BramBles limited 2008 AnnuAl RepoRt
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Customers, Markets, people
www.brambles.com
Brambles limited
ABn 89 118 896 021
10 Financial performance
12 Chairman’s Review
14 Chief executive officer’s Report
16 executive leadership team
18 CHep
22 Recall
24 Board of Directors
28 Sustainability Report
40 Financial Review
44 Corporate Governance Report
54 Directors’ Report – Remuneration Report
78 Directors’ Report – other Information
82 Shareholder Information
85 Financial Report – Financial Statements
150 Financial Report – Directors’ Declaration
151 Financial Report – Independent Auditors’ Report
153 Auditors’ Independence Declaration
154 Five Year Financial performance Summary
155 Glossary
Inside back cover Directory, Annual General Meeting
and Dividend details
our customers and their markets are in 45 countries ...
direCtOrY
Brambles limited
level 40
Gateway
1 Macquarie place
Sydney nSW 2000
Australia
telephone: 61 (0) 2 9256 5222
Facsimile: 61 (0) 2 9256 5299
Website: www.brambles.com
Brambles limited has a primary listing on
the Australian Securities exchange and
a secondary listing on the london Stock
exchange. the global headquarters of
Brambles is in Sydney, Australia.
All currency amounts in this report are in
uS dollars unless otherwise specified.
annual General meeting
the 2008 Annual General Meeting of
Brambles limited will be held on tuesday,
25 november at 10.00am (AeDt) at:
level 3
overseas passenger terminal
Circular Quay West Street, the Rocks
Sydney nSW 2000
A live webcast of the meeting will be
broadcast on www.brambles.com.
dividend
the final dividend of 17.5 Australian cents
per share is 10% franked for all shareholders
in Brambles limited and will be paid on
9 october 2008.
Brambles Business Units
CHeP americas
8517 South park Circle
orlando Fl 32819-9040
united States of America
CDI holders will receive their dividend
payments as soon as possible after ordinary
shareholders, once fx transactions have been
completed.
telephone: 1 407 370 2437
Facsimile: 1 407 355 6211
email:
Website: www.chep.com
chep@brambles.com
CDIs holders who are also CReSt
participants can expect to receive their
dividend payments via CReSt electronic
unmatched Stock event (uSe) messages,
once the cash has been received and
reconciled by euroclear uK and Ireland,
taking note of their election (if any) of a
default payment currency option as detailed
in the euroclear uK and Ireland international
service description.
For CDI holders who use the equiniti
corporate nominee service, additional
processing time is required to print and mail
cheques, or, for holders who have completed
dividend mandate forms, to set up cash
transfers into their bank accounts. All CDI
holders who use the equiniti corporate
nominee service will receive their dividends
in pounds sterling.
CHeP emea
1 lamb Walk
london
Se1 3tt
united Kingdom
telephone: 44 (0) 207 940 0080
Facsimile: 44 (0) 207 940 7876
CHeP asia-Pacific
level 6, Building C
11 talavera Road,
north Ryde
nSW 2113
Australia
telephone: 61 (0) 2 9856 2437
Facsimile: 61 (0) 2 9856 2404
recall
one Recall Center
180 technology parkway
norcross GA 30092
united States of America
telephone: 1 770 776 1000
Facsimile: 1 770 776 1001
email:
Website: www.recall.com
recall@brambles.com
CHep
Recall
CHep and Recall
Cover: Brian Soulsby, national eCR
and Supply Chain Manager of Colgate-
palmolive and Matthew Jager, team
leader – Sales, CHep Asia-pacific.
Page 1: Andrew letfallah, Recall
Sales Manager – Retail, has been
with Brambles for over seven years
and manages a sales team of 13.
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Brambles is committed to achieving Zero Harm, which
means zero injuries and zero environmental damage,
and has used a peFC, Chain of Custody accredited
printer to produce this Annual Report.
the text pages of this Annual Report are printed on
enVI web, a carbon neutral, peFC Certified paper,
which is an elemental chlorine free pulp derived from
sustainable forests. the paper was manufactured at
Australian papers’ Wesley Vale Mill under ISo 14001,
an international environmental standard.
... served by more than 12,000 Brambles people.
Our people are totally committed to our customers. They know that achieving
sustainable growth requires us to understand, and anticipate, our customers’
changing needs and operating environments. Brambles strives for continuous
improvement in customer service and satisfaction to make it easier for our
customers to do business with us.
Brambles Limited 2008 Annual Report 1
is the global leader in pallet and container pooling services.
CHEPCHEP is the global leader in pallet and container pooling services.
PALLETS
PALLETS
CHEP’s pallet pooling system helps
our customers by lowering transport
and distribution costs, improving
handling efficiencies and safety, and
reducing product damage.
rEuSABLE PLASTiC
rEuSABLE PLASTiC
ConTAinErS
ConTAinErS
CHEP’s Reusable Plastic
Containers reduce product damage
and packaging-related costs, improve
product and retailer presentation and
reduce packaging waste.
AuTomoTivE ConTAinErS
AuTomoTivE ConTAinErS
CHEP’s automotive containers help
our customers by avoiding double
handling of parts as automotive
components move directly from
suppliers to manufacturers.
inTErmEdiATE BuLk
inTErmEdiATE BuLk
ConTAinErS
ConTAinErS
CHEP’s Intermediate Bulk
Containers provide cost and quality
assurance for the bulk packaging
of liquid and dry products in the
food, chemical, pharmaceutical and
transport industries.
2 Brambles Limited 2008 Annual Report
is a global leader in the management of information
recall is a global leader in the management of information
recall
throughout its life cycle.
throughout its life cycle.
CATALyST And CHEmiCAL
CATALyST And CHEmiCAL
ConTAinErS
ConTAinErS
CHEP’s Catalyst and Chemical
Containers provide petroleum
refining and chemical industry
customers a safe and efficient
solution for transporting spent
catalysts that is environmentally
superior to bags or drums.
doCumEnT mAnAgEmEnT
doCumEnT mAnAgEmEnT
SoLuTionS (dmS)
SoLuTionS (dmS)
Recall’s DMS business benefits
our customers through the secure
indexing, storage, image capture
and retrieval of physical and
digital documents.
SECurE dESTruCTion
SECurE dESTruCTion
SErviCES (SdS)
SErviCES (SdS)
Recall’s SDS business benefits
our customers by providing best
practice and confidential destruction
of sensitive documents and other
media items of critical value to
the customer.
dATA ProTECTion
dATA ProTECTion
SErviCES (dPS)
SErviCES (dPS)
Recall’s DPS business benefits our
customers by providing reliable
and secure off-site storage, as well
as the rotation, protection and
recovery of computer back-up data.
Brambles Limited 2008 Annual Report 3
Helping our customers to move over three million
pallets and containers of product every day to
markets in 45 countries
CHEP works with many of the world’s leading manufacturers of fast moving
consumer goods, such as Colgate-Palmolive, to provide pallet pooling solutions
that reduce costs, waste and product damage and increase productivity
and efficiency.
An independent life cycle analysis of CHEP USA’s pallet pool found that, compared to traditional exchange and one-way pallet solutions,
CHEP’s system generates much less waste, uses at least 30% less energy and produces at least 33% less greenhouse gas emissions.
4 Brambles Limited 2008 Annual Report
Working with our customers to improve supply
chain efficiency
CHEP’s Innovation Centre in Orlando, Florida is a facility dedicated to designing
and continuously testing our pallets and containers to make them more
durable and safer for use in the supply chain. Customers can work with
CHEP engineers to test and validate material handling platforms and packaging
to help improve the performance of their products while in storage and transit.
A major food manufacturer asked a packaging film supplier to consider shipping its product rolls on a standard CHEP pallet. After testing a
number of unit load configurations, CHEP demonstrated that the rolls could be organised in a specific pattern that resulted in a 20% increase
in product shipped per load and improved operating efficiencies. It also allowed the customer to have additional CHEP pallets in the supply
chain for its use downstream.
Brambles Limited 2008 Annual Report 5
One touch, fresh produce
CHEP’s Reusable Plastic Containers (RPCs) are a durable, reusable,
high quality product that is shipped through the supply chain and displayed
in a retail environment with minimal handling. RPCs offer a one-touch
solution for customers in the fresh fruit and vegetable industry, reducing
damage to produce and removing cardboard from the waste stream.
CHEP’s RPC agreement with Woolworths will set a benchmark in efficiency, safety and environmental performance for Australasia’s fresh
produce supply chain. Under the agreement, the specially designed RPCs will be retrieved and inspected before being washed and relocated
for their next use. In addition to protecting produce as it travels from the farm to the supermarket shelf, CHEP’s RPCs will provide reverse
logistics savings, and reduce water usage and health and safety risks associated with manual handling.
6 Brambles Limited 2008 Annual Report
Improving productivity for automotive customers
CHEP’s automotive containers are designed specifically for the automotive
industry to improve manufacturing efficiencies, reduce product damage
and packaging waste. They also allow customers to improve supply chain
productivity and reduce expenditure by integrating container control with
ordering systems so containers are allocated according to demand.
CHEP is working with ChangAn Ford Mazda Automotive Nanjing in China to provide a total container management solution throughout their
supply chain. CHEP’s pooling model will help avoid double handling of incoming parts, increase efficiency and save costs. CHEP’s people,
who will be located at the customer’s premises, will work with the customer and its supplier base to remove disposable packaging and
replace it with returnable and reusable CHEP containers to drive further long term savings and waste reduction.
Brambles Limited 2008 Annual Report 7
Leading the industry in security and efficiency
Recall’s industry-leading application of radio-frequency identification (RFID)
technology to its carton tracking system increases the accuracy, efficiency
and speed of inventory audits because it allows individual cartons to be
detected three rows deep. Standard bar coding, in comparison, requires
manual search and identification.
Recall can provide cost effective, 100% annual inventory and audit reporting to customers facing stringent audit compliance requirements.
Previously, a million carton audit would take two years to hand-scan and complete. Recall’s RFID-enabled facilities can now do it in a number
of days, saving customers time and money and minimising risk exposure – an ability unprecedented in the information management industry.
8 Brambles Limited 2008 Annual Report
Environmentally sound secure destruction
Identity and intellectual property theft is a major concern throughout the
world. Recall’s exclusive closed loop destruction process allows customers
to dispose of sensitive information and material securely and confidentially.
Globally, Recall collected, shredded and sent for recycling approximately 225,000 tonnes of paper this financial year. Recycling reduces
energy and waste generation and Recall’s recycling saves the equivalent of 697,000 cubic metres of landfill or the felling of about three million
trees. In terms of greenhouse gas emissions, it is the same as removing over 130,000 cars from the road.
Brambles Limited 2008 Annual Report 9
Financial Performance
Brambles delivered another year of solid results in 2008.
Sales revenue grew 13% (6% in constant currency)
to US$4,358.6 million.
Comparable operating profit grew 12% (6% in constant currency)
to US$1,046.9 million.
uS$ miLLionS
uS$ miLLionS
Continuing operations
Sales
Comparable operating profit before costs
relating to quality and Walmart1
Comparable operating profit
Profit after tax, before special items
Special items after tax
Profit after tax, from discontinued operations
2008
2008
20072007
% CHAngE
% CHAngE
% CHAngE
% CHAngE
AT ConSTAnT
AT ConSTAnT
CurrEnCy
CurrEnCy
4,358.6
3,868.8
13%
1,078.4
1,046.9
626.5
20.4
1.8
932.8
932.8
585.7
(152.0)
857.6
16%
12%
7%
6%
9%
6%
0%
Profit for the year2
648.7
1,291.3
(50%)
Earnings per share (US cents)
EPS before special items from continuing operations
Basic EPS
Cash flow from operations
Free cash flow
Net debt
Gearing (net debt/net debt + equity)
Interest cover
44.5
46.0
810.0
412.6
37.8
83.4
875.5
490.2
2,426.2
1,996.9
61.1%
10.0x
58.4%
22.9x
18%
(45%)
10%
note
1 Costs incurred by CHEP USA associated with quality improvement and innovation and transition costs as a result of Walmart’s decision
to modify management of pallet flows within its network in the USA.
2 In 2007 Brambles made an US$820.7 million pre-tax (US$832.9 million post-tax) gain on sale of discontinued businesses, primarily
Cleanaway UK and Asia.
To show underlying performance, constant currency comparisons are used throughout this Report. Constant currency relative performance
is calculated by translating both current period and comparable period results into US$ at the actual monthly exchange rates applicable for
the comparable period.
Its purpose is to show relative performance between periods before the translation impact of currency fluctuations.
10 Brambles Limited 2008 Annual Report
Total dividend of 34.5 Australian cents, up 13%.
Cash flow from operations remained strong at US$810.0 million.
Earnings per share before special items grew 18%
(10% in constant currency) to 44.5 US cents.
SALES From ConTinuing oPErATionS
SALES From ConTinuing oPErATionS
(uS$ miLLionS)
(uS$ miLLionS)
ComPArABLE oPErATing ProFiT
ComPArABLE oPErATing ProFiT
From ConTinuing oPErATionS11
From ConTinuing oPErATionS
(uS$ miLLionS)
(uS$ miLLionS)
4,359
3,869
9%
38%
3,522
8%
38%
3,275
8%
38%
8%
40%
38%
37%
36%
16%
17%
17%
36%
16%
By business:
CHEP Asia-Pacific
CHEP EMEA
CHEP Americas
Recall
1,074
964
9%
37%
9%
35%
801
44%
42%
10%
37%
619
41%
12%
41%
33%
14%
12%
12%
12%
By business:
CHEP Asia-Pacific
CHEP EMEA
CHEP Americas
Recall
2005
2006
2007
2008
2005
2006
2007
2008
CASH FLoW From ConTinuing oPErATionS1 1
CASH FLoW From ConTinuing oPErATionS
(uS$ miLLionS)
(uS$ miLLionS)
EArningS PEr SHArE
EArningS PEr SHArE
(ConTinuing oPErATionS, BEForE SPECiAL iTEmS)
(ConTinuing oPErATionS, BEForE SPECiAL iTEmS)
(uS CEnTS)
(uS CEnTS)
867
847
7%
35%
43%
11%
42%
752
698
8%
41%
10%
43%
34%
40%
37%
13%
11%
10%
15%
By business:
CHEP Asia-Pacific
CHEP EMEA
CHEP Americas
Recall
44.5
37.8
25.5
18.3
2005
2006
2007
2008
2005
2006
2007
2008
note
1 Excludes unallocated Brambles Headquarters costs.
Brambles Limited 2008 Annual Report 11
Brambles delivered a solid performance
during the 2008 financial year in what
was a challenging economic environment
in many markets.
grAHAm krAEHE Ao CHAIRMAN
12 Brambles Limited 2008 Annual Report
Brambles’ solid performance in the 2008
financial year was driven mainly by volume
growth across all regions of CHEP and
Recall. Our balance sheet remains strong
with significant unutilised credit facilities
and no major debt refinancing due before
November 2010. Cash flow from operations
remains strong at US$810 million.
Under the on-market share buy-back
program approved by shareholders at last
year’s Annual General Meeting, Brambles
has bought back 42 million shares at a total
cost of US$392 million.
The Board was pleased to declare a final
dividend for the 2008 financial year of 17.5
Australian cents per share. Together with
the interim dividend of 17.0 Australian cents,
the total dividend for the year was 34.5
Australian cents, an increase of 13% over
last year.
rETirEmEnT oF don ArguS
On 6 February 2008, Don Argus retired
as Chairman of Brambles due to his other
business commitments. Don provided strong
leadership during his tenure of eight and a
half years, a period that involved some of
the most momentous changes in Brambles’
history. These changes included uniting
the ownership of CHEP around the globe
to create the world’s largest pallet pooling
operator and, more recently, simplifying
Brambles’ structure and successfully
implementing both a CEO succession
process and a new management structure
to support growth.
Don made an outstanding contribution
to Brambles and he left the company in a
position of operational and financial strength,
with a growing global footprint. On behalf
of all shareholders, I would like to thank
Don for his contribution to Brambles.
I thank my Board colleagues for
their confidence in appointing me
Chairman. Following his appointment
as CEO, Mike Ihlein has reorganised the
management structure and appointed
a strong team who, I am confident, can
deliver Brambles’ growth strategy.
BoArd rEnEWAL And CorPorATE
govErnAnCE
In addition to the retirement of Don Argus,
there were a number of other changes to
the Board during the year. As advised last
year, David Turner and Hans-Olaf Henkel
retired as Directors at the conclusion of
the 2007 Annual General Meeting and
Dave Mezzanotte retired as a Director on
4 April 2008. Liz Doherty joined the Board
as an Executive Director on 1 December
2007, following her appointment as Chief
Financial Officer.
Jac Nasser resigned as a Non-executive
Director on 14 January 2008 and I thank
him for his excellent contribution to the
Board over four years, including his service
on the Remuneration Committee and the
Nominations Committee.
The Corporate Governance Report on
page 44 of this Annual Report outlines
the key components of Brambles’
governance framework. During the 2008
financial year, Brambles made the transition
from the first edition to the second edition
of the ASX Corporate Governance Council’s
Principles and Recommendations. As at
30 June 2008, the Board considers that
Brambles was in compliance in all material
respects with the second edition of those
principles and recommendations. The
Board is, however, conscious that best
practice in the area of corporate governance
is continuously evolving, and will therefore
continue to anticipate and respond to
further corporate governance developments
on an ongoing basis.
SuSTAinABiLiTy
Brambles has recognised for many years
that we must focus not only on our financial
performance, but also social, ethical,
environmental and other non-financial issues
to ensure we create a sustainable company
and sustainable shareholder value. Our
Sustainability Report on page 28 provides
details of our performance in these areas.
Brambles has a relatively light environmental
footprint – we will not, for example, be
obliged to report under Australia’s new
National Greenhouse and Energy Reporting
System from 2009. We are committed,
nevertheless, to minimising our impact on
the environment and I am pleased to say
that we have again maintained our position
in the landmark FTSE4Good and Dow Jones
Sustainability Indices.
Brambles continues to provide financial and
other forms of support to a broad range of
charitable and community organisations
around the world. The Brambles
Community Reach program provided about
US$600,000 in grants during the year
to help our people to support causes that
benefit health, the environment or safety.
More detail is provided on pages 38 and 39.
SAFETy
We are also committed to working safely
and applying industry best practice to the
health, safety and wellbeing of employees,
customers, contractors, suppliers and the
communities in which we operate. Our aim
is to achieve Zero Harm, which means zero
injuries and zero environmental damage.
It is with great sadness, however, that I
report that Mr Ícaro Roldão Chaves de Barros
Júnior, an employee of CHEP in Brazil, was
fatally injured in January 2008 in a road
traffic accident when he lost control of his
vehicle in heavy rain and collided with a
truck. On behalf of Brambles, I extend my
sincere condolences to his family and friends.
ouTLook
Brambles is well positioned to deliver another
year of sales revenue and profit growth in the
2009 financial year. Good progress is being
made in a number of strategically important
growth areas for CHEP, particularly food
service and beverages in the USA, expansion
in Germany and Poland and the emerging
markets of China and India. The Company
is confident of continuing to win significant
new business in all markets and this will
contribute to volume growth in the 2009
financial year and beyond.
All business units (CHEP Americas, EMEA
and Asia-Pacific, and Recall) are expected
to deliver increased sales revenue in the
2009 financial year. Ongoing focus on cost
efficiencies and network optimisation will
also benefit profit growth in each business
unit. However, CHEP Asia-Pacific profit
growth will be impacted in the near term due
to its strategic investments in the emerging
markets of China and India.
Brambles remains confident that an
agreement will be reached with Walmart
to deliver the lowest cost overall supply chain
solution, although CHEP USA profit growth
will be subdued in the 2009 financial year
due to non-recurring Walmart transition costs.
Brambles has robust business models
in both CHEP and Recall which have a
continuing ability to gain significant new
business. A considerable proportion of
customers are involved in the fast moving
consumer goods (FMCG) sector which,
while not immune from downturns, generally
proves less volatile in challenging economic
conditions. However, Brambles recognises
that the more difficult consumer environment
in many markets has the potential to
dampen organic growth in the short term.
Brambles has a high quality customer base,
strong track record in winning new business
and opportunities for growth in existing
and emerging markets. While the current
economic uncertainty in global markets has
the potential to affect consumer sentiment,
Brambles is well positioned to achieve its
objective of 10% compound sustainable
sales revenue growth in the medium to
long term.
Brambles Limited 2008 Annual Report 13
Brambles’ performance in 2008 confirmed the
strength of our business models and featured
excellent early progress in the implementation
of our growth strategy.
mikE iHLEin CHIEF EXECUTIvE OFFICER
14 Brambles Limited 2008 Annual Report
The highlights of Brambles’ financial
performance during the year were:
–
sales revenue up 13% (6% in constant
currency) to US$4.4 billion;
–
comparable operating profit up
12% (6% in constant currency) to
US$1,046.9 million;
–
prior to our investment in quality initiatives
and the impact of transition costs relating
to the management of pallet flows in the
Walmart network in the USA, comparable
operating profit was up 16% (9% in
constant currency) to US$1,078.4 million;
–
comparable operating profit margin
maintained at 24%;
–
earnings per share before special items
up 18% (10% in constant currency) to
44.5 US cents;
–
cash flow from operations remaining
strong at US$810.0 million; and
–
Brambles value Added (BvA) up
US$24 million to US$516 million.
It is a tribute to the excellence of our people
that we delivered a solid performance given
the increasingly challenging economic
environment in many markets. Importantly,
we continue to win significant new business,
in both existing and new markets.
Brambles continues to implement a range
of initiatives to effectively manage transport
costs. These initiatives include optimising
transport networks and using on-line
auctions to meet its transport requirements.
The recent acquisition of LeanLogistics,
a leading provider of technology-based
transport and supply chain solutions in
the USA, will also enable CHEP to provide
enhanced transportation management
services to customers.
invESTmEnT For groWTH
Brambles has extensive organic growth
prospects in all its key markets as well
as a number of significant geographic
expansion opportunities. During the year,
we commenced a strategic investment
program targeted mainly at new business
in CHEP.
When the program was announced in
February 2008, opportunities were identified
across all parts of the business. Some of the
key opportunities in CHEP are the beverages
and food service sectors in the USA,
business expansion in Germany, Central and
Eastern Europe and China, along with the
establishment of a CHEP presence in India.
CHEP has made good progress on its
strategic program, with capital expenditure
in the 2008 financial year totalling
approximately US$35 million on the
following new business activities:
–
increased presence in the food service
sector in the USA through a significant
expansion of business with Tyson Foods,
which will become one of CHEP USA’s
largest customers;
–
new business in the USA non-
carbonated beverages sector, with a
major manufacturer converting from
‘white wood’ to CHEP;
–
adding a number of new customers
in China, including Tsing Tao Breweries,
Nestlé Waters, Asia Pacific Breweries,
Nongfu Spring Mineral Water and
ChangAn Ford Mazda;
–
CHEP Asia-Pacific commencing operations
in the rapidly growing Indian market in the
latter part of the financial year; and
–
CHEP EMEA winning business in
Germany and adding several new
customers in Poland.
Successful execution of the strategic
investment program will contribute to
Brambles’ objective to achieve 10%
compound sustainable revenue growth
in the medium to long term.
invESTmEnT in QuALiTy
And innovATion
CHEP USA is also investing US$100 million
over two years in a range of initiatives
focused on quality improvement and
innovation in response to customers’
increased use of automation. A total of
US$25.1 million was spent during the 2008
financial year. The initiatives included:
–
establishing a team of plant quality
representatives located at service centres
which inspect, repair and re-issue pallets
to customers;
–
implementing automated digital pallet
inspection equipment; and
–
introducing the new Blue Step Pallet
(currently under trial) which provides
better protection for customer products
and reduced pallet damage.
nEW orgAniSATion And ExECuTivE
LEAdErSHiP TEAm
In August 2007, I announced a new
organisation structure to provide the support
required to deliver profitable growth in
both existing and new markets. The most
significant change is that CHEP is now
managed as three Groups:
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
USA, Canada,
Latin America, plus
LeanLogistics and the
global Catalyst and
Chemical Containers
business
Europe, Middle East
and Africa
Australia, New
Zealand, South-East
Asia, India and China
The reporting structure for Recall remains
unchanged.
On 31 January 2008, I announced the three
new Group Presidents for CHEP:
Kevin Shuba
Tom Gorman
Craig van der Laan
Group President,
CHEP Americas
Group President,
CHEP EMEA
Group President,
CHEP Asia-Pacific
These outstanding executives report directly
to me as part of the new Brambles Executive
Leadership Team (ELT). The other members
of the ELT are:
Elton Potts
President and Chief
Operating Officer,
Recall
Liz Doherty
Chief Financial Officer
Nick Smith
Jasper Judd
Senior vice President
– Human Resources
Senior vice
President – Strategic
Development
Profiles of the ELT members are provided
on pages 16 and 17. I am delighted that
we were able to promote individuals with
excellent skills, talent and experience from
within the business and also attract external
senior executives of the highest quality.
CuSTomErS, mArkETS, PEoPLE
When I became Chief Executive Officer on
1 July 2007, I stressed that Brambles has
very strong foundations on which to build
its future – highly valuable service offerings,
a substantial and expanding customer base
in existing and new markets and excellent
people with proven expertise.
To implement our growth strategy
successfully, and to consolidate our position
as a highly competitive global enterprise,
we must be totally committed to our
Customers, our Markets and our People –
and also maintain our culture of continuous
improvement. Led by our new Executive
Leadership Team, we are working together
to seize opportunities to grow, win new
business and generate profitable, sustainable
growth for the benefit of our shareholders.
We are also working with our customers to
respond to the current supply chain cost
and efficiency challenges. Our performance
during 2008, and our continuing success in
winning new business, makes me optimistic
about the medium to longer term growth
outlook for our company.
Brambles Limited 2008 Annual Report 15
Executive Leadership Team
mikE iHLEin
Chief Executive officer
Chief Executive officer
Mike joined Brambles as Chief
Financial Officer in March 2004
and became Chief Executive
Officer in July 2007. Previously,
he had a long career with
Coca-Cola Amatil Limited (and
related companies), where he
was Chief Financial Officer
(1997–2004), Managing
Director of Coca-Cola Amatil,
Poland (1995–97) and had
previously held a number of
senior business development
and treasury roles within
that company. Mike holds a
Bachelor of Business Studies
(Accounting) from the University
of Technology, Sydney. He is
also an Associate Member of the
Australian Institute of Company
Directors, a CPA Australia and
a member of Financial Services
Institute of Australasia (Finsia).
