being appointed Chairman
of the Board in October 2018. He also is currently a Governor of the World Wide Fund for Nature, the
global environmental group, since 1993, and was a Board Director for 10 years (2006 to 2016). He has also
held Board positions on ASX-listed and unlisted technology companies in online procurement, education
and information.
Christine Holman
MBA, GAICD
David Ansell
BA (COMMUNICATION), GAICD
John Armstrong
BBUS, MBA, MAICD
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. He has acted
as interim Chief Executive Officer
since 1 April 2019.
Independent Non-Executive
Director
Mr Ansell joined the Board
in October 2013 and is a
member of both the People and
Remuneration and Audit and
Risk committees. He has enjoyed
a highly successful career in
consumer-facing organisations
in Australia, Asia and the United
States. He played a pivotal role
in the start-up years of Foxtel,
was CEO of advertising agency
Saatchi & Saatchi, Managing
Director of Mars Incorporated
in Australia, and President of a
global Mars unit based in the
United States.
Mr Ansell has a strong
operating and supply chain skill
set and a deep understanding
of brand and 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.
Independent Non-Executive
Director
Mr Armstrong joined the Board
in May 2015 and became
Chairman of the Audit and Risk
Committee in October 2018.
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
and 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 is a Non-
Executive Director of Lovisa
Holdings Ltd (since September
2018). Mr Armstrong has
previous ASX listed experience
as a Non-Executive Director
with Melbourne IT and
iProperty Group.
Independent Non-Executive
Director
Ms Holman joined the Board in
March 2019 and is Chairman of
the People and Remuneration
Committee.
She brings more than 20
years of extensive commercial
and Board experience across
a variety of areas including
mergers and acquisitions,
finance, sales, technology, digital
transformations and marketing.
She currently serves on the
boards of two ASX companies,
WiseTech Global Ltd & CSR
Ltd, and on the Board of a
Federal Government Business
Enterprise, the Moorebank
Intermodal Company.
Ms Holman’s previous roles
include the CFO and Commercial
Director at Telstra Broadcast
Services. She also worked for
more than a decade in private
investment management,
assisting management and
Boards of investee companies on
strategy, corporate development
and mergers and acquisitions.
Ms Holman holds a Master’s
in Business Administration and
a Post Graduate Diploma in
Management from Macquarie
University and is a Graduate
of the Australian Institute of
Company Directors’ Company
Directors Course. Ms Holman has
previous ASX-listed experience
as a Non-Executive Director with
HT&E Ltd and Vocus Ltd.
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BLACKMORES ANNUAL REPORT 2019
Diversity
Blackmores is committed to
diversity and the Company
complies with the Equal
Opportunity for Women in the
Workplace Act 1999.
Across the Group, 70%
of employees were women
including 40% of the Executive
Team, 44% of Senior Executives,
64% of other Management roles.
We have set a target for
women to comprise 50% of the
Board of Directors and Group
Executives by 2025.
Year in Review
Blackmores Australia & New Zealand
Blackmores remains the number one vitamin and
dietary supplement (VDS) brand in Australia with 15.9%
domestic market share1 and a strong gap over our nearest
domestic competitor. Blackmores was again recognised
as Australia’s most trusted brand for the 11th year running,
and our products are now used in more than one-in-five
households.2
Sales in Australia and New Zealand of $267 million
were slightly ahead of the prior year (with a modest gain in
Australia and a slight decline in New Zealand).
We are the most recognised brand name in the market
and now have the highest brand penetration.2
In November 2018, we completed the acquisition
of Impromy – an evidence-based weight management
program developed in collaboration with the CSIRO. This
addition to the portfolio builds on our commitment to the
health and wellness category.
Other Asia
FY19 was a particularly strong year for Blackmores in Asia
(excluding China) with all markets achieving revenue
growth, contributing to an overall 30% increase in sales to
$107 million.
Across Asia, we saw strong growth in both well-
established and new markets due to increased distribution
and new product launches. This includes Vietnam up 157%
and Korea up 28%. Indonesia sales were up 90% and
pleasingly, the business turned profitable for the first time
during the second-half.
We are focused on continuing to diversify into new
markets with new products. The business is continuing its
evaluation of market entry into India.
China
China sales were impacted during the year by changes to
e-commerce laws, which took effect from January 2019.
We continue to see an ongoing evolution in the way
Chinese consumers access our products, with a shift away
from Australian retailers to more direct purchasing from
e-commerce platforms in China.
Sales in the China segment, comprising key export
accounts and in-country sales were $122 million (down 15%
compared to the prior year).
However, our in-country business continues to grow
strongly with sales up 22% during the year.
In November 2018, we showcased our brand and
products as a major exhibitor at the China International
Import Expo (CIIE) in Shanghai – the largest trade expo ever
held anywhere in the world and attended by an estimated
500,000 visitors.
The CIIE event was a clear demonstration of China’s
commitment to open trade to give Chinese consumers
access to the world’s best products.
November’s ‘11/11 Singles Day’ promotion in China saw
sales up 65%, with more than 200,000 products sold.
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Goh Sue San, Tan Li Li from
Blackmores Malaysia
BLACKMORES ANNUAL REPORT 2019
Year in Review
Left to right: Bonnie
Donovan from PAW by
Blackmores with Buddy
Paul Habekost,
Blackmores Institute
Danny Urbinder and Belinda
Reynolds from BioCeuticals
Bioceuticals Group
Sales for the BioCeuticals Group (which includes
BioCeuticals, IsoWhey and Global Therapeutics’ brands)
were up 4% compared to the prior year.
BioCeuticals continues to be Australia’s clear market
leader of practitioner-only products, with the business
growing 6% in the year.
BioCeuticals is a leader in innovation with successful
new product launches and expanded ranges including
ArmaForce and Ultra Muscleze, and a continued focus on
clinical services and educational training programmes.
During the year, BioCeuticals commenced a medicinal
cannabis trial, in conjunction with the Prince of Wales
Hospital and Endeavour College of Natural Therapies.
The randomised, double-blind clinical trial is examining
tolerability of cannabis oil in patients with glioblastoma
multiforme (GBM), a form of brain cancer. Endeavour’s
Dr Janet Schloss is the lead investigator and Neurosurgeon,
Dr Charlie Teo, is the prescribing physician.
The trial has shown very encouraging results and we
are confident the research will provide greater insight and
evidence for the safe use of medicinal cannabis for cancer
patients with a poor prognosis. We are investigating options
to bring a cannabis product to market in FY20.
Blackmores Institute
The Blackmores Institute grew its investment in research
across Australia and Asia to build the evidence-base for
natural medicine, supporting Blackmores Group innovation
and informing healthcare practice.
In China, a partnership with leading university, Tsinghua,
included the launch of a green paper on the ‘Health of
Chinese Career Women’.
In Australia, the Institute published an industry first
literature review, ‘Sustainable Nutrition’, looking at the
impacts of climate change on nutritional and natural
medicine to inform business strategy and encourage
industry discussion and action.
The Institute’s expert educators developed a professional
framework of learning for healthcare advisors across Asia
and the Pacific, which included 3 major symposia, several
pharmacist masterclasses and an extensive online education
portal.
These services received widespread industry
acknowledgement winning several awards for excellence
including Learn X Live, AITD and Nutraingredients Asia.
14
BLACKMORES ANNUAL REPORT 2019 1
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Outlook
Challenging trading conditions in our channels to China
are expected to continue during the first-half of FY20. The
impact of changes to China’s e-commerce laws and costs
associated with restructuring and the Braeside acquisition
are expected to result in profit for the first-half being below
the prior corresponding period.
The second-half of FY20 is expected to benefit from
operational efficiencies as a result of the execution of
business improvement initiatives.
Despite a challenging year, the Board remains
optimistic about the significant opportunities available to
the business and is focused on ensuring these are seized
and delivered.
This is a priority shared by the Executive Team and our
incoming Chief Executive Officer, Alastair Symington, who
will join the Company on 16 September.
Shareholders will have the opportunity to meet Alastair
at the Annual General Meeting on 31 October.
Strategic Priorities
We are continuing to invest significantly in our strategic
priorities to support the ongoing growth of our business.
Major progress has been made as we prepare to
take ownership of the Catalent manufacturing facility (in
Braeside, Victoria) on 25 October 2019. This includes
increasing the number and volume of Blackmores Group
products manufactured on-site.
The acquisition will provide greater control over our
supply chain and strengthen our research and development
capabilities.
In February 2019, we committed to a major streamlining
of our business – to simplify and improve our processes and
structure. The business is making good progress towards
targeting $60 million in savings over three years, allowing
us to continue investing in key strategic initiatives, build our
capability and deliver overall margin improvement.
Dividend
The Board has declared a final dividend of 70 cents per
share (cps), bringing total dividends for the year to 220 cps
fully franked. The record date is 28 August 2019 and the
dividend is payable on 12 September 2019.
The Dividend Reinvestment Plan (DRP) remains available
for the final dividend, allowing shareholders to reinvest
distributions in the Company’s securities and to support
the funding of growth initiatives. Shareholders who elect to
participate in the DRP will benefit from a 2.5% discount.
If you wish to participate in the DRP or change your
current nomination, you will need to do so by 5pm (AEST)
on 29 August 2019. Further information is available at
blackmores.com.au/dividend
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BLACKMORES ANNUAL REPORT 2019
Strategic
Priorities
In FY19 we continued to focus activity
around the four strategic pillars to
enable transformation and growth.
To elevate our commitment to invest in our people and processes,
to create a high performing achievement culture, in the 2019
fi nancial year the strategic pillar previously known as Operational
Fitness was updated to People + Performance. Our focus has
shifted to strategically investing in developing capability and
processes to set us up for success.
16 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 9
We are a consumer-
obsessed business,
winning through our
global growth platforms.
We are a leading
infl uencer and
innovator in the global
wellness ecosystem.
Outperform in
China and become
the leading Australian
vitamin and dietary
supplement company
in Asia.
Invest in our people
and processes to create
a high performing
achievement culture.
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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 9 17
Building deeper
connections and
leveraging the
opportunities that
digital technology
presents to the
category to enhance
the consumer
experience.
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 9
Key achievements
• Blackmores is the #1 vitamin and supplement
brand in Australia,1 Malaysia, Thailand and
Singapore.
• Blackmores voted most trusted vitamin and
supplement brand in Australia (11 years running),
Malaysia (7 years running) and Singapore
(5 years running). 2
• Compared to last year, 250,000 more people are
buying Blackmores in Australia.
•
‘Begin Better Every Day’ regional consumer
marketing campaign rolled out across Asia markets.
• FX Medicine Podcasts downloaded 1.6 million
times in 133 countries, leading conversations
about the latest in evidence-based and functional
medicine.
• 70,000 consumer and practitioner health
enquiries responded to by our Advisory and
Technical Services teams.
• 29.5 million social connections with motivated,
health conscious Australians to #BeAWellbeing.
• Artificial intelligence used to personalise send times
for digital communications, so individuals receive
emails when they are most likely to open them.
• Key sporting events sponsored in Australia and Asia
including the Blackmores Sydney Running Festival,
Fusion Health Byron Bay Lighthouse Run, Run for a
Reason WA, and Run & Move Thailand.
• Pure Animal Wellbeing digital footprint
strengthened with 280,000 new website visitors.
1. Nielsen© & IQVIA™, RMS/Sell Out service, Vitamins and Dietary
Supplements, Australia Grocery Pharmacy, Domestic Sales, MAT 11/05/2019.
2. Reader’s Digest Most Trusted Brand Annual Surveys.
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Superkid Casey, aged 3
Craig Wagner, Head of Grocery
“
Two global research studies
conducted with 13,000 people
telling us about their health and
wellness concerns to help us give
consumers what they want.
”
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BLACKMORES ANNUAL REPORT 2019
Growing the research
capacity of the
Blackmores Institute
and BioCeuticals and
leveraging Blackmores’
experience to increase
the knowledge base of
natural healthcare for
product innovation
and accredited
education.
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 9
Key achievements
• BioCeuticals’ ground-breaking clinical
trial investigating the effect of medicinal
cannabis on glioblastoma multiforme led
by Endeavour College of Natural Health
and supported by Dr Charlie Teo has seen
very encouraging results.
• $10 million donated by the Blackmore
Foundation (Marcus and Caroline
Blackmore’s personal philanthropic trust)
to Southern Cross University to establish
a National Centre for Naturopathic
Medicine.
• Blackmores Institute published the
scientific literature review ‘Sustainable
Nutrition’ to further understanding of the
impact of climate change on nutritional
and natural medicine.
• 142 new products launched across
the Group, including products tailored
for specific market demand including
Blackmores Collagen Pro, Blackmores
Vitamin C & Echinacea Effervescent
and our new BioCeuticals Herbal
Extracts range.
• Impromy weight management program
(developed in collaboration with the
CSIRO) acquired in November 2018.
• 52 clinical trials undertaken across the
Blackmores Group exploring natural
solutions for cardiovascular health,
immunity, gut health and more.
• Two million educational touchpoints with
health practitioners, pharmacy students
and consumers about evidence-based
complementary medicine.
• 1,040 healthcare practitioners attended
our research symposia in Australia,
Thailand and Vietnam.
“
5,000 Australians undertook
BioCeuticals DNA testing
to unlock their full health
potential with personalised
wellness, supported by 1,300
practitioners who completed
our DNA testing accreditation.
”
Madeline Ong, Technical Manager, Global Therapeutics
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Claire Briggs and Vladimir Stajic from Blackmores Institute
BLACKMORES ANNUAL REPORT 2019
Nurturing and
growing the Australian
business to leverage
Blackmores’ leadership
position in other
markets. Continuing to
grow across Asia and to
explore new frontiers.
Key achievements
• We partnered with leading academic institutions to
build knowledge about complementary medicine,
including:
– Two research fellowships with the University of
Technology, Sydney
– Health journalists’ program at Tsinghua
University in China
– Pharmacists’ education program with Taylor’s
University in Malaysia
• Social fan base increased to more than 2.5 million
followers in Asia, including 170 million social
connections with Chinese consumers inspired to
#BeginBetterEveryDay with wellness ambassador
Shawn Dou.
• Reinvigorated our engagement strategy with Chinese
consumer infl uencers in Australia, including specialised
education, infl uencer marketing and tailored events.
• Blackmores Institute published a Green Paper on the
Health of Chinese Career Women in collaboration
with Tsinghua University to help shape public health
initiatives, generating signifi cant consumer, media,
industry and government interest.
• E-commerce and mobile shopping sales up 66%,
comprising more than 40% of our Asia business.
• Blackmores in Thailand remained the #1 VDS brand
with a strong focus on new product launches and CSR
activities during the year.
• Blackmores remained the #1 VDS brand in Singapore,
achieving 38% market share and winning the fi sh oil
category.
• Malaysia achieved 20% growth, reaching 2 million
consumers including through CSR campaign Project
Kindness to help the socially disadvantaged
in urban areas.
•
In Taiwan (China) and Korea, we partnered with Costco
Wholesale Retail, selling our fl agship products.
• Vietnam’s strong growth of 157% was driven by our
partnership with Pharmacity and we are the leading
Australian infant formula brand in the country.
•
Indonesia is one of our fastest growing markets, up
90% on last year with Pregnancy & Breast-Feeding
Gold our best-seller.
• Blackmores launched in Pakistan, with six products
distributed through 400 pharmacies and more than
300 pharmacists trained in complementary medicine.
“
Blackmores enjoyed a strong presence
at the inaugural China International
Import Expo (CIIE) in Shanghai and
was the only VDS brand and one of
only four Australian companies to
be inaugurated as a CIIE Enterprise
Alliance member. Our presence
generated over 120 million
impressions on China media.
22 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 9
”
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Mandy Lee, Nutrition & Health Specialist, Blackmores Hong Kong
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Streamlining and
simplifying operations,
building leadership and
cross-cultural skills and
capabilities.
24 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 9
Key achievements
• Blackmores Group’s new Surry Hills Campus,
Sydney, built for growth, collaboration and
wellbeing to open in September 2019.
• Preparations for acquisition of Catalent Australia’s
soft gel and tablet manufacturing facility in
October 2019, with a comprehensive program
of work undertaken to maximise growth and
efficiencies.
• Integrated Business Planning (IBP) process
implemented to enhance inventory management,
ensuring our consumers are placed at the centre
of our business.
• New Leadership Standards developed to guide
our people through change and enable focus on
execution to unlock growth.
• Cloud-based technology harnessed to build
a global financial and supply chain operating
system to allow singular access to data across all
markets.
• Supplier risk management software implemented
to improve supply chain transparency and
enhance our shared commitment with suppliers
for an ethical supply chain.
• Environmental Management System (EMS)
implemented across all our Australian operations.
• 71% of waste diverted from low value landfill and
recovered for recycling and reuse.
“
4.8 billion tablets and capsules
produced for sale through more
than 53,000 points of distribution
globally.
”
From top: Amy Ong,
Blackmores Bungarribee
Distribution Centre
Paul Brazel and Matthew Vines,
Blackmores Bungarribee
Distribution Centre
Carlo Falcone,
Production Operator
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BLACKMORES ANNUAL REPORT 2019
Operating &
Financial
Review
Group and Divisional Results
Operating Review
Financial Review
Group Risks
26 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 9
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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 9 27
Group and Divisional Results
Operating Review
Financial Review
Group Risks
The Group reported record revenue of $610 million (up 1% compared to the prior
year) and net profit after tax (NPAT) of $53 million (a 24% decrease on the prior year).
The reported profit for the year includes one-off restructuring costs of $1.6m post-tax.
Excluding these significant items, underlying NPAT for the year was $55m.
Following a strong first-half, where revenue was growing 11% compared to the prior year, the second-half proved to be
more challenging and closed with revenue that was 7% below the same period last year.
Overall, the Group achieved increased sales in all markets – except China which was down 15% due to e-commerce law
changes taking effect from January 2019 and New Zealand was down slightly by 1% on the prior year. The greatest challenge
the business faced during the year was the ongoing evolution of the way Chinese consumers access our products, with a shift
away from Australian retailers to more direct purchasing from China e-commerce platforms.
01
Australia and
New Zealand
Blackmores’ sales in Australia
and New Zealand of $267
million were slightly ahead of
the prior year (with a modest
gain in Australia and a slight
decline in New Zealand).
Having been 19%
ahead of the prior year
at the end of the first-
half, the second-half was
significantly impacted by
the implementation of the
new China e-commerce
law with the shift away from
purchases being made
through Australian retailers.
In Australia, Blackmores
is the clear number one
VDS brand, with a 15.92%
market share1 and has been
voted the most trusted
brand for the 11th year in
a row2. Sales and market
share gains were supported
by successful new product
launches including
magnesium powders and
immune products, and the
acquisition of the Impromy
brand during the year.
The earnings before
interest and tax (EBIT) result
from this segment was down
by 20% year-on-year due to
a combination of increased
levels of investment in our
brands, unfavourable moves
in raw material pricing and
restructuring costs.
02
China
Sales in the China segment,
comprising key export
accounts and in-country
sales, were $122 million,
down 15% on the prior year.
China in-country sales to
e-commerce platforms were
up 22%.
When China-influenced
sales through Australian
retailers are taken into
account, we estimate overall
sales to Chinese consumers
to be down around 14%.
The weaker performance
in this segment was driven
by the export business,
which was impacted
by regulatory change.
In addition, during the
second-half of the financial
year we undertook some
deliberate measures to
reduce excess stock held by
a number of e-commerce
platforms, which further
contributed to the overall
sales decline.
The EBIT result of the
China segment declined
40% on the prior year.
This result was impacted
by the sales performance,
higher raw material pricing
and increased investment
during the year in marketing
our brand and building the
size and capability of our
local team.
03
Other
Asia
FY19 was a particularly
strong year for Blackmores’
sales across Other Asia
markets (excluding China),
with this segment’s revenue
growing by 30% in the year
to $107 million. This result
included some exceptional
performances from a
number of markets and all
delivered underlying sales
growth.
Standout results (in local
currency terms) included
our Indonesia business
which grew by 90%. Our
newest market, Vietnam,
was up 157%.
Some of our more
established markets
increased growth through
additional distribution and
new product launches in
the year including Korea
up 28% and Malaysia
delivering 20% growth.
EBIT in this segment
also improved significantly
year-on-year, more than
tripling compared to the
prior year due to the sales
performance delivering
strong operating leverage.
Our joint venture business
in Indonesia turned
profit-making in the year,
delivering a small EBIT
contribution for the first
time.
04
BioCeuticals
Group
The BioCeuticals Group
includes contributions from
the BioCeuticals and Global
Therapeutics businesses
and together they delivered
sales of $113 million, up 4%
compared to the prior year.
Within the segment
result, BioCeuticals lifted
sales by 6% whilst Global
Therapeutics’ sales declined
by 3% for the year.
BioCeuticals remains
the clear market leader in
practitioner-only products
and again delivered a
strong pipeline of new
products throughout the
year.
EBIT grew 10%, slightly
ahead of sales as we
continue to benefit from
improved operating
efficiencies across the
business.
1. Nielsen & IQVIA RMS/Sell Out
service, Vitamins and Dietary
Supplements, Australia Grocery
Pharmacy, Total Retail Sales, Fiscal
Year 2019
2. Australia’s most trusted vitamin
and supplement brand as voted by
Australians in the 2009-2019 Readers
Digest Most Trusted Brand Surveys.
28
BLACKMORES ANNUAL REPORT 2019 i
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&
01
Australia & New Zealand
Revenue
$267
Million
02
China
Revenue
$122
Million
03
Other Asia
Revenue
$107
Million
04
BioCeuticals Group
Revenue
$113
Million
Revenue $millions
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2018
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BLACKMORES ANNUAL REPORT 2019
Group and Divisional Results
Operating Review
Financial Review
Group Risks
Blackmores is a geographically diverse Group. We have an extensive presence
across the Asia Pacific, with operations supporting our seven brands.
Blackmores Group manages 41 warehouse locations and
16 office locations, employing 1,400 people across Asia
Pacific. We support more than 40 IT platforms and software
systems.
We are accountable to more than 20 regulatory
authorities who influence our product ranges and how we
communicate with our consumers.
Group headquarters is located at the Blackmores
Campus at Warriewood, a 25,000 square metre purpose-
built facility where most 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.
Now in its second year of operation, the Blackmores
Bungarribee Warehouse in Western Sydney has doubled
the Group’s warehouse footprint and allows room for
future growth. The facility is critical to our customer service
proposition, being purposefully designed for high levels of
automation and to maximise workflow and efficiencies.
The warehouse ships on average 2,500 orders per week.
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.
Our commitment to an ethical supply chain
The Australian legislation around modern day slavery
requires that we publicly state the actions we are taking to
create visibility in our supply chain by December 2020.
In the 2019 financial year, we implemented a software
solution to enable us to work with our suppliers to ensure
their business practices align with our commitment to
sustainable sourcing.
We’re on track to publish results more than a full year
earlier in October 2019.
Integrated Business Planning
A key element of being a truly consumer-centric business is
ensuring consumers have all our products available to them.
In March 2019, the Blackmores Group implemented an
Integrated Business Planning (IBP) process.
The implementation of Integrated Business Planning
delivers smooth inventory management through deep
connectivity across the Group, critical data and information
sharing, and timely and transparent decision-making.
IBP will be the process by which the Executive Team
will run and manage the business, enabling better stock
management and working collectively to ensure that we
have the Right Product, available at the Right Time in the
Right Place for our consumers.
Preparing to integrate Catalent Australia’s
manufacturing facility
Throughout the 2019 financial year, preparations have
continued for the upcoming acquisition of Catalent’s
Braeside manufacturing facility in October 2019.
This acquisition will see Blackmores vertically integrate
into manufacturing of products, which will deliver significant
benefits across multiple aspects of the business including
lowering overall risk of supply, faster and more agile
response times for customers, and overall greater control
of our supply chain.
Once complete, the acquisition will strengthen
Blackmores’ quality credentials and new product
development capabilities as well as enabling improved
management of Blackmores’ current and future portfolio
of registered products in Asia.
Business reporting improvements
In the 2019 financial year, the business commenced a
roll out of a new Oracle enterprise resource planning
(ERP) system across our Asian markets. This is a move to
consolidate technology platforms and bring in-country
finance and supply chain services onto a common, single
enterprise platform.
A unified ERP platform is delivering transparency and
helping get products into our markets more efficiently. It
enables our business to have access to timely and accurate
financial and supply chain information across our markets
in Asia.
At the close of the financial year, roll outs in both
Singapore and China were complete. The remainder of Asia
business units will be transitioned in FY20.
30
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Top: Wes Ipsen, Strategic
Sourcing Manager
Bottom: Joakim Karlsson,
Blackmores Bungarribee
Distribution Centre
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BLACKMORES ANNUAL REPORT 2019
Group and Divisional Results
Operating Review
Financial Review
Group Risks
Group Financial Position
Despite a challenging year for the Group, impacted by
China regulatory changes, the fi nancial health of Blackmores
remains sound at the end of the 2019 fi nancial year.
Total net assets increased by $14 million to $208 million
at June 2019, largely driven by increases in non-current
assets and partially offset by increased debt levels,
refl ecting higher working capital requirements to support
our growth priorities.
Current assets increased by $3 million in the year,
driven by inventory and partially offset by lower cash levels
for the Group.
Inventory at $125 million was $21 million higher than
the prior year due to the building of safety stock levels
in advance of taking ownership of the Catalent Braeside
manufacturing facility (in October 2019), risk mitigation
steps taken to ensure continuity of supply and a slowing of
demand in China sales in the second-half of the year.
Non-current assets increased by $23 million to $185
million at year end. This refl ects the continued investment
in our IT systems and the acquisition of the Impromy weight
management brand in November 2018.
Current liabilities have decreased by $24 million to
$151 million, largely due to the timing of inventory
purchasing cycles which were intentionally lower
compared to the prior year.
Non-current liabilities at $133 million increased by
$36 million from June 2018, driven by increased borrowings
to fund higher working capital requirements and the
Impromy acquisition.
Net debt at $94 million increased by $45 million, higher
than the increase in gross borrowings due to the lower cash
position. The cash balance of $25 million was $12 million
lower than prior year following the successful repatriation
of cash from China during the second-half of the 2019
fi nancial year.
The gearing ratio has increased from 20% to 31% in
the year but remains at modest levels and we continue to
maintain a conservative level of headroom against all debt
covenants.
During the 2019 year, we undertook a refi nancing of our
debt facilities and secured an increase to our facilities (now
at $305 million, up from $230 million), added new banking
partners as well as improved margins and terms which will
provide the business with greater fl exibility to fund future
growth.
With higher gross debt, the Group’s net interest
cover decreased to 16.1 times, down from 25.9 times.
Notwithstanding the decrease, these levels still maintain
conservative levels given the Group’s ongoing interest
commitments.
32 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 9
Aaron Canning
Cash generated from operations of $52 million
represented a $38 million decline on the prior year, largely
attributable to higher working capital in the second-half.
Net cash fl ows from operating activities were $20 million,
with interest and tax cash outfl ows broadly fl at compared to
the prior year. This also represented a $38 million decline on
the prior year. The cash conversion ratio of 57% for the year
was below our historical levels.
Reported NPAT was $53 million (2017: $70 million), a
24% decrease on the prior year. Adjusting for signifi cant
items relating to restructuring of $1.6 million post-tax, the
underlying result was $55 million, a 21% decrease.
Reported basic earnings per share (EPS) decreased 24%
to 309.2 cents (2018: 406.4 cents). The EPS adjusted for
signifi cant items was down 22% to 318.2 cents.
Dividends per share were 220 cents (2018: 305 cents),
refl ecting a 71% payout ratio.
Investment returns on the metrics of return on assets
and shareholders’ equity at 17% and 26% respectively were
impacted by profi t performance and higher working capital.
Income tax expense was lower, refl ecting the decline in
profi t, with a Group effective tax rate of 29.3%, marginally
higher than the prior year.
The Group will issue a separate voluntary 2019 Taxation
Disclosure report providing further details on the types and
amount of taxation paid by the Company.
Aaron Canning
Aaron Canning
Chief Financial Offi cer
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RETURN ON SHAREHOLDERS’ EQUITY
RETURN ON ASSETS1
15
16
17
18
19
CASH CONVERSION RATIO
%
60
50
40
30
20
10
0
%
120
100
80
60
40
20
0
15
16
17
18
19
%
GEARING
60
50
40
30
20
10
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%
90
85
80
75
70
65
60
15
16
17
18
19
DIVIDEND PAYOUT RATIO
15
16
17
18
19
REVENUE
$610 million
The Group delivered
revenue of $610
million across all
divisions and brands,
a 1% increase on the
prior year.
EBIT1
$83 million
Earnings before
interest and taxes of
$83 million was down
19% compared to the
prior year.
NPAT1
$55 million
Net profi t after tax
(NPAT) attributable
to shareholders of
Blackmores of $55
million, down 21%
on the prior year.
EPS1
318 cents
Earnings per share
(EPS) of 318 cents,
was down 22% on
the prior year.
DIVIDENDS
PER SHARE
220 cents
Dividends of 220
cents per share were
28% lower compared
to the prior year.
800
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600
500
400
300
200
100
160
140
120
100
80
60
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100
80
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500
400
300
200
100
500
400
300
200
100
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1. FY19 excludes restructuring costs of $2.2m or $1.6m post-tax.
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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 9 33
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.
The changing natural environment and changing
markets as a result of global warming may impact
access to some raw materials.
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 results 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.
• Dedicated internal capability focused on sourcing.
• Direct sourcing of key and scarce ingredients.
• Strengthened supplier relationships and contracts balancing
volume requirements.
• Strong sustainability charter and science-based approach to
understanding the resilience of key ingredients.
• Regular climate-related scenario assessments undertaken to
progress ongoing adaptive measures.
• 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
Financial and
treasury risk
Financial and credit risks include negative impact
on profit, balance sheet and cash flow. Treasury risks
include change in exchange rates, ingredient prices,
interest rates and funding cause 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.
breach.
• Diversification of currencies and working with supply partners to
more effectively use these currencies for Group procurement.
• Active ongoing reviews and assessments 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.
More on the Group’s approach to understand and address the potential impacts of climate change is outlined on page 41.
34
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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.
Top: Vladimir Stajic, Head of
Research & Technical Affairs,
Blackmores Institute
Bottom: Mia, aged 4, celebrating
World Environment Day
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BLACKMORES ANNUAL REPORT 2019
The
Blackmores
Difference
Sustainability
38
Community
42
Our People
44
Blackmores’ commitment to sustainability,
community and our people is what sets us
apart. We have always been the leader in
our industry – and we always will be.
36 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 9
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Indica, aged 9, with Diesel
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 9 37
The
Blackmores
Difference
Blackmores’ sustainability program is guided by the United
Nations Sustainable Development Goals and is structured
to address the most signifi cant impacts of the business and
our greatest opportunities to effect change. Full reporting
and targets will be published in October 2019
at blackmoressustainability.com.au
Our sustainability vision is for a world where people and
nature thrive together and we are focused on progressing
four goals:
1. Tread Lightly
2. Source Responsibly
3. Lead the Change
4. Improve Wellbeing
Sustainability
Improve
community
health and
wellness
Nurture a
values-driven
culture that
makes a positive
contribution
to the
community
Create a safe
and healthy
workplace
Reduce the
intensity of our
emissions
Deliver
sustainable
packaging
solutions
Transition to
renewable
energy
Optimise
material
recycling and
recovery
Tread Lightly
Commit to an
ethical supply
chain
Improve
Wellbeing
Healthy People,
Healthy Planet
Source
Responsibly
Adopt
sustainable
sourcing
standards
Partner with
others to make
a difference
Lead the Change
Embed high
business
standards
Take action
on climate
change
Invest in
research and
education
Value diversity,
inclusion and
equality
38 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 9
A team of Blackmores staff
volunteers celebrated World
Environment Day by planting more
than 1,000 native seedlings across
our local coastline to prevent dune
erosion and support the Greener
Communities program at Northern
Beaches Council.
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Blackmores’ founder, Maurice
Blackmore, advocated that
you can’t have healthy people
without a healthy planet.
BLACKMORES ANNUAL REPORT 2019
The
Blackmores
Difference
Key highlights
• Launched Partnering For People with our supply
partners, a program to improve supplier transparency
and address the risk of modern day slavery in our
supply chain, including deployment of supplier risk
management software with 73% of supply partners
assessed.
• Completed a 2°C Scenario Workshop to inform a Group
climate change risk assessment.
• Published ‘Sustainable Nutrition’, a Blackmores Institute
scientifi c literature review to understand the impact of
climate change on nutritional and natural medicine.
• Adopted a Clean Energy Strategy to increase the use
of renewable energy and reduce the intensity of our
emissions by 20% by 2030.
•
Implemented an Environmental Management System
modelled on ISO 14001 standard to facilitate continuous
improvement in environmental management
throughout our facilities and operations.
• 71% waste diverted from low value landfi ll and
recovered for recycling and reuse.
• Featured the Australasian Recycling Label on 16
products.
• Returned more than 18,000 Blackmores glass bottles in
Thailand through the B For Earth initiative for recycling.
Reused 5,000 bottles for hydroponic planting vessels
for edible vegetables used in school education and
donated the money raised through recycling to an
orphanage supporting the nutrition and welfare of
young girls.
• Commissioned a lifecycle assessment of Blackmores’
two most signifi cant packaging formats to better
understand the environmental footprint of our products.
• Staff contributions to the community increased:
> Employee contributions through Blackmores’
matched donations scheme were $196,000 in the
year, with 30% of staff now participating.
> More than 300 employees donated their time to
community initiatives, representing more than 2,000
hours of volunteering.
Sustainability
40 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 9
Understanding the impact of
climate change
Blackmores Group has a reliance on
nature for key ingredients in nutritional
medicine products and is therefore
proactive in addressing the changing
natural environment.
Blackmores has taken a strong position
to address mitigation, our actions to
slow the acceleration of global warming,
and adaptation, building resilience into
our business model and supply chain to
adapt to the changing physical world and
changing markets as a result of climate
change with a focus on the protection and
conservation of natural resources.
The Board has responsibility for
considering the potential impacts
climate change will present in the future,
oversight of the operational strategy
to adapt to global warming and the
transition to a low-carbon economy, and
to targets to reduce the intensity of the
Group’s emissions.
To inform evidence-based decision-
making on the risk of climate change,
the Group has:
• Published a scientific literature
review on the impact of climate
change on nutritional and natural
medicine, exploring factors
relating to biodiversity, marine
sources of ingredients, medicinal
plants and changes to human
nutritional needs. Read the full
report: blackmoresinstitute.org/
sustainablenutrition
• Held a Senior Management facilitated
2°C Scenario Workshop and
subsequent risk analysis.
• Adopted a Clean Energy Strategy
to deliver a targeted reduction in
emissions intensity of 20% by 2030.
Blackmores acknowledges the
recommendations of the Task Force on
Climate-related Financial Disclosures
and publishes further information
including Scope 1, Scope 2 and Scope
3 greenhouse gas emissions in our
annual Sustainability Report, which will be
released in October 2019.
Edgar Cabal,
Senior Procurement
Manager
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BLACKMORES ANNUAL REPORT 2019
The
Blackmores
Difference
As a values-driven Company, giving back is core to
our DNA. The Blackmores Group strives to make
a difference by building healthier communities
across Asia Pacific and supporting charitable
organisations and inspirational individuals who
are helping to build a brighter future.
Every year, the Blackmores Sydney Running Festival
inspires more than 34,000 people to achieve their health
and fitness goals, raising more than $1.5 million for
charitable causes in September 2018.
The Blackmores Mercie Whelan Women & Wellbeing
Awards in partnership with CCNB celebrate women making
an outstanding contribution to their local communities.
We also sponsored the 2019 Women’s World Adaptive
Surfing Champion, Sam Bloom.
In Asia, Malaysia’s Project Kindness continued serving
healthy meals in soup kitchens to the urban poor and
homeless. Thailand’s Keep Running Keep Wellbeing initiative
once again donated 7,543 pairs of shoes to underprivileged
children. And Indonesia’s support of Bumi Sehat Foundation
continued to help improve maternal and child health in rural
communities.
Other charitable initiatives supported by the Blackmores
Group to improve community health and wellness include
Quest for Life Foundation, The Growth Project, United in
Compassion, Auckland City Mission, Guide Dogs Australia,
Rotary Australia and more.
“Thailand’s Keep Running
Keep Wellbeing initiative
once again donated
7,543 pairs of shoes to
underprivileged children.”
42
Dorji Lingpa Foundation
Making a difference in
Bhutan
The tiny nation of Bhutan, nestled high in the Eastern
Himalayas, prioritises the health and wellness of its
people using a ‘Gross National Happiness Index’ to
measure sustainable development.
Inspired by our Asia Managing Director Peter
Osborne, who has done charitable work there for
many years, Blackmores staff around the globe rallied
together to raise more than $17,000 for the Dorji
Lingpa Foundation to benefit a remote monastic
community.
Our Executive Director Marcus Blackmore and
his wife Caroline matched this amount, increasing
the total donation to $34,000 which will be used to
help build housing for students and the local village
community.
BLACKMORES ANNUAL REPORT 2019 Community
B for Earth
Ensuring for our future
generations
The Blackmores ‘B for Earth’ program in Thailand, now
in its fifth year, was born of our longstanding belief that
you can’t have healthy people without a healthy planet.
Last year, consumers returned 18,000 empty Blackmores
bottles to do double good – reduce their environmental
footprint and support local schoolchildren.