Age 53.
kEvin SHuBA
group President, CHEP
group President, CHEP
Americas
Americas
Kevin has worked with CHEP
since 1996, serving as
President, CHEP USA from
November 2006 until his
appointment to his current role
in February 2008. His previous
roles at CHEP include Senior
vice President, New Business
Development and Senior vice
President, Sales & Business
Development. Before CHEP, he
worked for insurance company
Mason-McBride Inc from 1994
to 1996 and Baxter Healthcare
Corporation from 1987 to 1994.
Kevin attended the United
States Military Academy at West
Point, graduating in 1981 with
a Bachelor of Science degree
in Engineering. He served in
various command and staff
positions in the United States
Army from 1981 to 1986.
Age 49.
CrAig vAn dEr LAAn
group President, CHEP
group President, CHEP
Asia-Pacific, global Head
Asia-Pacific, global Head
of mergers and Acquisitions
of mergers and Acquisitions
Craig joined Brambles in 2001
and, having served continuously
as a member of Brambles’ global
Executive Committee (now
Executive Leadership Team),
was appointed to his current role
in February 2008. His previous
roles with Brambles included as
Group General Counsel, Group
Company Secretary and global
head of Human Resources.
Prior to joining Brambles, he
was a General Counsel to, and
Company Secretary of, the
Westfield Group. Previously,
Craig was Corporate Solicitor
for Australian National Industries
and a solicitor with Mallesons
Stephen Jaques. He holds
degrees in Law (LLB (Hons))
and Arts (BA) from the
University of Sydney.
Age 43.
Liz doHErTy
Chief Financial officer
Chief Financial officer
Liz joined Brambles as Chief
Financial Officer and Executive
Director in December 2007.
She is currently a non-executive
director of SABMiller plc. Liz
was Group International Finance
Director at Tesco plc from 2001
to 2007. She previously had a
long career with Unilever plc
in increasingly senior operating
finance roles based in a number
of locations, including Asia
and Europe. She holds a First
Class Bachelor of Science
degree from the University
of Manchester, UK. Liz is a
Fellow of the Chartered Institute
of Management Accountants
(FCMA) and a Fellow of the RSA.
Age 50.
16 Brambles Limited 2008 Annual Report
JASPEr Judd
Senior vice President
Senior vice President
– Strategic development
– Strategic development
Jasper joined Brambles in
2002. He served as Acting
Chief Financial Officer following
Mike Ihlein’s appointment as
Chief Executive Officer in July
2007 and, before that, was
Group Financial Controller for
about four years. His previous
roles were Interim Senior vice
President and Chief Financial
Officer, CHEP Europe and
General Manager, Finance &
Administration. Before joining
Brambles, he was Chief
Financial Officer of Brainspark
plc and held senior financial
positions at a number of other
companies including Booker
plc. Jasper is a member of
the Institute of Chartered
Accountants in England and
Wales and graduated from
Cambridge University with a
Master of Arts (Hons).
Age 47.
Tom gormAn
group President, CHEP EmEA
group President, CHEP EmEA
Tom joined Brambles in March
2008. Previously, he had
a long career with the Ford
Motor Company, and served as
President Ford Australia from
March 2004 until January
2008. His previous roles at
Ford included General Sales
Manager; Executive Director,
North America Fleet, Lease
and Remarketing Operations;
Executive Director, Business
Development; and Finance
Director, Ford France. Before
joining Ford, he worked for
the Bank of Boston. Tom
graduated from Tufts University
in 1982 with a Bachelor of
Arts degree in Economics and
International Relations and
in 1987 he graduated from
Harvard Business School
with a Master of Business
Administration with distinction.
Age 48.
niCk SmiTH
Senior vice President
Senior vice President
– Human resources
– Human resources
Nick joined Brambles in
November 2007. Previously,
Nick was the Group Human
Resources Director for Inchcape
plc, the international automotive
retail group. Prior to this Nick
spent a number of years in the
telecommunications industry,
firstly with British Telecom plc,
and then Cable & Wireless
plc. During this period, Nick
spent three years working
for Cable & Wireless Optus
in Australia, where he was
Human Resources Director.
He has also worked for KPMG
and Macquarie Bank. Nick
is a qualified management
accountant, and has a BSc
(Econ) in International Politics
and an MBA.
Age 47.
ELTon PoTTS
President and Chief operating
President and Chief operating
officer, recall
officer, recall
Elton joined Brambles in 2002
as vice President, Controller
for CHEP USA. That same
year he was appointed vice
President, Asset Management
for CHEP USA, and later
became Senior vice President,
Asset Management for CHEP
USA in 2003. In December
2006 he was appointed Chief
Operating Officer of Recall and
then appointed President and
Chief Operating Officer of Recall
in April 2007. Before joining
Brambles, Elton held various
operations and finance roles
with Owens-Corning and Newell
Rubbermaid. He holds a degree
in Financial Management from
Clemson University and an MBA
from Capital University.
Age 44.
Brambles Limited 2008 Annual Report 17
CHEP is the global leader in pallet and container
pooling services, with over 7,000 people
supporting more than 345,000 customer
locations in 45 countries. CHEP issues, collects,
repairs and re-issues about 300 million pallets
and containers from its global network of over
500 service centres to assist manufacturers,
distributors and retailers to transport their
products safely and efficiently.
18 Brambles Limited 2008 Annual Report
SALES By SErviCE (uS$ miLLionS)
SALES By SErviCE (uS$ miLLionS)
SALES By rEgion (uS$ miLLionS)
SALES By rEgion (uS$ miLLionS)
2,956
2%
5%
5%
88%
2,763
2%
5%
6%
87%
3%
5%
6%
86%
3,610
3,218
3%
5%
5%
87%
3,610
3,218
11%
45%
2,956
10%
45%
2,763
10%
45%
10%
47%
43%
45%
45%
44%
2005
2006
2007
2008
2005
2006
2007
2008
Other
Automotive
RPC
Pallets
Asia-Pacific
EMEA
Americas
CHEP delivered another year of solid profit
growth and the highlights of this year’s
financial performance were:
–
sales revenue rising 12% (6% in constant
currency) to US$3.6 billion; and
–
comparable operating profit rising
12% (6% in constant currency) to
US$945.2 million.
Under the new organisation structure
introduced during the year, CHEP is
managed in three groups:
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
USA, Canada,
Latin America plus
LeanLogistics and
the global Catalyst
and Chemical
Containers business
Europe, Middle East
and Africa
Australia, New
Zealand, South-East
Asia, India and China
CHEP AmEriCAS
CHEP Americas delivered a solid result in
difficult economic conditions with sales
revenue up 10% (8% in constant currency)
to US$1,581.3 million and comparable
operating profit up 7% (5% in constant
currency) to US$452.8 million. Prior
to investment in quality and innovation
initiatives in CHEP USA and the Walmart
transition costs (see right), comparable
operating profit for CHEP Americas grew
15% (12% in constant currency). The profit
margin remained steady at 29% which was
an excellent outcome given the additional
costs incurred during the year.
CHEP USA grew sales revenue by 6%,
although the second half of the year
was impacted by slowing demand in a
significantly weaker economy. Both Canada
and Latin America delivered sales revenue
and comparable operating profit growth
in excess of 10% (in constant currency)
primarily driven by increased volume.
Reported volume growth in the USA was
2%. However, prior to the loss of a large, low
margin customer to ‘white wood’, volume
growth would have been a little over 4%.
This was achieved through organic growth
supplemented by net new customer wins
during the year, although slowing economic
demand resulted in lower volume growth
in the second half of the year.
Sales 12%
CHEP and Walmart continue to be in
constructive discussion regarding Walmart’s
decision to modify the management of
pallet flows within its network in the USA.
Finalisation of an agreement is taking longer
than expected due to the complex nature
of the management of pallet flows in the
Walmart network and the involvement of a
number of third party pallet management
service providers in the new arrangements.
Brambles remains confident that an
agreement will be reached with Walmart
to deliver the lowest cost overall supply
chain solution. Brambles’ objective is that
the arrangements will be broadly operating
cost neutral to CHEP on an ongoing
basis as compared with the previous
arrangements. As Walmart is not an emitter
customer of CHEP, there is no impact
expected on sales revenue or issue volumes
from any new arrangements.
CHEP incurred transition costs relating to
Walmart of US$10.9 million in the 2008
financial year, due to loss of white wood
revenue and temporary additional transport
costs. It is estimated that approximately
US$30 million in transition costs will be
incurred in the 2009 financial year.
BLuE STEP PALLET
BLuE STEP PALLET
The Blue Step Pallet, which will
be launched in the 2009 financial
year, has been designed by CHEP
engineers to enhance protection
for customers’ products while also
reducing pallet damage.
Brambles Limited 2008 Annual Report 19
Every day, CHEP manages the movement of about half a million Reusable Plastic Containers (RPCs) to over 1,600 customers around the
world. Fruit and vegetables are loaded from the field or processing facility directly into the RPC – a durable, reusable, high quality container
that can be shipped through the supply chain and displayed in a retail environment with minimal handling.
A number of significant customer wins
during the 2008 financial year will
contribute strongly to volume in the 2009
financial year and beyond. During the
year, CHEP USA won new business with
estimated annualised sales of more than
US$100 million. CHEP USA’s growth in
the food service sector through business
expansion with Tyson Foods, the world’s
largest processor and marketer of chicken,
beef and pork, is particularly significant. This
is the largest customer win by CHEP USA
for several years and will make Tyson Foods
one of CHEP USA’s largest customers.
CHEP USA also continued to roll out
Total Pallet Management initiatives to
both emitters (including manufacturers)
and distributors (including retailers). In the
2008 financial year, seven emitter and five
distributor sites were added. (Total Pallet
Management involves CHEP employees
or subcontractors handling, inspecting
and sorting inbound pallets at a customer
distribution centre.)
CHEP Canada had strong sales revenue
growth driven by increases in organic and
new business. CHEP Latin America achieved
strong sales revenue growth through a
combination of organic growth with major
customers, lane expansion and new
business, particularly in Mexico and Brazil.
In the second half of the financial year,
Brambles acquired LeanLogistics, a
leading US provider of technology-based
transport and supply chain solutions,
for US$45 million. This acquisition will
enable CHEP to provide a new and value-
enhancing service to both existing and new
customers. LeanLogistics is making excellent
progress on its transport optimisation
solution for a wide range of customers.
CHEP EmEA
CHEP EMEA increased sales revenue
by 13% (4% in constant currency) to
US$1,642.1 million and comparable
operating profit by 18% (9% constant
currency) to US$396.5 million. The primary
drivers of profit growth during the year were
volume increases and European network
efficiencies.
CHEP EMEA had 4% volume growth across
all major platforms, with Europe delivering
3% volume growth, predominantly through
new business in B1208A and display pallet
volume as well as new business wins in
automotive containers.
The sales pipeline for CHEP Europe
continues to strengthen, and during the
year the European team won new business
with estimated annualised sales of more
than US$80 million. Key growth segments
include beverages, food, transporters and
DIY (Do It Yourself) industries.
Increased operating efficiencies helped
drive CHEP Europe’s improved performance.
Transport costs were US$14 million
lower than last year, equivalent to a one
percentage point reduction in the transport
cost ratio (transport costs as a proportion of
revenue) to 22%. This was largely due to
improved network efficiencies in the United
Kingdom.
The Managed Recovery service offering has
given CHEP UK customers greater flexibility
while maintaining CHEP’s control over its
pallets. More than 43% of available flows
have converted to Managed Recovery and
all of the UK’s top nine grocery retailers
have some Managed Recovery flows
in and out of their networks. (Managed
Recovery involves CHEP collecting empty
trade quality pallets and returning them
to the manufacturer. This service can be
used in conjunction with CHEP’s exchange
and one-way trip pallet pooling models
to minimise the supply chain costs of the
manufacturer and retailer.)
CHEP Middle East and Africa continued to
perform strongly driven primarily by robust
organic growth in South Africa.
20 Brambles Limited 2008 Annual Report
Beverage manufacturers, bottlers, distributors and retailers benefit from CHEP’s pallet pooling system because it reduces product damage,
lowers transportation costs, improves handling efficiencies and safety, and eliminates the need for customers to purchase and repair pallets.
CHEP ASiA-PACiFiC
CHEP Asia-Pacific increased sales revenue
by 20% (5% in constant currency) to
US$386.9 million and comparable operating
profit by 10% (down 5% in constant
currency) to US$95.9 million. This result
includes start-up costs in China and
India as well as costs associated with the
implementation of new information systems
in Australia and New Zealand.
The investments in China and India will
continue to impact comparable operating
profit in the short to medium term – but
they are helping to build the foundations
for strong future growth in these exciting
new markets.
During the year, CHEP Asia-Pacific
continued to win new customers in China
including Tsing Tao Breweries, Nestlé
Waters, Asia-Pacific Breweries, Pearl River
Breweries and Nongfu Spring Mineral
Water. CHEP Asia-Pacific also signed a
three-year agreement with ChangAn Ford
Mazda Automotive Nanjing to provide total
container management solutions through
their supply chain.
CHEP entered the rapidly growing Indian
market during the year and progress is
encouraging. Pallet trials with two major
manufacturers have been completed
successfully and larger scale pilot programs
in both pallets and automotive containers
have been implemented. Pallet shipments to
CHEP’s first customers in India commenced
toward the end of the financial year.
STrEngTH oF THE CHEP modEL
The CHEP business model delivers
substantial benefits to customers and others
in the supply chain, including:
–
consistent, high quality platforms;
–
lower supply chain costs;
–
reduced product damage;
–
faster loading and unloading;
–
lower transport costs;
–
lower disposal costs;
–
on-site management; and
–
environmental sustainability.
Further information about the environmental
benefits of the CHEP model, including the
way it reduces the amount of lumber used
to build pallets and the amount of lumber
that goes to waste, is provided in the
Sustainability Report on page 28.
While the CHEP pallet pooling model is
strong, CHEP continues to drive a culture of
continuous improvement by using a program
called Perfect Trip. Perfect Trip employs Six
Sigma Methodology – that is, using facts,
data and statistical analysis to improve
and reinvent business processes – to grow
sales, reduce costs and improve quality and
customer satisfaction.
In addition, CHEP established a number of
global councils three years ago that bring
together team leaders from around the world
to identify and leverage best practices, align
policies and procedures and share resources
for the maximum benefit of CHEP and
its customers.
There are currently 11 global councils
focusing on the following areas: Operations,
Finance, Human Resources, Health
and Safety, Marketing, Sourcing, Asset
Management, Sales, Logistics, Quality
and Perfect Trip.
The guiding principle for the global councils
is to prioritise opportunities that will drive
additional value over and above what exists
in the CHEP business today.
CHEP is a leader in innovation and
technology. As illustrated on page 5 of this
Annual Report, CHEP’s Innovation Centre in
Orlando, Florida is dedicated to continuously
improving CHEP pallets and containers and
working with customers to help improve
the performance of their products while
in storage and transit. CHEP also has a
dedicated radio frequency identification
(RFID) team that is working with customers
and industry experts to identify the optimal
tag/reader configurations for use with
CHEP pallets and containers within the
extended supply chain.
Brambles Limited 2008 Annual Report 21
Recall is a global leader in the management
of information throughout its life cycle.
Its 4,500 Team Members service nearly
80,000 customers, working in approximately
300 dedicated operations centres in over
20 countries, on five continents. Recall provides
secure storage, retrieval and destruction of
digital and physical information according to
global standard operating procedures to ensure
security, efficiency, customer satisfaction
and sustainability.
22 Brambles Limited 2008 Annual Report
SALES By SErviCE (uS$ miLLionS)
SALES By SErviCE (uS$ miLLionS)
SALES By rEgion (uS$ miLLionS)
SALES By rEgion (uS$ miLLionS)
748
10%
24%
650
66%
566
11%
23%
66%
512
11%
24%
65%
12%
26%
62%
748
3%
25%
650
3%
24%
566
512
3%
22%
26%
49%
2%
18%
30%
50%
27%
45%
26%
47%
2005
2006
2007
2008
2005
2006
2007
2008
Data Protection Services
Secure Destruction Services
Document Management Solutions
Rest of World
Europe
Australia/New Zealand
Americas
Sales 15%
The highlights of Recall’s financial
performance during the year were:
–
sales increasing by 15% (7% in constant
currency) to US$748.3 million;
–
comparable operating profit increasing
by 8% (down 2% in constant currency)
to US$128.4 million;
–
cash flow from operations increasing
by US$41.3 million to US$127.7 million;
and
–
carton volume growth of 8%.
All regions achieved good sales revenue
growth, primarily driven by solid volume
growth, mainly in Document Management
Solutions and new customer wins. In
constant currency terms, European sales
revenue increased by 10%, Americas
by 5% and Rest of the World by 7%.
All regions achieved robust comparable
operating profit growth apart from North
America where performance has been
impacted by higher costs.
Recall is focused on improving the efficiency
and business excellence of its Americas
business with turnaround initiatives currently
being implemented.
Excellent progress is being made on the
rollout of the Bank of America contract in
the USA – it has already reached one million
cartons in storage.
During 2008, Recall invested in new
information centre facilities in the UK,
USA and France.
Importantly, there are many growth
opportunities for Recall in all its major
markets. Ongoing complexity and stringency
of regulatory requirements, such as
“Sarbanes-Oxley”, is underpinning future
growth because it increases the need for
secure information management solutions.
Identity and intellectual property theft is
a major concern throughout the world and
this is increasing the need for companies to
put in place sound information management
procedures and controls. In addition, digital
technology is creating more information for
storage and management – both physical
and digital.
Furthermore, Recall leads the industry in
designing and implementing solutions that
bridge the gap between physical and digital
information management with its Integrated
Solutions service offering. Increasing focus
on availability of critical information, disaster
recovery and contingency planning worldwide
will continue to expand the demand for
Recall’s expertise in this area of the business.
More broadly, the “unvended” market
opportunities for Recall are extensive.
Unvended is the industry term for
information management processes that
are not currently outsourced to companies
like Recall. It is estimated that Recall has
less than 5% of the global market.
Recall has achieved high scores in
independent customer satisfaction surveys
in all countries and has strong customer
loyalty. Recall is focused on continuous
improvement and applies Six Sigma and
Lean methodologies to identify, implement
and further improve best practices in its
operations worldwide. Recall aims to pass
on the benefits of these practices to its
customers, for example in the key areas
of security and technology. Recall vehicles
equipped with global positioning systems
(GPS) and biometric access at Recall
facilities have both become part of Recall’s
operations while the ReQuest Web platform
allows DMS customers to manage all of their
holdings, schedule deliveries and collections,
and establish administrative rules in a secure
online environment.
Recall is also consolidating its position as
the industry leader in RFID (radio frequency
identification) technology. RFID tagging sets
the standard for identification, inventory
and tracking of customers’ document and
electronic data archives and adds a new
layer of security and management efficiency
to Recall’s industry-leading information
management solutions.
At Recall’s RFID-enabled facilities, RFID tags
are attached to Recall cartons and “read”
by specially designed RFID equipment.
This is favourable to placing bar codes on
cartons, because RFID tags can be read
through three rows of cartons – something
that is not possible with standard bar code
technology. RFID processes are completed
much more quickly and accurately than bar
code processes and this improves customer
service and satisfaction.
RFID technology is also helping Recall to
achieve its objective of Perfect Order – that
is, delivering a customer’s order on time,
completely and in accordance with Recall’s
Standard Operating Procedures.
doCumEnT mAnAgEmEnT
doCumEnT mAnAgEmEnT
SoLuTionS (dmS)
SoLuTionS (dmS)
Recall’s largest service line is DMS,
which provides secure indexing,
storage, image capture and retrieval
of information to small and large
companies around the world.
Brambles Limited 2008 Annual Report 23
Brambles is well positioned
to continue to deliver revenue
and profit growth.
grAHAm krAEHE Ao
Chairman
Chairman
Board of Directors
LukE mAyHEW
non-executive director
non-executive director
Tony FroggATT
non-executive director
non-executive director
Liz doHErTy
Chief Financial officer
Chief Financial officer
and Executive director
and Executive director
24 Brambles Limited 2008 Annual Report
We continued to win significant
new business during 2008 and
this makes me optimistic about
the medium to longer term growth
outlook for our company.
mikE iHLEin
Chief Executive officer and Executive director
Chief Executive officer and Executive director
STEPHEn JoHnS
non-executive director
non-executive director
dAvid goSnELL
non-executive director
non-executive director
CAroLyn kAy
non-executive director
non-executive director
Brambles Limited 2008 Annual Report 25
Board of Directors
grAHAm krAEHE Ao
non-executive Chairman (independent)
non-executive Chairman (independent)
Chairman of the nominations Committee
and member of the remuneration Committee.
Rejoined the Board in December 2005, was appointed Deputy
Chairman in October 2007 and Chairman in February 2008. He is
currently a member of the Board of the Reserve Bank of Australia,
Chairman of Bluescope Steel Limited and a director of Djerriwarrh
Investments Limited. Graham was a Non-executive Director of
Brambles from December 2000 until March 2004, when he
retired due to commitments in his past role as Chairman of National
Australia Bank Limited. He has also been the Managing Director and
Chief Executive Officer of Southcorp Limited and a non-executive
director of News Corporation. Graham has a Bachelor of Economics
degree from Adelaide University. He is an Officer of the Order of
Australia. Age 65.
Liz doHErTy
Chief Financial officer and Executive director
Chief Financial officer and Executive director
Joined Brambles as Chief Financial Officer and Executive Director
in December 2007. She is currently a non-executive director of
SABMiller plc. Liz was Group International Finance Director at
Tesco plc from 2001 to 2007. She previously had a long career
with Unilever plc in increasingly senior operating finance roles based
in a number of locations, including Asia and Europe. She holds
a First Class Bachelor of Science degree from the University
of Manchester, UK. Liz is a Fellow of the Chartered Institute
of Management Accountants (FCMA) and a Fellow of the RSA.
Age 50.
Tony FroggATT
non-executive director (independent)
non-executive director (independent)
member of the nominations Committee
and the remuneration Committee.
Joined Brambles as a Non-executive Director in June 2006.
Currently a non-executive director of AXA Asia Pacific Holdings
Limited and Billabong International Limited. Previously, he was
Chief Executive of Scottish & Newcastle plc from May 2003 to
October 2007. Tony began his career with the Gillette Company
and has held a wide range of sales, marketing and general
management positions in many countries with major consumer
goods companies including HJ Heinz, Diageo and Seagram. He
holds a Bachelor of Law degree from Queen Mary College, London
and an MBA from Columbia Business School, New York. Age 60.
dAvid goSnELL
non-executive director (independent)
non-executive director (independent)
member of the Audit Committee.
Joined Brambles as a Non-executive Director in June 2006. He is
Managing Director of Global Supply and Procurement for Diageo
plc, leading a global team of 9,000 people across manufacturing,
logistics and technical operations as well as managing Diageo’s
multi-billion dollar procurement budget. Prior to joining Diageo,
David spent 20 years at HJ Heinz where he served on the UK board
and held various European operational positions. He holds a
Bachelor of Science degree in Electrical and Electronic Engineering
from Middlesex University, England. Age 51.
26 Brambles Limited 2008 Annual Report
mikE iHLEin
Chief Executive officer and Executive director
Chief Executive officer and Executive director
Joined Brambles as Chief Financial Officer in March 2004 and
became Chief Executive Officer in July 2007. Previously, he had a
long career with Coca-Cola Amatil Limited (and related companies),
where he was Chief Financial Officer (1997–2004), Managing
Director of Coca-Cola Amatil, Poland (1995–97) and had previously
held a number of senior business development and treasury roles
within that company. Mike holds a Bachelor of Business Studies
(Accounting) from the University of Technology, Sydney. He is
also an Associate Member of the Australian Institute of Company
Directors, a CPA Australia and a member of the Financial Services
Institute of Australasia (Finsia). Age 53.
STEPHEn JoHnS
non-executive director (independent)
non-executive director (independent)
Chairman of the Audit Committee and member
of the nominations Committee.
Joined Brambles as a Non-executive Director in August 2004. He is
currently a non-executive director of the Westfield Group, Chairman
of Spark Infrastructure Group and a director of Sydney Symphony
Orchestra Limited. Previously Stephen had a long executive career
with Westfield where he held a number of positions including that
of Finance Director from 1985 to 2002. He has a Bachelor of
Economics degree from the University of Sydney and is a Fellow
of the Institute of Chartered Accountants in Australia. Age 61.
CAroLyn kAy
non-executive director (independent)
non-executive director (independent)
member of the Audit Committee.
Joined Brambles as a Non-executive Director in June 2006.
She is a director of Commonwealth Bank of Australia Limited
and the Starlight Foundation and an external board member of
Allens Arthur Robinson. Carolyn has had extensive experience in
international finance at Morgan Stanley in London and Melbourne,
JP Morgan in New York and Melbourne, and Linklaters & Paines
in London. She holds Bachelor degrees in Law and Arts from the
University of Melbourne and a Graduate Diploma in Management
from the AGSM. Carolyn is a Fellow of the Australian Institute of
Company Directors and a member of Chief Executive Women. She
was awarded a Centenary Medal for services to Australian society in
business leadership. Age 47.
LukE mAyHEW
non-executive director (independent)
non-executive director (independent)
Chairman of the remuneration Committee.
Joined Brambles as a Non-executive Director in August 2005.
He is a non-executive director of WH Smith plc and Chairman
of Pets at Home Group Limited. Luke was Managing Director
of John Lewis, the UK’s leading department store business,
from 2000 to 2004 and Director of Research and Expansion
at John Lewis Partnership plc, which also includes the Waitrose
supermarket operation, from 1992 to 2000. He previously held
senior positions at Thomas Cook and British Airways and was
Chief Executive of Shandwick’s European business. He has a
Bachelor of Arts (Honours) degree from Oxford University and
a Master of Economics degree from the University of London.
Age 55.
Brambles Limited 2008 Annual Report 27
Sustainability Report
In recent years, the summary of our performance in
social, ethical, environmental and other non-financial
areas has been called the Corporate Social Responsibility
(CSR) Report.
From this year it will be called the Sustainability Report
– because we believe our performance in all these areas
plays a vital role in creating a sustainable company for
the future and sustainable shareholder value.
While we have changed the name of this report, our
Sustainability and CSR policies have been integrated into
our core values for many years and remain fundamental
to the way we do business around the world.
I am again proud to confirm that Brambles has retained
its listing in the Dow Jones Sustainability Index, the
FTSE4Good Index and several other independent
measures of our Sustainability and CSR performance.
These results have been achieved because both CHEP and
Recall are focused firmly on improving their Sustainability
performance, including the Brambles-wide commitment
to Zero Harm – which means zero injuries and zero
environmental damage.
Whilst we did not deliver in 2008 the same improvement
in greenhouse gas emissions and energy intensity as we
have done in the previous four years, we nevertheless
believe that both CHEP and Recall make a positive
contribution to sustainable business practices. CHEP’s
pallet pooling model, for example, reduces the amount
of lumber used to build pallets and the amount of lumber
that goes to waste because:
28 Brambles Limited 2008 Annual Report
–
–
–
–
the lumber used is harvested from sustainable sources;
CHEP pallets are higher in quality and have a longer
useful life than alternative platforms;
CHEP pallets are continuously inspected, repaired
and reused; and
the clear sense of ownership and controlled end-of-life
management of our pallets maximises recycling and
therefore reduces waste sent to landfills.
On the opposite page, you can see how our US and
European teams are allowing our customers to calculate
the environmental benefits of the CHEP pooling model.
On page 32, we provide examples of Recall’s Sustainability
achievements, including the recycling of paper from its
Secure Destruction Services business.
As these examples show, Brambles remains committed to
continuous improvement through monitoring best practice,
minimising our environmental impact and supporting our
local communities.
mikE iHLEin
CHIEF EXECUTIvE OFFICER
CASE STudy
CHEP environmental calculators
CHEP USA has developed a website that enables any USA
company to easily calculate how much they can reduce solid waste,
greenhouse gas emissions and energy consumption by using the
CHEP pallet pooling system instead of alternative shipping platforms
such as white wood or disposable pallets.
It also shows how different platforms affect transportation and
procurement costs, product damage and product handling
productivity.
The environmental calculations generated by the website are based
on findings from a comprehensive third-party Life Cycle Inventory
Analysis conducted last year on CHEP USA’s pallet pooling system.
This report showed that CHEP pooled pallets produce much less
solid waste, require less total energy and generate less greenhouse
gas emissions than non-pooled and one-way systems. A copy of the
study is available on the Brambles website. Based on these findings,
in 2007, use of CHEP USA’s pallet pool eliminated approximately
1.1 billion kilograms of solid waste, saved eight trillion BTUs (British
Thermal Units) of energy and avoided 634 million kilograms of
greenhouse gas emissions.
The US energy savings alone, when compared to one-way
disposable pallets, were enough to power every household in Tampa
and Orlando, Florida for an entire year. The saving in solid waste was
the equivalent of more than 100,000 garbage-filled trucks while gas
emission reductions equalled the annual exhaust emissions of over
118,000 cars.
In Europe, CHEP has worked with Leeds University to develop a
similar calculator that demonstrates the significant environmental
benefits of the CHEP pallet pooling system when compared with
returnable white wood or disposable pallet alternatives over a
10 year period.
The model measures the operational and pooling efficiencies of
CHEP, the responsible use and conservation of lumber during
the entire pallet life cycle (including production and repair) and
the ongoing environmental benefits from the trees that would
otherwise be felled if non-CHEP shipping platforms were used.
The CHEP environmental calculator is installed on every CHEP
Europe sales representative’s laptop, enabling the team to quantify
the benefits of CHEP to existing and potential customers.
To use the calculator, a range of data is inserted into the model
including the number of pallet movements, cycle time, damage
rate, pallet size and transportation distances. The benefits are
then quantified in the number of trees saved from being cut down
and reduced carbon dioxide emissions.
The calculator shows that, over a 10 year period, use of CHEP
Europe’s pallet pool will save more than 242 million trees from
being felled when compared with one-way disposable pallets.
This represents an area of 8,500 square kilometres.
According to Leeds University’s Dr Darron Dixon-Hardy, who worked
with CHEP to test and validate the calculator, it is “the perfect tool to
demonstrate to potential customers that they can significantly reduce
their environmental footprint. The solution does not necessarily lie
in planting more trees, but rather in avoiding felling them in the first
place – and this is where CHEP has an important role to play”.
Brambles Limited 2008 Annual Report 29
SuSTAinABiLiTy rEPorT PArAmETErS
This Sustainability Report covers the 2008 financial year. Last year’s
CSR Report was contained within last year’s Annual Report and
is available on the Brambles website (www.brambles.com).
Where possible, Brambles has provided comparisons between this
year’s data and data from previous years. Some data has not been
compiled in previous years, however, and therefore comparison is
not possible. Where data is being provided for the first time, it will
be used for comparisons in future reports.
Further information about Brambles’ Sustainability and CSR policies,
practices, performance and reporting can be obtained by contacting
the vice President Corporate Affairs at exchange@brambles.com.
SuSTAinABiLiTy And CSr PoLiCiES
Brambles’ policies are communicated to all employees and
are available on the Brambles website.
The Brambles Executive Leadership Team (see pages 16 and 17)
helps to formulate Sustainability and CSR policies and its members
are responsible for implementing Sustainability and CSR policies
across the organisation.
The Group Risk Committee establishes, monitors and reviews
internal control and risk management systems around agreed
policies, including Sustainability and CSR policies, and reports
regularly to the Board.
rECogniTion
During the year, Brambles retained its listings in the Dow Jones
Sustainability Index (DJSI) and the FTSE4Good Index, two
of the most authoritative international guides for socially
responsible investors.
Shareholders are encouraged to provide feedback to the
Board. Opportunities to do so are outlined in the Corporate
Governance Report.
Details on the remuneration of Board members, senior executives
and managers are provided in the Remuneration Report on
pages 60 to 72.
CommiTmEnT
During the 2008 financial year, Brambles made the transition
from the first edition to the second edition of the ASX Corporate
Governance Council’s Principles and Recommendations. As at
30 June 2008, the Board considers that Brambles was in
compliance in all material respects with the second edition
of those principles and recommendations
Brambles endorses the United Nations Universal Declaration
of Human Rights and has incorporated this Declaration into
its policies and Code of Conduct.
EngAgEmEnT
Brambles actively seeks feedback from its key stakeholders and
each key stakeholder group has a primary point of contact within
Brambles who is responsible for appropriate engagement and action:
Customers
Group Presidents of CHEP
President and Chief Operating Officer, Recall
investors
vice President Investor Relations
Employees
(including
contractors)
Company Secretary (human rights)
vice President Group Risk and Audit (safety)
Inclusion in the FTSE4Good Index means Brambles meets globally
recognised corporate responsibility standards and practices. Inclusion
in the DJSI means Brambles is considered to be among the leading
10% of corporations in its sector. In fact, Brambles is ranked as a
Sustainability Leader in the Support Services industrial sector.
Community and
the environment
vice President Corporate Affairs
vice President Group Risk and Audit
Suppliers
Group Presidents of CHEP
President and Chief Operating Officer, Recall
Brambles is also a founding member of the FTSE ISS Corporate
Governance Index Series, which focuses on best corporate
governance practice by listed entities.
Brambles is a constituent of the Ethibel Excellence Sustainability
Index, which is designed to list best-in-class companies across
sectors and regions in terms of sustainable development and
stakeholder involvement. Brambles was also recognised by AuSSI,
the Australian SAM Sustainability Index, as being the sustainability
leader of the Commercial Services and Supplies sector.
govErnAnCE
The Corporate Governance Report on pages 44 to 53 of this
Annual Report provides details of Brambles’ corporate governance
framework as well as risk management, internal compliance and
control measures. The principal risks and uncertainties facing
Brambles are set out in Section 7.2 of the Corporate Governance
Report and are also on the Brambles website under the subsection
‘Brambles Risk Profile’.
The Brambles Board has eight members and information on each
member is provided on pages 26 to 27 of this Annual Report.
The Corporate Governance Report outlines the role, composition
and independence of Board members. It also provides information
on how conflicts of interest are avoided and performance is reviewed.
government and
regulatory bodies
Company Secretary
Group Presidents of CHEP
President and Chief Operating Officer, Recall
Brambles holds regular meetings with regulatory bodies, government
and non-government organisations and also conducts customer and
supplier surveys and consultation forums, local community forums
and focus groups.
Brambles follows a calendar of regular disclosure to the market on its
financial and operational results. The calendar, which is available on
the Brambles website, includes dates for the release of half-year and
full-year results, other financial information, shareholder meetings
and Brambles’ involvement in major investment conferences.
Brambles recognises the importance of its relationship with investors
and analysts. From time to time, Brambles holds briefings to provide
information and seek feedback from analysts and investors. At least
two Brambles representatives attend all briefings, one of whom is
usually the vice President Investor Relations. A record of the briefing
is maintained and a copy of any presentation material is placed on
the Brambles website.
30 Brambles Limited 2008 Annual Report
During the 2008 financial year, the following presentations
and teleconferences were made to analysts and the investment
community:
2 August 2007
Mike Ihlein presentation
Accelerating Growth: Building on
Strong Foundations
22 August 2007
Full-Year Results briefing
24–29 october
2007
Operations Review presentations in New York,
Orlando and London
16 november
2007
Annual General Meeting, Brisbane
21 February 2008 Half-Year Results briefing
18 April 2008
Teleconference regarding Total Pallet
Management arrangements with Walmart
24 June 2008
Teleconference regarding Trading Update for
the 11 months to 31 May 2008
All information and presentation materials provided at these
meetings were released to the stock exchanges and are available on
the Brambles website.
Brambles encourages vigorous and robust analysis by the investment
community and a policy of consistent access and treatment is
applied, irrespective of the views and recommendations expressed.
Brambles uses the Annual General Meeting to communicate with
shareholders about its financial situation, performance, ownership,
strategies and activities. General Meetings allow an opportunity for
shareholder participation. The vice President Investor Relations and
Company Secretary deal with shareholder enquiries at other times.
The Brambles Engagement Survey involves all employees and is
confidential. It surveys employees’ perceptions of their workplace and
the data is used to track progress from previous surveys, measure
Brambles against internal and external best practice and identify key
actions for improvement.
The most recent survey was conducted in April 2008. The response
rate set a new global Brambles benchmark of 86%. The results of
the survey were communicated to employees in each business and
were used to identify and understand concerns at a local level and to
drive action to address any concerns. The next employee survey will
be conducted in April 2009.
Following its formation in 2004, the Brambles European Works
Council meets formally on an annual basis. Its purpose is to
bring together management and elected workers’ representatives
from all the EU Member States in which Brambles operates.
Representatives are consulted, receive information and give their
views on a range of transnational issues such as health and safety,
business performance, sales activity, business developments and
employment trends. At the last meeting held in Lisbon in June 2008,
Tom Gorman, Group President CHEP EMEA, Nick Smith, Senior
vice President – Human Resources and other senior management
attended and took part in wide-ranging discussions concerning
Brambles, CHEP and Recall.
our SuSTAinABiLiTy APProACH And PErFormAnCE
Economic
Brambles’ financial performance is reported in detail in this
Annual Report.
Environmental
Protection of the environment and the Sustainability of our activities
are fundamental to the way Brambles does business.
One of Brambles’ Shared values is that we always act with integrity
and respect for the community and the environment. We are firmly
committed to sound environmental practice in our daily operations.
Brambles is committed to achieving Zero Harm. This means zero
injuries and zero environmental damage. We believe the community
has the right to expect that every employee will care for the
environment. We consider the environment in decisions concerning
the development of projects, the selection of commercial partners
and suppliers and the launch of new products or services.
Our respect for the environment means Brambles is committed to
using resources more efficiently, minimising waste and encouraging
the sustainable use of our products and services.
EnvironmEnTAL PoLiCy
Environmental policy is set by the Board and applies in all countries
where Brambles operates – even in countries that do not have
comprehensive laws protecting the environment.
It is a minimum requirement that all Brambles operations comply
with all relevant environmental laws and regulations. We further
expect all employees to care for the environment by adopting the
following principles:
–
strive to achieve best environmental practices in the industry;
–
continually improve the efficiency of our use of raw materials and
energy per unit output;
–
minimise the generation of emissions and waste per unit output;
–
dispose of unavoidable waste in a responsible manner;
–
minimise social impacts such as noise and loss of visual amenity;
–
respond to any community environmental concerns with integrity,
honesty and respect; and
–
ask our contractors and suppliers to adhere to the same
environmental standards that we do.
Each business sets appropriate environmental performance targets,
monitors progress and reports results.
The Brambles Environmental Policy requires every business unit
to ensure that it adheres to these principles. Site environmental
management plans are required at all operating locations and are
to include:
–
appropriate containment, storage and disposal of wastes and
other potential contaminants;
–
management and monitoring of air emissions, waste water
discharges and waste stream releases;
–
effectiveness of truckwash and stormwater containment facilities;
–
maintenance and monitoring of fuel storage tanks;
–
containment systems in the event of accidents such as equipment
fires, breakdowns and vehicle collisions;
–
paint spraying emission minimisation;
–
noise and dust abatement;
–
preservation of visual amenity;
–
regulatory and licensing requirements; and
–
any other community-sensitive environmental issues.
Environmental audits are conducted periodically to evaluate
compliance with applicable laws and regulations and implementation
of this policy.
Brambles Limited 2008 Annual Report 31
While Recall Australia’s Information Centre in Greystanes, Sydney covers 20,000 square metres, its use of natural light,
electric picking system and ability to capture rainwater mean its carbon footprint is relatively small.
EnvironmEnTAL ComPLiAnCE And mAnAgEmEnT
Senior managers are required to provide a statement on
environmental compliance twice each year. In addition, each
business prepares regular environmental compliance reports
for the Group Risk Committee and the Board.
EnvironmEnTAL PErFormAnCE
Brambles’ businesses benefit the environment by providing reusable
product transport systems and recycling wood and paper.
Recall assists customers to reduce material usage by providing
space- and paper-efficient document archival and retrieval solutions.
As a direct benefit of its digitisation capabilities and integrated
solutions, customers are likewise able to reduce their dependence
on physical transportation to review information secured by Recall.
Recall also collects, shreds and sends for recycling about 225,000
tonnes of paper each year, which equates to approximately three
million trees.
The CHEP pallet pooling system of reusing and recycling pallets
significantly reduces customers’ use of resources and waste by
an estimated seven million tonnes of landfill a year in the USA
alone. The solid waste reduction is the equivalent of 2.85 million
Chilean Radiata pine trees, saved on an annual basis by CHEP USA
operations alone.
CASE STudy
recall Australia
Recall Australia’s Secure Destruction Services business securely
destroys and recycles about 30,000 tonnes of paper and
cardboard each year, the equivalent of approximately 93,000 cubic
metres of landfill space and 374,000 trees. In terms of greenhouse
gas emissions, it is the same as removing 2,764 cars from the
road every year.
As this paper comes from customers, Recall is currently developing
an invoice that includes environmental metrics, such as the volume
of paper recycled, so customers can demonstrate that their waste
paper has been dealt with in an environmentally efficient way.
More broadly, Recall Australia is making a concerted effort to reduce
the carbon footprint of not only its customers but also itself.
An example is Recall’s Information Centre in Greystanes, a Sydney
suburb. This purpose-built 24 metre high building has capacity to
store over six million cartons and its construction included a number
of design features to reduce its carbon footprint.
For instance, it has been built to take advantage of natural light,
avoiding the need to install fluorescent lighting to cover its
20,000 square metres of floor space. This has the added
advantage of significantly reducing the risk of fire.
CHEP in the USA and Europe offers customers environmental
calculators that demonstrate the carbon emission savings made by
using the CHEP pallet pooling system (see case study on page 29).
The automated electric carton picking system eliminates the need for
diesel-powered forklifts and the building’s large roof surface is used
to capture rainwater for use on the facility’s gardens and lawns.
CHEP also operates a pool of more than 30 million reusable
plastic containers. These containers are a substitute for cardboard
packaging used to transport fresh fruit and vegetables and therefore
reduce waste by avoiding the need for many thousands of tonnes
of cardboard boxes.
Brambles is committed to improving the efficient use of its own
resources and minimising generation of waste.
32 Brambles Limited 2008 Annual Report
CHEP has policies in place to obtain lumber from certified sources. In South Africa, CHEP now owns four pine tree plantations
and plans to purchase more in the years ahead.
WHErE doES our LumBEr ComE From?
During the year, Brambles established a dedicated team to
enhance its lumber sustainability practices. The team facilitates
world class procurement governance in terms of strategic sourcing,
consistent procurement processes and support of environmental
sustainability efforts.
CHEP, the only purchaser of lumber within Brambles, maintains
strict lumber sourcing policies. These policies support the
replenishment of natural resources by sourcing lumber from
plantations and state-managed forests and requiring managed
forest certifications from all suppliers. Our suppliers are audited and
certified against rigorous standards for responsible timber harvesting,
reforestation and biodiversity preservation.
CHEP does not source lumber from forests or forest product
suppliers unless it is confident that the supplier is likely to be
complying with all relevant legislation relating to the trade in forest
products. CHEP does not source from protected areas, parks or
similar areas where harvesting operations are not complementary
to responsible forestry management. Furthermore, CHEP has taken
steps to assure itself of the provenance and quality of its lumber
by instituting an audit program at a number of points in its lumber
supply chain. CHEP Americas has a relationship with Conservation
International, an organisation that specialises in global biodiversity
conservation and sustainable forestry, to ensure environmental
excellence in our business and sourcing practices.
CHEP South Africa has acquired four plantations in recent years
with approximately 171,280 cubic metres of standing trees. The
plantations have mature pine trees ready for harvesting and milling
into sawn board for use as repair material for CHEP South Africa’s
pallet pool.
CHEP Australia is a Patron of the Gottstein Trust, a leading supporter
of forestry research and education.
CHEP also minimises the impact of its internal waste generation
by ensuring that scrap pallets and containers are recycled for uses
including animal bedding, mulch and fuel.
HoW doES CHEP rEduCE THE uSE oF LumBEr?
CHEP’s pallet pooling model reduces the amount of lumber
used to build pallets and the amount of lumber that goes to
waste because:
–
the lumber used is harvested from sustainable sources;
–
CHEP pallets are higher in quality and have a longer useful life
than alternative platforms;
–
CHEP pallets are continuously inspected, repaired and reused; and
–
the clear ownership of the CHEP pool and the controlled end-of-life
management of CHEP pallets maximises recycling and therefore
reduces waste sent to landfills.
CHEP USA engaged an independent contractor in 2007 to conduct a
detailed analysis of the life cycle inventory of its wood pallet systems.
The study found that CHEP USA’s system generates much less
production waste and recycling/disposal waste than the non-pooled
exchange and one-way systems. The solid waste reduction is the
equivalent of 2.85 million Chilean Radiata pine trees each year.
In addition, the study found that CHEP uses at least 30% less energy
and produces 33% less greenhouse gas emissions than traditional
exchange and 136% less than whitewood one-way systems.
Whilst this study was conducted in the USA, it is indicative of
CHEP’s pooled pallet system worldwide. A copy of the study
is available on the Brambles website (www.brambles.com).
Brambles Limited 2008 Annual Report 33
equivalent emission intensity
COCO22 equivalent emission intensity
Energy intensity
Energy intensity
0.200
0.180
0.160
0.140
0.120
0.100
0.080
0.060
0.040
0.020
0.000
e
u
n
e
v
e
r
l
s
e
a
s
f
o
D
S
U
r
e
p
2
O
C
f
o
g
K
2003
2004
2005
2006
CHEP
Group
2007
Recall
2008
1.800
1.600
1.400
1.200
1.000
0.800
0.600
0.400
0.200
0.000
e
u
n
e
v
e
r
s
e
l
a
s
f
o
D
S
U
r
e
p
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s
e
l
u
o
a
g
e
M
2003
2004
2005
2006
CHEP
Group
2007
Recall
2008
EnErgy UsE and grEEnhoUsE gas (ghg) Emissions
Like most businesses, Brambles contributes to climate change
through its transport operations and the consumption of electricity,
both of which entail burning fossil fuels.
CasE stUdy
ChEp Usa
CHEP USA has implemented a number of initiatives to reduce its
greenhouse gas emissions and minimise its environmental footprint.
However, Brambles has a relatively light environmental footprint.
For instance, Brambles does not expect its operations to be
obliged to report under Australia’s new National Greenhouse and
Energy Reporting System. Nevertheless, both CHEP and Recall
track their generation of GHG emissions, along with other relevant
eco-efficiency measures including energy and transport fuel usage.
In 2008, Brambles did not maintain the same level of improvement
in its GHG emission and energy use intensities as it demonstrated
over the preceding four years. Brambles notes that, because
its environmental footprint is so light, even small changes in its
operational activities can have a relatively large impact on the
intensity measures.
EnvironmEntal ComplianCE
Except as set out below, the operations of the Group in Australia are
not subject to any particular and significant environmental regulation
under a law of the Commonwealth or a State or Territory. The
operations of the Group in Australia involve the use or development
of land, the use of transportation equipment and the transport of
goods. These operations may be subject to State, Territory or Local
government environmental and town planning regulations, or require
a licence, consent or approval from Commonwealth, State or Territory
regulatory bodies.
Brambles’ businesses comply with all relevant environmental
laws and regulations and none were involved in any adverse
environmental prosecutions during the year.
For example, CHEP USA is an ENERGY STAR Partner with the US
Environmental Protection Agency (EPA) and Department of Energy.
This partnership involves a commitment by CHEP to track and
reduce energy use in its buildings and facilities across the USA.
CHEP USA has also joined the SmartWay Transport Partnership,
a collaboration between the US EPA and the freight industry
designed to increase energy efficiency while significantly reducing
greenhouse gas emissions and air pollution. CHEP is contributing to
the Partnership’s goal to reduce 33 to 66 million tonnes of carbon
dioxide and up to 200,000 tons of nitrogen oxide per year by 2012
by improving the environmental performance of all its operations.
Carbon dioxide is the most common greenhouse gas and nitrogen
oxide contributes to smog.
CHEP USA also launched a Hybrid Vehicle Incentive Program
in May 2008. Under the program, staff members are eligible to
receive US$2,000 if they purchase an environment-friendly vehicle,
such as a hybrid car or truck. The definition of hybrid is the same
as that used by the US Department of Energy and the Internal
Revenue Service.
These initiatives highlight CHEP USA’s commitment to reducing its
impact on the environment and building a sustainable business.
34 Brambles limited 2008 Annual Report
Transport fuel intensity
Transport fuel intensity
Greenhouse gas generation by source
Greenhouse gas generation by source
0.030
0.025
0.020
0.015
0.010
0.005
0.000
e
u
n
e
v
e
r
s
e
l
a
s
f
o
D
S
U
r
e
p
s
e
r
t
i
L
2003
2004
2005
2006
CHEP
Group
2007
Recall
2008
Natural gas 11.93%
Gasoline/petrol 5.20%
Propane 0.04%
LPG 2.23%
Fuel oil/Diesel 17.75%
Heavy fuel oil 0.04%
Electricity 62.81%
soCial pErformanCE
labour practices
Brambles employs over 12,000 people in 45 countries.
Our employment policies commit Brambles to:
–
providing a safe working environment with an objective of
achieving Zero Harm through industry best practice in health and
safety management (see Health and Safety section on page 36);
–
being an equal opportunities employer, committed to developing
a diverse workforce where everyone is treated fairly irrespective
of gender, sexual orientation, age, disability, race, religion;
–
creating an environment where everyone is encouraged to give
their best and realise their full potential, by providing learning and
development opportunities for individuals and groups; and
–
ensuring employees can discuss any problem connected with
their work confident that they will receive a fair, impartial and
confidential review of the issue.
Brambles respects the individual’s right to freedom of association
and relates to its people through both collective and individual
agreements, according to local law, custom and practice.
As mentioned above, the Brambles European Works Council
meets formally on an annual basis. Its purpose is to bring together
management and elected workers’ representatives from all the EU
Member States in which Brambles operates.
Under the Brambles Speaking Up policy, everyone is encouraged
to notify the company of any suspicions about actual or planned
breaches of the law, company policies or the Code of Conduct.
Details of whom to approach, how to do so and the subsequent
process are clearly outlined. Brambles will not tolerate the
victimisation of any employee who speaks up in such circumstances.
We continue to ensure that our employees are informed of significant
company news and strategic developments. Methods of employee
communication include announcements and newsletters distributed
by email, in-house publications, information posted on the intranet
and face-to-face meetings with senior managers.
As mentioned above, the Brambles Employee Survey gathers
employees’ perceptions of their workplace and the data is used
to track progress from previous surveys, measure Brambles against
internal and external best practice and identify key actions for
improvement.
Code of Conduct
The Brambles Code of Conduct forms part of each employee’s terms
and conditions and provides an ethical and legal framework for all
employees in the conduct of Brambles business. It is available on
the Brambles website.
The Code is not intended to be all-encompassing. There are areas
in which we expect our businesses to develop detailed policies
in accordance with local requirements. The Code provides a set
of guiding principles that may be supplemented with additional
local policies.
The Code of Conduct is regularly reviewed and updated. Senior
management must provide a statement of compliance with the
relevant areas of the Code of Conduct every six months or identify
those areas on which they cannot sign off. The sign-offs are audited
on a sample basis by Brambles Headquarters.
Brambles limited 2008 Annual Report 35
Until this year, Brambles had successfully achieved four years of over
20% compound improvement in both lost time injury frequency and
severity rates. Although in 2007 Brambles got close to world-class
levels (generally considered to be LTIFR less than 2.0 and LTISR
less than 15.0), 2008 was disappointing and Brambles has seen
its performance slip back to 2006 levels. Brambles’ continuing
operations recorded an LTIFR of 3.1 for 2008.
Brambles lost time injury severity rate
Brambles lost time injury severity rate
s
r
u
o
h
k
r
o
w
n
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l
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e
p
s
I
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n
i
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s
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l
s
y
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D
600
500
400
300
200
100
0
2003
2004
2005
2006
2007
2008
CHEP
Brambles
Recall
This year’s LTISR was 59.1. Overall, although the performance
in 2008 was disappointing, Brambles is encouraged by the
75% improvement in LTISR since it started measuring its global
performance in 2003. However, we remain determined to make
continual progress towards Zero Harm.
2003
2004
2005
2006
2007
2008
10.3
7.3
6.2
3.1
2.0
3.1
236.0
91.3
97.4
55.2
37.3
59.1
LTiFr
LTiSr
Comparison of Brambles safety measures (such as LTIFR and LTISR)
with global industry averages is problematic due to varying definitions
between companies, industries and countries.
However, where a comparison can be made, CHEP’s performance
appears to be significantly ahead of companies in similar industries.
For example, in 2006, the last year for which Bureau of Labor
Statistics was available, CHEP USA’s LTIFR performance of 4.7
was significantly better than the Wood Pallets and Skids and
Warehousing and Transportation industries’ performances of
14.5 and 13.5 respectively.