We distributed 5,000 bottles to almost 100 primary
schools across Thailand, teaching students how to grow
hydroponic vegetable gardens and cook nutritious meals,
and awarding five schools with education and wellness
scholarships.
The remaining bottles were sold to a recycling factory
and the proceeds of 50,000 baht (AUD $2,200) donated
to the Rajvithi Home for socially disadvantaged girls aged
5-18 to fund ongoing health and nutrition programs.
Through initiatives like ‘B for Earth’, Blackmores is
proud to help build healthy foundations for today and
into the future.
Opposite: Marika Kontellis from CCNB
and Caroline Blackmore celebrating
the 2019 International Women’s Day
theme #betterforbalance
Keitkeaw Thisspumee, Blackmores
Thailand (right) and friend Sivayut
Jariyasatit
Below: Student Raditdanai
participating in our B for Earth
sustainability program in Thailand
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BLACKMORES ANNUAL REPORT 2019
The
Blackmores
Difference
Our People
The wellbeing and continued development of our employees
is a cornerstone of culture at the Blackmores Group.
Investing in our people
The Blackmores Group is committed to developing the right
skills and capability to support our growth ambitions.
During the year, we steadily lifted our people and culture
Workplace Health and Safety (WHS)
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.
processes, focusing on performance reviews, succession
planning and the development of a flexible working
philosophy.
To build capability amongst leaders at all levels of the
organisation, we’ve introduced new Leadership Standards.
As they are embedded in our people and culture processes,
the standards will enable us to identify and develop top
talent into the future.
Investing in modern workplaces
At the Blackmores Group, we recognise the need to have
modern agile workplaces, to enable collaboration across
our brands and markets and attract diverse talent to support
our business growth.
In the 2019 financial year, the Blackmores Group has
invested in a new state-of-the-art inner city office in Sydney.
Launching in September 2019, the Surry Hills Campus is
designed to accommodate business growth and expansion.
It will be fully enabled with the right collaboration
technology to support teams working together across
markets and regions and is designed to provide a best-in-
class employee experience.
“Make people happy.
Be the employer of choice.”
– MARCUS BLACKMORE
In the 2019 financial year, the Blackmores Workplace
Health and Safety (WHS) Committee was restructured as the
business prepares to add manufacturing to its value chain.
Our Group WHS Committee now comprises a Steering
Committee plus eight Safety Improvement Teams (SITs)
covering all our locations. The Steering Committee is
responsible for setting the direction for WHS throughout
the business. Our Safety Improvement Teams are location-
based, responsible for WHS improvement plans and
performance for their designated site.
This new structure allows us to effectively facilitate co-
operation between management and workers in investigating,
developing and carrying out measures to ensure workers’
health and safety across our sites. The aim of the committee is
to ensure that workers’ views are heard on WHS matters and to
continually improve safety across our business.
There were 13 reportable injuries, with no fatalities, which
is in-line with the prior period. 92% of those reports resulted
in short-term impairment only.
A holistic approach to the wellbeing of our people
The commitment to a holistic, all-in approach to the
wellbeing of our employees was demonstrated in the
number of WHS training and engagement touchpoints
for employees across the Group. In the 2019 financial
year, there were 7,890 individual WHS-related training
touchpoints. Training topics communicated through the
WHS Committee included a focus on mental health.
In the 2019 financial year, the WHS ran six mental health
education sessions across the business, facilitated by both the
Red Cross and Benestar, our Employee Assistance Program
partner. The sessions were designed to encourage a dialogue
around the importance of mental and emotional health.
Other training focus areas in the 2019 financial year
included safe travelling, evacuating our sites, ergonomics
and manual handling. To ensure the information was well
understood by employees, training was designed as a
combination of face-to-face sessions and videos featuring
real employees.
44
BLACKMORES ANNUAL REPORT 2019 Clockwise from left: Mark Lucas
and Jamie Haua, Blackmores
Bungarribee Distribution
Centre
Chang Shin Park, Sales
& Marketing Manager,
Blackmores Korea
Melissa Lokan, Blackmores
Institute and Simone Gibbs,
Blackmores procurement team
Pito Hatherley, Blackmores
Warriewood Staff Café
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Jacqui O’Donnell from PAW by Blackmores with Riley, aged 8, Neve, aged 5, and Bowie
BLACKMORES ANNUAL REPORT 2019
Executive Team
01
02
03
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05
06
07
08
09
10
46
01
Marcus C Blackmore AM
Interim Chief Executive Officer
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. He has acted as
interim Chief Executive Officer
since 1 April 2019.
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 various positions
at The Alfred Hospital, Monash
University and RMIT 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 National
E Health Transition Authority
(NeHTA) medicines terminology
group, Clinical Oncological
Society of Australia (CITIG)
and Advisory Committee for
the Australasian Integrative
Medicine Association.
Lesley is a current member of
the Pharmaceutical Society of
Australia, Australian Institute of
Company Directors, Australia-
China Business Council Health,
and Medical Research working
group, International Women’s
Forum, plus on the course
advisory committees for the
nutrition degrees 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.
Lesley is a member with the
Menzies Research Catalyse
program and was named
CEO Magazine's Health &
Pharmaceutical Executive of the
Year in 2018.
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 multinational
organisations in Asia, Australia
and New Zealand, the UK
and the US. Prior to joining
Blackmores in December 2014,
Aaron worked at Goodman
Fielder, Westfield and Diageo
Plc. At Goodman Fielder he
held several leadership roles
including Managing Director
Grocery Category, Managing
Director Asia Pacific, and Finance
Director Asia Pacific.
Aaron has a Bachelor of
Commerce in Marketing
and Management and a
postgraduate First Class Honours
degree in Management. He is a
qualified accountant, a Fellow
of the Association of Chartered
Certified Accountants, a member
of the Chartered Accountants
Association of Australia and New
Zealand and a graduate of the
Australian Institute of Company
Directors. Aaron was named
CEO Magazine’s 2016 CFO of
the Year (runner-up).
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.
BLACKMORES ANNUAL REPORT 2019
on Trade and Development
and the UN Commission for
Sustainable Development.
Peter has lived and worked in
Asia for 30 years and speaks
Mandarin-Chinese. Peter is
a graduate of the Australian
Institute of Company Directors,
a Fellow of the Hong Kong
Institute of Directors, and the
first foreigner to be appointed
as Honorary Vice Chairman
of the China Association for
Quality Inspection (CAQI) in
Beijing.
10
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 tele 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.
Brett was named CEO
Magazine's Chief Information
Officer of the Year in 2018.
record of generating value
through supply chain strategies
and continuous improvement.
Prior to joining Blackmores,
Jeremy had 20 years with Mars
Incorporated encompassing
multiple segments across, in
various Director roles as an
Executive Team member based
in both Australia and the USA.
He also spent 18 months as Asia
Pacific Procurement Director
of Nando’s for 18 months
immediately prior to joining
Blackmores.
Jeremy has delivered results
in both business and functional
leadership through developing
high performing teams and
nurturing a positive culture
through communication and
interpersonal skills.
07
Jane Franks
Chief People Officer
Jane joined Blackmores in
October 2018 in a newly
created Chief People Officer
role, responsible for developing
and executing the Blackmores
people strategy. As guardian of
the employee value proposition,
Jane’s role is accountable for a
new strategic focus on culture,
capability and talent across all
markets.
Jane is an accomplished
executive with 20 years of
experience in the financial
services and consumer products
sectors across HR, strategy
and business management
roles. Passionate about people
and making a difference, Jane
has a strong track record of
building partnerships to improve
business performance through
building strong organisational
cultures, improving leadership
capability and embedding
rigorous talent practices.
Prior to Blackmores, Jane
was HR Director for Diageo
Australia and before that held
senior roles across the Westpac
Group, including 11 years
within BT Financial Group. Her
qualifications include a Bachelor
of Business and membership
of the Australian Institute
of Company Directors and
Australian Human Resources
Institute.
Cecile is a Chartered Secretary
and a Certified Practicing
Accountant and has a Bachelor
of Business (Accounting) and a
Graduate Diploma of Applied
Corporate Governance with the
Governance Institute of Australia.
She is a graduate of the
Australian Institute of Company
Directors. Cecile serves on
the Governance Institute of
Australia’s Legislation Review
Committee and is the Chairman
of CCNB Limited. In 2015 she
was awarded the Rotary Paul
Harris Fellow.
05
Tami Cunningham
Chief Marketing & Innovation
Officer (interim)
Tami has over 20 years of diverse
marketing experience across
multiple sectors and regions.
She has a strong track record
identifying and exploiting
business growth opportunities,
with a unique mix of strategy,
brand and innovation capability
based on a deep understanding
of customers, commercial drivers
and best-in-class process and
people leadership.
Prior to joining Blackmores
in 2017, Tami was Marketing
Director for Mars, where she was
a member of the Leadership
Team and led the Marketing
function across the gum, mints
and confectionery portfolio for
the Pacific region.
As Blackmores’ interim Chief
Marketing and Innovation
Officer, Tami is responsible for
driving a renewed focus on
innovation and new product
development and engaging
consumers across our brands
and markets.
Tami has a Bachelor of
Economics from the University of
Sydney and is passionate about
creating values-driven, customer-
oriented businesses that inspire
with their brand purpose.
06
Jeremy Cowan
Chief Operations Officer
Jeremy joined Blackmores
in July 2018 and has strong
leadership and strategy
capability, linked to his extensive
functional and technical
acumen across end-to-end
supply chain, encompassing
sales and operations planning,
manufacturing, logistics and
procurement. He has a proven
08
Eric Jeanmaire
Managing Director, Australia &
NZ (interim)
Eric has more than 20 years of
retail and brand experience in
health and beauty multinationals,
across both the European and
Australian markets. He has a
strong focus on understanding
consumers and retail partners
and building market-leading
brands and deep strategic
partnerships with retailers in the
region.
Prior to joining Blackmores
in 2013, Eric was at Colgate
Palmolive Australia, where
he held several roles in the
retail category and business
development. As interim
Managing Director for the
Australia and New Zealand
region, Eric is responsible for
developing and delivering
effective strategies across all
brands and categories in the
region.
Eric is passionate about
developing and contributing
to an organisational culture
that delivers on business
performance and a strong
commitment to natural health.
09
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, China, Taiwan
(China), Hong Kong (China),
Korea, and Japan; joint venture
Kalbe Blackmores Nutrition
in Indonesia; distribution
partnerships in Vietnam,
Kazakhstan and Pakistan; and
overall strategy for Blackmores’
growth objectives in Asia.
Prior to joining Blackmores in
2009, Peter was one of Australia’s
most senior trade diplomats
working with the Australian
Trade Commission in China with
postings in Beijing, Shanghai,
Hong Kong and Taipei. 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
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BLACKMORES ANNUAL REPORT 2019
49
50
54
72
73
77
78
79
80
81
82
Five Year History
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
125 Company Information
2019
Financial
Report
48
BLACKMORES ANNUAL REPORT 2019
Five Year History
$’000
Revenue
2019
2018
2017
2016
2015
609,502
601,136
552,160
598,659
388,366
Earnings before interest, tax, depreciation and
amortisation (EBITDA)
Depreciation and amortisation
Earnings before interest and tax (EBIT)
Net interest expense
Profit before tax
Income tax expense
(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 (DPS) (cents)
Share price at 30 June
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
DPS
91,414
10,874
80,540
4,995
75,545
22,115
(39)
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
-
53,469
70,005
59,013
100,008
46,556
94,484
207,292
490,928
305,526
150,509
122,508
51,806
17,362
309.2
220
$89.91
$7.06
56.7%
25.8%
16.9%
71.2%
31.3%
13.2%
29.3%
2.03
16.1
15.3
1.4
(17.3)
(20.7)
(23.6)
(23.9)
(27.9)
49,532
192,875
464,850
302,507
174,467
123,869
90,131
17,227
406.4
305
$142.50
$7.19
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%
7.1%
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
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
1. Calculated as cash generated from operations divided by EBITDA.
2. Calculated as net profit after tax 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.
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BLACKMORES ANNUAL REPORT 2019
2019
Directors’
Report
50
BLACKMORES ANNUAL REPORT 2019 Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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
Christine Holman
Brent Wallace
Total
FULLY PAID ORDINARY SHARES
SHARE RIGHTS
1,000
800
4,010,043
1,500
12,302
4,025,645
-
-
-
-
-
-
SHARE RIGHTS GRANTED TO DIRECTORS AND SENIOR EXECUTIVES
Selected Senior Executives are invited annually by the Board to participate in the Executive Performance Share Plan (EPSP). Under
this plan, eligible Senior Executives are granted rights to acquire shares in Blackmores. Refer to the Remuneration Report on pages
54 to 71 for more details. During the year, the following rights to shares were granted:
Senior Executives
Aaron Canning2
David Fenlon3
Peter Osborne2
Former Executive Director
Richard Henfrey 2,4
Total
1, 2
2019
NUMBER
3,218
3,393
3,049
3,068
12,728
1. Includes rights granted under the 2019 financial year (FY19) Long-Term Incentive Plan (LTI). Rights vest provided specific performance objectives and hurdles are met over the
three-year period commencing 1 July 2018 to the year ending 30 June 2021.
2. Includes rights granted under the Staff Share Plan. Rights of 32 shares for Aaron Canning, 34 shares for Peter Osborne and 23 shares for Richard Henfrey will vest in the 2020
financial year (FY20).
3. David Fenlon resigned 30 June 2019.
4. Richard Henfrey ceased to be an Executive Director 28 March 2019.
SHARE OPTIONS
During and since the end of the financial year, no share options were in existence and no new share options were granted to Directors
or Senior Executives of Blackmores.
REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL
Information about remuneration of Directors and Key Management Personnel is set out in the Remuneration Report of this Directors’
Report, on pages 54 to 71.
COMMITTEE MEMBERSHIPS
As at the date of this report, the Company had an Audit and Risk Committee, a Nominations Committee and a People and
Remuneration Committee. Members of the Board acting on the Committees during the year were:
Audit and Risk:
John Armstrong, Chairman
David Ansell
Stephen Chapman1
Christine Holman2
Jackie McArthur3
Brent Wallace
Nominations:
Brent Wallace, Chairman
David Ansell
John Armstrong
Marcus Blackmore
Stephen Chapman1
Richard Henfrey4
Christine Holman2
Jackie McArthur3
Helen Nash6
People and Remuneration:
Christine Holman, Chairman2
David Ansell5
Stephen Chapman1
Jackie McArthur3
Helen Nash6
Brent Wallace
1. Stephen Chapman resigned as a Non-Executive Director 27 November 2018.
2. Christine Holman joined as a Non-Executive Director from 18 March 2019.
3. Jackie McArthur was appointed a member of the Committee 27 August 2018 and resigned as a Non-Executive Director 5 August 2019.
4. Richard Henfrey ceased to be an Executive Director 29 March 2019.
5. David Ansell joined as a member of the Committee 25 October 2018.
6. Helen Nash resigned as a Non-Executive Director 5 August 2019.
2019
Directors’
Report
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BLACKMORES ANNUAL REPORT 2019
Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
COMPANY SECRETARIES
Cecile Cooper, BBus, Dip Inv Rel (AIRA), CPA, GAICD. Company Secretary and Director Corporate Affairs. Ms Cooper joined
Blackmores in 1991. As Company Secretary, Ms Cooper is responsible for company secretarial and corporate governance support
across the Group. She has held a variety of positions within Blackmores and her experience includes financial and management
experience including enterprise resource planning system implementations, design of business reporting solutions, business
management, risk management and compliance. Ms Cooper is the Chairman of CCNB Ltd.
Aaron Canning, BCom(Hons), FCCA, CA, GAICD. Chief Financial Officer. Mr Canning joined Blackmores in 2014 as Chief Financial
Officer. He has extensive management experience in Asia, New Zealand, the UK, the USA and Australia with ASX listed and
multinational organisations including Goodman Fielder, Westfield and Diageo Plc. His most recent experience was with Goodman
Fielder as the Managing Director Grocery Category. Prior to this, he was the Managing Director Asia Pacific and Finance Director
Asia Pacific. Mr Canning is a qualified accountant, a Fellow of the Association of Chartered Certified Accountants, a member of the
Chartered Accountants Association of Australia and New Zealand and a member of the Australian Institute of Company Directors.
PRINCIPAL ACTIVITIES
The principal activity of the Blackmores Group in the course of the financial year was the development, sales and marketing of natural
health products for humans and animals including vitamins, and herbal and mineral nutritional supplements. The Blackmores Group
has operations in Australia, New Zealand and Asia.
RESULTS
The Financial Report for the years ended 30 June 2019 and 30 June 2018 and the results herein have been prepared in accordance
with Australian Accounting Standards.
The statutory net profit after tax (NPAT) (in thousands) of the Blackmores Group for the financial year was $53,469 (2018: $70,005).
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 26 to 35 inclusive.
DIVIDENDS
The amounts paid or declared by way of dividend since the start of the financial year are:
• A final dividend of 155 cents per share fully franked in respect of the year ended 30 June 2018, as detailed in the Directors’ Report
for that financial year, was paid on 12 October 2018
• An interim dividend of 150 cents per share fully franked in respect of the year ended 30 June 2019 was paid on 20 March 2019
• On 14 August 2019, Directors declared a final dividend for the year ended 30 June 2019 of 70 cents per share fully franked,
payable on 12 September 2019 to shareholders registered on 28 August 2019.
This will bring total ordinary dividends to 220 cents per share fully franked (2018: 305 cents per share fully franked) for the full year.
GROUP STRATEGY
Activities across the Group for the 2019 financial year were aligned to four key strategic priorities:
1. Consumer connectedness
2. Innovation & expertise
3. Global advantage
4. People & performance
Information about these strategic priorities is set out on pages 16 to 25 inclusive.
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 2019.
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 AND RISK
In recognising the need for the highest standards of corporate behaviour and accountability, the Board of Blackmores Ltd endorses
the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. The Company’s Corporate
Governance Statement is available on the Blackmores website at blackmores.com.au (go to ‘Investor Centre’, then click on ‘Governance
& Board of Directors).
The material risks that could affect Blackmores’ future financial performance and their potential impacts are set out in the Operating
and Financial Review on page 34.
INDEMNIFICATION OF OFFICERS AND AUDITORS
During the financial year, Blackmores paid a premium in respect of a contract insuring the Directors, the Company Secretary and all
Executive Officers of the Blackmores Group against any liability incurred in their role as Director, Company Secretary or Executive
Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability
and the amount of the premium. Blackmores has not otherwise, during or since the end of the financial year, indemnified or agreed to
indemnify an Officer or auditor of the Blackmores Group against a liability incurred as such an Officer or auditor.
52
BLACKMORES ANNUAL REPORT 2019 Directors’ Report
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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 Armstrong2
Marcus Blackmore2
Stephen Chapman
Richard Henfrey²
Christine Holman
Jackie McArthur
Helen Nash
Brent Wallace
BOARD OF
DIRECTORS
AUDIT & RISK
COMMITTEE
NOMINATIONS
COMMITTEE
PEOPLE AND
REMUNERATION
COMMITTEE
HELD1
ATTENDED
HELD1
ATTENDED
HELD1
ATTENDED
HELD1
ATTENDED
12
12
12
5
8
5
12
12
12
11
11
9
5
7
4
12
12
12
4
4
N/A
2
N/A
1
3
N/A
4
4
4
1
2
3
1
3
-
4
1
1
1
1
1
-
1
1
1
1
1
1
1
1
-
1
1
1
4
N/A
N/A
2
N/A
3
5
6
6
5
2
2
2
3
3
5
6
6
1. Reflects the number of meetings held during the time that the Director held office or was a member of the Committee 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 72 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 (and expressed in) the nearest thousand dollars, unless otherwise
indicated.
Amounts in the Remuneration Report are actual.
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BLACKMORES ANNUAL REPORT 2019
2019
Remuneration
Report
Key points
• Blackmores’ remuneration structure aligns Senior
Executive remuneration to Group performance.
• Blackmores’ long-standing profi t share scheme
aligns the remuneration of all employees to
profi ts of the Group.
• FY19 short-term incentives (STI) were not paid to
the Executive Director and Senior Executives as
performance hurdles were not met.
• Long-term incentives (LTI) were not awarded in
the year as the achievement of the three-year
EPS growth targets for the FY17 plans, granted in
July 2016, were not met.
• No LTI vested in relation to FY18 or FY19 plans.
• Non-Executive Director fees were increased in
FY19.
• The CEO resigned during the year and the
Executive Director was appointed interim CEO.
• Alastair Symington accepted the role as CEO
and MD and will commence in September 2019.
• Brent Wallace was appointed as Chairman of
the Board following the retirement of Stephen
Chapman from the Board in November 2018.
• The appointment of Christine Holman as a
Non-Executive Director in March 2019 brings
new skills to the Board and supports our
continued commitment to diversity.
• Senior Executives received increases to Fixed
• Jane Franks commenced in the new role of
Annual Remuneration (FAR) during the year due
to organisational changes, expanded roles and
responsibilities and alignment to appropriate
benchmarking.
Chief People Offi cer in October 2018.
• Jackie McArthur and Helen Nash resigned as
Non-Executive Directors on 5 August 2019.
Introduction from the Chairman of the People and Remuneration Committee
Dear Shareholder,
I am pleased to present to you our 2019 Remuneration Report.
This report outlines FY19 performance and remuneration
outcomes for Blackmores’ Chief Executive Offi cer (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 profi t growth and shareholder
returns.
FY19 was a challenging year. A small increase in Net Sales refl ects
the impact of regulatory changes in China, which continue to
evolve. The Australian retail channel experienced sales decline
due to the channel shift in servicing China consumers. The
reduced sales growth was a signifi cant change from previous
years in which Blackmores had experienced strong Net Sales
growth. Net Profi t down 24%, which refl ects the reduced sales,
increased investment in brand advertising and promotion
programs and one-off costs associated with the business
improvement plan. The work to streamline the business will
reduce the operating cost base and support the structure of the
business in future years.
Net Sales were up 1% and NPAT down 24% on the prior year.
The share price decreased 37% during the year. Blackmores’
total shareholders return (TSR) was a decrease of 35%, Return
on Equity of 26%, Earnings Per Share (EPS) decrease of 24% and
dividend decrease of 28%.
As a result, the Executive Directors and Senior Executives did not
receive an award under the short-term incentive (STI) plan.
No shares vested under the three-year long-term incentive (LTI)
plan. There were no awards to Executive Directors and Senior
Executives under this plan due to the non-achievement of the
EPS growth hurdle during the FY17 to FY19 performance period.
ALIGNING REMUNERATION WITH BUSINESS
PERFORMANCE AND STRATEGY
Over recent years, the Committee has enhanced the
remuneration structures. Senior Executives’ fi xed and
performance-based remuneration programs incentivise delivery
of the strategy and provide remuneration outcomes which are
aligned with shareholder returns. Benchmarking reviews of the
CEO, Senior Executive and Non-Executive Director remuneration
have ensured that remuneration was commensurate with the
appropriate peer group to retain and attract key personnel.
The new role of Chief People Offi cer reporting to the CEO
commenced during the year and has progressed a program
of work focused on enhancing our culture, linking our business
strategy and further aligning our remuneration structures to
shareholder expectations and the delivery of our business
objectives.
KEY OUTCOMES FOR FY19 REMUNERATION
1. Consistent with our ‘One Blackmores’ philosophy, whereby
we strive to create a unifi ed culture and set of goals, the FY19
STI plan included three strategic measures of Group Net
Sales, China Net Sales and a stock cover measure in addition
to the original 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 FY19 STI plan was further enhanced to ensure Senior
Executives were only rewarded for achievement of outcomes
if they had displayed leadership behaviours during the year
in line with Blackmores’ values. This acted as a gateway for the
FY19 STI.
54 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 9
2019
Remuneration
Report
4. Marcus Blackmore increased the number of days worked per
week and his remuneration was increased accordingly.
FY20 CHANGES
1. Alastair Symington has accepted the role of CEO and
Managing Director and will commence in September 2019.
As disclosed in the announcement to the market, his FY20
fi xed remuneration including statutory superannuation will
be $1,300,000, FY20 STI plan maximum potential 120%
of Total Fixed Remuneration and FY20 LTI plan maximum
potential 200% of Total Fixed Remuneration. Following the
commencement of employment, a cash payment of up to
$300,000 may be made. Subject to all requisite shareholder
approvals at the 2019 AGM, Mr Symington may be issued
or transferred a number of shares equivalent in value up to
$1,000,000 which includes a three-year performance period.
2. The FY20 LTI plan will include an additional measure of
Return on Average Invested Capital (ROIC). Introducing ROIC
alongside the EPS measure will provide further alignment with
enhancement of shareholder returns.
3. There will be no increases to the fi xed remuneration of the
current Senior Executives in FY20.
4. There will be no increase in Non-Executive Director fees in
FY20. The Board will assess the Chairman fees against the
relevant benchmark in the second-half of FY20 with a view
to potentially closing the current gap against peers. The
total Directors’ pool is now $1,300,000. The projected FY20
annualised Non- Executive Director fees are $1,100,000.
Details of Directors’ fees are on page 69.
5. Jackie McArthur and Helen Nash resigned as Non-Executive
Directors on 5 August 2019.
On behalf of the Board and Committee, I invite you to read the
2019 Remuneration Report and welcome your feedback on
our approach to and disclosure of Blackmores’ remuneration
arrangements.
Christine Holman
Chairman, People and Remuneration Committee
5. Following the resignation of the CEO in March 2019,
Marcus Blackmore was appointed as the interim CEO with
no increase to remuneration.
6. Senior Executives’ FAR was increased by between 2% and 8%.
Full details are on page 57.
7. The FY19 statutory NPAT decrease of 24% did not meet
the year-on-year growth requirement set by the Board for
the STI plan to be activated and, as a result, there were no
awards to Senior Executives. This contrasted with the FY18
payments, where an NPAT increase of 19% met the hurdle
rate and, as such, the CEO and Senior Executives did receive
an STI payment in that year. The Board considers the STI
outcomes for FY19 and FY18 highlight the strong alignment
between fi nancial performance, shareholders’ interests and
remuneration outcomes.
8. Under the long-standing profi t share scheme, up to 10% of
NPAT is paid to employees of Blackmores. In FY19 this was
the equivalent of 15 days’ incremental salary. This compares
to FY18 in which the equivalent of 26 days’ incremental salary
was paid.
9. The LTI plan has a three-year performance period. The FY17
plan did not vest due to negative three-year compound
annual growth rate (CAGR) in EPS and refl ects the
disappointing performance over this period. The FY18 and
FY19 LTI plans are three-year plans. The total remuneration
for the fi nancial year, the details of which are shown on page
65, includes an accounting expense reversal 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.
10. The FY19 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.
11. Following a review of relevant benchmarks, Non-Executive
Director fees were increased by 11% including the increase to
statutory superannuation. There was no increase in FY18 other
than increases to statutory superannuation. An additional
Non-Executive Director, Christine Holman, was appointed
during the year.
12. An external Board review is conducted bi-annually and was
last completed during FY18. This was an extensive review
with all Board members and the Senior Management team
involved. This provided the Directors with both collective and
individual feedback. The Board strongly believes that a high-
performance culture starts in the Boardroom and the review
has helped provide the Board and Senior Management
team with some focus areas to action over the two-year
period. This included elevating culture in the Board agenda
and supporting Board and management interactions with
extended leadership team participation in meetings.
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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 9 55
2019
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 2019 (FY19) 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 2019:
Non-Executive Directors
David Ansell
Non-Executive Director and member of the Audit and Risk Committee, People and Remuneration Committee and
Nominations Committee
John Armstrong
Non-Executive Director, Chairman of the Audit and Risk Committee and member of the Nominations Committee
Christine Holman
Non-Executive Director and member of the Audit and Risk Committee, People and Remuneration Committee and
Nominations Committee (joined 18 March 2019)
Jackie McArthur
Non-Executive Director and member of the Audit and Risk Committee, People and Remuneration Committee and
Nominations Committee (resigned 5 August 2019)
Helen Nash
Brent Wallace
Executive Director
Non-Executive Director, Chairman of the People and Remuneration Committee and member of the Nominations
Committee (resigned 5 August 2019)
Non-Executive Director, Chairman of the Board, Chairman of the Nominations Committee, member of the Audit and
Risk Committee and the People and Remuneration Committee
Marcus Blackmore
Executive Director, interim Chief Executive Officer and member of the Nominations Committee
Senior Executives
Aaron Canning
Chief Financial Officer
David Fenlon
Managing Director Australia and New Zealand (resigned 30 June 2019)
Peter Osborne
Managing Director Asia
56
BLACKMORES ANNUAL REPORT 2019 2019
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 FY19 and that was either paid or payable
during the financial year or will be paid subsequent to the end of
the year.
The remuneration outcomes prepared in accordance with
accounting standards as required by the Corporations Act
2001 are contained on page 65 of the report. The totals in the
statutory remuneration table on page 55 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 entitlements due to an
increase in the statutory provisions 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 FY19 portion of the fair value of
rights granted in FY17, FY18 and FY19 under the LTI plan and
the Staff Share Plan. Vesting of FY18 and FY19 rights under
the LTI plan and the FY19 rights under the Staff Share Plan
remain 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.
The FY17 rights under the LTI plan have forfeited as the
performance conditions were not met. Both the statutory
remuneration table and the following outcomes table include nil
value for the FY17 LTI awards.
Included in the statutory remuneration table is a reversal of the
expense which had been amortised in FY18 for the FY18 rights.
The following table includes nil value.
The FY18 rights under the staff share plan which have vested
were valued at $86.21 in the statutory remuneration table. This
differs to the following outcomes table, which includes the FY18
share plan awards valued at $148.18, which was the share price
on the 31 July 2018 vesting date.
SALARY AND
FEES
STI AND PROFIT
SHARE
NON-
MONETARY1
OTHER2 SUPERANNUATION
$
$
$
$
$
TOTAL
$
EQUITY THAT
TOTAL
VESTED REMUNERATION
RECEIVED
DURING 20183
$
$
Executive Director
Marcus Blackmore4
2019
2018
361,616
110,000
20,954
29,128
40,582
16,677
-
2,098
20,531
15,416
443,683
173,319
-
232,572
443,683
405,891
Senior Executives
Aaron Canning
2019
2018
David Fenlon5
2019
2018
Peter Osborne
2019
2018
571,288
521,657
609,317
558,750
603,809
511,769
Former Executive Directors
Richard Henfrey6
2019
2018
Christine Holgate
2018
722,053
866,418
626,089
32,945
135,769
35,157
122,613
33,710
106,534
-
-
9,519
46,345
-
-
2,600
2,124
-
2,085
-
-
23,131
23,032
629,964
682,582
3,702
278,451
633,666
961,033
20,531
20,049
674,524
749,842
-
-
674,524
749,842
-
-
637,519
618,303
3,702
220,883
641,221
839,186
36,855
265,513
20,139
9,401
-
2,693
15,398
23,990
794,445
1,168,015
-
272,390
794,445
1,440,405
-
17,924
-
5,012
649,025
-
649,025
Total
2019
2018
2,868,083
3,194,683
159,621
659,557
70,240
90,347
2,600
9,000
79,591
87,499
3,180,135
4,041,086
7,404
1,004,296
3,187,539
5,045,382
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 FY19 year relates to the FY18 Staff Share Plan grant. The value disclosed is based on the share price on the vesting date 31 July 2018.
4. Marcus Blackmore’s number of days worked increased in FY19.
5. David Fenlon resigned as a Senior Executive on 30 June 2019.
6. Richard Henfrey ceased as a Executive Director on 29 March 2019.
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BLACKMORES ANNUAL REPORT 2019
2019
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 ‘Governance and Board of Directors’). The
charter is reviewed annually by the Committee and the Board.
The People and Remuneration Committee comprises five
independent Non-Executive Directors who have experience in
both remuneration governance and the Blackmores business.
The members during FY19 were Helen Nash (Committee
Chairman), David Ansell, Christine Holman, Jackie McArthur, Brent
Wallace and Stephen Chapman (resigned 27 November 2018).
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 Mercer Consulting (Australia) Pty Ltd 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
$66,000.
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:
58
Blackmores’ Remuneration Framework
Rewards the achievement of strategic goals, financial targets
and operational performance and behaviour gateway
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 – 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 other strategic measures. The STI requires the
achievement of year-on-year NPAT 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
eligible 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 2019 2019
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’ remuneration is disclosed in the report as a
percentage of total target annual remuneration for FY19, and 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 Annual 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.
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BLACKMORES ANNUAL REPORT 2019
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Short-Term Incentives (STI) – Performance Conditions
Specific information relating to the actual annual performance awards is set out in the table on page 66.
What is the annual
incentive and
who is eligible to
participate?
What is the
amount the
eligible employee
can earn?
What were the
performance
conditions for
FY19?
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 Officer1
Senior Executives
Year-on-year NPAT / Net Sales
Growth & Stock Cover Measure
% of FAR
Threshold
Maximum
Measures
0
0
0
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
over prior year
China Net Sales achievement
over prior year
Stock cover measure
Individual objectives:
Financial (i.e. revenue, new
product launches and other
specific objectives)
Non-financial measures (i.e.
safety, employee engagement
and other agreed objectives)
60
20
10
10
N/A
60
20
10
10
60
20
10
10
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 FY19, the Directors included strategic measures of Group Net Sales and China Net Sales growth over prior
year along with a stock cover measure to support customer service levels.
Using these measures of NPAT, Net Sales and stock cover as incentive performance measures 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 along with a stock cover measure 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.
In FY19, a Culture Gateway was introduced related to value-driven behaviours. Should an Executive be
considered to have not displayed appropriate behaviour, this could potentially cause the Executive to be
removed from the STI program for that year.
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.
1. Chief Executive Officer refers to Richard Henfrey.
60
BLACKMORES ANNUAL REPORT 2019
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When are
performance
conditions
tested?
NPAT, Net Sales and the stock cover measure 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.
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 66.
What is the annual
incentive and who is
eligible to participate?
All eligible permanent staff in the Group, including Senior Executives, can elect to contribute between
$1,000 and $10,000 to be used to purchase shares in the Company. At the end of the financial year,
the Company will provide a benefit by applying a matching ratio to the shares purchased by each
participant for that financial year.
What is the amount the
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 FY19?
For FY19, the Company will match one share for every three shares purchased during the financial
year. For FY19, 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 2019 and have purchased
shares during the year which remain in the plan.
Why were these
performance measures
chosen?
When are performance
conditions tested?
When 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 66.
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 FY19?
Under the Company’s Collective Agreement, up to 10% of Group NPAT is allocated to staff.
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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BLACKMORES ANNUAL REPORT 2019
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Remuneration
Report
Long-Term Incentives (LTI) – Performance Conditions
Specific information relating to the actual annual performance awards is set out in the table on page 66.
What is the annual incentive
and who is eligible to
participate?
What is the amount the
eligible employee can
earn?
Eligible employees are invited annually by the Board to participate in the Executive Performance Share
Plan (EPSP). Under this plan, eligible employees are granted rights to acquire shares in Blackmores.
Eligible employees include the Executive Directors, Senior Executives and other nominated
employees.
Chief Executive Officer1
Executive Director and
Senior Executives
% of target performance
% of FAR
Less than 5
5
5 to 10
10
10 to 25
25
0
25
Sliding scale
50
Sliding scale
150
0
10
Sliding scale
20
Sliding scale
80
What was the performance
condition for FY19?
The performance condition is the three-year CAGR in EPS. The performance period for measuring EPS
growth is three years (FY19 to FY21).
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 2021 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.
1. Chief Executive Officer refers to Richard Henfrey.
62
BLACKMORES ANNUAL REPORT 2019
2019
Remuneration
Report
5.
PERFORMANCE AND REMUNERATION OUTCOMES
Performance Incentives – Actual Performance 2019
Financial Year
The actual performance is illustrated in the charts below:
SHARE PRICE ($)
150
120
90
60
30
0
89.91
DIVIDEND PER SHARE (CENTS)
220
2015
2016
2017
2018
2019
RETURN ON EQUITY (%)
500
400
300
200
100
0
60
50
40
30
20
25.8
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2016
2017
2018
2019
2015
2016
2017
2018
2019
Short-Term Incentives (STI)
Similar to previous years, NPAT achievement was selected as the key Group performance measure for the STI awards in respect of
FY19. The Directors also include strategic measures for the STI awards to align with the key strategic objectives in a year. In respect of
FY19, the Directors selected Group Net Sales and China Net Sales achievement and a stock cover measure as the strategic measures.
Blackmores’ FY19 statutory NPAT of $53 million represented a 24% decrease on prior year. A requirement of the STI plan is year-on-
year growth and as a result, there were no STIs awarded to Senior Executives (2018: $400,991).
This award is included under the ‘STI and Profit Share’ column in the remuneration disclosures table on page 65.
Blackmores’ NPAT and Net Sales over the past five years are shown in the following graphs:
NET SALES ($M)
NPAT ($M)
700
600
500
400
300
200
100
0
610
100
80
60
40
20
0
53
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
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BLACKMORES ANNUAL REPORT 2019
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Long-Term Incentives (LTI)
Similar to previous years, EPS achievement was selected as the
Group performance measure for the LTI awards in respect of FY19.
The LTI plan includes a three-year performance period. There were
no FY17 LTI awards eligible to vest in FY19 due to a failure to meet
the performance hurdle. The FY18 and FY19 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 65 includes an accounting expense reversal
of $504,006 (2018: expense of $935,849) 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)
309
2015
2016
2017
2018
2019
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 and ceased as CEO during FY19. The FY18 LTI award is the incentive plan for his prior role as a Senior
Executive and the FY19 STI and LTI as awards are based on the performance hurdles for the Company not being met.