Similarly, Recall USA’s LTIFR performance of 3.3 compares well
with the 2006 figures of the Transport and Warehousing industry
as well as the Warehousing sector’s performance of 13.5. Recall
USA incurred a fine of $1,125 as a result of inadequate ground
markings for forklift traffic in a SDS facility by OSHA, the country’s
occupational health and safety regulatory authority. The shortcoming
was immediately corrected in consultation with OSHA.
It is with great sadness that we note that in January 2008 Mr Ícaro
Roldão Chaves de Barros Júnior, an employee of CHEP in Brazil, was
fatally injured in a road traffic accident when he lost control of his
vehicle in heavy rain and collided with a truck.
In response, both CHEP and Recall have enhanced their safe driving
initiatives to improve safe driving and reduce vehicle accidents.
This year, CHEP Australia inaugurated the CHEP Young Driver
Program as part of its commitment to the safety of employees and
their families. CHEP offered to pay 50% of the cost of a one-day
defensive driving course for employees’ sons and daughters aged
between 17 and 25.
Health and Safety
At Brambles, we are committed to achieving Zero Harm. This means
zero injuries and zero environmental damage.
The Board is responsible for setting health and safety policies.
The Group Presidents of CHEP and the President and Chief
Operating Officer of Recall are responsible for policy implementation
and safety performance, within the monitoring and reporting
framework governed by the Group Risk Committee. More information
is provided in the Corporate Governance Report on pages 44 to 53.
We believe everyone has the right to be safe at work and to return
home to their family and friends as healthy as when they started
the day.
Brambles’ Zero Harm Charter, which sets out the vision, values and
behaviours and commitment required to work safely, is provided to
all employees and is available on the Brambles website.
Our Zero Harm commitment is based on our belief that all accidents,
injuries and harm can and should be prevented. To that end, every
manager is accountable for achieving Zero Harm and required to
demonstrate leadership in creating a culture which actively promotes
Zero Harm. Everyone is responsible for committing and contributing
to Zero Harm.
We think first of Zero Harm, considering health, safety and the
environment in all decisions concerning the development of projects,
the selection of commercial partners and suppliers and the launch of
new products or services. Economic considerations do not overrule
health and safety or environmental concerns.
We ensure that the occupational health safety and environment
(OHS&E) management systems and training reflect our Zero Harm
commitment.
Each business has its own OHS&E management systems, including
business-specific policies, procedures, risk assessment, monitoring
and compliance mechanisms. These systems include hazard
management, incidents, near misses and system failure reporting,
recording and corrective action procedures. OHS&E management
systems are designed to ensure that each employee receives the
appropriate safety training. Safety is the responsibility of each
individual employee, while accountability for safety is clearly
integrated into manager and supervisor job descriptions.
Health and safety performance indicators measure compliance with
corporate objectives and milestones, allow assessment of progress
and comparison with industry benchmarks and provide incentive
for improvement.
Health and Safety Performance
The principal safety performance measures are Lost Time Injury
Frequency Rate (LTIFR) and Lost Time Injury Severity Rate (LTISR).
LTIFR measures the number of injuries that result in an employee
being absent from work for one or more whole shifts per million
work hours. LTISR measures the number of injury days lost per
million work hours.
Brambles lost time injury frequency rate
Brambles lost time injury frequency rate
12
10
8
6
4
2
0
s
r
u
o
h
k
r
o
w
n
o
i
l
l
i
m
r
e
p
s
I
T
L
2003
2004
2005
2006
2007
2008
CHEP
Brambles
Recall
36 Brambles Limited 2008 Annual Report
Areas where conflicts might arise include share ownership, direct or
indirect personal interest in contracts, seeking or accepting gifts or
entertainment beyond levels considered reasonable, employment
outside Brambles, or use of confidential information.
Brambles’ Speaking Up policy means any employee who has a
genuine belief there has been activity that is against the law or
in breach of our policy on Bribery and Corruption (or any other
policy) can readily identify who to go to with their concerns and
how to do so. Every effort will be made to protect the reporting
employee’s confidence.
Competition
Brambles competes fairly in the markets in which it operates.
Uncompetitive behaviour is bad for our customers and is
unacceptable to the community at large. Brambles’ passion
for success means that we compete effectively and fairly in
the markets in which we operate.
Managers are responsible for ensuring that they comply with
competition laws in their area of operations and that all relevant
employees receive thorough training in this area. This requires
managers to identify the areas in which their businesses are most at
risk from non-compliance and to deal with these in regular training
sessions. Competition compliance manuals are regularly updated and
prepared with local legal experts and provided to relevant employees.
Training programs for employees are developed in conjunction with
local legal experts, covering relevant areas of competition compliance
in the particular locations of the businesses. This includes refresher
training of existing employees and induction training for new recruits.
Political donations and Public Policy
Brambles does not make donations to political parties and will not do
so without the specific endorsement of shareholders.
Brambles is a member of the Business Council of Australia (BCA).
From time to time, the BCA makes representations to government
representatives and political parties on behalf of its members.
However, such representations by the BCA may or may not reflect
Brambles’ position on specific issues.
data Protection and Privacy
Brambles’ Code of Conduct requires employees to keep confidential
all information gained during the course of their employment.
Brambles’ policy is to maintain the privacy of information relating
to its employees and customers. Where there are specific local
privacy laws, compliance with this policy has regard to these
legal requirements.
research and development
Brambles carries out research and development activities in
relation to both its CHEP and Recall businesses. These activities
comprise continuously testing its pallets and containers to make
them more durable and safer for use in the supply chain, designing
and improving pallet and container repair equipment, development
of radio frequency identification, development of document
management processes and developing and improving software.
Performance and development
We aim to create an environment where everyone is encouraged to
give their best and realise their full potential, through the provision
of learning and development for individuals and groups. The
Performance and Development Plan introduced in 2005 has been
extended to all staff and provides the mechanism to identify and
track development activities for individuals. While systems are not in
place to measure the exact number of training days per employee,
the majority of Brambles employees have undertaken job-specific
or developmental training during the year.
Brambles is also designing company-wide key performance
indicators to put in place consistent measures for all our people.
Human rights
Brambles endorses the United Nations Universal Declaration of
Human Rights which contains standards to protect people’s human
rights against violations by individuals, groups or nations. The
standards declare that respect for human rights and human dignity
“is the foundation of freedom, justice and peace in the world”.
Brambles has incorporated the provisions of the declaration into its
policies and Code of Conduct. We respect the human rights of our
employees and other stakeholders. We will not tolerate child labour
or forced labour in our own operations or those of our suppliers.
Brambles operates in four countries – China, Saudi Arabia, United
Arab Emirates and Zimbabwe – that FTSE4Good classifies as “of
concern”. Although these are only small operations, comprising less
than 0.1% of Brambles’ global sales, employees in these countries,
like all Brambles employees, have received training in the Brambles
Code of Conduct.
None of Brambles’ operations are believed to be at risk for incidents
of child or forced labour.
our PLACE in SoCiETy
Brambles’ businesses benefit the local community by creating
employment directly and indirectly, providing high quality support
services that assist customers to grow their businesses and
purchasing materials from local and national suppliers.
Brambles primarily operates in commercial and industrial areas.
This minimises the impact of our operations, since these areas are
designed for such use.
We conduct business in accordance with the laws and regulations of
each country in which a Brambles business is located. We compete
fairly in the markets in which we operate.
In following the Zero Harm commitment (see Health and Safety
section on page 36), we remain determined to fulfil our obligation
to ensure that we work without causing harm to ourselves, our
colleagues or the community.
Bribery and Corruption
Corrupt practices are completely unacceptable to Brambles and
strictly prohibited. No bribes or similar payments will be made
to, or accepted from, any party. All commercial transactions must
be properly and accurately recorded. Sales agents, consultants
and similar advisers must be appointed in accordance with these
principles and paid at a rate consistent with their services. Assets
and confidential information must be fully protected and must not
be used by employees for personal gain.
Employees must not engage in activities that involve, or could
appear to involve, a conflict between their personal interests
and the interests of Brambles.
Brambles Limited 2008 Annual Report 37
Brambles is a sponsor of Clean Up the World and, on the third weekend of September, Brambles volunteers join millions of people
in more than 100 countries to clean up their local parks and other natural areas. In Sydney, Brambles volunteers worked with
authorities to help clean up a section of the Lane Cove National Park.
Our COmmunities
Our businesses and our people are part of the communities in which
they operate and Brambles provides financial and other forms of
support to a broad range of charitable and community organisations
around the world.
This support is provided in three ways:
–
donations funded by Brambles Headquarters, primarily through
the Community Reach program;
–
contributions made by Brambles’ businesses to a range of local
and national charities; and
–
personal contributions made by Brambles employees around
the world to a range of fundraising events and activities.
The Brambles Community Reach program provided about
US$600,000 in grants during the year to help our people support
causes that benefit health, the environment or safety – in order to
reinforce these key priorities of our business and culture.
Grants were made to employees in the USA, UK, France, Spain,
South Africa and Australia to support organisations in those
countries and also in other countries including India and Uganda.
The grants included donations to purchase clean drums for drinking
water in South Africa, water purification units for orphanages in India
and equipment for a rural fire brigade in Australia.
Community Reach also continued to support the Prostate Cancer
Foundation of Australia, Great Barrier Reef Foundation and Clean Up
the World (CUW), an organisation that mobilises 35 million people in
over 100 countries each year “to clean up, fix up and conserve the
environment”. Further Information about CUW and its activities can
be found on its website at www.cleanuptheworld.org.
In addition to Community Reach, Brambles’ businesses and people
make valuable contributions to a range of organisations. In Europe,
for example, CHEP’s team of process improvement specialists
initiated a series of workshops to assist charitable organisations and
community projects. In Paris, a team worked with Coup de Pouce
Humanitaire, a charity that undertakes building and aid projects in
the world’s poorest communities, to plan and execute a humanitarian
aid mission more efficiently. In Manchester, a team worked with
Christie’s Hospital, one of the leading cancer treatment centres in
Europe, to improve the allocation and retrieval of equipment and
to improve customer service and communication. Both workshops
were extremely successful.
In France, CHEP has recently formed a partnership with Restaurant
du Coeur, a leading Non-Government Organisation, to deliver food
and meals to homeless and needy people. CHEP contributed 400
pallets for the transport, distribution and display of hundreds of food
and hot meal packages during their Winter campaign.
38 Brambles Limited 2008 Annual Report
CHEP USA supports Habitat for Humanity, a charity that helps people in need. This year, CHEP USA volunteers built a home in
Orlando for a single mother with three daughters, two of whom are disabled.
Recall Global Headquarters supports Atlanta’s Community Food
Bank, an organisation that distributes donated food to low income
families in Georgia. In June 2008, Recall volunteers filled 140 boxes
of food for the Food Bank. In addition, the team collected
and transported over 750 kilograms of donated food, the
equivalent of more than 1,000 meals. Recall Global Headquarters
also supports UNICEF.
In other parts of the world, Recall supports European charities
including Red Cross and Children’s Cancer Fund, two Malaysian
centres for disadvantaged children and St George’s Foundation
in Australia.
Brambles is proud of the qualities shown by our people as they
continue to support their local communities in myriad ways.
In the USA, CHEP donated over US$215,000 during the year to
organisations including the American Heart Association, America’s
Second Harvest, Toys for Tots, Rainforest Alliance and Habitat for
Humanity as part of its CHEP Cares program.
Habitat for Humanity brings together families in need and volunteers
of all faiths, in partnership with community resources, to enhance
lives by building homes, strengthening neighbourhoods and
improving local communities. CHEP USA volunteers spent about
1,000 hours building a home in Orlando for a single mother with
three daughters, two of whom are disabled. The family was living in
government housing and their new home includes features that will
make caring for the girls easier.
In Australia, CHEP received a call from the Queensland State
Emergency Service (SES) in January 2008 after torrential rain
caused the Warrego River to flood, threatening a number of
regional towns. The SES wanted to hire or buy a large number of
pallets to support specially designed pallet-supported flood barriers.
CHEP immediately offered to provide the pallets for free, including
transport. Almost 1,000 pallets were sent to Charleville by road
train, a journey that took seven hours and involved a police escort.
Thankfully, the flood waters didn’t reach the feared six metre level.
Several towns suffered significant damage, however, and the
Premier of Queensland, Anna Bligh, thanked CHEP for its response
to the emergency.
Brambles Limited 2008 Annual Report 39
Financial Review
ComPArATivE BuSinESS PErFormAnCE AT ConSTAnT CurrEnCy ExCHAngE rATES
2008 actual
US$m
2008 at prior
year fx rates
US$m
2007 actual
US$m
% change at
constant
currency
Continuing Operations
Sales
CHEP
Recall
Continuing operations
Comparable operating profit
before costs relating to quality and Walmart
CHEP
Recall
Brambles HQ
Continuing operations
CHEP USA: Quality and innovation costs
CHEP USA: Walmart transition costs1
Comparable operating profit
CHEP
Recall
Brambles HQ
Continuing operations
Reconciliation to statutory profit after tax
Comparable operating profit from continuing operations
Net finance costs
Profit before tax and special items, from continuing operations (PBTA)
Tax expense on PBTA
Profit after tax, before special items, from continuing operations
Special items after tax, from continuing operations
Profit after tax, from continuing operations
Profit after tax, from discontinued operations
Profit for the year
Earnings per share (US cents)
EPS before special items from continuing operations
Basic EPS
6%
7%
6%
9%
(2%)
28%
9%
6%
(2%)
28%
6%
6%
(148%)
(4%)
12%
0%
3,610.3
748.3
4,358.6
3,396.7
693.0
4,089.7
3,218.4
650.4
3,868.8
976.7
128.4
(26.7)
923.9
116.1
(22.3)
1,078.4
1,017.7
(20.6)
(10.9)
(31.5)
892.4
116.1
(22.3)
986.2
986.2
(148.8)
837.4
(252.8)
584.6
(20.6)
(10.9)
(31.5)
945.2
128.4
(26.7)
1,046.9
1,046.9
(149.5)
897.4
(270.9)
626.5
20.4
646.9
1.8
648.7
44.5
46.0
845.2
118.5
(30.9)
932.8
–
–
–
845.2
118.5
(30.9)
932.8
932.8
(59.9)
872.9
(287.2)
585.7
(152.0)
433.7
857.6
1,291.3
37.8
83.4
492
BvA (Brambles value Added)2 from continuing operations
516
1 Operating expenses for 2008 also include transition costs of US$10.9 million within CHEP USA as a result of Walmart’s decision to modify management of pallet flows
within its network in the USA.
2 Brambles value Added (BvA) represents the value generated by a business over and above the cost of the capital it uses to generate that value. BvA is denominated in
US dollars using Brambles’ AIFRS results. It is calculated as comparable operating profit (COP) less (average capital invested (ACI), at fixed June 2007 exchange rates,
multiplied by Brambles’ weighted average pre-tax cost of capital (WACC)).
40 Brambles Limited 2008 Annual Report
ovErviEW
This section reviews the results of the Group’s operations during the
year by reference to the key financial performance measures outlined
in the review.
CHEP improved sales by 6% and continues to improve profitability.
CHEP incurred increased expenditure investing in growth in 2008
but a continued focus on asset management control helped to
maintain strong cash flow from operations at US$719.3 million.
Brambles achieved a solid performance in 2008 with 6% sales
growth. This was driven predominantly by volume growth across all
regions of CHEP and Recall. Comparable operating profit also grew
by 6% and included the following significant costs:
(i)
the investment in quality and innovation in CHEP USA;
(ii) transition costs associated with Walmart’s decision to modify
management of its pallet flows in CHEP USA;
(iii) cost increases in Recall North America; and
(iv) costs associated with the establishment of the CHEP business
in India and growth of the CHEP business in China.
Excluding the impact of the investment in quality and innovation
and the transition costs associated with Walmart in CHEP USA,
Brambles’ comparable operating profit grew by 9% on the
previous year.
The comparative 2007 financial statements included both the
trading results of divested businesses up to the date of divestment
and the profits and losses on their divestment shown within
“Discontinued Operations”.
The Directors have chosen to show separately Special Items on
the face of the Income Statement (page 86), believing results before
Special Items to be relevant measures of business performance.
Included within Special Items are the exceptional profits and losses
on sales of businesses forming part of the divestment program.
The definition of Special Items is shown in the Glossary (page 156).
rESuLTS oF ConTinuing oPErATionS
Brambles continues to focus on the use of BvA in 2008. BvA
continues to form the core component of short term incentive
arrangements for all senior executives, including Executive Directors.
BvA And rETurn on CAPiTAL invESTEd PErFormAnCE
2008 at
fixed
June 07 fx
US$m
2007 at
fixed
June 07 fx
US$m
2008
ROCI
2007
ROCI
269
200
55
524
6
530
263
176
60
499
16
515
30%
25%
31%
28%
13%
25%
31%
25%
33%
28%
13%
25%
(14)
(23)
516
492
24%
25%
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
CHEP
Recall
Continuing (pre HQ)
Unallocated
Brambles HQ costs
Total continuing
operations
Total BvA for Brambles’ continuing operations in 2008 was
US$516 million, an increase of US$24 million on the previous year
based on comparable fixed exchange rates. Return on Capital Invested
(ROCI) fell slightly to 24%, reflecting the second half acquisition of
LeanLogistics, quality and innovation costs and Walmart transition
costs in CHEP USA and the investments for future growth, especially
in CHEP Asia-Pacific.
In CHEP Americas, solid sales growth of 8% enabled comparable
operating profit to grow by 5% to US$452.8 million despite a
slowdown in growth in the second half of the financial year due
mainly to the more challenging economic environment. The result
includes US$20.6 million of operating expenditure as part of
the investment in quality improvement and innovation to meet
the requirements of CHEP’s existing and prospective customers.
This primarily includes costs associated with repairs to bring the
pallet specification to the required standard and Plant Quality
Representatives to ensure that customers’ increased automation
needs are met. The result also includes US$10.9 million of costs
associated with Walmart’s decision to modify its management of
pallet flows in the USA. The cost represents transition costs incurred
whilst the network is being reconfigured.
CHEP Americas’ operating profit growth before the US$31.5 million
of costs associated with the aforementioned investment in quality
and Walmart was 12%. Average Capital Invested increased at a
faster rate than profit due to the acquisition of LeanLogistics in
the second half of the year. This led to a small reduction in ROCI
to 30%. Cash flow from operations in CHEP Americas grew
from US$324.4 million to US$365.2 million, largely due to the
increase in profit.
In CHEP EMEA, sales growth was 4% with comparable operating
profit growing by 9% to US$396.5 million. CHEP Europe achieved
3% sales growth whilst CHEP MEA achieved a strong 19% sales
growth. The profit growth reflected excellent cost management and
would have been higher were it not for the one off US$5.0 million
net impact of the profit on the sale of the Madrid property and the
costs from the closure of the Brentwood service centre in the UK,
both recognised in 2007. ROCI was steady at 25% with increased
capital expenditure, to support growth, offsetting the impact of the
profit growth. CHEP EMEA’s cash flow from operations fell from
US$364.2 million to US$296.1 million mainly due to the increase in
capital expenditure.
CHEP Asia-Pacific’s sales growth was 5%. Comparable operating
profit fell by 5% to US$95.9 million due to the increases in operating
expenditure in CHEP China and CHEP India as the businesses there
were established. The Australian and New Zealand businesses also
incurred additional costs in setting up new information systems and
preparing for the new Woolworths RPC contract. Average Capital
Invested increased to US$311.2 million due to the investment in new
pallets in China and pooling equipment to support the Woolworths
contract which, combined with the fall in comparable operating
profit, meant that ROCI fell to 31%. Cash flow from operations in
CHEP Asia-Pacific fell from US$91.8 million to US$58.0 million
due to the increase in capital expenditure.
Recall maintained a ROCI of 13%. Sales grew by 7% with all
regions contributing. Comparable operating profit fell by 2% to
US$128.4 million due to higher costs in North America. All other
regions achieved profit growth. Recall increased cash flow from
operations from US$86.4 million to US$127.7 million primarily
due to improvements in working capital management.
The reduction in costs in Brambles HQ reflected the impact of
savings in administration costs following Unification.
Brambles Limited 2008 Annual Report 41
Financial Review (continued)
SPECiAL iTEmS
Within Special Items there are a number of exceptional items
reflected in the income statement for the year ended 30 June 2008.
These are set out in Notes 6 and 12 (pages 102 and 109) to the
financial statements, and largely reflect costs related to restructuring
and Unification and adviser costs.
FinAnCE CoSTS
Net finance costs were US$149.5 million compared to
US$59.9 million last year. The large increase in finance costs
reflects the temporary low level of debt during 2007 following the
receipt of various divestment proceeds, with debt increasing in the
second half of 2007 to fund the Cash Alternative and on-market
share buy-backs. Despite higher Australian interest rates in 2008,
average funding costs were relatively stable assisted by lower
US short term rates on US dollar bank loans and interest rate
hedging positions.
During 2008 Brambles continued to increase debt to fund on-market
share buy-backs. Buy-backs totalled US$392.0 million during the
year equating to 42.4 million shares at an average price of A$10.07.
Net borrowings at year end were US$2,426.2 million, compared to
US$1,996.9 million the previous year.
EArningS PEr SHArE
Prior year comparisons for earnings per share are partially distorted
due to the share buy-backs reducing the number of shares on issue
throughout the last two years.
For continuing operations, basic earnings per share before special
items were 44.5 US cents (2007: 37.8 US cents), an increase of
18% at actual exchange rates. Basic earnings per share after special
items were 46.0 US cents (2007: 83.4 US cents), the decrease
being due to the business divestment profits achieved in 2007.
TAxATion
The tax expense on continuing operations’ profit before tax and
special items of US$897.4 million was US$270.9 million, an
effective tax rate of 30.2%. This compares with 32.9% in the
previous year. The fall in the effective tax rate is principally due to a
reduction in tax rates in certain overseas jurisdictions, particularly
Europe, plus recognition of previously unrecognised tax losses.
The effective tax rate on profit after special items of 26.5% is
principally due to the reset of Australian assets’ tax cost bases
following Unification.
CASH FLoW
Cash flow from operations for the continuing operations was again
strong at US$810.0 million but a reduction of US$28.3 million
on the previous year due to the increase in capital expenditure
to support growth, partially offset by strong working capital
management.
Similarly, free cash flow was down US$77.6 million to
US$412.6 million. This was due to the reduction in cash flow
from operations and the increase in interest paid on the higher
debt. Dividends of US$444.8 million were paid during the year.
42 Brambles Limited 2008 Annual Report
dividEndS
The Board has declared a final dividend of 17.5 Australian cents
per share which will be 10% franked. This is an increase of
0.5 Australian cents on the 2007 final dividend.
The total dividend has increased by 13% from 30.5 Australian cents
to 34.5 Australian cents.
Dividends paid in 2007 included a special dividend of
34.5 Australian cents paid prior to Unification in October 2006.
This special dividend included 21.0 Australian cents in recognition
of the success of the divestment program and 13.5 Australian
cents in lieu of the 2007 interim dividend that would have normally
been paid in April 2007.
riSk mAnAgEmEnT
Brambles is exposed to a variety of market based (refer to Section 7,
page 51) and financial risks, including exposure to fluctuating interest
and exchange rates, liquidity risks, changing economic conditions,
technological and industry based risks, competitive environment,
counterparty credit risks and regulatory changes which, either
singularly or collectively, may affect revenue, cost structure or value
of assets within the business, all of which are difficult to quantify.
Brambles’ policies with respect to interest and exchange rate risk and
appropriate hedging instruments are described below and further
information is contained in Note 30 (page 135) to the Financial
Statements including a sensitivity analysis (page 137) with respect to
these financial instruments. Brambles’ centralised treasury function is
responsible for the management of these risks within Brambles.
Standard financial derivatives are used by Brambles to manage
financial exposures in the normal course of business. Dealings
in financial derivatives are restricted through a set of delegated
authorities approved by the Board. No derivatives are used for
speculative purposes. In addition, derivatives are transacted
predominantly with relationship banks which have a reasonable
understanding of Brambles’ business operations. Furthermore,
individual credit limits are assigned to those banks, thereby limiting
exposure to credit-related losses in the event of non-performance
by a counterparty.
Funding And LiQuidiTy
Brambles funds its operations through existing equity, retained
cash flow and borrowings, and manages its capital structure so
as to be consistent with a solid investment grade credit. During
the year, Brambles extended committed credit facilities totalling
US$310 million until November 2010. In addition, Brambles
arranged US$300 million in committed bank credit facilities for
three and five year terms.
Brambles has also US$425 million of US private placement notes
with maturities ranging from 2011 to 2016 and access to further
funding through overdrafts, uncommitted and standby lines of credit,
principally to manage day-to-day liquidity.
A core group of domestic and international banks currently provide
committed credit facilities totalling US$3.6 billion. These facilities
are generally structured on a multi-currency revolving basis with
maturities ranging to August 2012. Borrowings under the facilities are
floating-rate, unsecured obligations with covenants and undertakings
typical for these types of arrangements. To minimise foreign
exchange risks, borrowings are arranged in the currency of the
relevant operating asset to be funded.
At the end of the financial year, borrowing facilities, inclusive of the
US private placement, totalled the equivalent of US$4.2 billion.
Undrawn headroom under the facilities totals US$1.7 billion.
The weighted average term of the facilities was 2.2 years and
the maturity profile is shown in Note 24 (page 122) to the
Financial Statements.
Subsequent to balance sheet date, a new three year €100 million
(US$158 million) facility was signed and is available for drawing.
The US$300 million in new committed bank credit facilities
combined with this additional US$158 million replace approximately
US$500 million in maturing facilities due in November 2008.
inTErEST rATE riSk
Brambles’ interest rate risk policy is designed to reduce volatility
in funding costs through prudent selection of hedging instruments.
This policy includes maintaining a mix of fixed and floating-rate
instruments within a target band, over a certain time horizon.
In some cases, interest rate derivatives are used to achieve this
result synthetically. The present policy is to require the level of
fixed-rate debt to be within 40% to 70% of total forecast debt
arising over a 12 month period, progressively decreasing to 0%
to 50% for debt maturities extending beyond three years.
As at 30 June 2008, 48% of Brambles’ total interest-bearing debt
was at fixed interest rates (45% in 2007). The weighted average
period was 3.2 years (3.9 years in 2007). The fair value of all
interest rate swap instruments was US$1.1 million net loss.
ForEign ExCHAngE riSk
Foreign exchange exposures are managed from a perspective of
protecting shareholder value. Exposures generally arise in either
of two forms:
–
transaction exposures affecting the value of transactions translated
back to the functional currency of the subsidiary; and
–
translation exposures affecting the value of assets and liabilities
of overseas subsidiaries when translated into US dollars.
Under Brambles’ foreign exchange policy, foreign exchange hedging
is mainly confined to hedging transaction exposures where they
exceed a certain threshold, and as soon as a defined exposure
arises. Within Brambles, exposures may arise with external parties
or, alternatively, by way of cross-border intercompany transactions.
Forward foreign exchange contracts are primarily used for these
purposes. In Brambles’ context, exposures in this regard are not
significant given the nature of its operations.
Translation exposures are mitigated by matching the currency of
debt with that of the asset. Except for a small amount of balance
sheet hedge borrowing in Euro, Brambles does not hedge currency
exposures incurred on foreign currency profits and net investment
balances.
At the end of the financial year, the fair value of foreign exchange
instruments was US$1.1 million net gain.
rELATivE STrEngTH oF mAJor CurrEnCiES AgAinST THE uS doLLAr
Australian dollar
0.98
0.91
0.84
0.77
0.70
Euro
1.60
1.50
1.40
1.30
1.20
Sterling
2.10
2.05
2.00
1.95
1.90
1.85
June
2006
December
2006
June
2007
December
2007
June
2008
June
2006
December
2006
June
2007
December
2007
June
2008
June
2006
December
2006
June
2007
December
2007
June
2008
Average exchange rate
Brambles Limited 2008 Annual Report 43
Corporate Governance Report
1. inTroduCTion
Brambles is a global organisation with businesses operating in
45 countries. This demands that it comply with an extensive range of
varying legal, regulatory and governance requirements. In particular,
through its listing on the ASX and secondary listing on the LSE,
Brambles is committed to observing the requirements applicable
to publicly listed companies in Australia and the requirements
applicable to companies with a secondary listing in the UK.
The Board has adopted a governance framework which takes into
account both Australian regulatory requirements and international
best practice. Where the standards of best practice for corporate
governance vary across jurisdictions, as they inevitably do, the
Board has resolved to adopt those practices it considers to be
the better of the prevailing standards.
The ASX Corporate Governance Council (ASX Council) issued
the second edition of the Corporate Governance Principles and
Recommendations (CGPR) during August 2007. This edition
applies to Brambles for the financial year beginning 1 July 2008.
The ASX Council, however, encouraged companies to make an
early transition to the new principles and Brambles made this
transition during the year.
This Corporate Governance Report outlines the key components
of Brambles’ governance framework by reference to the CGPR.
By 30 June 2008, the Board believes Brambles met or exceeded in
all material respects the requirements under the CGPR.
The Board is, however, conscious that best practice in the area of
corporate governance is continuously evolving, and will therefore
continue to anticipate and respond to further corporate governance
developments on an ongoing basis.
2. SHArEHoLdErS
Shareholders play an important role in the governance of Brambles
by electing the Board, whose task it is to govern on their behalf.
Brambles is committed to the promotion of investor confidence by
taking steps within its power to ensure that trading in its securities
occurs in an efficient and informed market. Brambles recognises
the importance of effective communication as a key part of building
shareholder value and that, to prosper and achieve growth, it must,
among other matters, earn the trust of shareholders, employees,
customers, suppliers and communities, by being open in its
communications and consistently delivering on its commitments.
The Board has adopted a Continuous Disclosure and
Communications Policy to reinforce Brambles’ commitment
to the continuous disclosure obligations imposed by law and to
describe the processes implemented by it to ensure compliance;
to outline Brambles’ corporate governance standards and related
processes and ensure that timely and accurate information
about Brambles is provided equally to all shareholders and
market participants; and to outline Brambles’ commitment to
communicating effectively with shareholders and encouraging
effective shareholder participation in shareholder meetings.
A copy of the Continuous Disclosure and Communications Policy
can be found on the Brambles website at www.brambles.com.
To achieve the above objectives and satisfy regulatory requirements,
the Board provides information to shareholders and the market in
several ways:
–
Significant announcements are released directly to the market via
the ASX and a UK regulatory information service. Copies of these
announcements are immediately placed on the Brambles website
at www.brambles.com.
–
The Brambles website contains further information about Brambles
and its activities, including copies of recent interim and annual
reports and recordings of the most recent presentations to analysts.
Live webcasts of those presentations are also transmitted via the
Brambles website.
–
Shareholders are asked to elect whether they would like to receive
annual reports in printed form or be sent a notification when each
annual report is available on the Brambles website. Shareholders
who do not respond are sent a printed notification of availability
of the annual report. Brambles believes shareholders benefit from
electronic communication as they receive information promptly and
have the convenience and security of electronic delivery. Electronic
communication is also environmentally friendly and generates
cost savings.
–
The Chairman regularly meets major investors to understand
their issues and concerns and discuss particular matters relating
to Brambles’ governance and strategy. No new material or
price sensitive information is provided at such meetings. Other
Non-executive Directors may attend meetings with major investors
and will attend them if requested. The Chairman reports to the
Board on the matters discussed at meetings with major investors,
and copies of relevant correspondence are included in the Board
papers. Copies of analysts’ reports are also circulated to the Board.
–
AGMs provide an opportunity for the Board to communicate with
investors and encourage their participation, through presentations
on Brambles’ businesses and current trading. Shareholders are
encouraged to attend AGMs and to use this opportunity to ask
questions on any matter.
–
To make better use of the limited time available, shareholders
are invited to register questions and issues of concern prior to
AGMs. This can be done either by completing the relevant form
accompanying the notices convening the meetings or by emailing
Brambles at shareholderquestions@brambles.com. Frequently
asked questions and their answers are posted on the Brambles
website. Shareholders may, of course, also ask questions at AGMs
without having registered their questions in this manner.
–
Shareholders may electronically lodge their proxy votes on items
of business at AGMs. The 2008 Notice of AGM describes how this
can be done.
–
Copies of the speeches delivered and presentations made by the
Chairman and Chief Executive Officer at AGMs, a summary of the
proceedings of the meetings and the outcome of voting on the
items of business, are posted on the Brambles website after the
meetings.
–
Live webcasts of the AGMs are also transmitted via the Brambles
website at www.brambles.com.
44 Brambles Limited 2008 Annual Report
3. BoArd oF dirECTorS
3.1 role of the Board
The Board is responsible for overseeing the effective management
and control of the Group on behalf of Brambles’ shareholders,
supervising executive management’s conduct of the Group’s affairs
within a control and authority framework which is designed to
enable risk to be prudently and effectively assessed and monitored.
The Board is responsible for setting the Group’s overall strategic
objectives, facilitating the provision of appropriate financial and
human resources to meet these objectives, and reviewing executive
management’s performance.
The Board has a schedule of matters specifically reserved to it for
decision, a copy of which can be found on the Brambles website
at www.brambles.com. This schedule includes, among other
matters, the establishment of the Group’s overall strategic direction
and strategic plans for the major business units; the approval of
budgets, financial objectives and policies, and significant capital
expenditure; the approval of Brambles’ financial statements and
published reports; the establishment of Brambles’ systems of
internal control and risk management; and the appointment of key
senior executives. The charters of the various Board committees
also require certain matters to be approved by the Board, including,
among other matters, the executive remuneration policy and the
appointment of the external auditors.
Beyond those matters reserved to the Board, the Board has
delegated to the Chief Executive Officer and executive management
responsibility for management of Brambles within the control and
authority framework set by the Board.
The roles of the Chairman and executive management, led by the
Chief Executive Officer, are separated and clearly defined:
–
The Chairman, Don Argus, until his retirement on 6 February 2008
and thereafter, Graham Kraehe, his successor, is responsible for
leadership of the Board, setting the Board’s agenda and conducting
Board meetings, and facilitating effective communication with
shareholders and the conduct of shareholder meetings.
–
Executive management, led by the Chief Executive Officer,
Mike Ihlein, has been delegated responsibility for the management
of Brambles as outlined above. The levels of authority for
management are periodically reviewed by the Board and are
documented. The Chief Executive Officer is assisted by the
Executive Leadership Team. Further details concerning the
Executive Leadership Team are outlined in section 5.1.
The Non-executive Directors constructively challenge and assist
in the development of strategy. They review the performance of
management in meeting agreed goals and objectives and monitor
the reporting of performance. They have a prime role in appointing
and, where necessary, recommending the removal of, Executive
Directors, and in their succession planning.
The Board has delegated some of its responsibilities to the Audit,
Nominations and Remuneration Committees. The Board is also
supported by the Executive Leadership Team and the Group Risk
Committee which are management committees. Details of all these
committees are set out in sections 4 and 5.
With the assistance of these Board and management committees,
the Non-executive Directors satisfy themselves as to the integrity of
financial information, and that financial controls and systems of risk
management are robust. Through the Remuneration Committee,
they also determine appropriate levels of remuneration of the
Executive Directors.
The Chairman is responsible for facilitating the effective contribution
of Non-executive Directors, who are to receive accurate, timely and
clear information so that they may effectively discharge their duties
and responsibilities. The Chairman is also responsible for facilitating
constructive relations between Executive and Non-executive
Directors. Where necessary, Directors seek clarification or request
the provision of further information.
Directors may take independent professional advice at Brambles’
expense in the furtherance of discharging their duties and
responsibilities. None of the Directors availed themselves of
this right during the year.
The structure of the Board ensures that no individual or group
of individuals dominates the Board’s decision-making process.
Directors are required to complete a declaration of interest form
prior to their appointment. This form is tabled at the Board meeting
to consider the appointment of the relevant Director. If their
circumstances change or they acquire any office, property or interest
which may conflict with their office as a Director of Brambles or the
interests of Brambles, Directors are required to disclose its character
and extent in writing at the next Board meeting. Directors are
generally not entitled to attend any part of a Board meeting, or to vote
on any matter, in which they have a material personal interest unless
the other Directors unanimously decide otherwise. In appropriate
cases, Directors may be required to absent themselves from a
meeting of the Board while such a matter is being considered.
The Chairman holds meetings with the Non-executive Directors from
time to time, without the presence of the Executive Directors or other
executives. The Non-executive Directors meet without the Chairman
present at least annually to appraise the Chairman’s performance,
and on such other occasions as may be considered appropriate.
The Board is assisted by the Company Secretary who, under
the direction of the Chairman, is responsible for facilitating good
information flows within the Board and its committees and between
senior executives and Non-executive Directors, as well as the
induction of new Directors and the ongoing professional development
of all Directors. The Company Secretary is responsible for monitoring
compliance with the Board’s procedures and for advising the Board,
through the Chairman, on all governance matters. All Directors have
access to the advice and services of the Company Secretary, whose
appointment and removal is a matter for the Board.
The Company Secretary is Robert Gerrard. His qualifications and
experience are set out on page 78.
Brambles Limited 2008 Annual Report 45
Corporate Governance Report (continued)
Brambles Limited’s constitution provides that a Director who held
the office of director of both BIL and BIP and was already appointed
a Director of Brambles Limited at Unification shall, for the purposes
of determining that Director’s first rotation period, be taken to have
been appointed a Director of Brambles Limited from the earlier of
the date that he or she was appointed a director of BIL and the
date he or she was appointed a director of BIP. In this way, the
rotation of Directors operates seamlessly and has not been affected
by Unification.
The names of the Directors in office at the date of this Report, the
year of their most recent election by shareholders, their status as
Executive or Non-executive Directors, whether the Board considers
that they are independent Directors, whether they will retire and
seek re-election at the 2008 AGM, and when they are next due for
re-election, are set out in the table on page 47.
3.4 independence of non-executive directors
The Board has considered the independence of each of the Directors
in office as at the date of the Directors’ Report. A summary of the
conclusions drawn by the Board in relation to each Director is
set out in the table on page 47. Having regard to its review, the
Board considers that all Non-executive Directors are independent.
In reaching this determination, the Board had regard to the
relationships set out in Box 2.1 of the CGPR and noted that
one of these relationships exists. Carolyn Kay is a director of the
Commonwealth Bank of Australia (CBA), which is a substantial
shareholder of Brambles. The Board noted that the most recent
substantial shareholder notice issued by CBA provided that the
relevant interests in CBA’s Brambles Limited shares were held
either by registered managed investment schemes and decisions
to buy or sell those shares or exercise voting rights relating to them
were outsourced to external managers unrelated to the CBA, or
by investment managers who exercise voting and disposal powers
relating to those shares subject to client direction. For those reasons,
the Board does not consider that Carolyn Kay’s relationship with CBA
gives rise to any actual or perceived loss of independence on her
part. In considering the matters in Box 2.1, the Board considered
that a customer was material if it accounted for more than 2%
of Brambles’ gross revenue and that a supplier was material if
Brambles accounts for more than 2% of the supplier’s consolidated
gross revenue.
3.2 Board, committee and director performance review
The Board and its committees carry out both internal and external
reviews, with the form of review alternating each year. During the
year, the Board undertook an internal review of its performance as
a whole and the performance of each of its committees. The reviews
involved the completion of a questionnaire by each of the Directors
and, for committee reviews, other persons involved in committee
functions, on matters relevant to their performance. The reviews
were subsequently presented to, and reviewed by, the Board and
each committee respectively.
The Board will carry out an external review of its performance during
the 2009 year. This will include an evaluation of the performance of
individual Directors.
Prior to the Board making any recommendation to shareholders
with respect to the re-appointment of Directors, the Board
undertakes a process of reviewing their performance during the
period in which they were a member of the Board and determines
whether they should be put forward for re-election. This process
was followed for the Directors being proposed for re-election at
the 2008 AGM.
3.3 Composition of the Board
The Board consists of eight members, with two Executive Directors
(the Chief Executive Officer and the Chief Financial Officer) and six
Non-executive Directors.
The biographies for each of the current Directors, shown on pages
26 and 27, indicate the breadth of their business, financial and
international experience. This gives the Directors the range of
skills, knowledge and experience essential to govern Brambles,
including an understanding of the health, safety, environmental and
community related issues which it faces. The Board considers that
its current composition reflects an appropriate balance of Executive
and Non-executive Directors.
Letters of appointment, which are contracts for service but not
contracts of employment, have been put in place with each of
the Non-executive Directors. A copy of the standard letter of
appointment used by Brambles can be found on the Brambles
website at www.brambles.com. These letters confirm that the
Non-executive Directors have no right to compensation on the
termination of their appointment for any reason, other than for
unpaid fees and expenses for the period actually served.
Directors are appointed for an unspecified term, but are subject
to election by shareholders at the first general meeting after their
initial appointment by the Board. No Director may serve for more
than three years without being re-elected by shareholders.
Re-appointment is not automatic. The Board reviews whether
retiring Directors should stand for re-election, having regard to
their performance and the contribution of their individual skills
and experience to the desired overall composition of the Board.
46 Brambles Limited 2008 Annual Report
directors in office at the date of this report
For the purposes of this table, the date of last election is the date the relevant Director was last elected to the Boards of Brambles or BIL
and BIP. The order in which Directors retire by rotation, having regard to Unification, was described in section 3.3.
Name
G J Kraehe AO
A G Froggatt
D P Gosnell
M F Ihlein
S P Johns
S C H Kay
C L Mayhew
Last elected
2006
2006
2006
2006
2007
2006
2007
Executive or
Non-executive
Non-executive
Non-executive
Non-executive
Executive
Non-executive
Non-executive
Non-executive
Independent
Retiring in
2008
Seeking
re-election
in 2008
Next due for
re-election
Yes
Yes
Yes
No
Yes
Yes
Yes
No
Yes
Yes
Yes
No
No
No
No
Yes
Yes
Yes
No
No
No
2009
2008
2008
2008
2010
2009
2010
Directors appointed by the Board since the last shareholders meeting, who will be standing for election for the first time at the 2008 AGM
M E Doherty
–
Executive
No
–
–
–
3.5 Board succession planning and renewal
The Board is conscious of the need to ensure that proper processes are in place to deal with succession issues at Board level, and to keep the
Board evergreen. This will require the Board to assess periodically the skills set necessary to meet Brambles’ demands.
The Nominations Committee assists the Board in this process, which ordinarily involves the identification of the need for a new appointment
and suitable candidates, the preparation of a brief including a description of the role and capabilities required, and the engagement of
independent recruitment organisations. Further information concerning the Nominations Committee is set out in section 4.2.
Over the last several years, the ongoing process of Board renewal has continued, with the appointment of Stephen Johns during the 2005
year and the appointment of Luke Mayhew, Carolyn Kay, David Gosnell and Tony Froggatt during the 2006 year. In addition, Graham Kraehe
rejoined the Board as a Non-executive Director during the 2006 year. During the second half of the 2008 year, the Board, with the assistance
of the Nominations Committee, conducted a review of its skills set (including its geographic experience) and decided to seek to appoint two
new Non-executive Directors during the 2009 year. In addition, the Board will continue to seek to appoint new members in future years to
succeed existing Directors as they retire, ensuring an appropriate balance of skills and experience.
3.6 induction and ongoing professional development of directors
Newly appointed Directors receive appropriate induction and training, specifically tailored to their needs. This includes visits to operating sites,
meetings with major shareholders and presentations on Brambles’ businesses and functions by its business unit leaders and functional heads.
On an ongoing basis, Directors participate in various seminars and conferences held by industry and professional bodies. In addition, Board
meetings regularly include sessions on recent developments in governance and corporate matters.
3.7 Board meetings
The Board holds scheduled Board meetings at least six times a year to review matters such as Brambles’ financial performance, current
trading, key business initiatives, and strategy, budget and business plans. The meetings are generally held over two days. The Board meets
in Sydney and other locations, including operational sites, from time to time. Details of the number of Board and committee meetings held
during the year, and attendance at those meetings by each of the Directors and committee members, are set out in the Directors’ Report –
Other Information on page 79.
Presentations to the Board are frequently made by senior executives.
The Board recognises the importance of independent judgement and constructive debate on all issues under consideration.
3.8 directors’ remuneration
Details of remuneration, including retirement benefits, paid to the Executive and Non-executive Directors are set out in the Remuneration
Report on pages 60, 61, 64, 70 and 71.
Brambles Limited 2008 Annual Report 47
Corporate Governance Report (continued)
4. CommiTTEES oF THE BoArd
The Board has established three standing committees to assist
in the execution of its responsibilities: the Audit Committee, the
Nominations Committee and the Remuneration Committee. Other
committees of the Board are formed from time to time to deal with
specific matters.
Each of the Board’s standing committees operates under a charter
detailing its delegated authority from the Board. The charter of
each committee can be found on the Brambles website at
www.brambles.com.
Regular reports of the committees’ activities are provided to the
Board and minutes are circulated to all Directors.
4.1 Audit Committee
The objective and purpose of the Audit Committee is to assist
the Board in fulfilling its corporate governance and oversight
responsibilities by:
–
monitoring and reviewing:
•
the integrity of financial statements;
•
internal financial controls;
•
the objectivity and effectiveness of the internal auditors; and
•
the independence, objectivity and effectiveness of the
external auditors;
–
making recommendations to the Board in relation to the
appointment of the external auditors, the approval of their
remuneration and the terms of their engagement;
–
reviewing and monitoring the policy on the engagement of
the external auditors to supply non-audit services, taking into
account relevant ethical guidance regarding the provision of
non-audit services by the external auditors; and
–
reporting to the Board, identifying any matters in respect of which
it considers that action or improvement is needed and making
recommendations as to the steps to be taken.
The Audit Committee discharges these responsibilities by meeting
regularly throughout the year and, among other matters:
–
reviewing, and challenging where necessary, the actions and
judgment of management in relation to all regular financial reports
and any other formal announcements relating to Brambles’
financial performance prepared for release to the ASX, regulators
and the public, including interim and annual financial reports,
before making appropriate recommendations to the Board;
–
reviewing the audit plans of the internal auditors, including the
scope and materiality level of their audits; monitoring compliance
with, and the effectiveness of, the audit plans of the internal
auditors; reviewing reports from the internal auditors on their audit
findings, management responses and action plans in relation
to those findings, and reports from the internal auditors on the
implementation of those action plans; and facilitating an open
avenue of communication between the internal auditors, the
external auditors and the Board;
48 Brambles Limited 2008 Annual Report
–
reviewing the audit plans of the external auditors, including the
nature, scope, materiality level and procedures of their audits;
monitoring compliance with, and the quality and effectiveness
of, the audit plans of the external auditors; and reviewing
reports from the external auditors in relation to their major audit
findings, management responses and action plans in relation
to those findings, and reports from the external auditors on the
implementation of those action plans; and
–
reviewing and recommending to the Board the fees payable to the
external auditors, pre-approving the performance by the external
auditors of any non-audit related work in accordance with the
Audit Independence Charter, and any proposed fees to be paid to
the external auditors for that work, and monitoring compliance with
the Board’s policy on the performance by the external auditors of
non-audit related work.
The Committee is also responsible for ensuring that Brambles’ policy
on Speaking Up is communicated properly and complied with
throughout Brambles, for monitoring that policy, and for ensuring
that appropriate protection against victimisation and dismissal is
given to Brambles employees who make certain disclosures in the
public interest.
A copy of the Audit Committee’s Charter giving full details of its
duties and responsibilities can be found on the Brambles website
at www.brambles.com.
In line with current best practice recommendations, the Audit
Committee is comprised entirely of Non-executive Directors,
all of whom the Board considers to be independent.
The members of the Audit Committee, including details of their
relevant qualifications, are as follows:
–
Stephen Johns (Committee Chairman) had a long career as a
senior executive and director of the Westfield Group, holding a
number of positions including that of Finance Director from 1985
until 2002. He holds a Bachelor of Economics degree from the
University of Sydney and is a Fellow of the Institute of Chartered
Accountants in Australia.
–
David Gosnell is the Managing Director of Global Supply and
Procurement for Diageo plc. He holds a Bachelor of Science
degree in Electrical and Electronic Engineering from Middlesex
University, England.
–
Carolyn Kay is a director of Commonwealth Bank and the Starlight
Foundation and an external board member of Allens Arthur
Robinson. She holds a Bachelor of Law and Arts degree from the
University of Melbourne and a Graduate Diploma of Management
from the AGSM. She is a Fellow of the Australian Institute of
Company Directors.
Graham Kraehe retired as a member of the Committee on 10 April
2008 following his appointment as Chairman of Brambles.
The Board considers that each of the members of the Audit
Committee has recent and relevant financial experience and an
understanding of accounting and financial issues relevant to the
industries in which Brambles operates.
Details of Audit Committee meetings held during the year, and
attendance at those meetings, are set out in the Directors’ Report
on page 79.
4.2 nominations Committee
The objective and purpose of the Nominations Committee is to
support and advise the Board in fulfilling its responsibilities to
shareholders in ensuring that the Board is comprised of individuals
who are best able to discharge the responsibilities of Directors.
The Committee discharges these responsibilities by meeting
regularly throughout the year and, among other matters:
–
assessing periodically the skills required to discharge competently
the Board’s duties, having regard to the strategic direction of the
Group, and assessing the skills currently represented on the Board
by the Directors to determine whether those current skills meet the
required skills identified;
–
reviewing the structure, size and composition (including the
balance of skills, knowledge and experience) of the Board and
the effectiveness of the Board as a whole, and keeping under
review the leadership needs of Brambles, both executive and
non-executive, with a view to ensuring the continued ability of
Brambles to compete effectively in the marketplace;
–
preparing a description of the role and capabilities required for any
Board appointment; identifying suitable candidates to fill Board
vacancies as and when they arise and nominating candidates for
the approval of the Board;
–
ensuring that, in determining the process for the identification of
suitable candidates for appointment:
•
a search is undertaken by an appropriately qualified independent
third party acting on a brief prepared by the Committee which
identifies the skills sought;
•
the search is international, extending to those countries in which
candidates with the necessary skills would ordinarily be expected
to be found; and
•
candidates are considered from a wide range of backgrounds;
–
ensuring that, on appointment, Non-executive Directors receive a
formal letter of appointment, setting out the time commitment and
responsibility envisaged in the appointment;
–
in relation to any re-appointment of a Non-executive Director on
conclusion of their specified term of office, undertaking a process
of review of the retiring Non-executive Director’s performance
during the period in which they have been a member of the Board;
–
reviewing annually the time commitment required of Non-executive
Directors and carrying out performance evaluations to assess
whether the Non-executive Directors are devoting enough time
to fulfil their duties; and
–
giving full consideration to appropriate succession planning,
satisfying itself that processes and plans are in place in relation
to both Board (particularly for the key roles of Chairman and
Chief Executive Officer) and other senior executive appointments.
A copy of the Nominations Committee’s Charter giving full details of
its duties and responsibilities can be found on the Brambles website
at www.brambles.com.
The Nominations Committee is comprised entirely of Non-executive
Directors, all of whom the Board considers to be independent.
The members of the Nominations Committee are Graham Kraehe
(Committee Chairman), Stephen Johns and Tony Froggatt (appointed
to the Committee on 10 April 2008). Don Argus and Jac Nasser
retired as members of the Committee on 6 February 2008 and
14 January 2008 respectively, when they also retired or resigned
as Directors.
Details of Nominations Committee meetings held during the year,
and attendance at those meetings, are set out in the Directors’
Report on page 79.
4.3 remuneration Committee
The objective and purpose of the Committee is to assist the Board
in establishing remuneration policies and practices which:
–
enable Brambles to attract and retain executives and Directors
who will create value for shareholders;
–
fairly and responsibly reward executives having regard to the
performance of Brambles, the performance of the executive and
the general remuneration environment; and
–
comply with the provisions of the ASX Listing Rules and the Act.
The Committee discharges these responsibilities by meeting regularly
throughout the year and, among other matters:
–
determining and agreeing with the Board the broad policy
for the remuneration of the Chairman of the Board, the Chief
Executive Officer and other members of the senior executive team,
and reviewing the ongoing appropriateness and relevance of
the executive remuneration policy;
–
determining the remuneration for the Executive Directors and
the Company Secretary, reviewing the proposed remuneration
for the senior executive team, ensuring that contractual terms on
termination, and any payments made, are fair to the individual and
Brambles, that failure is not rewarded and that the duty to mitigate
loss is fully recognised, and, in determining such packages and
arrangements, giving due regard to all relevant regulations and
associated guidance;
–
insofar as they impact on the Executive Directors and the senior
executive team, approving the design of, and determining targets
for, all cash-based executive incentive plans, and approving the
total proposed payments from all such plans;
–
keeping all equity based plans under review in the light of
legislative, regulatory and market developments, determining each
year whether awards will be made under such plans and whether
there are exceptional circumstances which allow awards at other
times, approving total proposed awards under each plan, and
approving awards to Executive Directors and reviewing awards
made to the senior executive team;
–
annually reviewing and taking account of the remuneration trends
across Brambles in its main markets; and advising on any major
changes in employee benefit structures throughout Brambles;
–
reviewing the funding and performance of Brambles’ retirement
plans and reporting to the Board; and
–
selecting, appointing and setting the terms of reference for external
remuneration consultants who advise the Committee in respect of
the remuneration of the Executive Directors.