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
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Net profit after tax (NPAT)
Earnings per share (EPS)
STI
LTI
$m
120
100
80
60
40
20
0
64
BLACKMORES ANNUAL REPORT 2019 2019
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
2019. 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 57 because of the following:
1. Leave movements – annual leave and long service leave movements due to an increase in the statutory accruals rather than cash
payments.
2. Share-based payments – The accounting standards require share-based payments expense to be calculated using the fair value of
the shares at grant date, amortised over the relevant performance and service period. The statutory remuneration table includes the
accounting value for LTI grants for the FY17 year which have vested and the FY18 and FY19 years which have not yet vested.
SHORT-TERM EMPLOYMENT BENEFITS
SALARY
STI AND
AND FEES PROFIT SHARE1
$
$
NON-
MONETARY2
$
OTHER3
$
POST-
EMPLOYMENT
BENEFITS
SUPER-
ANNUATION
$
OTHER
LONG-TERM
EMPLOYMENT
BENEFITS
SHARE-
BASED
PAYMENT
PERFORMANCE
RIGHTS5,6
$
OTHER4
$
TOTAL
$
Executive Director
Marcus Blackmore7
2019
2018
Senior Executives
Aaron Canning
2019
2018
David Fenlon9
2019
2018
Peter Osborne
2019
2018
Former Executive Directors
Richard Henfrey8
2019
2018
Christine Holgate
2018
Total
2019
2018
361,616
110,000
20,954
29,128
40,582
16,677
-
2,098
20,531
15,416
-
-
(15,031)
148,130
428,652
321,449
544,974
475,777
32,945
135,769
-
-
46,557
43,697
23,131
23,032
5,844
4,544
(70,674)
180,676
582,777
863,495
558,260
522,042
35,157
122,613
9,519
46,345
50,446
53,043
20,531
20,049
8,091
7,966
(71,306)
71,306
610,698
843,364
585,785
471,473
33,710
106,534
-
-
52,787
55,466
-
-
-
-
(53,464)
144,748
618,818
778,221
663,209
826,959
36,855
265,513
20,139
9,401
57,837
73,899
15,398
23,990
15,560 (286,137)
99,270
522,861
390,989 1,690,021
520,384
-
17,924
50,941
5,012
(89,729)
-
504,532
2,713,844
2,926,635
159,621
659,557
70,240
90,347
207,627
279,144
79,591
87,499
29,495
22,051
(496,612) 2,763,806
935,849 5,001,082
1. ‘STI and profit share’ includes amounts paid by way of profit share on 14 December 2018 and 19 June 2019.
2. ‘Non-monetary’ includes motor vehicle benefits and any fringe benefits tax paid on these benefits.
3. ‘Other’ shown in short-term employment benefits relates to provisions for annual leave.
4. ‘Other’ shown in long-term employment benefits relates to provisions for long service leave.
5. The FY19 share-based payments include the LTI plan and represent the FY19 portion of the fair value of rights granted in FY17, FY18 and FY19. The FY17 rights have
vested and there is nil value included in FY19 as the performance conditions were not met. Vesting of the FY18 and FY19 rights remains subject to performance and service
conditions as outlined on page 62. The FY19 portion of the FY18 rights includes a reversal of the amount amortised in FY18.
6. The FY19 share-based payments include the Staff Share Plan and represent the FY19 portion of the fair value of rights granted in FY18 and FY19. Vesting of the FY19 plan
remains subject to service conditions as outlined on page 62.
7. Marcus Blackmore’s LTI plan is paid as a cash equivalent in lieu of shares. Mr Blackmore’s performance rights are valued on the share price at 30 June 2019 ($89.91). Other
KMP are valued at fair value at grant date. This difference reflects Mr Blackmore’s LTI plan being paid as a cash equivalent.
8. Richard Henfrey ceased as an Executive Director on 29 March 2019. Mr Henfrey’s FY19 performance rights represent the reversal of the fair value of share-based payments
expensed in prior financial years that were forfeited by him as the service period was not met owing to his resignation.
9. David Fenlon resigned as a Senior Executive on 30 June 2019.
1
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V
E
R
V
I
E
W
2
I
H
G
H
L
I
G
H
T
S
3
C
H
A
I
R
M
A
N
&
C
E
O
4
Y
E
A
R
I
N
R
E
V
I
E
W
I
5
S
T
R
A
T
E
G
C
P
R
O
R
I
T
I
E
S
I
6
O
P
E
R
A
T
I
N
G
R
E
V
I
E
W
7
B
L
A
C
K
M
O
R
E
S
D
I
F
F
E
R
E
N
C
E
8
F
I
N
A
N
C
I
A
L
R
E
P
O
R
T
9
R
E
M
U
N
E
R
A
T
I
O
N
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BLACKMORES ANNUAL REPORT 2019
2019
Remuneration
Report
Performance Related Remuneration
Statutory Performance Related Remuneration Table
The following table shows an analysis of the non-performance and performance-related (STI, Profit Share and LTI) components of the
FY19 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 Director
Marcus Blackmore
2019
2018
Senior Executives
Aaron Canning
2019
2018
David Fenlon5
2019
2018
Peter Osborne
2019
2018
Former Executive Director
Richard Henfrey4
2019
2018
Total
2019
2018
98.6
44.9
106.5
63.4
105.9
77.0
103.2
67.7
147.7
61.2
112.2
68.1
4.9
9.1
5.7
15.7
5.8
14.5
5.4
13.7
7.0
15.7
5.8
13.2
-3.5
46.1
-12.2
20.9
-11.7
8.5
-8.6
18.6
-54.7
23.1
-18.0
18.7
1.4
55.1
-6.5
36.6
-5.9
23.0
-3.2
32.3
-47.7
38.8
-12.2
31.9
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 FY19 accounting expense of the FY19 portion of the rights granted in FY17, FY18 and FY19. The FY19 portion of the
FY18 rights includes a reversal of the amount amortised in FY18.
3. Performance Rights includes the Staff Share Plan and represents the FY19 accounting expense of the FY19 portion of the rights granted in FY19.
4. Richard Henfrey ceased as an Executive Director on 29 March 2019.
5. David Fenlon resigned as a Senior Executive on 30 June 2019.
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BLACKMORES ANNUAL REPORT 2019
2019
Remuneration
Report
Short-Term Incentives
The following tables show the details of the STI cash bonuses awarded as remuneration to Executive Directors and Senior Executives
that were paid for the financial year ended 30 June 2019.
Executive Director
Marcus Blackmore
Senior Executives
Aaron Canning
David Fenlon4
Peter Osborne
Former Executive Director
Richard Henfrey
STI1,2
INCLUDED IN
REMUNERATION3
% OF STI AWARD
AS A MAXIMUM
STI AWARD
% OF MAXIMUM
STI AWARD
FORFEITED4
-
-
-
-
-
-
-
-
-
-
100
100
100
100
100
1. Amounts included in remuneration for the financial year represent the amount related to the financial year based on achievement of personal goals and satisfaction of
performance criteria.
2. Amounts forfeited are due to the performance or service criteria not being met in relation to the current financial year.
3. The awards are paid according to the table on page 60.
4. David Fenlon resigned as a Senior Executive on 30 June 2019.
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 FY19 and FY18. 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
Senior Executives
Aaron Canning
24/11/15
2,507
147.49
369,757
179.50
450,007
17/11/16
3,383
99.19
335,560
113.90
385,324
17/11/17
3,824
144.39
552,147
162.13
619,985
16/11/18
3,186
124.21
395,733
128.00
407,808
David Fenlon7
17/11/16
3,045
99.19
302,034
113.90
346,826
17/11/17
3,716
144.39
536,553
162.13
602,475
16/11/18
3,393
124.21
421,445
128.00
434,304
Peter Osborne
24/11/15
1,986
147.49
292,915
179.50
356,487
17/11/16
2,352
99.19
233,295
113.90
267,893
17/11/17
2,935
144.39
423,785
162.13
475,852
16/11/18
3,015
124.21
374,493
128.00
385,920
Former Executive Director
Richard Henfrey
24/11/15
2,452
147.49
361,645
179.50
440,134
17/11/16
3,045
99.19
302,034
113.90
346,826
17/11/17
12,852
144.39
1,855,700
162.13
2,083,695
16/11/18
9,880
124.21
1,227,195
128.00
1,264,640
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,954
319,753
-
-
-
-
-
-
-
-
-
-
-
-
1,550
253,642
-
-
-
-
-
-
1,912
312,880
-
-
-
-
-
-
08/18
08/19
08/20
08/20
08/19
08/20
08/20
08/18
08/19
08/20
08/20
08/18
08/19
08/20
08/20
VALUE OF
RIGHTS NOT
VESTED
$
-
-
619,985
407,808
-
-
-
-
-
475,852
385,920
-
-
-
-
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.
FY19 grant over 1 July 2018 to 30 June 2021).
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 FY16 plan in August 2018.
7. David Fenlon resigned as a Senior Executive on 30 June 2019.
1
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I
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W
2
I
H
G
H
L
I
G
H
T
S
3
C
H
A
I
R
M
A
N
&
C
E
O
4
Y
E
A
R
I
N
R
E
V
I
E
W
I
5
S
T
R
A
T
E
G
C
P
R
O
R
I
T
I
E
S
I
6
O
P
E
R
A
T
I
N
G
R
E
V
I
E
W
7
B
L
A
C
K
M
O
R
E
S
D
I
F
F
E
R
E
N
C
E
8
F
I
N
A
N
C
I
A
L
R
E
P
O
R
T
9
R
E
M
U
N
E
R
A
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I
O
N
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BLACKMORES ANNUAL REPORT 2019
2019
Remuneration
Report
(b) Staff Share Plan
NAME
Senior Executives
Aaron Canning
Peter Osborne
GRANT
VESTED
EXERCISED
DATE
NUMBER OF
RIGHTS
FAIR VALUE
PER RIGHT
$
TOTAL FAIR
VALUE1
$
NUMBER OF % OF NUMBER
NUMBER
GRANTED OF RIGHTS2
DATE
RIGHTS1
VALUE
$
31/7/17
31/7/18
31/7/17
31/7/18
25
32
25
34
23
86.21
141.95
86.21
141.95
2,155
4,542
2,155
4,826
31/7/18
31/7/19
31/7/18
31/7/19
25
-
25
-
100
-
100
-
25
-
25
-
3,702
-
3,702
-
141.95
3,265
31/7/19
-
-
-
-
Former Executive Director
Richard Henfrey3
31/7/18
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. FY19
grant over 1 July 2018 to 31 July 2019).
2. Rights were exercised under the FY18 plan in August 2018.
3. Richard Henfrey ceased as an Executive Director on 29 March 2019 and his rights balance reflects holdings as at that date.
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 by 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 had six months’ notice (or payment in lieu).
8.
NON-EXECUTIVE DIRECTORS’ 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.
Shareholders at a meeting held on 25 October 2018 determined the maximum total Non-Executive Director fees payable, including
Committee fees, to be $1,300,000 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 FY18 Annual 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 FY19 by 18% and Committee fees by 11% effective 1 July 2018. There was no increase in FY18. Fees are in line with the
50th percentile of companies in the peer group.
68
BLACKMORES ANNUAL REPORT 2019
2019
Remuneration
Report
Non-Executive Director fees for FY19 include:
FEES
Board
Audit and Risk
People and Remuneration
Nominations
CHAIRMAN
$
279,615
21,900
21,900
-
2019
MEMBER
$
142,350
10,950
10,950
-
CHAIRMAN
$
240,049
16,425
16,425
-
2018
MEMBER
$
120,450
9,855
9,855
-
The total annual Non-Executive Director remuneration for the Board of six (2018: six) Non-Executive Directors for FY19 was $1,063,979
(2018: $806,307).
The following table discloses the remuneration of the Non-Executive Directors for the financial year ended 30 June 2019.
SHORT-TERM
EMPLOYMENT
BENEFITS
POST
EMPLOYMENT
BENEFITS
FEES AND ALLOWANCES
$
NON-MONETARY1
$
SUPERANNUATION
$
TOTAL
$
Non-Executive Directors
David Ansell
2019
2018
John Armstrong
2019
2018
Christine Holman2
2019
2018
Jackie McArthur3
2019
2018
Helen Nash3
2019
2018
Brent Wallace4
2019
2018
Former Non Executive Director
Stephen Chapman5
2019
2018
Total
2019
2018
146,688
119,000
146,688
119,000
42,692
-
146,692
20,493
149,904
125,000
227,592
134,000
97,692
220,000
957,948
737,493
-
-
-
-
-
-
-
-
-
-
6,219
-
12,453
-
18,672
-
13,935
11,305
13,935
11,305
4,055
-
13,935
1,929
14,240
11,875
19,481
12,730
160,623
130,305
160,623
130,305
46,747
-
160,627
22,422
164,144
136,875
253,292
146,730
7,778
19,670
117,923
239,670
87,359
68,814
1,063,979
806,307
1. ‘Non-monetary’ includes benefits and any applicable fringe benefits tax.
2. Christine Holman joined as a Non-Executive Director on 18 March 2019.
3. Jackie McArthur and Helen Nash resigned as Non-Executive Directors on 5 August 2019.
4. Brent Wallace was in the role of Chairman from 25 October 2018.
5. Stephen Chapman was in the role of Chairman from 1 March 2017 to 25 October 2018 and resigned as a Non-Executive Director 27 November 2018.
1
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V
E
R
V
I
E
W
2
I
H
G
H
L
I
G
H
T
S
3
C
H
A
I
R
M
A
N
&
C
E
O
4
Y
E
A
R
I
N
R
E
V
I
E
W
I
5
S
T
R
A
T
E
G
C
P
R
O
R
I
T
I
E
S
I
6
O
P
E
R
A
T
I
N
G
R
E
V
I
E
W
7
B
L
A
C
K
M
O
R
E
S
D
I
F
F
E
R
E
N
C
E
8
F
I
N
A
N
C
I
A
L
R
E
P
O
R
T
9
R
E
M
U
N
E
R
A
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I
O
N
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BLACKMORES ANNUAL REPORT 2019
2019
Remuneration
Report
9.
NON-EXECUTIVE DIRECTORS AND SENIOR EXECUTIVE TRANSACTIONS
Equity Holdings
During FY19 and FY18 there were no share options in existence. There have been no share options issued since the end of the financial
year.
Shares
The table below outlines the fully paid ordinary shares of Blackmores Limited held by KMP.
Fully Paid Ordinary Shares of Blackmores Limited
343
Non-Executive Directors
David Ansell
John Armstrong
Stephen Chapman
Christine Holman2
Jackie McArthur3
Helen Nash3
Brent Wallace
Executive Director
Marcus Blackmore
Senior Executives
Aaron Canning
David Fenlon4
Peter Osborne
Former Executive Director
Richard Henfrey5
Total
BALANCE AT
1/7/18
NUMBER
RECEIVED ON
SETTLEMENT
OF RIGHTS
NUMBER
NET CHANGE
OTHER1
NUMBER
BALANCE AT
30/6/19
NUMBER
1,000
800
20,028
-
-
1,487
12,302
-
-
-
-
-
-
-
-
-
241
1,500
600
-
-
1,000
800
20,269
1,500
600
1,487
12,302
4,001,835
-
8,208
4,010,043
20,860
199
7,163
1,979
-
1,575
430
-
(900)
23,269
199
7,838
11,936
4,077,610
1,912
5,466
(1,564)
8,515
12,284
4,091,591
1. Includes shares issued under the Company’s Staff Share Plans.
2. Christine Holman joined as a Non-Executive Director on 18 March 2019.
3. Jackie McArthur and Helen Nash resigned as Non-Executive Directors on 5 August 2019.
4. David Fenlon had six months’ notice (or payment in lieu).
5. Richard Henfrey ceased as an Executive Director on 29 March 2019 and his 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 1/7/18
SATION EXERCISED
NET OTHER BALANCE AS
CHANGE AT 30/6/19
BALANCE
VESTED AT
VESTED
BUT NOT
30/6/19 EXERCISABLE
VESTED
AND
RIGHTS
VESTED
EXERCISABLE DURING YEAR
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
Senior Executives
Aaron Canning
David Fenlon1
Peter Osborne
Former Executive Director
Richard Henfrey2
Total
9,186
6,761
6,862
3,218
3,393
3,049
(1,979)
(3,383)
- (10,154)
(2,352)
7,042
-
5,984
(1,575)
17,809
40,618
9,903
19,563
(1,912) (22,732)
(5,466) (38,621)
3,068
16,094
-
-
-
-
-
-
-
-
-
-
1,979
-
1,575
1,912
5,466
-
-
-
-
1. David Fenlon had six months’ notice (or payment in lieu).
2. Richard Henfrey ceased as an Executive Director on 29 March 2019.
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BLACKMORES ANNUAL REPORT 2019
2019
Remuneration
Report
Loan Disclosures
There were no loan balances exceeding $100,000 due from KMP during or at the end of the financial year (2018: $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 s298(2) of the Corporations Act 2001.
On behalf of the Directors
Brent Wallace
Chairman
Dated in Sydney, 14 August 2019
1
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V
E
R
V
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W
2
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I
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4
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6
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7
B
L
A
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8
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9
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71
BLACKMORES ANNUAL REPORT 2019
Auditor’s Independence Declaration
72
BLACKMORES ANNUAL REPORT 2019 Independent Auditor’s Report
73
BLACKMORES ANNUAL REPORT 2019 Independent Auditor’s Report
74
BLACKMORES ANNUAL REPORT 2019 Independent Auditor’s Report
75
BLACKMORES ANNUAL REPORT 2019 Independent Auditor’s Report
76
BLACKMORES ANNUAL REPORT 2019 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
Brent Wallace
Chairman
Dated in Sydney, 14 August 2019
77
BLACKMORES ANNUAL REPORT 2019 Consolidated Statement of Profit or Loss
and Other Comprehensive Income
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
NOTES
2019
$’000
2018
$’000
2.1
2.3
2.4.3
2.5.1
609,502
4,792
614,294
243,987
148,846
68,616
10,874
9,503
12,483
7,231
14,280
1,342
4,422
(235)
12,405
533,754
80,540
258
(5,253)
(4,995)
75,545
(22,115)
53,430
601,136
718
601,854
232,374
137,135
59,229
8,940
9,306
11,647
7,014
13,546
1,141
1,872
5,686
12,352
500,242
101,612
416
(4,346)
(3,930)
97,682
(28,459)
69,223
53,469
(39)
53,430
70,005
(782)
69,223
2,629
(509)
2,120
2,625
603
3,228
55,550
72,451
55,578
(28)
55,550
73,274
(823)
72,451
4.5.1
4.5.1
309.2
309.2
406.4
405.7
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
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 (loss)/gain on hedging instruments entered into for cash flow hedges (net of tax)
Other comprehensive income for the period (net of tax)
Total comprehensive income for the period
Total comprehensive income/(expense) attributable to:
Owners of the parent
Non-controlling interests
EARNINGS PER SHARE
– Basic earnings per share (cents)
– Diluted earnings per share (cents)
Notes to the Consolidated Financial Statements are included on pages 82 to 123.