Brambles Limited 2008 Annual Report 49
Corporate Governance Report (continued)
5.2 group risk Committee
The Group Risk Committee assists the Board in fulfilling its corporate
governance and oversight responsibilities by establishing, monitoring
and reviewing internal control and risk management systems to
safeguard shareholders’ investment and Brambles’ assets, ensuring
compliance with, reviewing the effectiveness of, and continuously
monitoring Brambles’ risk management and internal control systems,
and reporting to the Board on a regular basis.
Based on its review work, the Committee also prepares and submits
to the Board a report on the effectiveness of Brambles’ management
of its material business risks as required by the CGPR.
The Committee members are Liz Doherty (Chief Financial Officer
and Committee Chairman), key managers from each business unit
and senior executives from Brambles’ risk management, legal,
accounting, secretarial and internal audit functions.
A copy of the Group Risk Committee’s Charter can be found on
the Brambles website at www.brambles.com.
6. EvALuATion
Brambles has a well established performance management and
development planning process, which is used throughout the Group.
The process spans objective setting consistent with the Company’s
remuneration policy and targets for cash and equity based incentive
plans set by the Remuneration Committee, as well as personal
development planning, half year reviews and full year appraisals.
These then feed into a performance rating, as well as the assessment
of annual bonuses. Senior executives (including the Executive
Leadership Team) all participate in this process, which is overseen
by the Remuneration Committee.
Performance evaluations for senior executives (including the
Executive Leadership Team) were carried out during the year
in accordance with this process.
A copy of the Remuneration Committee’s Charter giving full details of
its duties and responsibilities can be found on the Brambles website
at www.brambles.com.
The Remuneration Committee is comprised entirely of Non-executive
Directors, all of whom the Board considers to be independent.
The members of the Remuneration Committee are Luke Mayhew
(Committee Chairman), Graham Kraehe (appointed to the Committee
on 10 April 2008), and Tony Froggatt. Hans-Olaf Henkel, Jac Nasser
and Don Argus retired from the Committee on 16 November 2007,
14 January 2008 and 6 February 2008 respectively, when they
also retired or resigned as Directors.
The Committee meets at least three times a year. Details of
Remuneration Committee meetings held during the year, and
attendance at those meetings, are set out in the Directors’ Report
on page 79. Details of Brambles’ remuneration policy can be found
in the Remuneration Report on pages 55, 56 and 70.
5. mAnAgEmEnT CommiTTEES
5.1 Executive Leadership Team
The Brambles Executive Leadership Team assists in developing
and implementing Brambles’ strategic direction, and ensuring
its resources are well managed. The Team has a range of
responsibilities, which include:
–
reviewing business and corporate strategies;
–
formulating major policies in areas such as succession
planning and talent management, human and capital resources
management, information technology, risk management,
communications, and post-investment project reviews;
–
leading initiatives which may from time to time vary but now
include:
•
Zero Harm;
•
diversity; and
•
quality; and
–
leading the implementation of change processes.
Minutes of meetings of the Team are circulated to the Board.
The members of the Team are Mike Ihlein (Chief Executive
Officer and Committee Chairman), Liz Doherty (Chief Financial
Officer), Tom Gorman (Group President, CHEP Europe, Middle
East and Africa), Jasper Judd (Senior vice President – Strategic
Development), Elton Potts (President and Chief Operating Officer,
Recall), Kevin Shuba (Group President, CHEP Americas), Nick Smith
(Senior vice President – Human Resources) and Craig van der Laan
(Group President, CHEP Asia-Pacific and Global Head of Mergers
and Acquisitions).
Dave Mezzanotte (Chief Operating Officer, CHEP) was a member of
the Executive Leadership Team during the year until he left Brambles
on 4 April 2008.
50 Brambles Limited 2008 Annual Report
7. ACCounTABiLiTy And AudiT
7.1 internal control and risk management
The Board is responsible for the establishment and review of the
effectiveness of the Group’s system of internal control and risk
management. The Board is supported in this role by management,
and in particular by the Group Risk Committee, the Audit Committee
and internal audit.
Management is responsible for the development, implementation
and management of systems that:
–
identify, assess and manage risks in an effective and efficient
manner;
–
enable decisions to be based on a comprehensive view of the
reward-to-risk balance;
–
provide greater certainty of the delivery of objectives; and
–
satisfy the Group’s corporate governance requirements.
These systems are designed to limit the risk of failure to achieve
business objectives. It must be recognised, however, that internal
control and risk management systems can provide only reasonable,
and not absolute, assurance against the risk of material loss.
Key elements of Brambles’ internal control systems include:
–
a Code of Conduct that sets out an ethical and legal framework
for all employees in the conduct of Brambles’ business;
–
financial systems to provide timely, relevant and reliable
information to management and to the Board;
–
appropriate formalised delegations and limits of authority
consistent with Brambles’ objectives;
–
annual management declarations confirming, among other matters,
the adequacy of internal control procedures, the effectiveness of
risk management systems and compliance with all regulatory and
statutory requirements;
–
an internal audit function, which carries out risk-based audits
based on an annual plan approved by the Audit Committee, which
provides assurance on the robustness of the ongoing internal
control environment; and
–
other sources of independent assurance, such as environmental
audits, occupational health and safety audits and reports from
the external auditors.
During the year, the Board reviewed the effectiveness of the internal
control and risk management systems and will continue to do so on
an ongoing basis by:
–
considering and approving the budget and forward plan of
each business;
–
reviewing detailed monthly reports on business performance
and trends;
–
setting limits on delegated authority;
–
receiving regular reports on Brambles’ treasury activities,
and reviewing treasury guidelines, limits and controls;
–
receiving twice yearly written assurances from the Chief Executive
Officer and Chief Financial Officer under section 295A of the Act
and Principle 7.3 of the CGPR;
–
receiving twice yearly reports on the effectiveness of internal
control and risk management systems, including the report under
Principle 7.2 of the CGPR from the Group Risk Committee; and
–
receiving reports from the Audit Committee, which has
a responsibility to assist the Board in reviewing internal
financial controls.
The key elements of Brambles’ business risk management systems
are set out below:
risk control – risks to the achievement of business objectives are
identified through a process of examination between Brambles’ risk
management team and functional process owners. The identified
risks are assessed in terms of their underlying causes, business
consequences, external variables and controllability, current internal
control effectiveness, likelihood of occurrence and overall risk priority.
The resulting risk and control profiles are presented to the Board,
together with a risk improvement program designed to increase the
effectiveness of controls and manage the overall level of risk. This
process forms part of the Board’s annual review of the effectiveness
of the systems of internal control.
risk monitoring – in addition to regular monitoring by the Group
Risk Committee, risks and controls are reassessed by management
on a biannual basis. The outcome of those assessments and details
of progress in implementing risk improvement programs are reported
to the vice President Group Risk and Audit. In addition, a report on
the effectiveness of the management of business risks is provided
to the Group Risk Committee and the Board. The effectiveness of
the specific risk controls and risk improvement programs are also
periodically reviewed by internal audit, and the results reported to
the Group Risk Committee and the Board.
Brambles Limited 2008 Annual Report 51
Corporate Governance Report (continued)
–
Systems and technology – Brambles relies on the continuing
operation of its information technology and communications
systems, including those in CHEP’s Global Data Centre.
Interruption or failure of these systems could impair Brambles’
ability to provide its services effectively. This could damage its
reputation and, in turn, could have an adverse effect on its ability
to attract and retain customers.
–
Force majeure – Brambles is subject to the risk of strikes, terrorism,
war, fire, flood, earthquakes and other acts of God and other acts
outside its control. In particular, a fire in a Recall DMS facility could
have a number of potential consequences in terms of employee
safety, reputation, financial impairment and litigation. Whilst
Brambles maintains appropriate insurances and fire protection
controls, some of these force majeure risks may be uninsurable.
–
Security and contract management – Part of Brambles’ businesses,
particularly in Recall, is the storage and protection of its customers’
information from unauthorised access, use, disclosure, destruction,
modification or disruption. Any inadequate or undocumented
customer contracts could give rise to a potential exposure to
customer disputes and legal liability in the event of a service failure,
such as loss of customer data. To manage the risk of loss of its
customers’ information, Brambles maintains appropriate physical
and information technology security measures. Nevertheless
it is possible that future claims could exceed the level or scope
of Brambles’ insurance and that provisions in the Company’s
accounts for self-insured risks could prove insufficient.
–
Safety – Brambles is subject to various operational hazards,
including industrial, road traffic or transportation accidents
that could potentially result in injury or fatality to employees,
contractors or the public. Brambles has adopted a Zero Harm
policy to manage its safety risks, details of which are in the
Sustainability Report on page 36.
–
Reputation – Brambles is subject to the risk that negative publicity,
whether true or not, may change stakeholder perceptions of its
past actions and future prospects and affect its overall appeal to
regulators, customers, employees, suppliers and shareholders.
In turn, this may have an impact on licences to operate, customer
purchase decisions, employee retention and shareholder value.
7.2 Principal risks
The principal risks and uncertainties facing Brambles are
described below.
–
Economic and business conditions – Brambles has operations
spread across a diverse range of countries and territories. It is
subject to risks related to global economic and business conditions
and climate. These may affect, among other things, profitability,
demand for services, the solvency of counterparties and the ability
to obtain additional finance.
–
Equipment control and quality – Brambles is subject to the
risk that the operating and capital costs of CHEP may fluctuate
because of the pallet and container pools operated by CHEP. These
costs are sensitive to the efficiency and effectiveness of the control
and quality standards employed.
–
Raw material supply – Brambles relies on the continued supply of
raw materials essential to its operations. To enhance the continued
availability of lumber for wooden pallets, CHEP sources its supplies
from a range of providers in each geographic region. Further, where
appropriate, CHEP has purchased its own timber plantations.
–
Strategy and capital allocation – Selection of the optimal corporate
strategy, business model, financial structure and capital allocations,
including the pace of expansion into emerging markets, are central
to the enhancement of the value of shareholders’ investment and
protection of Brambles’ assets as it seeks to capture the full value
of the available growth opportunities.
–
Competition and retention of major customers – Brambles operates
in a competitive environment. Many of the markets in which it
operates are served by numerous competitors and are also subject
to the threat of a new entrant or a new technology, product or
service offering. This could potentially have an impact on revenue,
cost base, economies of scale and the value of existing assets.
Customers and other users of Brambles’ services could also affect
market structure, market share or profitability.
–
Fuel costs – Brambles has operations that are directly or indirectly
exposed to volatility in fuel costs that have the potential to impact
margins. Brambles has and continues to implement a range of
initiatives to manage transport costs.
–
Talent management – Brambles’ ability to meet its business
objectives is directly related to its ability to create an
optimal working environment to attract, develop and retain
high-performing individuals. Loss of talented people could, until
suitable replacements are found, affect Brambles’ capability to
execute its growth plans and productively utilise existing resources
in personnel, facility capacity and infrastructure.
52 Brambles Limited 2008 Annual Report
7.3 External Audit
PricewaterhouseCoopers has been engaged by the Board to act as
external auditors to Brambles since the 2002 financial year. Under
the terms of engagement, the Australian audit engagement partner
will rotate every five years.
Any dealings in Brambles Limited securities by a Director or a
member of the Executive Leadership Team are reported to Brambles
within two business days of effecting such dealings. The ASX and a
UK regulatory information service are notified of these transactions
within applicable time limits.
The Securities Trading Policy applies to Brambles’ equity based
awards under the incentive plans described in section 3 of the
Remuneration Report. The policy prohibits senior managers
from acquiring financial products or entering into arrangements
which have the effect of limiting the exposure to the risk of price
movements of Brambles securities.
9. SuSTAinABiLiTy
Brambles is committed to meeting high standards of compliance
with respect to its health, safety, environmental and community
responsibilities, which are essential to the way in which Brambles’
businesses operate.
A Sustainability Report addressing these issues can be found
on pages 28 to 39, and on the Brambles website at
www.brambles.com.
10. BrAmBLES CodE oF ConduCT
Brambles has a Code of Conduct, which provides an ethical
and legal framework for all employees in the conduct of
Brambles’ business. The Code of Conduct defines how Brambles
relates to its shareholders, employees, customers, suppliers and
the community. Further details of the content of the Code of
Conduct are set out in the Sustainability Report. A copy of the
Code of Conduct can be found on the Brambles website at
www.brambles.com.
11. ASx CorPorATE govErnAnCE CounCiL’S PrinCiPLES
And rECommEndATionS
The Board notes that at the beginning of the year, Brambles was in
compliance with the first edition of the CGPR and, during the year,
made the transition to the second edition of the CGPR. The Board
considers that, as at 30 June 2008, Brambles was in compliance in
all material respects with the second edition of the CGPR.
The Audit Committee is responsible for making recommendations
on the appointment, evaluation and dismissal of external auditors,
setting fees and reviewing the independence and objectivity of the
external auditors.
The Board remains committed to its policy relating to the performance
of non-audit work by external auditors, so as to safeguard the external
auditors’ objectivity and independence. This policy is set out in a
Charter of Audit Independence, a copy of which can be found on
the Brambles website at www.brambles.com. The policy divides
non-audit work into three categories: work which must be approved
by the Chief Financial Officer (if fees will fall below specified limits),
work which must be approved by the Audit Committee and work
which is prohibited. Prior consultation with, and approval of the
Chief Financial Officer or Audit Committee, as prescribed by the
Charter of Audit Independence, is required whenever management
recommends that the external auditors undertake non-audit work.
Internal accounting, valuation services, actuarial services and internal
audit services must not be performed by the external auditors.
Details of the amounts paid to the external auditors during the year
for audit and non-audit services are set out in Note 34 on page 147.
8. SHArE oWnErSHiP And dEALing
Details of Brambles Limited securities held by Directors are set
out on pages 69 and 72. The Board has put in place policies
covering dealings in securities by Directors, senior executives and
individuals located in Brambles’ Headquarters. These are contained
in a Securities Trading Policy, a copy of which can be found on the
Brambles website at www.brambles.com.
The policy is designed to ensure that shareholders, customers
and the international business community have confidence that
Brambles’ Directors and senior executives are expected to comply
with the law and best practice in corporate governance, and
handle confidential information lawfully and with integrity.
Under this policy, Directors and relevant employees are required
to obtain approval before dealing in Brambles Limited’s securities,
and are prohibited from such dealing at certain times, other than
in exceptional circumstances, and then only where the relevant
person declares that he or she does not possess any price sensitive,
non-public information.
Brambles Limited 2008 Annual Report 53
Directors’ Report – Remuneration Report
dEAr SHArEHoLdEr,
I am pleased to present Brambles’ 2008 Remuneration Report.
The structure of the current Remuneration Plan was agreed in 2004. Since then Brambles has evolved significantly. As a result of a
comprehensive review, we are now proposing a number of changes to our short and long term incentive plans. These are aimed at ensuring
that the executive remuneration policy reflects the changed business structure, supports the “Accelerating Growth” strategy approved by the
Board and announced by Mike Ihlein, Brambles’ CEO, during August 2007, and continues the focus on the efficient use of capital. We have
looked to reward long term shareholder value generation in a way that is motivating to a global management team.
Full details of the proposed changes are set out in detail in sections 4.1.1 and 4.2.1 of the 2008 Remuneration Report. In summary, however,
we are proposing:
–
relatively minor changes to the annual short term incentives which continue to be based around the delivery of Brambles value Added;
–
that the Enhanced STI element of the current plan is removed in order to simplify remuneration structures, with a comparable value being
incorporated into the LTI plan; and
–
that the LTI plan continues to be in the form of shares which may vest after a three year performance period, but with a vesting scale
related to two separate performance criteria: a TSR element which applies to half of a LTI Award, with the other half of the award based
on the delivery of profitable and sustainable global growth, measured by a combination of sales revenue growth targets and BvA hurdles
(details of the targets and hurdles proposed for 2009 are set out in the 2008 Notice of AGM).
The Board believes the proposed revisions to the senior executive remuneration policy will help drive strong long term value for shareholders,
whilst continuing to attract, retain and motivate the best global talent.
On behalf of the Remuneration Committee, thank you for your interest in the Report.
Luke mayhew
Non-executive Director and Chairman of the Remuneration Committee
54 Brambles Limited 2008 Annual Report
ConTEnTS
1. Background
2. Remuneration Committee
3. Remuneration policy and structure
4. Performance of Brambles and proposed changes
to incentive plans
5. Executive Directors and Disclosable Executives
6. Non-executive Directors’ disclosures
7. Appendices
1. BACkground
This Remuneration Report includes information on Brambles’ Executive
Directors, Non-executive Directors, and other Group executives whose
details are required to be disclosed (disclosable Executives).
The Disclosable Executives include those persons having authority
and responsibility for planning, directing and controlling the activities of
the Group, and who, for some or all of the year ending 30 June 2008
(year), have been a member of the Executive Leadership Team of
Brambles (key management Personnel), as well as the five most
highly paid executives of each of Brambles Limited and the Group
(other Senior Executives).
This report includes all disclosures required by the Act, regulations
made under the Act, and Australian Accounting Standard AASB 124:
Related Party Disclosures. The disclosures required by Section 300A
of the Act have been audited. Disclosures required by the Act cover
both Brambles Limited and the Group. The footnotes in this report
start on page 75.
2. rEmunErATion CommiTTEE
The Remuneration Committee (Committee) operates under
delegated authority from the Board. The Committee’s activities are
governed by its Charter. Its responsibilities include recommending
overall remuneration policy to the Board, approving the remuneration
arrangements for both the Executive Directors and the Company
Secretary and reviewing the remuneration policy and individual
arrangements for other senior managers.
Details of the membership of the Committee can be found on
page 50. The Committee’s Charter, as well as a full list of advisors
who provided data or consulting services to the Committee during the
Year can be found on the Brambles website at www.brambles.com
on the Corporate Governance page.
3. rEmunErATion PoLiCy And STruCTurE
3.1 remuneration policy
The Board has adopted a remuneration policy for the Group which
is consistent with its business objectives and designed to attract
and retain high calibre executives, align executive rewards with the
creation of shareholder value and motivate executives to achieve
challenging performance levels.
The Board’s policy is that service contracts for the Group’s senior
managers should have no fixed terms but should be capable of
termination on a maximum of 12 months’ notice, with the employing
company retaining the right to terminate the contract immediately
by making a payment equal to no more than 12 months’ pay in
lieu of notice. Some executives (but not the Executive Directors)
have pre-existing service contracts that contain notice periods
that exceed 12 months or are based in countries where higher
severance terms apply.
When setting and reviewing remuneration levels for the Executive
Directors and other members of the Executive Leadership Team,
the Committee considers the experience, responsibilities and
performance of the individual and takes account of market data
relevant to the individual’s role and location, as well as Brambles’
size, geographic spread and complexity. The Group’s remuneration
policy is to pay at the median level of remuneration for target
capability and performance and to provide upper quartile rewards
for outstanding capability and performance.
3.2 Proposed changes to remuneration policy
During the year, the Committee carried out a review of the
remuneration policy. The purpose of the review was to ensure
that Brambles’ policy supported the Group’s business strategy,
in particular, the Accelerating Growth strategy announced by
Mike Ihlein, Brambles’ CEO, in August 2007, the new business
structure announced by Mr Ihlein at that time and the creation of
shareholder value. As a result, the Committee has recommended
changes be made to both Brambles’ short and long term incentive
plans for future years.
The proposed changes to the short term incentive plans continue
the focus on strong operational performance during the year. The
proposed changes to the long term incentive plan are to provide a
balance between a focus on sustained profitable growth in line with
the Accelerating Growth strategy and ensuring participants focus on
the share price performance of Brambles, relative to the ASX100, as
well as smoothing out the otherwise cyclical volatility of the ASX100.
Further details of these changes are set out in Sections 4.1.1 and 4.2.1
of this report. Shareholder approval of the amendments to the rules of
the long term incentive plan will be sought at the 2008 AGM.
In addition, Brambles will be seeking shareholder approval at the
AGM to implement a global employee share plan. This is seen
as a valuable part of Brambles’ employment offering and helpful
in reinforcing the value of being part of the Group. Brambles also
believes it is in shareholders’ interests for a larger proportion of
Brambles’ global employees to share an interest in and returns
from improved shareholder value.
3.3 Structure of remuneration
Remuneration is divided into those components which are not
directly linked to target capability and performance (that is, they
are “Fixed”), and those components which are variable and are
directly linked to Brambles’ financial performance and personal
performance objectives (that is, they are “At risk”).
3.3.1 Fixed remuneration
Fixed remuneration generally consists of base salary and benefits.
However, some Executive Directors and certain other managers
based in Australia are provided with an annual Total Fixed
Remuneration (TFr) amount and have flexibility as to the precise
mixture of cash and benefits they receive within that amount. These
benefits are provided at cost and are inclusive of any Fringe Benefits
Tax (FBT) incurred by the relevant employing company. They may
include motor vehicles, health care, and disability and life insurance.
Senior managers who are not covered by TFR may receive similar
benefits in addition to their base salary.
As a global group, Brambles operates an international mobility policy
which can include the provision of housing, payment of relocation
costs and other location adjustment expenses where appropriate.
Brambles Limited 2008 Annual Report 55
Directors’ Report – Remuneration Report (continued)
3.3.2 At risk remuneration
In addition to those elements of remuneration which are Fixed, a significant element of senior managers’ total potential reward is required to
be At Risk. This means that an individual’s maximum potential remuneration may be achieved only in circumstances where they have met
challenging objectives, described as Key Performance Indicators (kPis), which contribute to Brambles’ overall profitability and performance
for the benefit of all shareholders. KPIs comprise both financial and personal objectives, described in more detail in Section 4.1 of this report.
At Risk remuneration is provided to Brambles’ senior managers through short term incentive (STi) and long term incentive (LTi) arrangements.
All the incentive plans under which awards to Executive Directors and the Disclosable Executives are still to vest or be exercised are
summarised in the diagram below or in Sections 7.2 or 7.3.
The structure of Brambles’ current incentive arrangements was approved by BIL and BIP shareholders at their respective 2004 AGMs and
adopted by the shareholders of Brambles Limited at the 2006 Extraordinary General Meeting. These arrangements received a 98% vote in
favour at the 2004 meetings and a 99% vote in favour at the 2006 meeting.
Brambles’ At Risk remuneration includes four different types of award, the key features of which are illustrated in the following diagram.
(References to “TSr” are references to Total Shareholder Return, which measures the returns that a company has provided for its
shareholders, reflecting share price movements and reinvestment of dividends over a specified period. References to “Performance Period”
are to a three year period.) The manner in which the awards operate is summarised below:
STI Cash Award(1)
Size determined by performance against
KPIs for financial year just ended.
80% financial KPIs
20% personal KPIs
Equity award date
�
STI Share Award(1)
Size normally derived from
size of STI Cash Award.
Enhanced STI Share Award
50% of size of STI Share Award.
LTI Award
Size determined as %
of salary/TFR.
Vesting date
(3rd anniversary of equity award date)
�
Awards vest subject to continued
employment at 3rd anniversary
of grant.
Awards vest subject to continued
employment at 3rd anniversary
of grant, and relative TSR ranking
of between 37th and 25th out of
100 over Performance Period.*(2)
Awards vest subject to continued
employment at 3rd anniversary
of grant, and relative TSR ranking
of between 50th and 25th out of
100 over Performance Period.*(2)
�
Start of financial year 1
�
End of financial year 3
* Performance Period
Vesting depends upon relative TSR ranking during three months prior to start of this period,
compared with that during final three months of this period.
The market value at the date of grant of all equity awards made to any person in any financial year should not normally exceed two times their
TFR or equivalent. The Committee may, however, increase this limit to three times TFR in exceptional circumstances. The STI Share Award,
Enhanced STI Share Award and LTI Share Award all have a maximum life of six years from grant date.
Brambles’ Securities Trading Policy applies to awards granted under the incentive arrangements described above. That policy prohibits senior
managers from acquiring financial products or entering into arrangements which have the effect of limiting exposure to the risk of price
movements of Brambles securities. It is a term of senior executives’ employment contracts that they are required to comply with all Brambles’
policies (including the Securities Trading Policy). Management declarations are obtained twice yearly and include a statement that all policies
have been complied with.
More detailed information on Brambles’ current incentive arrangements is set out in Section 4, and in the option and performance share plan
rules, which can be found on Brambles’ website at www.brambles.com on the Corporate Governance page.
56 Brambles Limited 2008 Annual Report
3.3.3 Proposed change to At risk remuneration
As a result of the review of Brambles’ remuneration policy, Brambles
is proposing to remove the Enhanced STI Share Award and instead
roll a comparable value into the LTI Share Award. This will simplify
the plan construction. Brambles is also looking to make minor
changes to the STI incentives and more significant changes to the
LTI incentives. Details are set out in Sections 4.1.1 and 4.2.1.
4. PErFormAnCE oF BrAmBLES And ProPoSEd
CHAngES To inCEnTivE PLAnS
Brambles’ remuneration policy is directly linked to its performance,
both in terms of earnings and the creation of shareholder wealth.
This link is achieved in the following ways:
–
by placing a significant portion of executives’ remuneration At Risk;
–
by selecting appropriate KPIs for annual STI Cash Awards and
performance conditions for equity awards; and
–
by requiring those KPIs or conditions to be met in order for the At
Risk component of reward to be awarded or to vest.
The relationship between Brambles’ remuneration policy and its
performance over the Year and the previous four financial years is set
out in Sections 4.2.2 and 4.2.3. The tables in those sections show the
level of vesting of awards triggered by performance over those periods.
4.1 STi key Performance indicators
As outlined in Section 3.3.2, senior managers have the opportunity
to receive an annual STI Cash Award based on performance against
KPIs. The KPIs chosen for the Year (in addition to an individual’s
personal and safety objectives) were Brambles value Added (BvA),
plus (for members of the Executive Leadership Team) Profit After Tax
(PAT) and Cash Flow From Operations (CFo).
A focus on BvA helps ensure the efficient use of capital within
Brambles, PAT captures interest and tax charges which are not
directly incorporated in BvA, and CFO is a key measure of a
company’s ability to pay dividends and pursue growth opportunities,
and is used by many analysts as a basis for valuing companies.
The key levels of performance possible against each of the financial
KPIs relevant to the STI awards for the Year were: Threshold
(the minimum necessary to qualify for the awards); Target
(where the performance targets have been met); and maximum
(where the targets have been exceeded, and the related rewards have
reached their upper limit).
The actual levels of performance achieved for the Year against the
financial KPIs are summarised in the table below.
KPIs
Level of performance achieved during the Year(3)
Brambles BvA
Brambles CFO
Brambles PAT
CHEP BvA
Recall BvA
Between Threshold and Target
Between Threshold and Target
Between Threshold and Target
Between Threshold and Target
Below Threshold
4.1.1 Proposed changes to STi key Performance indicators
As discussed in Section 3.2 above, minor changes to the STI Cash
Award incentives are being made for the year ending 30 June 2009
and beyond. The changes relate to the KPIs for those awards. From
the 2009 year, financial KPIs for the Chief Executive Officer and Chief
Financial Officer will be BvA and PAT, and the financial KPIs for the
remainder of the Key Management Personnel will be BvA. Further,
financial KPIs will form 70% of the STI Cash Award performance
conditions for the Chief Executive Officer and other members of the
Executive Leadership Team. The remaining 30% of the STI Cash
Award performance conditions will be based on personal, strategic
and safety objectives.
The financial KPIs for the Chief Executive Officer and the Chief
Financial Officer, which comprise 70% of their STI Cash Award, will
be made up of two components: Brambles Group BvA (50%) and
Brambles Group PAT (20%). The financial KPIs for the remaining Key
Management Personnel will, for Group Presidents, be based half on
their respective business unit’s BvA and half on Brambles BvA and,
for the remaining Executive Leadership Team members, be based
100% on Brambles BvA.
4.2 Equity award vesting conditions
As outlined in Section 3.3.2, senior managers also currently have the
opportunity to receive equity awards in the form of STI Share Awards,
Enhanced STI Share Awards and LTI Awards. The vesting of all three
types of equity award normally only occurs three years from the date
of award. The vesting of Enhanced STI Share Awards and LTI Awards
also depends on Brambles’ TSR ranking relative to the ASX100 over
a Performance Period in accordance with the vesting schedules
described in Section 7.2.
A relative TSR performance condition helps ensure that value is only
delivered to participants if the investment return actually received
by Brambles’ shareholders is sufficiently high relative to the return
they could have received by investing in a portfolio of alternative
stocks over the same period. vesting is also conditional on the Board
being satisfied that the financial performance of Brambles over the
Performance Period has been at an acceptable level. Under the 2006
Share Plan, TSR calculations are normally based on average daily
closing share prices in the three months immediately preceding the
start and end of the Performance Period.
Details of equity awards made to Executive Directors and Disclosable
Executives which may affect remuneration in this or future reporting
periods are set out in Section 7.3. The vesting of these awards was
subject variously to performance conditions based on compound
annual growth rate (CAgr) in earnings per share (EPS), or relative
TSR ranking.(4) The 2001 Option Plans were based on TSR
performance against FTSE 100/S&P/ASX50 and the 2001 Share
Plans were based on compound EPS growth. The 2004 Share Plans,
which were approved by shareholders, resulted in a shift to vesting
based on performance against the ASX100 and the FTSE 350. In
2006, shareholders approved the 2006 Share Plan, which provides
for the vesting of share awards based on the TSR ranking of Brambles
relative to the ASX100 over the Performance Period.
Brambles Limited 2008 Annual Report 57
Directors’ Report – Remuneration Report (continued)
The tables in Sections 4.2.2 and 4.2.3 illustrate the relationship
between Brambles’ remuneration policy and performance, showing
the level of vesting of equity awards triggered by performance over
various periods to 30 June 2007 and to 30 June 2010. In the case
of awards which have not yet reached their earliest testing date, the
level of vesting shown is that which would be triggered if the current
level of performance were maintained until testing.
4.2.1 Proposed changes to LTi Award vesting conditions
As discussed in Section 3.2 above, changes to the LTI arrangements
have been recommended by the Committee and shareholder
approval to those changes will be sought at the 2008 AGM.
The first proposed change is to cease to grant Enhanced STI Share
Awards and instead, roll a comparable value of those Awards into
the LTI Award.
The second proposed change is to the performance conditions which
must be met in order for LTI Awards to vest. Performance conditions
will be divided into two equal components: 50% of an LTI Award will
be measured by a relative TSR condition and the other 50% by a
CAGR sales revenue target and BvA performance condition.
–
TSR Condition – half of the LTI Award will continue to be
measured by a relative TSR condition, thereby providing a link
between executive reward and Brambles’ performance against
other companies in the ASX100. The manner in which relative
performance will be measured, however, will change. The Board
recognises the volatility in the ASX100 index. This is due in part to
the high number of companies in the Basic Resources and Oil and
Gas sectors in the ASX100. The performance of these companies
can be cyclical in nature and is primarily impacted by external
market factors, such as the market price of commodities. The new
relative TSR condition is being proposed to smooth out the impact
of such cyclical volatility.
The new condition would be satisfied if Brambles’ TSR over
the Performance Period equals the TSR of the median ranked
company in the ASX100 over this period. Threshold vesting would
occur for TSR performance equal to that of the median ranked
ASX100 company. It is proposed that 40% of awards would
vest at Threshold. While this is higher than the current vesting
of 30% at Threshold, this continues to be more demanding
than the current practice for ASX100 companies which have
TSR performance conditions, where 50% vesting for the
median TSR performance is normal.
Maximum vesting would occur for outperformance of the median
ranked company by a predetermined factor, which, for awards
granted in 2008, will be outperformance of the TSR of the median
ranked ASX100 company by 25%. This level of performance is
comparable to “upper quartile” vesting and historical analysis shows
that this level of performance would have been upper quartile in
the ASX100 in a significant majority of Performance Periods in the
last six years. A three month averaging period will continue to be
applied. If Brambles’ TSR performance is between Threshold and
Maximum, vesting is on a pro-rata straight line basis.
–
Sales revenue growth/BvA – the performance condition for
the other half of the LTI award will be measured against the
achievement of profitable growth objectives. This is designed to
directly support the Accelerating Growth strategy, as announced
by Mike Ihlein in August 2007. The growth element is designed
to reward both long term sales revenue and BvA growth. vesting
would be primarily based on achievement of sales revenue with
three year performance hurdles set on a CAGR basis.
The sales revenue growth elements would be underpinned by BvA
hurdles to ensure quality of earnings is maintained at a strong level.
Both sales revenue growth and BvA will be measured in constant
currency. The sales revenue growth targets underpinned by BvA
hurdles are designed to drive profitable business growth and deliver
increased shareholder value.
Details of these proposals and the performance matrix setting out the
sales revenue growth targets and BvA hurdles for the LTI Awards to
be made in the 2009 financial year have been included in the 2008
Notice of AGM. In future years, Brambles will set out future LTI Sales
Revenue Growth/BvA matrices retrospectively in its annual report and
will report on achievement against the performance hurdles in the
remuneration report for the applicable year.
The diagram below sets out how these proposed changes would fit
together to provide a revised incentive framework for senior executives.
STI Cash Award
Size determined by performance
against KPIs for financial year
just ended.
70% financial KPIs
30% personal KPIs
Equity award date
�
STI Share Award
Size normally derived from
size of STI Cash Award.
LTI Award
Size determined as %
of salary/TFR.
Vesting date
(3rd anniversary of equity award date)
�
Awards vest subject to continued
employment at 3rd anniversary of grant.
TSR – Threshold vesting where TSR equals
median ranked ASX100 company over
performance period.
Full vesting for outperformance of 25%.
Satisfaction of sales revenue growth with
BVA performance condition over
Performance Period.
�
Start of financial year 1
�
End of financial year 3
* Performance Period
50% of vesting depends on a relative TSR ranking during the three months prior to the
start of this period, compared with that during the final three months of the period.
Vesting of the remaining 50% is based on sales revenue CAGR and BVA conditions
over the entire period.
58 Brambles Limited 2008 Annual Report
4.2.2 EPS CAgr performance – awards under 2001 Share Plans
Awards under the 2001 Share Plans are subject to performance hurdles based on CAGR in EPS. The following table details, for awards made
during the financial year indicated, the performance against the applicable hurdle for the periods indicated.
Awards made
during year
2003(5)
Performance
condition
Start of
Performance
Period
CAGR
performance
(p.a.)
Vesting triggered
(as % of
original award)
CAGR
performance
(p.a.)
Vesting triggered
(as % of
original award)
EPS CAGR
1 Jul 2002
14.2%
92.5%
N/A
N/A
Period to 30 June 2007
Period to 30 June 2008
See Section 7.2 for further information on the calculation of EPS for historical awards.
4.2.3 relative TSr performance – awards under 2001 option Plans and 2004 and 2006 Share Plans
Awards under the above Option and Share Plans are subject to performance hurdles based on relative TSR. The following table details,
for awards made during the financial years indicated, the performance against the applicable hurdle for the periods indicated.
Period to 30 June 2007
Period to 30 June 2008
Awards made
during year
Performance
condition
Start of
Performance
Period
Ranking
performance
(out of 100)
Vesting triggered
(% of
original award)
Vesting triggered
(% of
original award)
2003(6)
2005(7)
Relative TSR(8)
1 Jul 2002
Relative TSR(9)
1 Jul 2004
60.5(8)
17.4(9)
0%
100% Enhanced STI Awards
100% LTI Awards
0%
N/A
2006(7)
Relative TSR(11)
1 Jul 2005
46.6(11)
N/A
0% Enhanced STI Awards
39.52% LTI Awards
The following table provides similar details for awards which have yet to be tested.
Awards made
during year
2007(10)
Performance
condition
Start of
Performance
Period
Ranking
performance
(out of 100)
Vesting if current performance is
maintained until earliest testing date
(% of original award)
Period to 30 June 2008
Relative TSR(11)
21 Feb 2007
84(11)
2007(10)
Relative TSR(11)
1 Jul 2007
75(11)
0% Enhanced STI Awards
0% LTI Awards
0% Enhanced STI Awards
0% LTI Awards
4.3 global Employee Share Plan
Brambles will be seeking shareholder approval at the 2008 AGM to implement a global employee share plan, called the MyShare Plan.
The objectives in offering the MyShare Plan are to:
–
increase the proportion of employees who hold shares in Brambles;
–
assist in the retention of employees; and
–
leverage the Brambles identity in its business, and align the interests of Brambles’ employees with those of its shareholders.
The proposed plan is an employee contribution and company matching scheme. Brambles believes that this type of plan offers the best opportunity
for employees to make a personal commitment to contribute, and receive a benefit commensurate with their contribution.
Under the proposed plan, employees will acquire ordinary shares which they must hold for a two year period. If they hold the shares, and remain
employed at the end of that two year period, Brambles will “match” the number of shares they hold by issuing or transferring to them the same
number of shares which they held for the qualifying period. The plan would be capped at A$5,000 per annum in contributions to ensure that
individuals are not overexposed, and that the overall costs of the plan are not excessive.
The terms and conditions of the plan will allow for flexibility in how the matching shares will be satisfied, either through new issue shares or
existing shares bought on market. Details of the terms and conditions will be included in the 2008 Notice of AGM.
Brambles Limited 2008 Annual Report 59
Directors’ Report – Remuneration Report (continued)
5. ExECuTivE dirECTorS And diSCLoSABLE ExECuTivES
5.1 Executive directors: appointment and resignation
5.1.1 m E doherty
Liz Doherty was appointed to the Board as an Executive Director
with effect from 1 December 2007.
The material terms of Liz Doherty’s employment arrangements
as Chief Financial Officer are outlined below.
With effect from 1 December 2007, Liz Doherty receives an annual
TFR of A$1,200,000. This is subject to annual review.
Liz Doherty will participate in Brambles’ STI arrangements. In respect
of each financial year commencing on and from 1 July 2007, she
will receive an STI Cash Award, the cash opportunity under which
will be 45% of TFR at target and 67% of TFR at maximum.
Liz Doherty will also participate in Brambles’ LTI arrangements,
currently provided under the 2006 Share Plan. Liz Doherty will
receive in respect of each financial year commencing on and from
1 July 2007:
–
an STI Award of share rights, the Brambles shares subject to
which will have a market value, calculated as at the date of grant,
equal to the STI Cash Award referable to that financial year;
–
an Enhanced STI Award of share rights, the Brambles shares
subject to which will have a market value, calculated as at the
date of grant, equal to 22.5% of TFR, which may be increased
to 33.5% at maximum. If shareholders approve the changes to
the 2006 Share Plan referred to in Section 4.2.1, Enhanced STI
Awards will no longer be granted and a comparable value of those
awards will be rolled into LTI Awards; and
–
an LTI Award of share rights, the Brambles shares subject to which
will have a market value, calculated as at the date of grant, equal
to 67% of TFR.
Any short or long term incentive awards made to Liz Doherty with
respect to the Year will be pro-rated for the actual period of her
service during the Year.
Liz Doherty will receive a sign-on cash payment of A$192,900, 50%
of which was paid on her commencement date and 50% of which is
payable on the first anniversary of employment.
STI Awards were granted to Liz Doherty in recognition of her
forfeiting certain share and long term incentives on leaving her former
employment, and are disclosed in Section 5.6. Approval for this grant
was obtained at the 2007 AGM.
5.1.2 d A mezzanotte
Dave Mezzanotte resigned as a Director of the Board with effect from
4 April 2008.
On 7 August 2007, Dave Mezzanotte entered into an agreement
which set out his termination arrangements. These are
outlined below.
Dave Mezzanotte will receive his normal STI Cash Award for the Year
(pro-rated for his period of service up to 4 April 2008). He has not
received an STI Share Award, Enhanced STI Award or LTI Award for
the Year. Dave Mezzanotte will instead be paid an amount in cash
equal to the face value of the STI Share Award which would have
been made to him for the Year. Dave Mezzanotte will also receive
an amount in cash equal to the face value of the STI Share Award
which would have been made to him in relation to the year ending
30 June 2007.
Dave Mezzanotte was afforded good leaver(12) treatment in respect
of his previously granted awards under Brambles’ 2004 and 2006
Share Plans.
Six months after the termination of his employment Dave Mezzanotte
will receive a payment equal to US$800,000 in lieu of notice,
together with an additional retention payment of US$200,000.
Dave Mezzanotte will also receive standard benefits and payments,
including cash payments for life insurance and car allowance.
Following cessation of his employment, neither Dave Mezzanotte
nor any person engaged by him, nor any corporation in which he
is concerned, will directly or indirectly, anywhere in the world, for
a period of two years undertake any work or otherwise be engaged
by or involved in:
(a) any business in competition with or of a similar nature to CHEP
and/or Recall; or
(b) any business, if and to the extent that him doing so would result
in Brambles breaching non-competition undertakings that it
has given to purchasers of businesses divested as part of its
restructuring.
This will not prevent Dave Mezzanotte from holding a relevant
interest in not more than 1% in aggregate of any class of issued
shares or securities of any listed corporation or other entity which
is listed or traded on a stock exchange.
60 Brambles Limited 2008 Annual Report
5.2 Service contracts
Name and role(s)
Executive Directors
M F Ihlein
Chief Executive
Officer, Brambles.
Contract type and
any special terms
Salary/TFR
Other directorships
and associated fees Termination
Continuing contract.
On death, estate
entitled to 1.3 times
TFR amount.
TFR amount of
A$2,250,000 as at
30 June 2008.
–
M E Doherty
Chief Financial
Officer, Brambles,
from 1 December
2007.
Continuing contract. On
death, estate entitled
to 1.3 times TFR
amount. Entitlement to
sign-on cash payment
and STI Awards as
outlined in Section
5.1.1 and disclosed in
Sections 5.3 and 5.6
respectively.
TFR of A$1,200,000
from 1 December
2007 on appointment
as Chief Financial
Officer.
Permitted to act
as a non-executive
director of
SABMiller plc
and to retain the
fees from that
appointment,
being £65,000
per year.
Salary of US$800,000
from 1 July 2007 until
resignation as Chief
Operating Officer on
4 April 2008.
TFR amount of
A$975,000 as at
30 June 2008.
–
–
Former Executive Director
D A Mezzanotte
Chief Operating
Officer, CHEP,
to 4 April 2008.
Continuing contract
terminated by reason
of resignation on
4 April 2008.
Current Key Management Personnel
C A van der Laan
Senior vice President
– Legal and Mergers
& Acquisitions and
Company Secretary,
Brambles, to
31 January 2008.
Group President
CHEP Asia-Pacific
and Global Head
of Mergers &
Acquisitions from
1 February 2008.
Continuing contract.
On death, estate
entitled to 0.5 times
TFR amount and
0.5 times average
annual STI paid to
him over the three
previous years. Entitled
to certain retention
payments and awards,
the details of which
are disclosed in
Sections 5.3 and 5.6
respectively.
Pension
TFR amount
includes
any pension
contributions.
TFR amount
includes
any pension
contributions.
Defined contribution
arrangement, the
costs of which
are disclosed in
Section 5.3.
TFR amount
includes
any pension
contributions.
May be terminated
without cause, by
employer giving
12 months’ notice,
or by employee giving
six months’ notice.
Payments in lieu of notice
calculated by reference
to annual TFR.
May be terminated
without cause, by
employer giving
12 months’ notice, or
by employee giving
six months’ notice.
Payments in lieu of notice
calculated by reference to
annual TFR.
Termination benefits
disclosed in Sections
5.1.2 and 5.3.
May be terminated
without cause, by
employer giving 12
months’ notice, or
by employee giving
six months’ notice.
Payments in lieu of notice
calculated by reference to
annual TFR and average
STI Cash Award payment
over previous three years.
Brambles Limited 2008 Annual Report 61
Directors’ Report – Remuneration Report (continued)
5.2 Service contracts (continued)
Current Key Management Personnel (continued)
Contract type and
any special terms
Continuing contract.
Salary/TFR
Salary of US$425,000
as at 30 June 2008.
Name and role(s)
E E Potts
President and Chief
Operating Officer,
Recall.
Other directorships
and associated fees Termination
–
Pension
Defined contribution
arrangement, the
costs of which
are disclosed in
Section 5.3.
15% of base salary,
the costs of which
are disclosed in
Section 5.3.
May be terminated
without cause by
employer giving 12
months’ notice or by
the employee giving six
months notice. Payments
in lieu of notice calculated
by reference to annual
base salary and health
insurance benefits.
May be terminated
without cause, by
employer giving 12
months’ notice, or
by employee giving
six months’ notice.
Payments in lieu of notice
calculated by reference to
annual base salary.
Pension contribution
arrangement, the
costs of which
are disclosed in
Section 5.3.
15% of base salary,
the costs of which
are disclosed in
Section 5.3.
May be terminated
without cause, by
employer giving 12
months’ notice, or
by employee giving
six months’ notice.
Payments in lieu of notice
calculated by reference to
annual base salary and
health insurance benefits.
May be terminated
without cause, by
employer giving 12
months’ notice, or
by employee giving
six months’ notice.
Payments in lieu of notice
calculated by reference to
annual base salary.
T J Gorman
Group President
CHEP Europe,
Middle East and
Africa (EMEA).
K J Shuba
President CHEP
USA to 31 January
2008.
Group President
CHEP Americas,
from 1 February
2008.
N P Smith
Senior vice
President –
Human Resources,
Brambles, from
5 November 2007.
Continuing contract.
Entitlement to sign-
on cash payment
of US$400,000 of
which:
i) 60% payable on
commencement
date; and
ii) 40% payable on
first anniversary
of employment.
Entitlement to STI
Awards in recognition
of him forfeiting
certain equity awards
on leaving his former
employment, the details
of which are disclosed
in Section 5.6.
Continuing contract.
–
Salary of US$600,000
from 1 March 2008
on appointment as
Group President
CHEP EMEA.
–
Salary of US$500,000
from 1 February 2008
on appointment as
Group President CHEP
Americas.
Continuing contract.
–
Salary of A$500,000
from 5 November
2007 on appointment
as Senior vice
President – Human
Resources, Brambles.
62 Brambles Limited 2008 Annual Report
Name and role(s)
J R A Judd
Group Financial
Controller to
31 January 2008.
Senior vice
President – Strategic
Development,
Brambles, from
1 February 2008.
Other Senior Executives
M D’Cotta Carreras
President CHEP
Europe.
Contract type and
any special terms
Continuing contract.
Entitled to transitional
housing allowance and
school fee allowance,
ending 30 June 2010.
Salary/TFR
Salary of A$476,000
as at 30 June 2008.
Other directorships
and associated fees Termination
–
May be terminated
without cause, by
employer giving
12 months’ notice, or
by employee giving
six months’ notice.
Payments in lieu of notice
calculated by reference to
annual base salary.
Pension
15% of salary,
the costs of which
are disclosed in
Section 5.3.
Continuing contract.
Salary of €371,000 as
at 30 June 2008.
–
M D Lamb
President CHEP
USA.
Continuing contract.
Entitled to transitional
housing allowance
and school fee
allowance, ending
31 January 2011.
Salary of US$440,000
as at 30 June 2008.
–
Pension contribution
arrangements,
the costs of which
are disclosed in
Section 5.3.
Defined contribution
arrangements, the
costs of which
are disclosed in
Section 5.3.
May be terminated by the
employer without cause
in accordance with the
terms and conditions set
forth by the applicable
Spanish law in force, or
by employee giving three
months’ notice.
May be terminated
without cause, by
employer giving
12 months’ notice, or
by employee giving six
months’ notice. Payment
in lieu of notice calculated
by reference to annual
base salary and health
insurance benefits.
All of the Executive Directors, Key Management Personnel and Other Senior Executives described above have contracts which state that any
termination payments made to them would be reduced by any value to be received under any new employment.
Brambles Limited 2008 Annual Report 63
Directors’ Report – Remuneration Report (continued)
5.3 Total remuneration and benefits for the year
The following table shows details of the total remuneration and benefits provided to the Executive Directors and the Disclosable Executives
for the Year, together with prior year comparators. The TFR amounts shown for the Australian-based executives are those to which they were
entitled for the Year, and which they elected to receive in a combination of one or more of the following elements: cash salary payments;
pension contributions; and motor vehicle benefits.
US$’000
Short term employee benefits
Post
employment
benefits
Other
Share
based
payment
Cash/
salary/
Year TFR/fees
Non-
Cash monetary
bonus
Super-
benefits annuation
Termination/
sign-on
payments/
retirement
benefits
669
1,261(18) 5
228
N/A
55(13)
(13)
17(13)
–
–
–
N/A
N/A
Current Key Management Personnel
Name
Executive Directors
M F Ihlein
M E Doherty(49)
2008
2007
2008
2007
Former Executive Director
D A Mezzanotte(16)
2008
Totals
2007
2008
2007
C A van der Laan
E E Potts
T J Gorman(49)
K J Shuba(49)(61)
N P Smith(49)
J R A Judd(49)(61)
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
Other Senior Executives
M D’Cotta Carreras(49) 2008
M D Lamb(49)
Totals
2007
2008
2007
2008
2007
2,070
1,406
693
N/A
656
754
3,419
2,160
938
646
447
389
323
N/A
448
N/A
340
N/A
257
551
1,154
1,812
934(46)
884(18)
93
157
118
N/A
177
N/A
119
N/A
728(58)
360(48)
N/A
N/A
573
N/A
519(58)
N/A
4,316
1,035
181
N/A
122
N/A
2,104
1,041
5
2
77
7
4
4
159
13
3
N/A
9
N/A
–
N/A
29
N/A
176
N/A
54
N/A
434
17
74
105
74
105
–
–
43
33
48
N/A
57
N/A
45
N/A
64
N/A
79
N/A
74
N/A
410
33
2,835
1,166
Total
before
equity
2,794
2,672
1,112
N/A
1,432
6,741
4,104
1,876
1,534
755
603
892
N/A
708
N/A
504
N/A
1,181
N/A
Other
–
–
–
N/A
14
20
14
20
–
–
13
11
–
N/A
17
N/A
–
N/A
–
N/A
Options/
awards(15)
Total
1,255
1,111
28
N/A
669
2,449
1,780
835
434
320
163
25
N/A
269
N/A
N/A
N/A
322
N/A
385
N/A
318
N/A
4,049
3,783
1,140
N/A
4,001
2,101
9,190
5,884
2,711
1,968
1,075
766
917
N/A
977
N/A
504
N/A
1,503
N/A
1,394
N/A
1,098
N/A
–
1,009
N/A
11
N/A
41
11
N/A
780
N/A
7,705
2,137
2,474
10,179
597
2,734
–
–
174(14)
N/A
1,829(17)
–
2,003
–
–
–
–
–
400(14)
N/A
–
N/A
–
N/A
–
N/A
–
N/A
–
N/A
400
–
64 Brambles Limited 2008 Annual Report
5.4 Fixed and At risk remuneration for the year
The table below sets out, for both the Executive Directors and the Disclosable Executives, the percentage of their annual remuneration which
is At Risk (versus Fixed), and the percentage of the value of their remuneration for 2008 that consists of options and share rights.
Fixed(20)
At Risk(20)
Share Rights(21)
Executive Directors
M F Ihlein
M E Doherty(49)
Former Executive Director
D A Mezzanotte
2008
2007
2008
2007
2008
2007
Current Key Management Personnel
C A van der Laan
E E Potts
T J Gorman(49)
K J Shuba(49)
N P Smith(49)
J R A Judd(49)
Other Senior Executives
M D’Cotta Carreras(49)
M D Lamb(49)
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
48%
45%
59%
N/A
66%
37%
32%
45%
38%
49%
53%
N/A
50%
N/A
69%
N/A
59%
N/A
50%
N/A
53%
N/A
52%
55%
41%
N/A
34%
63%
68%
55%
62%
51%
47%
N/A
50%
N/A
31%
N/A
41%
N/A
50%
N/A
47%
N/A
32%
31%
19%
N/A
0%
43%
44%
28%
43%
28%
25%
N/A
29%
N/A
0%
N/A
21%
N/A
27%
N/A
28%
N/A
Brambles Limited 2008 Annual Report 65
Directors’ Report – Remuneration Report (continued)
5.5 Bonuses and equity based awards
The table below shows details of equity based awards made to the Executive Directors and the Disclosable Executives during the Year,
being rights to Brambles shares under the 2006 Share Plan. Awards made on 29 August 2007, have a vesting date of 29 August 2010
and an expiry date of 30 August 2013.(22) Awards made on 26 February 2008(59) have a vesting date of 1 December 2010 and an expiry
date of 2 December 2013. Awards made on 19 March 2008(60) have a vesting date of 1 March 2011 and an expiry date of 2 March 2014.
The estimated maximum and minimum possible total future value of these awards is also detailed.(23)
The table below also shows the STI Cash Award expected to be paid to the Executive Directors and the Disclosable Executives shortly in
respect of performance during the Year, expressed as a percentage of the amount which would have been paid, had all of their KPIs been
achieved at Maximum (with the balance being forfeited).