78
BLACKMORES ANNUAL REPORT 2019
Consolidated Statement of
Financial Position
AS AT 30 JUNE 2019
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 liabilities
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 Ltd
Equity attributable to non-controlling interests
Total equity
Notes to the Consolidated Financial Statements are included on pages 82 to 123.
NOTES
2019
$’000
2018
$’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
24,516
143,877
125,104
11,674
355
305,526
36,468
150,788
103,965
10,811
475
302,507
80,754
2,160
80,489
16,532
1,867
3,600
185,402
490,928
131,833
3,028
9,777
5,132
739
150,509
119,000
11,810
1,137
753
132,700
283,209
207,719
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
53,039
4,363
149,890
207,292
427
207,719
37,753
5,926
149,196
192,875
455
193,330
79
BLACKMORES ANNUAL REPORT 2019
Consolidated Statement
of Cash Flows
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers (net of promotional and other rebates)
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 business combinations
Payments for property, plant and equipment
Payments for intangible assets
Dividends received
Amounts received from 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
2019
$’000
2018
$’000
692,861
(641,055)
51,806
666,548
(576,417)
90,131
(6,719)
(25,255)
19,832
(5,634)
(26,467)
58,030
6.4
3.1
3.3
258
1,066
(8,595)
(14,735)
(5,154)
23
-
(27,137)
417
29
-
(10,773)
(5,055)
87
511
(14,784)
1,449,000
(1,416,000)
279
(39,925)
(6,646)
386,000
(378,968)
379
(49,957)
(42,546)
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
(13,951)
36,468
1,999
24,516
700
34,251
1,517
36,468
Notes to the Consolidated Financial Statements are included on pages 82 to 123.
80
BLACKMORES ANNUAL REPORT 2019
Consolidated Statement of
Changes in Equity
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019
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 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 declared
Share-based payments expense
Issue of shares under employee Long-Term Incentive
plans (net of on-market purchases and tax)
-
-
-
-
-
-
-
-
-
1,259
-
(2,687)
-
- 70,005
70,005
(782)
69,223
603
603
2,666
2,666
-
70,005
3,269
73,274
(41)
(823)
3,228
72,451
-
-
-
- (49,957)
-
-
(49,957)
1,259
- (49,957)
1,259
-
-
(6,555)
(9,242)
-
(9,242)
Balance as at 30 June 2018
37,753
3,739
188
1,999 149,196
192,875
455 193,330
Balance as at 1 July 2018
37,753
3,739
188
1,999 149,196
192,875
455 193,330
Profit/(loss) for the year
Other comprehensive income/(expense) for the
year (net of tax)
Total comprehensive income for the year
Dividends declared
Share-based payments benefit
Issue of shares under Dividend Reinvestment
Plan (DRP)
Issue of shares under employee Long-Term Incentive
plans (net of on-market purchases and tax)
-
-
-
-
-
-
-
-
-
(1,236)
12,616
-
2,670
(2,436)
-
- 53,469
53,469
(39) 53,430
(509)
(509)
-
2,618
2,618 53,469
2,109
55,578
2,120
11
(28) 55,550
-
-
-
-
- (52,541)
-
-
(52,541)
(1,236)
- (52,541)
- (1,236)
-
-
12,616
- 12,616
-
(234)
-
-
-
Balance as at 30 June 2019
53,039
67
(321)
4,617 149,890
207,292
427 207,719
Notes to the Consolidated Financial Statements are included on pages 82 to 123.
81
BLACKMORES ANNUAL REPORT 2019
NOTES
to the Financial Statements
––––
FOR THE FINANCIAL YEAR ENDED
30 JUNE 2019
82 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 9
01
GENERAL
INFORMATION
PAGE 84
02
OUR
OPERATIONS
PAGE 88
03
OUR
INVESTMENTS
PAGE 100
04
OUR
FINANCING
PAGE 106
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 Profi t 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 110
5.1 Categories of fi nancial 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 116
07
OTHER
PAGE 122
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
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 9 83
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 2019
01 GENERAL
INFORMATION
Blackmores Limited (the Company) is a public company listed on the Australian
Securities Exchange (trading under the symbol ‘BKL’), incorporated in Australia
and operating across Australia, New Zealand and Asia.
Blackmores Limited’s registered
offi ce 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 Annual Financial Report (Financial Report) of
Blackmores as at and for the twelve months ended 30 June 2019 comprises Blackmores and its subsidiaries (the Group).
The Financial Report of the Group as at and for the year ended 30 June 2019 is available upon request from the registered offi ce 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-profi t 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 14 August 2019.
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
fi nancial 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 2018, 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 (and expressed in) the nearest thousand dollars, unless otherwise indicated.
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 9
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 2019
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 fl ows are
included in the Consolidated Statement of Cash Flows inclusive of GST. GST in relation to investing or fi nancing activities which
is recoverable from, or payable to, the taxation authorities is classifi ed within operating cash fl ows.
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 fi nancial results and fi nancial 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 fl uctuate signifi cantly, 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 fl ows relating to transactions between members of the Group are eliminated in full on consolidation.
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 9 85
1.1 REPORTING ENTITY
1.3 BASIS OF PREPARATION
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 2019
01 GENERAL
1.5 APPLICATION OF NEW AND REVISED STANDARDS
INFORMATION
(i) AASB 15 Revenue from Contracts with Customers
In the current year, the Group has applied AASB 15 Revenue from Contracts with Customers (as amended), which is effective for an
annual period that begins on or after 1 January 2018. It replaced AASB 118 Revenue and related interpretations. Apart from providing
more extensive disclosures for the Group’s revenue transactions, the application of AASB 15 has not had a signifi cant impact on the
fi nancial position and/or fi nancial performance of the Group.
• Summary of revenue streams
• Revenue from sale of goods is reduced for discounts and promotional and other rebates.
(ii) AASB 9 Financial Instruments
AASB 9 introduces new requirements for the classifi cation and measurement of fi nancial assets and liabilities.
AASB 9 changes the calculation of impairment losses in fi nancial assets. It impacts the way that the Group calculates the doubtful debt
provision, now termed the expected credit loss allowance. The Group applies the IFRS 9 simplifi ed approach to measuring expected
credit losses, which uses a lifetime expected loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days
past due. A provision matrix is determined based on historical credit loss rates for each group of customers, adjusted for any material
expected changes to the customers’ future credit risk.
(iii) AASB 16 Leases
General impact of application
AASB 16 provides a comprehensive model for the identifi cation of lease arrangements and their treatment in the Financial Statements
for both lessors and lessees. AASB 16 will supersede the current lease guidance including AASB 117 Leases and the related
Interpretations when it becomes effective for accounting periods beginning on or after 1 January 2019. The date of initial application of
AASB 16 for the Group will be 1 July 2019.
Impact of the new defi nition of a lease
The Group will make use of the practical expedient available on transition to AASB 16 not to reassess whether a contract is or contains
a lease. Accordingly, the defi nition of a lease in accordance with AASB 117 and Interpretation 4 will continue to apply to those leases
entered into or modifi ed before 1 July 2019.
The change in defi nition of a lease mainly relates to the concept of control. AASB 16 distinguishes between leases and service
contracts on the basis of whether the use of an identifi ed asset is controlled by the customer. Control is considered to exist if the
customer has:
• The right to obtain substantially all of the economic benefi ts from the use of an identifi ed asset, and
• The right to direct the use of that asset.
The Group will apply the defi nition of a lease and related guidance set out in AASB 16 to all lease contracts entered into or modifi ed on
or after 1 July 2019. In preparation for the fi rst-time application of AASB 16, the Group has carried out an implementation project. The
project has shown that the new defi nition in AASB 16 will not change signifi cantly the scope of contracts that meet the defi nition of a
lease for the Group.
Impact on lessee accounting
Operating leases
AASB 16 will change how the Group accounts for leases previously classifi ed as operating leases under AASB 117, which were off-
balance sheet.
On initial application of AASB 16, for all leases (except as noted below), the Group will:
• Recognise right-of-use assets and lease liabilities in the Consolidated Statement of Financial Position, initially measured at the
present value of the future lease payments;
• Recognise depreciation of right-of-use assets and interest on lease liabilities in the Consolidated Statement of Profi t or Loss;
• Separate the total amount of cash paid into a principal portion (presented within fi nancing activities) and interest (presented within
operating activities) in the Consolidated Statement of Cash Flows.
Lease incentives (e.g. rent-free periods) will be recognised as part of the measurement of the right-of-use assets and lease liabilities,
86 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 9
1.5 APPLICATION OF NEW AND REVISED STANDARDS
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 2019
1.5 APPLICATION OF NEW AND REVISED STANDARDS (CONT.)
whereas under AASB 117 they resulted in the recognition of a lease liability incentive, amortised as a reduction of rental expenses on a
straight-line basis.
Under AASB 16, right-of-use assets will be tested for impairment in accordance with AASB 136 Impairment of Assets. This will replace
the previous requirement to recognise a provision for onerous lease contracts.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as personal computers and offi ce furniture),
the Group will opt to recognise a lease expense on a straight-line basis as permitted by AASB 16.
As at 30 June 2019, the Group has non-cancellable operating lease commitments of $22,852.
A preliminary assessment indicates that $22,488 of these arrangements relate to leases other than short-term leases and leases of
low-value assets, and hence the Group will recognise a right-of-use asset of $21,352 and a corresponding lease liability of $21,381 in
respect of all these leases.
The preliminary assessment indicates that $364 of these arrangements relate to short-term leases and leases of low value assets.
Finance leases
The main differences between AASB 16 and AASB 117 with respect to assets formerly held under a fi nance lease is the measurement
of the residual value guarantees provided by the lessee to the lessor. AASB 16 requires that the Group recognises as part of its lease
liability only the amount expected to be payable under a residual value guarantee, rather than the maximum amount guaranteed as
required by AASB 117.
Based on an analysis of the Group’s fi nance leases as at 30 June 2019 on the basis of the facts and circumstances that exist at that date,
the Directors of the Company have assessed that this change will not have a material impact on the amounts recognised in the Group’s
Consolidated Financial Statements.
1.5.1 Standards and interpretations in issue, not yet adopted
AASB 16 ‘Leases’
AASB 2018-6 Amendments to Australian Accounting Standards – Defi nition of a Business
AASB 2018-7 Amendments to Australian Accounting Standards – Defi nition of Material
AASB 2019-1 Amendments to Australian Accounting Standards – References to the
Conceptual Framework
1.5.2 Standards and interpretations 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 2016-5 Amendments to Australian Accounting Standards – Classifi cation and
Measurement of Share-based Payment Transactions
EFFECTIVE FOR
ANNUAL PERIODS
BEGINNING
ON OR AFTER
EXPECTED TO BE
INITIALLY APPLIED
IN THE FINANCIAL
YEAR ENDING
1-Jan-19
1-Jan-20
1-Jan-20
30-Jun-20
30-Jun-21
30-Jun-21
1-Jan-20
30-Jun-21
1-Jan-18
1-Jan-18
30-Jun-19
30-Jun-19
1-Jan-18
30-Jun-19
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 9 87
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 2019
02 OUR
OPERATIONS
Blackmores is a leading natural healthcare company across the Asia Pacifi c
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
2019
$’000
2018
$’000
755,880
(146,378)
609,502
746,681
(145,545)
601,136
4,792
718
614,294
601,854
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 performance obligation of the sale has been fulfi lled and control of the
goods has been transferred to the customer. Specifi cally, 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. Control of the goods
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.
Key estimates and judgements
Promotional and other rebates
Recognition of rebate accruals at balance date requires management to exercise signifi cant 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
by customers towards promotional activities.
For the year ended 30 June 2019, the Group recognised promotional and other rebates of $146,378 (2018: $145,545) which
have been charged against sales revenue as disclosed in the Consolidated Statement of Profi t or Loss and Other Comprehensive
Income.
Accruals for promotional and other rebates as at 30 June 2019 are included within other creditors and accruals in note 2.4.5.
88 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 9
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 2019
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
Blackmores, Pure
Animal Wellbeing and
Impromy brands sold
across Australia and
New Zealand, also
including the benefi t
of sales made to
customers which are
ultimately intended for
Asian markets.
CHINA
Comprising Blackmores
and Pure Animal
Wellbeing brands
in China (in-country)
and the 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 (China),
Taiwan (China),
Korea, Indonesia,
Vietnam, Pakistan and
Kazakhstan.
CORPORATE COSTS
Those costs which
cannot be reliably
allocated to a specifi c
segment, or which
have been incurred
for long-term growth
opportunities.
2.2.1 Revenue by segment
ANZ1
China
BioCeuticals Group
Other Asia
2019
$’000
2018
$’000
266,989
122,249
112,903
107,361
609,502
266,922
143,287
108,533
82,394
601,136
1. ANZ segment includes ‘other’ of $528 in 2018 comparatives.
The Group has one customer who contributed more than 10% of the Group’s revenue in the year (2018: one).
Included in revenue of the Group is revenue of $143,873 (2018: $141,202) 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
ANZ1
China
BioCeuticals Group
Other Asia
Corporate costs
1. ANZ segment includes ‘other’ in 2018 comparatives.
2.2.3 Revenue history by segment
2019
$’000
2018
$’000
49,782
21,465
17,914
7,479
(16,100)
80,540
62,133
35,627
16,339
2,353
(14,840)
101,612
267
267
2018
2019
143
122
109
113
107
82
S
N
O
I
L
L
I
M
$
300
250
200
150
100
50
0
ANZ
China
BioCeuticals
Group
Other Asia
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 9 89
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 2019
02 OUR
2.3 PROFIT FOR THE YEAR
OPERATIONS
PROFIT FOR THE YEAR HAS BEEN ARRIVED AT AFTER CHARGING:
Employee benefi ts expense
Post-employment benefi ts:
Defi ned contribution plans
Share-based payments:
Equity-settled share-based payments
Cash-settled share-based payments
Redundancy 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
2019
$’000
2018
$’000
7,886
7,184
(1,236)
(16)
1,259
397
2,195
-
140,017
148,846
128,295
137,135
3,916
7,662
-
943
2019
$’000
2018
$’000
24,516
36,468
Cash and cash equivalents comprise cash on hand, cash at bank, call deposits and overdrafts with an original maturity of three
months or less.
90 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 9
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 2019
2.4 WORKING CAPITAL (CONT.)
2.4.2 Reconciliation of profi t after tax to net cash fl ows from operating activities
Profi t after tax
Non-cash expenses
Depreciation and amortisation
Net (profi t)/loss on disposal of property plant and equipment
Non-cash income
Revaluation of investments
Investing cash fl ow items
Interest revenue
Dividend income
Proceeds from disposal of property, plant and equipment
Decrease/(increase) in assets
Receivables
Inventories
Other current assets
Deferred tax assets
Amounts advanced to related parties
(Decrease)/increase in liabilities
Trade and other payables
Current tax liabilities
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
(Loss)/gain recognised on cash fl ow hedges (net of tax)
Other items
Net cash infl ows from operations
2019
$’000
2018
$’000
53,430
69,223
10,874
(658)
8,940
357
(63)
(130)
(258)
(23)
(1,066)
(417)
(87)
(29)
6,911
(21,139)
(863)
(3,942)
-
(26,035)
(1,218)
1,712
1,047
(92)
270
2,469
2,629
(1,236)
(2,670)
(509)
262
19,832
(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
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 9 91
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 2019
02 OUR
2.4 WORKING CAPITAL (CONT.)
OPERATIONS
2.4.3 Current 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 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 fi nancial year
(Decrease)/increase to provision
Amounts written off as uncollectable
Balance at the end of the fi nancial year
2019
$’000
2018
$’000
143,833
(3,230)
(2,443)
936
4,781
143,877
153,208
(6,173)
(1,249)
2,405
2,597
150,788
19,853
2,765
2,336
2,987
27,941
29
38
39
3,124
3,230
6,173
(235)
(2,708)
3,230
22,245
1,484
440
3,265
27,434
18
12
18
7,370
7,418
1,059
5,686
(572)
6,173
As at 30 June 2019, the Group has two customers (2018: two customers) each comprising amounts greater than 5% (2018: 5%) of the
total trade receivables balance. These customers owe the Group more than $55,000 (2018: $52,000) and accounted for approximately
39% (2018: 35%) 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.
A provision for doubtful debts is recognised for expected credit losses for trade receivables. The expected credit losses are
estimated using a provision matrix based on the Group’s historical credit loss experience, shared credit risk characteristics
and days past due adjusted for any material expected changes to the customers’ future credit risk. The provision for doubtful
debts is the difference between the asset’s carrying amount and the future expected credit losses.
Refer to note 5.5 for more detail on how the Group manages credit risk.
Customers who wish to trade on credit terms are subject to extensive credit verifi cation procedures. Receivables balances
are monitored closely and management takes appropriate steps if a receivable becomes overdue and/or impaired.
92 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 9
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 2019
2.4 WORKING CAPITAL (CONT.)
2.4.4 Inventories
Ingredients
Raw materials
Finished goods
2019
$’000
2018
$’000
19,304
33,022
72,778
125,104
21,274
30,759
51,932
103,965
The provision at balance date to cover inventory write downs is $7,924 (2018: $11,611) 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 fi xed 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 fi rst-in-fi rst-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.
Signifi cant 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
2019
$’000
2018
$’000
79,360
48,907
3,566
131,833
98,723
56,144
3,001
157,868
1. The average credit period on purchases ranges from 30 to 90 days from the end of the month of invoice. The Group has fi nancial 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.
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 9 93
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 2019
02 OUR
2.5 INCOME TAXES
OPERATIONS
2.5.1 Income tax recognised in profi t 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
Benefi t relating to the origination and reversal of temporary differences
Current year adjustments in relation to prior years' deferred tax
Total income tax expense
2019
$’000
2018
$’000
19,847
(469)
25,257
(171)
1,969
768
22,115
3,242
131
28,459
Reconciliation of prima facie income tax expense to income tax expense recognised in profi t or loss
Profi t before tax
Income tax expense calculated at 30%
75,543
22,663
97,682
29,305
Tax-effect of reconciling items
Non-deductible expenses
Tax concessions
Prior year tax losses now utilised
Tax losses not recognised
Rate differential on overseas operations
Other
(Over)/under provision of income tax in previous year
Income tax expense recognised in profi t or loss
470
(281)
(914)
314
(774)
338
21,816
299
22,115
473
(229)
(1,089)
4
(101)
136
28,499
(40)
28,459
The tax rate used for the 2019 and 2018 reconciliations is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profi ts 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.
94 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 9
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 2019
2.5 INCOME TAXES (CONT.)
2.5.2 Deferred tax balances
Deferred tax balances arise from the following:
Temporary differences 2019
Property, plant and equipment
Prepayments and other
Provisions
Accruals
Cash fl ow hedges1
Foreign currency monetary items
Capitalised expenses
Indefi nite life intangible assets
Carried forward tax losses2
Other
OPENING
BALANCE
$’000
FILING
MOVEMENT DIFFERENCES
$’000
$’000
CLOSING
BALANCE
$’000
(522)
(26)
6,242
3,520
286
(541)
(14)
(9,339)
1,788
1,855
3,249
(36)
(5)
804
(279)
141
470
(13)
(1,402)
1,297
(272)
705
171
-
31
626
-
3
23
-
(281)
195
768
(387)
(31)
7,077
3,867
427
(68)
(4)
(10,741)
2,804
1,778
4,722
1. Cash fl ow hedges movement was recognised in other comprehensive income.
2. Unutilised tax losses were recognised as deferred tax assets during 2019. The recognition was dependent on future taxable profi ts of the relevant entities in excess of the profi ts
arising from the reversal of existing taxable temporary differences. The likelihood of suffi cient future taxable profi ts is supported by historic increases in sales and operating profi ts
of the relevant entities and further projected increases prior to expiry of the losses.
Temporary differences 2018
Property, plant and equipment
Prepayments and other
Provisions
Accruals
Cash fl ow hedges
Foreign currency monetary items
Capitalised expenses
Indefi nite life intangible assets
Carried forward tax losses
Other
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
(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
2019
$’000
16,532
(11,810)
4,722
(522)
(26)
6,242
3,520
286
(541)
(14)
(9,339)
1,788
1,855
3,249
2018
$’000
12,590
(9,341)
3,249
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 9 95
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 2019
02 OUR
2.5 INCOME TAXES (CONT.)
OPERATIONS
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: 2019-2027)
2019
$’000
2018
$’000
1,035
26
1,061
1,230
327
1,557
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 profi t;
• 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 and $1,130 were recognised with respect to
Blackmores Korea and Kalbe Blackmores Nutrition, respectively. Tax losses of $573 were recognised during the year ended 30
June 2019 for Blackmores Taiwan. No tax losses for the year ended 30 June 2019 were recognised for Blackmores Korea or Kalbe
Blackmores Nutrition.
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.
96 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 9
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 2019
2.6 PROVISIONS
Current
Employee benefi ts
Redundancy
Directors’ retirement
Non-current
Employee benefi ts
2019
$’000
2018
$’000
9,005
772
-
9,777
7,917
-
148
8,065
1,137
1,229
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 fl ows estimated to settle the present obligation, its carrying amount is the present value of those cash fl ows (where
the time value of money is material).
When some or all of the economic benefi ts 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 benefi ts 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 benefi ts 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 benefi ts are measured as the present value of the estimated future cash
outfl ows 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 benefi ts
Post-employment benefi ts
Other long-term benefi ts
Share-based payments
2019
$
2018
$
4,127,952
166,950
29,495
(496,612)
3,827,785
4,693,176
156,313
22,051
935,849
5,807,389
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.
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 9 97
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 2019
02 OUR
2.7 REMUNERATION STRUCTURE (CONT.)
OPERATIONS
2.7.2 Share-based payments
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. 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 profi t or loss over the
remaining vesting period, with corresponding adjustment to the equity-settled employee benefi ts 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 profi t or loss for the year.
Executive and Employee Share Option Plan
The Executive Performance Share Plan was approved at the Blackmores Annual General Meeting in October 2018. 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 specifi c 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 specifi c
performance objectives and hurdles are met over the three-year period commencing 1 July 2018 to the year ending 30 June 2021.
If the performance and employment vesting conditions are met, the minimum number of rights that could be vested under the
entitlement is 5,937 (2018: 6,724) and the maximum number of rights that could be vested is 44,196 (2018: 49,487). Several grant
dates applied to these rights; as a result, the following fair values applied to the number of rights listed below.
Share rights series
Grants in the 2019 year
Granted
Grants in the 2018 year
Granted
NUMBER
OF RIGHTS
GRANT
DATE
EXPIRY
DATE
EXERCISE FAIR VALUE AT
GRANT DATE
PRICE
44,196 16-Nov-18
30-Jun-21
N/A
$124.21
49,487
17-Nov-17
30-Jun-20
N/A
$144.39
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
2019
WEIGHTED
AVERAGE
OF RIGHTS EXERCISE PRICE
NUMBER
2018
WEIGHTED
AVERAGE
OF RIGHTS EXERCISE PRICE
NUMBER
99,472
44,196
(24,341)
(16,544)
-
102,783
102,783
N/A
175,463
49,487
(10,722)
(114,756)
-
99,472
99,472
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 2019 fi nancial year will be
determined in September 2021.
98 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 9
2.7 REMUNERATION STRUCTURE (CONT.)
2.7.2 Share-based payments
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 2019
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:
2019 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%
1. Chief Executive Offi cer refers to Richard Henfrey.
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%
Share-based conditions
pro-rata between
pro-rata between
pro-rata between
pro-rata between
CHIEF
EXECUTIVE
OFFICER1
OTHER SENIOR
COMPANY
EXECUTIVES MANAGEMENT
SENIOR
25
25 to 50
50
50 to 150
150
150
10
10 to 20
20
20 to 80
80
80
5
5 to 10
10
10 to 40
40
40
CHIEF
EXECUTIVE
OFFICER
OTHER SENIOR
COMPANY
EXECUTIVES MANAGEMENT
SENIOR
25
25 to 50
50
50 to 150
150
150
10
10 to 20
20
20 to 80
80
80
5
5 to 10
10
10 to 40
40
40
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 fi ve-day trading period commencing seven days after Blackmores’ results in respect
of the prior fi nancial year are announced to the ASX, less
• The amount of any fi nal dividend per share declared as payable for the prior fi nancial year.
Staff share acquisition plans
The Group has established two staff share acquisition plans.
The fi rst 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 profi t share. 551
shares were issued during the year ended 30 June 2019 (2018: 812 shares). In July 2019, 695 shares (2018: 511 shares) will be issued
to employees, including Senior Executives, for profi t share entitlement that would otherwise have been paid in cash during the year
ended 30 June 2019.
The second plan is open to all eligible employees including Senior Executives and enables them to purchase up to $10 thousand
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 2019 is 31 July 2019. The maximum cost of the shares provided by the Company for the 2019 fi nancial
year has been set at $500 thousand.
Options plan
At 1 July 2018 and at 1 July 2017 there were no share options outstanding. None were issued during the years ended 30 June 2019
(2018: nil) and as at 30 June 2019 (2018: 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 54 to 71.
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 9 99
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 2019
03 OUR
INVESTMENTS
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 2018
Cost
Accumulated depreciation
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Disposals and write offs
Depreciation
Other (including foreign exchange movements)
Net carrying amount at the end of the year
FREEHOLD LAND
AND BUILDINGS1
$’000
PLANT AND
LEASEHOLD
EQUIPMENT IMPROVEMENTS
$’000
$’000
TOTAL
$’000
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
Year ended 30 June 2019
Cost
Accumulated depreciation
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Disposals and write offs
Depreciation
Other (including foreign exchange movements)
Net carrying amount at the end of the year
49,487
(9,660)
39,827
90,575
(52,501)
38,074
5,682
(2,829)
2,853
145,744
(64,990)
80,754
41,117
-
(360)
(930)
-
39,827
32,466
13,573
(48)
(8,014)
97
38,074
2,678
1,162
-
(971)
(16)
2,853
76,261
14,735
(408)
(9,915)
81
80,754
Assets under construction included above:
-
8,074
368
8,442
1. Freehold land and buildings includes $12,488 of non-depreciable land (2018: $12,848).
100 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 9
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 2019
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 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 property 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/(net loss) is recognised in the Consolidated Statement of Profi t or Loss.
Impairment
Property, plant and equipment are tested for impairment in accordance with the policy for impairment of non-fi nancial assets
disclosed in note 3.3.
3.2 INVESTMENT PROPERTY
Cost
2019
$’000
2,160
2018
$’000
2,160
Investment property relates to land at 15 Jubilee Avenue, Warriewood, NSW 2102, which was acquired during the fi nancial year ended
30 June 2010.
Accounting policies
Investment property is defi ned 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. Deprecation is not charged on Blackmores’
investment property as it related 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 confi dent 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 profi t or loss in the period in which the property is derecognised.
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 9 101
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 2019
03 OUR
3.3 GOODWILL AND INTANGIBLE ASSETS
INVESTMENTS
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
Blackmores Australia
China
Year ended 30 June 2019
Cost
Accumulated amortisation
Net carrying amount
Net carrying amount at the beginning of the year
Assets obtained through business combinations
Additions
Amortisation
Other (including foreign exchange revaluation)
Net carrying amount at the end of the year
Allocated to cash generating unit
BioCeuticals
Global Therapeutics
Blackmores Australia
China
Other Asia
OTHER
INDEFINITE LIFE
INTANGIBLE
ASSETS1
$’000
BRANDS
$’000
OTHER
INTANGIBLE
ASSETS2
$’000
GOODWILL
$’000
29,461
-
29,461
29,461
-
-
-
29,461
20,849
7,597
1,015
-
29,461
34,500
-
34,500
29,461
5,039
-
-
-
34,500
20,849
7,597
6,054
-
-
34,500
28,613
-
28,613
28,613
-
-
-
28,613
15,313
13,300
-
-
28,613
30,244
-
30,244
28,613
1,631
-
-
-
30,244
15,313
13,300
1,631
-
-
30,244
5,490
-
5,490
2,613
2,877
-
-
5,490
264
1,160
2,566
1,500
5,490
7,515
-
7,515
5,490
-
2,025
-
-
7,515
264
1,160
3,091
3,000
-
7,515
6,674
(4,026)
2,648
1,067
2,178
(571)
(26)
2,648
680
-
1,968
-
2,648
13,261
(5,031)
8,230
2,648
3,327
3,129
(959)
85
8,230
680
-
6,166
-
1,384
8,230
TOTAL
$’000
70,238
(4,026)
66,212
61,754
5,055
(571)
(26)
66,212
37,106
22,057
5,549
1,500
66,212
85,520
(5,031)
80,489
66,212
9,997
5,154
(959)
85
80,489
37,106
22,057
16,942
3,000
1,384
80,489
1. Other indefi nite life intangible assets relate to registrations, trademarks, and formulations.
2. Other intangible assets relate to patents, capitalised website costs, customer relationships and royalty streams.
102 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 9
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 2019
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 identifi able 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 fi nite
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:
Research partnerships:
Customer relationships:
Royalty stream:
Capitalised website development:
20 years
14 years
10 years
5 years
3 years
Impairment
Intangible assets are tested for impairment in accordance with the policy for impairment of non-fi nancial assets disclosed in this
note.
Impairment of non-fi nancial 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 fi nite 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 indefi nite 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 and its fair value less costs to dispose (FVLCTD). For an
asset that does not generate largely independent cash infl ows, the recoverable amount is assessed at the cash generating unit
(CGU) level, which is the smallest group of assets generating cash infl ows independent of other CGUs that benefi t from the use
of the respective asset. Goodwill is allocated to those CGUs or groups of CGUs that are expected to benefi t from the business
combination in which the goodwill arose, identifi ed 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 Profi t or Loss.
Impairment losses recognised in respect of a CGU will be allocated fi rst 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.
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 9 103
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 2019
03 OUR
3.3 GOODWILL AND INTANGIBLE ASSETS (CONT.)
INVESTMENTS
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
2019
%
2018
%
2.0
8.4
2.0
8.4
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 using a value-in-use calculation. This calculation
uses cash fl ow projections based on the fi ve-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 fl ow projections are based on estimated growth in EBITDA and estimated working capital changes. The cash fl ows
beyond that fi ve-year period have been extrapolated using a steady 2% per annum growth rate, which is the projected long-
term infl ation rate. The Board believes 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 CGU.
104 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 9
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 2019
3.4 COMMITMENTS FOR EXPENDITURE
Catalent business combination1
Not longer than 1 year
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
2019
$’000
2018
$’000
48,000
-
48,000
-
43,200
43,200
8,028
14,824
-
22,852
19,867
19,867
1,246
750
1,996
65
65
2,762
4,688
600
8,050
6,286
10,212
95
16,593
3,152
3,152
2,558
-
2,558
131
131
1,414
4,035
600
6,049
1. Blackmores Limited is committed to the acquisition of Catalent Australia on or before 25 October 2019.
2. Operating leases relate to business premises and the Group's motor vehicle fl eet with lease terms of up to fi ve years. The majority of 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.
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 9 105
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 2019
04 OUR
FINANCING
The Group manages its capital to ensure that entities in the Group will
be able to continue as a going concern while maximising the return to
stakeholders through optimisation of the debt and equity balance.
The Group’s strategy remains unchanged since 2018.
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 fl ows are used to maintain and expand the Group’s production and distribution assets, as well as make the routine
outfl ows 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 fi nancial year was as follows:
Debt
Cash and cash equivalents
Net debt
Equity
Total capital
Gearing ratio
(Net debt as a % of total capital)
2019
$’000
2018
$’000
119,000
(24,516)
94,484
207,292
301,776
86,000
(36,468)
49,532
192,875
242,407
31.3%
20.4%
106 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 9
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 2019
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 for the following unused lines of credit:
Bank loan facilities
Bank overdrafts
2019
$’000
-
119,000
119,000
2018
$’000
-
86,000
86,000
181,000
5,000
186,000
134,000
10,000
144,000
The maturity profi le of current bank loan facilities is as follows:
Debt facilities
Total debt facilities as at 30 June
2019 are as follows:
Undrawn facilities
$181 million
60%
40%
Drawn facilities
$119 million
Maturity profi le
The maturity profi le of existing bank loan facilities by fi nancial year is as follows:
S
N
O
I
L
L
I
M
$
180
160
140
120
100
80
60
40
20
0
2020
2021
2022
2023
2024
Facility expires by Financial Year
Bank loan facilities may be drawn at any time, subject to the terms of the lending agreements. The above facilities are subject
to certain fi nancial covenants and undertakings. No covenants have been breached during the fi nancial year (2018: nil).
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 9 107
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 2019
04 OUR
4.3 INTEREST-BEARING LIABILITIES
FINANCING
Non-current
Unsecured at amortised cost
Bank loan
2019
$’000
2018
$’000
119,000
86,000
Funding activities
On 8 April 2019, Blackmores Limited entered into new funding arrangements with Bank of China, HSBC Bank Australia Limited,
National Australia Bank Limited and Westpac Banking Corporation with maturity dates of April 2022, April 2023 and April 2024. The
funds are available for general corporate purposes.
4.3.1 Reconciliation of liabilities arising from fi nancing activities
Interest-bearing liabilities
Balance at the start of the year
Net cash infl ows
Balance at the end of the year
Accounting policies
2019
$’000
2018
$’000
86,000
33,000
119,000
78,968
7,032
86,000
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
2019
ISSUED
CAPITAL
$’000
2018
NUMBER
2019
NUMBER
Fully paid ordinary shares
Balance at beginning of fi nancial year
Issue of shares under Executive and employee share plans (note 2.7)
Issue of shares under Dividend Reinvestment Plan (DRP)
Balance at end of fi nancial year
17,226,619
17,095
117,797
17,361,511
37,753
2,670
12,616
53,039
17,225,807
812
-
17,226,619
Fully paid ordinary shares carry one vote per share and carry a right to dividends.
2018
ISSUED
CAPITAL
$’000
37,753
-
-
37,753
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.
108 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 9
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 2019
4.5 SHAREHOLDER RETURNS
4.5.1 Earnings per share
Profi t attributable to shareholders of Blackmores Limited
WANOS1 used in the calculation of basic EPS1
WANOS1 used in the calculation of diluted EPS2
Basic EPS
Diluted EPS
2019
$’000
2018
$’000
53,469
70,005
Number
17,295,235
17,295,256
Number
17,226,563
17,254,843
Cents
309.2
309.2
Cents
406.4
405.7
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 2018 (2018: 30 June 2017)
– fully franked at 30% corporate tax rate
Interim dividend for year ended 30 June 2019 (2018: 30 June 2018)
– fully franked at 30% corporate tax rate
Unrecognised amounts
Fully paid ordinary shares
2019
CENTS PER
SHARE
TOTAL
$’000
2018
CENTS PER
SHARE
TOTAL
$’000
155
26,587
140
24,117
150
305
25,954
52,541
150
290
25,840
49,957
Final dividend for year ended 30 June 2019 (2018: 30 June 2018)
– fully franked at 30% corporate tax rate
70
12,154
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
2015
2016
2017
2018
2019
COMPANY
2019
$’000
2018
$’000
29,591
32,350
Earnings per share
Dividends per share
Dividend payout ratio
%
100
90
80
70
60
50
40
30
20
10
0
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 9 109
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 2019
05 OUR FINANCIAL
RISK MANAGEMENT
APPROACH
5.1 CATEGORIES OF FINANCIAL INSTRUMENTS
CLASSIFICATION
Amortised cost
Amortised cost
Available-for-sale
Fair value through profi t or loss
Fair value through profi t or loss
Amortised cost
Amortised cost
NOTE
2.4.1
2.4.3
5.7
5.7
5.7
4.3
2.4.5
2019
$’000
2018
$’000
24,516
143,877
1,503
355
36,468
150,788
1,355
475
739
119,000
131,833
203
86,000
157,868
Financial assets
Cash and cash equivalents
Loans and receivables
Unquoted equity investments
Derivative fi nancial assets
Financial liabilities
Derivative fi nancial liabilities
Interest-bearing borrowings
Trade payables
Accounting policies
Financial instruments
Financial assets and fi nancial liabilities are recognised when a Group entity becomes a party to the contractual provisions of
the instrument. Financial assets and fi nancial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of fi nancial assets and fi nancial liabilities (other than fi nancial assets and fi nancial liabilities
at fair value through profi t or loss) are added to or deducted from the fair value of the fi nancial assets or fi nancial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of fi nancial assets or fi nancial liabilities
at fair value through profi t or loss are recognised immediately in profi t or loss.
5.1.1 Financial assets
Non-derivative fi nancial assets are classifi ed into the following specifi ed categories: available-for-sale (AFS) fi nancial assets and
loans and receivables. The classifi cation depends on the nature and purpose of the fi nancial assets and is determined at the
time of initial recognition. All regular way purchases or sales of fi nancial assets are recognised and derecognised on a trade
date basis. Regular way purchases or sales are purchases or sales of fi nancial 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 fi xed or determinable payments that are not quoted in an active market
are classifi ed 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 fi nancial assets
In relation to the impairment of fi nancial assets, AASB 9 requires an expected credit loss model instead of an incurred credit loss
model under AASB139. The expected credit loss model requires the Group to account for expected credit losses and changes in
those expected credit losses at each reporting date.
AASB 9 requires the Group to measure the loss allowance for fi nancial instruments at an amount equal to the lifetime expected
credit losses. A lifetime expected loss allowance has been calculated for trade receivables through the use of an expected credit
loss model. The model is based on the Group’s historical credit loss experience, shared credit risk characteristics and days past due
adjusted for any material expected changes to the customers’ future credit risk.
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 fi nancial assets
The Group derecognises a fi nancial asset when the contractual rights to the cash fl ows from the asset expire, or when it transfers
the fi nancial asset and substantially all the risks and rewards of ownership of the asset to another party.
110 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 9
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 2019
5.1 CATEGORIES OF FINANCIAL INSTRUMENTS (CONT.)
5.1.2 Financial liabilities and equity instruments
Classifi cation as debt or equity
Debt and equity instruments are classifi ed 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 fi nancial 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 fi nancial 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 fi nancial liability, or (where appropriate) a shorter period, to the net carrying amount on
initial recognition.
Derecognition of fi nancial liabilities
The Group derecognises fi nancial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have
expired. The difference between the carrying amount of the fi nancial liability derecognised and the consideration paid and
payable is recognised in profi t or loss.
Derivative fi nancial instruments
The Group enters into a variety of derivative fi nancial 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 fi nancial 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 profi t or loss immediately unless the derivative is designated and effective as a hedging instrument, in
which event, the timing of the recognition in profi t 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 fl ow hedges or hedges of net investments in foreign operations. Hedges of foreign exchange
risk on fi rm commitments are accounted for as cash fl ow 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 fl ows of the hedged item
attributable to the hedged risk. Notes 5.3 and 5.4 set 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 fl ow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges is recognised
in other comprehensive income and accumulated under the heading of cash fl ow hedging reserve. The gain or loss relating
to the ineffective portion is recognised immediately in profi t 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 reclassifi ed to profi t or loss in
the periods when the hedged item is recognised in profi t or loss, in the same line of the Consolidated Statement of Profi t or Loss
and Other Income as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of
a non-fi nancial asset or a non-fi nancial 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-fi nancial asset
or non-fi nancial 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 qualifi es 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 profi t or loss. When a forecast transaction is no longer expected to occur, the gain
or loss accumulated in equity is recognised immediately in profi t or loss.
5.2 FINANCIAL RISK MANAGEMENT OBJECTIVES
The Group’s Corporate Treasury function provides services to the business, co-ordinates access to domestic and international
fi nancial markets and monitors and manages the fi nancial 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 fi nancial instruments to hedge these risk exposures. The use
of fi nancial 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 fi nancial derivatives. Compliance with policies and exposure limits is
reviewed internally on a continuous basis. The Group does not enter into or trade fi nancial instruments, including derivative fi nancial
instruments, for speculative purposes.
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 9 111
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 2019
05 OUR FINANCIAL
5.3 FOREIGN CURRENCY RISK MANAGEMENT
RISK MANAGEMENT
Sources of risk
The Group undertakes transactions denominated in foreign currencies; consequently, exposures to
exchange rate fl uctuations 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
2019
$’000
LIABILITIES
2018
$’000
12,447
2,000
834
399
495
17,980
4,549
836
350
198
ASSETS
2019
$’000
1,102
2
-
-
236
ASSETS
2018
$’000
2,509
912
-
-
216
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 profi t 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 profi t
or equity, and the balances below would be negative.
USD impact
NZD impact
CAD impact
EUR impact
Other
PROFIT / (LOSS)
10% INCREASE
10% DECREASE
2019
$’000
1,031
182
76
36
16
2018
$’000
1,406
331
76
32
(2)
2019
$’000
(1,261)
(222)
(93)
(44)
(20)
2018
$’000
(1,719)
(404)
(93)
(39)
2
The following forward foreign exchange contracts were still open at the reporting date, in local currency:
CURRENCY
USD
MYR
THB
NZD
CAD
KRW
NOTIONAL PRINCIPAL AMOUNT
FAIR VALUE
2019
$’000
14,160
3,838
5,780
5,210
632
1,101
2018
$’000
10,952
1,457
2,776
4,267
307
-
2019
$’000
252
(26)
(227)
39
14
(8)
2018
$’000
547
(45)
(5)
(82)
2
-
In 2019, there was hedge ineffectiveness of $nil (2018: $7) which was included within other expenses in the Consolidated Statement of
Profi t or Loss and Other Comprehensive Income.
112 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 9
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 2019
5.4 INTEREST RATE RISK MANAGEMENT
Sources of risk
The Group is exposed to interest rate risk as it borrows funds on a fl oating 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.
2019
$’000
2018
$’000
(119,000)
53,000
(66,000)
(86,000)
75,000
(11,000)
The following table details the notional amounts and remaining terms of interest rate swap contracts outstanding as at reporting date:
Outstanding fi xed or fl oating 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
2019
%
2.21
2.38
1.44
0.00
1.95
2018
%
1.86
2.16
0.00
0.00
2.02
2019
$’000
2018
$’000
2019
$’000
2018
$’000
23,000
10,000
20,000
-
53,000
35,000
40,000
-
-
75,000
(23)
(277)
(202)
-
(502)
19
(31)
-
-
12
The interest rate swaps settle on a quarterly basis. The fl oating rate on the interest rate swaps is the Australian bank bill swap bid rate.
All interest rate swap contracts are designated as cash fl ow hedges.
The Group will settle the difference between fi xed and fl oating interest on a net basis.
All other fi nancial assets and liabilities (in the current and prior fi nancial 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 fi nancial 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 2019, if interest rates had been 50 basis points higher or lower and all other variables were held constant,
the Group’s net profi t would decrease by $648 (2018: $575) or increase by $648 (2018: $575) respectively as a result of changes in the
interest rates applicable to commercial bank bills.
For the year ended 30 June 2019, 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 $370 or decrease by $375 respectively (2018: increase by $365 or decrease by
$369 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 fi xed and fl oating 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 fl ows 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 fi nancial year.
The Group entered into $30,000 of new interest rate swaps during the 2019 fi nancial year (2018: $nil), $35,000 matured during the
year (2018: $nil) and $17,000 were terminated during the 2019 fi nancial year (2018: $nil).
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 9 113
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 2019
05 OUR FINANCIAL
5.5 CREDIT RISK MANAGEMENT
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 fi nancial information, trade references
and their own trading record to rate their major customers. Ongoing credit evaluation is performed on
the fi nancial condition of accounts receivable. The credit risk on liquid funds and derivative fi nancial
instruments is limited because the counterparties are banks with sound credit ratings assigned by
international credit-rating agencies. The carrying amount of fi nancial 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 recent 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.
The Group continues to manage and measure risk with respect 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 fl ows.
Liquidity and interest risk tables
The following tables detail the Group’s remaining contractual maturity for its non-derivative fi nancial liabilities with agreed repayment
periods. The tables have been drawn up based on the undiscounted cash fl ows of fi nancial liabilities based on the earliest date on
which the Group can be required to pay. The tables include both interest and principal cash fl ows.
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
2019
Trade and other payables
Borrowings
2018
Trade and other payables
Borrowings
0.00
2.63
0.00
3.05
-
-
-
-
-
-
131,833
-
131,833
157,868
-
157,868
-
-
-
-
-
-
-
119,000
119,000
-
86,000
86,000
-
-
-
-
-
-
131,833
119,000
250,833
157,868
86,000
243,868
There has been no change to the Group’s exposure to liquidity risks or the manner in which it manages and measures the risks from the
previous year.
114 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 9
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 2019
5.6 LIQUIDITY RISK MANAGEMENT (CONT.)
The following table details the Group’s liquidity analysis for its derivative fi nancial instruments. The table has been drawn up based on
the undiscounted net cash infl ows/(outfl ows) on the derivative instruments that settle on a net basis and the undiscounted gross infl ows/
(outfl ows) on those derivatives that require gross settlement. When the amount payable or receivable is not fi xed, the amount disclosed
has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date.
2019
Net settled:
Interest rate swaps
2018
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
(95)
(55)
(166)
(222)
-
(538)
(55)
-
(97)
(25)
-
(177)
5.7 FAIR VALUE MEASUREMENTS
The Directors consider that the carrying amounts of fi nancial assets and fi nancial 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 fi nancial assets and fi nancial liabilities are determined as follows:
• The fair value of fi nancial assets and fi nancial 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
fl ow 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 fi nancial assets and fi nancial liabilities (excluding derivative instruments) is determined in accordance
with generally accepted pricing models based on discounted cash fl ow 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 fi nancial 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
2019
$’000
2018
$’000
1,503
355
-
1,858
(267)
(472)
(739)
1,355
449
26
1,830
(60)
(143)
(203)
Level 3
Level 1
Level 1
Level 1
Level 1
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 9 115
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 2019
06 OUR GROUP
STRUCTURE
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
Profi t for the year
Other comprehensive income
Total comprehensive income
6.1.1 Commitments for expenditure – parent entity
Catalent transaction1
Not longer than 1 year
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
2019
$’000
2018
$’000
174,576
175,291
349,867
105,969
136,791
242,760
53,039
54,102
(34)
107,107
189,113
159,631
348,744
125,619
107,448
233,067
37,753
74,699
3,225
115,677
32,032
(509)
31,523
52,191
603
52,794
48,000
-
48,000
5,504
12,765
-
18,269
19,867
19,867
1,030
730
1,760
65
65
2,440
4,270
600
7,310
-
43,200
43,200
4,373
8,301
95
12,769
3,152
3,152
2,550
-
2,550
-
-
996
3,660
600
5,256
1. Blackmores Limited is committed to the acquisition of Catalent Australia on or before 25 October 2019.
2. Operating leases relate to business premises and the Group’s motor vehicle fl eet with lease terms of up to fi ve years. The majority of 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.
116 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 9
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 2019
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 suffi cient fi nancial 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
2018
2019
%
%
PRINCIPAL ACTIVITY
Australia
100
Hong Kong (China) 100
100
China
100
China
100
Taiwan (China)
100
Australia
100
New Zealand
100
Singapore
100
Malaysia
100
Thailand
100
Thailand
100
Korea
100
Singapore
50
Indonesia
100
Australia
100
New Zealand
100
Australia
United Kingdom
100
Hong Kong (China) 100
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 offi ce
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 profi t 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 fi nancial report.
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 9 117
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 2019
06 OUR GROUP
STRUCTURE
6.2 SUBSIDIARIES (CONT.)
6.2.1 Controlled entities
The Consolidated Statement of Profi t 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 benefi ts 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
Licences and registrations
Other expenses
Total expenses
Earnings before interest and tax
Interest revenue
Interest expense
Net interest expense
Profi t before tax
Income tax expense
Profi t after tax
Other comprehensive income
Items that may be reclassifi ed subsequently to profi t or loss:
Net (loss)/gain on hedging instruments entered into for cash fl ow hedges (net of tax)
Other comprehensive (expense)/income for the period (net of tax)
Total comprehensive income for the period
2019
$’000
2018
$’000
514,281
2,981
517,262
243,957
110,443
36,586
9,494
7,181
8,852
5,717
7,315
1,195
4,166
9,362
444,268
72,994
197
(5,339)
(5,142)
67,852
(19,976)
47,876
518,861
631
519,492
225,817
106,718
34,084
7,939
7,321
8,471
5,856
8,641
1,042
1,698
13,774
421,361
98,131
209
(4,198)
(3,989)
94,142
(29,291)
64,851
(509)
(509)
603
603
47,367
65,454
118 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 9
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 2019
6.2 SUBSIDIARIES (CONT.)
6.2.1 Controlled entities (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 other intangible assets
Deferred tax assets
Other fi nancial assets
Total non-current assets
Total assets
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
Provisions
Other liabilities
Total current liabilities
NON-CURRENT LIABILITIES
Interest-bearing liabilities
Provisions
Other liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
CAPITAL AND RESERVES
Issued capital
Reserves
Retained earnings
Total equity
2019
$’000
2018
$’000
-
123,609
101,537
10,796
235,942
2,713
145,522
89,194
8,916
246,345
78,708
2,160
75,984
8,390
3,959
169,201
405,143
74,224
2,160
63,092
7,166
10,752
157,394
403,739
101,124
2,194
9,176
478
112,972
141,023
4,103
7,704
150
152,980
119,000
1,137
35
11,374
131,546
244,518
160,625
86,000
1,229
108
10,096
97,433
250,413
153,326
53,039
4,240
103,346
160,625
37,753
3,152
112,421
153,326
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 9 119
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 2019
06 OUR GROUP
STRUCTURE
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.
During the fi nancial year ended 30 June 2018, the operations of the partnership were suspended.
Bega Cheese Limited continues to supply Blackmores Group with infant formula and the Blackmores Group continues to market and
sell infant formula through its subsidiaries.
Bemore Partnership Pty Ltd
There have been no transactions in the partnership during the year ended 30 June 2019.
Accounting policy
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 fi nancial statements.
6.4 BUSINESS COMBINATIONS
2019
No subsidiaries were acquired during the fi nancial year ended 30 June 2019.
2018
No subsidiaries were acquired during the fi nancial year ended 30 June 2018.
In October 2019, Blackmores Limited will acquire 100% of Catalent Australia, a tablet and soft-gel capsule manufacturing facility in
Victoria for $48,000.
On 28 November 2018, Blackmores Group acquired the Impromy weight management product portfolio for $8,595.
Net consideration transferred
Cash
Assets acquired arising at date of acquisition
Non-current assets
Brands
Other intangible assets
Goodwill arising on acquisition
Consideration paid in cash
Less: Fair value of identifi able net assets acquired
Impact of acquisition on results of the Group.
The impact of the acquisition on the results of the Group is immaterial for the year ended 30 June 2019.
30 June 2019
$’000
8,595
1,631
3,327
4,958
8,595
(4,958)
3,637
120 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 9
6.3 JOINT OPERATIONS
6.4 BUSINESS COMBINATIONS
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 2019
6.4 BUSINESS COMBINATIONS (CONT.)
Accounting policy
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 profi t 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 identifi able assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts
of the identifi able assets acquired and liabilities assumed exceed 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 profi t 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 classifi ed. Contingent consideration that is classifi ed
as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity.
Contingent consideration that is classifi ed 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 profi t or loss.
6.5 CONTINGENT LIABILITIES
Blackmores has been in discussions with a relevant authority in one of the countries in which it trades pertaining to the historical use
of and compliance to export classifi cation codes and related exemptions claimed under free trade agreements between the periods
of 2009 to 2014. These discussions have been ongoing for over 3 years. The relevant authority recently issued assessments for
approximately $10 million (AUD). Blackmores has initiated an appeal process for those assessments. Blackmores considers that it has
correctly interpreted and complied with all relevant requirements under the free trade agreement and is pursuing all legal avenues of
objection. It remains unclear when a resolution to this matter will be reached. As at the date of signing, no legal liability exists in relation
to the assessments under applicable law of that jurisdiction. A reliable estimate of potential risks or probable outfl ows, if any, cannot be
determined. Accordingly, applying AASB 137 Provisions, Contingent Liabilities and Contingent Assets, no liability has been recorded in
the accounts as at 30 June 2019.
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 9 121
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 2019
07 OTHER
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 fi nancial year
(2018: $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 (expressed in actual dollars) 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
(2018: $nil).
Other related party transactions
During the fi nancial year ended 30 June 2019, 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 $nil (2018: $72,525) were charged.
• Fiftyfi ve5 Pty Ltd, a company of which Brent Wallace is a Director, performed certain consulting services for the Company for which
fees of $255,818 (2018: $nil) were charged.
Balances with related parties
$105,818 was owed to Fiftyfi ve5 Pty Ltd, of a company of which Brent Wallace is a Director at 30 June 2019.
No other balances are outstanding at the end of the fi nancial year with related parties that are not members of the Group (2018: $nil).
122 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 9
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 2019
7.2 REMUNERATION OF AUDITOR
Auditor of the parent entity
Auditing or reviewing the Financial Statements
Taxation services
Other non-audit services1
Network fi rm of the parent company auditor
Auditing or reviewing the Financial Statements
Taxation services
Other non-audit services1
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
2019
$
2018
$
320,774
90,801
98,068
509,643
285,255
17,278
18,620
321,153
325,944
112,398
149,500
587,842
246,493
-
-
246,493
Final dividend
The Directors declared a fully franked fi nal dividend of 70 cents per share on 14 August 2019 as described in note 4.5.2.
7.4 APPROVAL OF FINANCIAL STATEMENTS
The Consolidated Financial Statements were approved by the Board of Directors and authorised for issue on 14 August 2019.
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 9 123
ADDITIONAL INFORMATION
Number of holders of equity securities as at 26 July 2019
Ordinary share capital
17,362,206 fully paid ordinary shares are held by 17,868 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
16,297
1,379
99
78
15
17,868
513
NUMBER
PERCENTAGE
4,010,043
23.10%
Twenty largest holders of quoted equity securities as at 26 July 2019
FULLY PAID ORDINARY SHAREHOLDERS
NUMBER
PERCENTAGE
Mr M C Blackmore
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Dietary Products (Aust) Pty Limited
Milton Corporation Limited
Blackmore Foundation Pty Limited
BNP Paribas Nominees Pty Ltd (Agency Lending A/C)
National Nominees Limited (N A/C)
Mrs E M Whellan
BNP Paribas Nominees Pty Ltd (DRP)
Mrs P G Wright
Rathvale Pty Limited
Marcus Blackmore Holdings P/L (Blackmore S/F A/C)
Mr R Shepherd
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Netwealth Investments Limited (Wrap Services A/C)
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP
BNP Paribas Nominees Pty Ltd (IB AU Noms Retail Client DRP)
Total
3,159,609
1,626,089
840,742
766,112
614,741
601,270
368,664
337,709
199,405
160,350
149,934
124,800
120,196
103,205
99,230
88,179
44,787
41,859
38,881
38,702
9,524,464
18.20
9.37
4.84
4.41
3.54
3.46
2.12
1.95
1.15
0.92
0.86
0.72
0.69
0.59
0.57
0.51
0.26
0.24
0.22
0.22
54.86
124
BLACKMORES ANNUAL REPORT 2019
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
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.
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.
COMPANY INFORMATION
Board of Directors
Directors who are Executives of the Group:
Marcus Blackmore
Directors who are not Executives of the Group:
David Ansell
John Armstrong
Christine Holman (appointed 18 March 2019)
Brent Wallace (Chairman of Directors)
Change of Address
Shareholders who have changed address should advise our
share registrar in writing.
Auditor
Deloitte Touche Tohmatsu
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.
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).
125
BLACKMORES ANNUAL REPORT 2019 NOTES
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126 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 9
Surfing with Sam
Blackmores Group is proud to be continuing its long
lasting partnership with Sam Bloom.
Sam’s story of survival after a horrific fall, leaving her
paralysed from the chest down, continues to inspire all
of us at Blackmores. Her amazing courage and spirit to
continuously strive to be her best sets an example for
all to follow.
This year, Sam’s story will be shared with the world
with the making of a major feature film. It’s a story
Blackmores is proud to have played a small part in.
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