Name
Type of award
Number
Executive Directors
M F Ihlein
STI Cash Award(28)
STI Share Award(29)
N/A
60,961
Enhanced STI Share Award(30) 30,481
LTI Award(31)
Total
M E Doherty
STI Cash Award(28)
STI Share Award(59)(29)
Enhanced STI Share Award(30)
LTI Award(31)
Total
Former Executive Director
78,165
169,607
N/A
28,406
–
–
28,406
Equity based
awards
Minimum
future value
of awards
yet to vest
US$’000(25)
Maximum
future value
of awards
yet to vest
US$’000(26)
Value at
grant
US$’000(24)
Equity based and
STI Cash Awards
% cash
paid/equity
vested(27)
% cash/
equity
forfeited(27)
N/A
629
168
517
1,314
N/A
253
–
–
253
N/A
–
–
–
–
N/A
–
–
–
–
N/A
629
168
517
1,314
N/A
253
–
–
253
49%
0%
0%
0%
N/A
54%
0%
–
–
N/A
51%
0%
0%
0%
N/A
46%
0%
–
–
N/A
D A Mezzanotte STI Cash Award(28)
N/A
N/A
N/A
N/A
47%
53%
STI Share Award(29)
Enhanced STI Share Award(30)
LTI Award(31)
Total
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
N/A
N/A
66 Brambles Limited 2008 Annual Report
Name
Type of award
Number
Current Key Management Personnel
C A van der Laan STI Cash Award(28)
N/A
STI Share Award(29)
105,951(19)
Enhanced STI Share Award(30) 15,476
LTI Award(31)
Total
E E Potts
STI Cash Award(28)
STI Share Award(29)
48,605
170,032
N/A
10,755
Enhanced STI Share Award(30) 5,378
LTI Award(31)
Total
T J Gorman
STI Cash Award(28)
65,983
82,116
N/A
STI Share Award(60)(29)
36,365
Enhanced STI Share Award(30)
LTI Award(31)
Total
K J Shuba
STI Cash Award(28)
STI Share Award(29)
–
–
36,365
N/A
13,674
Enhanced STI Share Award(30) 6,837
LTI Award(31)
Total
N P Smith
STI Cash Award(28)
17,408
37,919
N/A
STI Share Award(29)
Enhanced STI Share Award(30)
LTI Award(31)
Total
–
–
–
–
J R A Judd
STI Cash Award(28)
STI Share Award(29)
N/A
12,509
Enhanced STI Share Award(30) 6,255
LTI Award(31)
Total
22,436
41,200
Equity based
awards
Minimum
future value
of awards
yet to vest
US$’000(25)
Maximum
future value
of awards
yet to vest
US$’000(26)
Equity based and
STI Cash Awards
% cash
paid/equity
vested(27)
% cash/
equity
forfeited(27)
N/A
–
–
–
–
N/A
–
–
–
–
N/A
–
–
–
–
N/A
–
–
–
–
N/A
–
–
–
–
N/A
–
–
–
–
N/A
1,092
85
322
1,499
N/A
111
30
436
577
N/A
297
–
–
297
N/A
141
38
115
294
N/A
–
–
–
–
N/A
129
34
148
311
66%
0%
0%
0%
N/A
28%
0%
0%
0%
N/A
65%
0%
–
–
N/A
39%
–
–
–
N/A
54%
–
–
–
N/A
56%
0%
0%
0%
N/A
34%
0%
0%
0%
N/A
72%
0%
0%
0%
N/A
35%
0%
–
–
N/A
61%
–
–
–
N/A
46%
–
–
–
N/A
44%
0%
0%
0%
N/A
Value at
grant
US$’000(24)
N/A
1,092
85
322
1,499
N/A
111
30
436
577
N/A
297
–
–
297
N/A
141
38
115
294
N/A
–
–
–
–
N/A
129
34
148
311
Brambles Limited 2008 Annual Report 67
Directors’ Report – Remuneration Report (continued)
5.5 Bonuses and equity based awards (continued)
Name
Type of award
Number
Other Senior Executives
M D’Cotta Carreras STI Cash Award(28)
STI Share Award(29)
N/A
11,967
Enhanced STI Share Award(30) 5,984
LTI Award(31)
Total
M D Lamb
STI Cash Award(28)
STI Share Award(29)
32,184
50,135
N/A
15,366
Enhanced STI Share Award(30) 7,683
LTI Award(31)
Total
17,103
40,152
Equity based
awards
Minimum
future value
of awards
yet to vest
US$’000(25)
Maximum
future value
of awards
yet to vest
US$’000(26)
Value at
grant
US$’000(24)
Equity based and
STI Cash Awards
% cash
paid/equity
vested(27)
% cash/
equity
forfeited(27)
N/A
123
33
213
369
N/A
158
42
113
313
N/A
–
–
–
–
N/A
–
–
–
–
N/A
123
33
213
369
N/A
158
42
113
313
44%
0%
0%
0%
N/A
37%
0%
0%
0%
N/A
56%
0%
0%
0%
N/A
63%
0%
0%
0%
N/A
5.6 Shareholdings and interests in options/share rights
The following table shows details of Brambles shares in which the Executive Directors and Disclosable Executives held relevant interests in
relation to:
–
ordinary shares, being issued shares held by them and their related parties;
–
options, being awards made under the 2001 Option Plans; and
–
share rights, being awards made before 30 June 2004 under the 2001 Share Plans, awards made on 24 November 2004 and
21 October 2005 under the 2004 Share Plans, and awards made on or after 19 January 2007 under the 2006 Share Plan.
Over the five year period commencing from the date they become members of the Executive Leadership Team, those members must,
as a minimum, achieve and maintain a shareholding equal to 75% of TFR or 100% of base salary before tax.
68 Brambles Limited 2008 Annual Report
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Brambles Limited 2008 Annual Report 69
Directors’ Report – Remuneration Report (continued)
6. non-ExECuTivE dirECTorS’ diSCLoSurES
6.1 non-executive directors’ remuneration policy
Non-executive Directors’ fees are determined by the Executive
Directors, with the Non-executive Directors taking no part in the
discussion or decision relating to their fees. In setting the fees,
advice is sought from external remuneration consultants on the
appropriate level of fees, taking into account the responsibilities
of Directors in dealing with the complexity and global nature of
Brambles’ affairs and the level of fees paid to non-executive directors
in comparable companies.
6.2 non-executive directors’ appointment letters
Directors are appointed for an unspecified term but are subject
to election by shareholders at the first AGM after their initial
appointment by the Board. Under Brambles Limited’s constitution,
no member of the Board may serve for more than three years from
the date of appointment without being re-elected by shareholders.
Re-appointment is not automatic. The Board will consider the
re-nomination of retiring Directors, having regard to the contribution
of their individual skills and experience to the desired overall
composition of the Board.
The following table sets out the current annual fees payable to
each of the Non-executive Directors. These were last reviewed
in January 2006.
Chairman
Deputy Chairman(36)
Other Non-executive Directors
Annual fees payable
with effect from
1 Jan 2007
US$489,000
US$225,000
US$117,000
Fee supplement for Audit Committee Chairman(37)
US$30,000
Fee supplement for other Committee Chairmen(37)
US$20,000
The maximum permissible annual fees for Directors of Brambles
(other than Executive Directors) is currently US$2,300,000. This
amount includes any remuneration paid to those Directors by
Brambles or by any of its subsidiaries for their services.
Letters of appointment for the Non-executive Directors, which are
contracts for service but not contracts of employment, have been put
in place. These letters confirm that the Non-executive Directors have
no right to compensation on the termination of their appointment for
any reason, other than for unpaid fees and expenses for the period
actually served.
The Non-executive Directors do not participate in Brambles’ short or
long term incentive plans, nor do they receive any benefits in kind or,
except for contributions to personal superannuation or pension funds
referred to in Section 6.3, retirement benefits.
Details of the year in which the Non-executive Directors are next
expected to be subject to re-election by shareholders are shown in
the Corporate Governance Report on page 47.
6.3 non-executive directors’ remuneration for the year
The fees and other benefits provided to Non-executive Directors
during the Year, and during the prior year are set out in the
table below.(38)
Any contributions to personal superannuation or pension funds on
behalf of the Non-executive Directors are deducted from their overall
fee entitlement.
No compensation or termination or other non-cash benefits were
provided to the Non-executive Directors for the Year.
70 Brambles Limited 2008 Annual Report
US$’000
Name
Current Non-executive Directors
A G Froggatt
D P Gosnell
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
Former Non-executive Directors
D R Argus AO
(retired 6 February 2008)
H-O Henkel
(retired 16 November 2007)
J Nasser AO
(resigned 14 January 2008)
D J Turner
(retired 16 November 2007)
Totals
Short term
employee
benefits
Directors’
fees
Post
employment
benefits
Super-
annuation
Other
Total before
equity
Share-based
payment
Options/
awards(40)
113
125
114
125
137
132
109
119
282
109
134
134
330
477
49
115
71
117
43
N/A
1,382
1,453
5
2
4
2
12
9
10
8
25
8
5
2
8
10
2
2
–
–
4
N/A
75
43
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
N/A
–
–
118
127
118
127
149
141
119
127
307
117
139
136
338
487
51
117
71
117
47
N/A
1,457
1,496
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Year
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
Total
118
127
118
127
149
141
119
127
307
117
139
136
338
487
51
117
71
117
47
N/A
1,457
1,496
Brambles Limited 2008 Annual Report 71
Directors’ Report – Remuneration Report (continued)
6.4 non-executive directors’ shareholdings and interests in options/share rights
Non-executive Directors are expected to hold shares in Brambles equal to their annual fees after tax within three years of their appointment.
The following table contains details of Brambles Limited shares in which the Non-executive Directors held relevant interests, being issued
shares held by them and their related parties. The Non-executive Directors do not participate in Brambles’ equity based incentive schemes.
Ordinary Shares
Current Non-executive Directors
A G Froggatt(41)
D P Gosnell(52)
S P Johns(53)
S C H Kay(54)
G J Kraehe AO(42)
C L Mayhew(55)
Former Non-executive Directors
D R Argus AO(51)
H-O Henkel
J Nasser AO
D J Turner(34)
Balance at the
start of the Year
Changes during
the Year
Balance at the
end of the Year
14,890
14,450
47,500
10,400
31,561
16,500
161,129
50,000
100,000
372,016
–
–
–
–
10,000
–
–
–
–
–
14,890
14,450
47,500
10,400
41,561
16,500
N/A
N/A
N/A
N/A
noTE:
David Turner’s interests in options/share rights were disclosed in the 2007 Annual Report, the number of which remained unchanged at
his retirement. However, prior to David Turner’s retirement on 16 November 2007, 540,740 options and 987,151 performance share rights
vested and on retirement 2,220,270 options and 1,363,017 performance shares were vested and exercisable.
72 Brambles Limited 2008 Annual Report
7. APPEndiCES
7.1 Basis of valuation of equity based awards
Unless otherwise specified, the fair value of the options and share rights included in the tables in this report, has been estimated using a
pricing model independently developed by Ernst & Young Transaction Advisory Services Limited on behalf of Brambles.
The following assumptions have been used in the valuation of awards made during the Year.
Date of grant
29 August 2007
26 February 2008
19 March 2008
Volatility
Risk free interest rate
Dividend yield
22%
N/A
N/A
6.11%
6.77%
5.94%
2.20%
3.00%
3.20%
7.2 Summary of 2001, 2004 and 2006 Plans
The table below contains details of the 2001 Share Plans, the 2001 Option Plans, and the 2004 and 2006 Share Plans under which the
Executive Directors and the Disclosable Executives have unvested and/or unexercised awards which could affect remuneration in this or
future reporting periods:
Plan
2001 Option Plans
Nature of
Vesting conditions
Award
Share Rights % of salary/TFR Time and relative
Size of Award
TSR hurdle
(between 50th
and 25th out
of 100).
2001 Share Plans
Share Rights % of salary/TFR Time and EPS
CAGR hurdle
(between 7% and
15% p.a.).
Share Rights % of salary/TFR Time and relative
2004 & 2006 Share
Plans (LTI)
2004 & 2006 Share
Plans (STI)
Share Rights Up to 100% of
size of STI Cash
Award(1)
2004 & 2006 Share
Plans (Enhanced STI)
Share Rights Up to 50% of
size of STI Share
Award
Performance/
vesting period
Three years, with
retests after four
and five years.
Life of Award
Maximum
of six years.
Three years, with
retests after four
and five years.
Maximum
of six years.
Three years.
Maximum
of six years.
Three years.
Three years.
Maximum
of six years.
Maximum
of six years.
Vesting schedule
38% vesting if
TSR is ranked
50th out of 100
companies. 100%
vesting if ranked
25th or better.
25% vesting if EPS
CAGR is 7% p.a.
100% vesting
if EPS CAGR is
15% p.a.
30% vesting if
TSR is ranked
50th out of 100
companies. 100%
vesting if 25th or
better.
100% vesting
based on
continuous
employment.
4% vesting if TSR
is ranked 37th out
of 100 companies.
100% vesting if
25th or better.
TSR hurdle
(between 50th
and 25th out
of 100).
Time only.
Time and relative
TSR hurdle
(between 37th
and 25th out
of 100).
The 2004 Share Plans operate in the same way as the 2006 Share Plan described in Section 4.2 although, under the 2004 Share Plans,
relative TSR performance is measured relative to the S&P/ASX50 and the FTSE 100.(8)
Brambles Limited 2008 Annual Report 73
Directors’ Report – Remuneration Report (continued)
7.3 options and share rights
The terms and conditions of each grant of options and share rights affecting remuneration in this or future reporting periods are outlined in the
table below. Options granted under the plans carry no dividends or voting rights(43):
Plans under which
awards made
2001 Option Plan 1) 5 September 2002(6)
Grant date
Expiry date
5 September 2008
A$7.08/£2.33
Exercise price(44)
Value at grant(44)(45) Status/vesting date
A$1.99/
A$2.12/£0.59
A$1.29/
A$1.36/£0.44
A$1.17/£0.44
A$9.17/£3.08
A$6.85/£2.19
A$4.16/£1.50
A$4.67/£1.85
A$6.11/A$6.41
A$3.30/A$3.46
A$6.11/A$6.41
A$4.00/A$4.19
A$7.52/A$7.71
A$3.58/A$3.67
A$4.19/A$4.30
A$12.60
A$5.72
A$6.97
A$12.64
A$6.75
A$8.11
A$9.39
A$8.84
A$8.01
All awards made to
current employees lapsed
as at 1 July 2007.
100% exercisable from
10 September 2006.
100% exercisable from
4 March 2007.
40.9% exercisable
from 23 August 2006.
Remainder lapsed.
70.9% exercisable from
23 August 2006.
100% exercisable from
10 September 2006.
100% exercisable from
4 March 2007.
100% exercisable from
9 September 2007.
100% exercisable from
9 September 2007.
100% exercisable from
9 September 2007.
100% exercisable from
9 September 2007.
22 October 2008.
22 October 2008.
22 October 2008.
30 August 2009.
30 August 2009.
30 August 2009.
29 August 2010.
29 August 2010.
29 August 2010.
1 December 2010.
1 March 2011.
28 April 2011.
2) 10 September 2003(6)
10 September 2009(22) A$4.75/£1.72
3) 4 March 2004(6)
4 March 2010
A$5.31/£2.11
2001 Share Plans 4) 2 April 2002(5)
2 April 2008
5) 5 September 2002(5)
5 September 2008(22)
6) 10 September 2003(5)
10 September 2009(22)
7) 4 March 2004(5)
4 March 2010(22)
2004 Share Plans 8) 24 November 2004(29)(47) 9 September 2010(22)
9) 24 November 2004(30)(47) 9 September 2010(22)
10) 24 November 2004(4)(47) 9 September 2010(22)
11) 24 November 2004(31)(47) 9 September 2010(22)
12) 21 October 2005(29)
13) 21 October 2005(30)
14) 21 October 2005(31)
22 October 2011(22)
22 October 2011(22)
22 October 2011(22)
31 August 2012(22)
31 August 2012(22)
31 August 2012(22)
30 August 2013(22)
30 August 2013(22)
30 August 2013(22)
2006 Share Plans 15) 19 January 2007(29)(57)
16) 19 January 2007(30)(57)
17) 19 January 2007(31)(57)
18) 29 August 2007(29)
19) 29 August 2007(30)
20) 29 August 2007(31)
21) 26 February 2008(29)(59) 2 December 2013(59)
22) 19 March 2008(29)(60)
23) 28 April 2008(29)
2 March 2014(22)
29 April 2014
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
74 Brambles Limited 2008 Annual Report
7.4 Footnotes to report
1. Under the Committee’s current policy, the value of an STI Share
Award for Executive Leadership Team members for a full normal
year is up to 100% of the value of their respective STI Cash
Award, and 67% for other executives.
10. These performance share rights were granted under the
2006 Share Plan. Rights under this Plan vest on the third
anniversary of their grant date, subject to meeting a relative
TSR performance condition. If the performance condition is
not met, the rights lapse.
2. vesting between the 63rd and 75th percentile occurs at 8%
for each additional 1% for Enhanced STI Awards and straight
line vesting occurs between the 50th and 75th percentile for
LTI Awards.
3. Financial targets set for the forthcoming financial year under
Brambles’ incentive plans will not constitute profit forecasts and
the Board is conscious that their publication may therefore be
misleading. Accordingly Brambles does not publish in advance
the forthcoming year’s STI financial targets for incentive purposes.
Brambles BvA performance for the Year is, however, set out
on page 41.
4. Transitional STI Awards were granted under the 2004 Plans,
which vest on the third anniversary of their date of grant,
subject to continuing employment and meeting a ROCI
performance condition.
5. These performance share rights were granted under the 2001
Share Plans. Rights under these Plans vested, where relevant,
on the third anniversary of their grant date, subject to meeting
an EPS performance condition. Where not met, the performance
condition was re-assessed on the fourth or fifth anniversary of
the grant date.
6. These options or performance share rights (as the case may
be) were granted under the 2001 Option Plans, or the 2004 or
2006 Share Plans respectively. Options and performance share
rights under these Plans vest on the third anniversary of their
grant date, subject to meeting a TSR performance condition.
If not met, the performance condition may be re-assessed
on the fourth or fifth anniversary of the grant date.
7. These performance share rights were granted under the
2004 Share Plans. Rights under these Plans vest on the third
anniversary of their grant date, subject to meeting a relative TSR
performance condition. If the performance condition is not met,
the awards lapse.
8. The average of the ranking of BIL (or from the date of Unification,
the primary listing of Brambles) against the S&P/ASX50; and the
ranking of BIP (or from the date of Unification, the secondary
listing of Brambles) against the FTSE 100.
9. The average of the ranking of BIL (or from the date of Unification,
the primary listing of Brambles) against the ASX100; and the
ranking of BIP (or from the date of Unification, the secondary
listing of Brambles) against the FTSE 350.
11. The ranking of the primary listing of Brambles against the
ASX100.
12. A good leaver is a participant in the relevant plan who leaves
employment of the Group because of, among other reasons,
death, illness, injury, disability, redundancy or retirement
(the fact of retirement being determined in the Board’s
absolute discretion).
13. The number for Mike Ihlein includes airfare entitlements
and non-monetary benefits in relation to car parking costs.
The number for Liz Doherty includes tax advice and relocation
costs. Non-monetary benefits are not included in the percentage
of remuneration which is shown as “Fixed” in the table in
Section 5.4.
14. The number for Liz Doherty represents a sign-on cash
payment, as noted in Sections 5.1.1 and 5.2. The number
for Tom Gorman represents a sign-on cash payment, as
noted in Section 5.2.
15. As part of Brambles’ transition to AIFRS, only awards made
on or after 7 November 2002 have been included in the
calculation of equity based remuneration.
16. Dave Mezzanotte became an Executive Director in
January 2007. His 2007 remuneration in this section includes
the prior six months where he was an Executive Leadership
Team member before becoming an Executive Director.
17. The termination benefits of Dave Mezzanotte include share
based payments of US$536,472 and US$257,276, based
on the aggregate face value of the shares subject to the award
which would otherwise have been made to him in August 2007
and August 2008 respectively, pursuant to his STI Share Award
for the years.
18. Includes special bonus on account of contribution to the
Unification.
19. Includes retention STI Share Award of 75,000 shares.
20. These percentages assume an on-target performance for the
purposes of STI Cash Awards (see Section 3.3.2); and reflect
the total value of equity awards actually made during the Year
valued as at the date of grant using the methodology set out in
Section 7.1.
Brambles Limited 2008 Annual Report 75
Directors’ Report – Remuneration Report (continued)
7.4 Footnotes to report (continued)
21. This percentage is based on the split between the “Total before
equity” figures shown in the table on page 64, and the total
value of equity awards actually made during the Year valued as
at the date of grant using the methodology set out in Section 7.1.
22. Awards granted to Elton Potts, Tom Gorman, Kevin Shuba and
Michael Lamb expire three years earlier than the date shown,
or immediately after vesting, if earlier.
23. Sections 4.2.2 and 4.2.3 contain details of those awards
which vested after 30 June 2006 or 2007 based on Brambles’
performance to those dates. No options are vested and
unexercisable at the end of the year.
24. The total value of the relevant equity award(s) valued as at the
date of grant using the methodology set out in Section 7.1.
25. Assumes performance and/or service conditions not met.
26. The total value of the relevant equity award valued as at the
reporting date using the methodology set out in Section 7.1.
35. Of those awards detailed in Section 7.3; plan numbers 8, 9,
11–20 are applicable to Mike Ihlein, and exercises occurred
from plan numbers 8, 9, 11; plan number 21 is applicable to
Liz Doherty; plan numbers 1, 5, 8–17 are applicable to Dave
Mezzanotte and exercises occurred from plan numbers 5, 8–15;
plan numbers 1, 5, 8, 9, 11–20 are applicable to Craig van der
Laan and exercises occurred from plan numbers 5, 8, 9 and 11;
plan numbers 1, 4, 5, 8–20 are applicable to Elton Potts and
exercises occurred from plan numbers 5, 8–11; plan number
22 is applicable to Tom Gorman; plan numbers 1, 3, 5, 7–20
are applicable to Kevin Shuba and exercises occurred from plan
numbers 5, 8, 9–11; plan numbers 1, 2, 5, 8, 9, 11–20 are
applicable to Jasper Judd and exercises occurred from plan
numbers 5, 8, 9, 11; plan numbers 1, 3, 5, 7, 9, 11–20 are
applicable to Miguel D’Cotta and exercises occurred from 3, 5,
7, 8, 9, 11; plan numbers 1, 5, 8–20, are relevant to Michael
Lamb and exercises occurred from plan numbers 5, 8–11.
36. There is currently no Deputy Chairman.
27. For continuing employees none of the equity awards shown will
vest or be forfeited until calendar year 2010, when performance
against the TSR and/or service condition can be determined.
37. Payable only to a Committee Chairman who is not also the
Board Chairman or a Deputy Chairman.
38. The total emoluments for all the Directors for the Year were
28. Based on the STI Cash Award expected to be paid around
September 2008 in respect of performance during the Year.
The percentages have been calculated relative to the amount
which can be paid if the maximum STI targets are met.
29. STI Share Awards vest on the third anniversary of their date of
grant, subject to continuing employment.
30. Enhanced STI Share Awards vest on the third anniversary
of their date of grant, subject to continuing employment and
meeting a TSR performance condition.
31. LTI Awards vest on the third anniversary of their date of
grant, subject to continuing employment and meeting a
TSR performance condition.
32. “Lapse” in this context means awards expired without being
exercised or forfeited because vesting conditions were not met.
33. There were no amounts payable but unpaid on the exercise
of options during the Year.
34. Of which 18,458 were held by Pershing Keen Nominees Limited
and 19,094 were held by Julia Anne Turner.
US$8 million (2007: US$12 million). The aggregate minimum
contributions of all Directors to complying superannuation funds
to avoid incurring the superannuation guarantee levy under the
Superannuation Guarantee (Administration) Act 1997 (Australia)
were A$97,187 (2007: A$80,077). The total number of
Directors who made such contributions was ten (2007: ten).
39. Balances are at cessation of employment for Dave Mezzanotte,
being 4 April 2008.
40. The Non-executive Directors did not participate in any
of Brambles’ cash or share based short or long term
incentive plans. David Turner, the former CEO, participated in
Brambles’ cash and share based short and long term incentive
schemes during his employment.
41. Of which 7,000 shares were held by Christine Joanne Froggatt.
42. Held by Invia Custodians for Graham John Kraehe
Private Superannuation Fund.
43. Awards granted under the 2001 Plans and 2004 Plans
were formerly over both BIL and BIP shares.
76 Brambles Limited 2008 Annual Report
44. All values in A$ relate to awards originally made over BIL shares,
and in £ to awards originally made over BIP shares.
45. These are the fair values calculated using the methodology
set out in Section 7.1. Where two values in one currency are
shown for awards on or after November 2004, the second
relates to rights awarded to Elton Potts, Kevin Shuba and
Michael Lamb, which expire on the third, rather than the sixth
anniversary of grant.
46. Includes retention payment of US$542,397.
47. Awards granted on 24 November 2004 were, for pricing
and vesting purposes, taken to have been granted on
8 September 2004.
48. Includes retention payment of US$180,799.
49. These individuals were not Disclosable Executives for 2007
and therefore no data was disclosed in respect of them.
50. Of which 115,000 shares were held by UBS Wealth
Management Australia Pty Limited for the Ihlein Family
Superannuation Fund and 1,000 shares were held in the
form of CDIs by Citibank.
51. Held through Alamiste Pty Limited as the trustee for the
Argus Superannuation Fund, of which Don Argus is a member.
52. Held by Susan Gosnell.
53. Of which 27,500 shares were held by Canzak Pty Limited and
20,000 shares were held by Caran Pty Limited.
54. Of which 5,500 were held by the Sarah Carolyn Hailes Kay
Superannuation Fund.
55. Held by Worldwide Nominees Limited.
56. During the year 2,531,185 performance share rights were
granted under the 2006 Share Plan of which 169,607 were
granted to Mike Ihlein and 28,406 were granted to Liz Doherty.
Approval for the issue of these securities was obtained under
ASX Listing Rule 10.14 at the AGM held on 16 November 2007.
57. Awards granted on 19 January 2007 were, for pricing
and vesting purposes, taken to have been granted on
30 August 2006.
58. Includes transitional housing allowance and schooling allowance.
59. Awards granted on 26 February 2008 were, for pricing
and vesting purposes, taken to have been granted on
1 December 2007.
60. Awards granted on 19 March 2008 were, for pricing and vesting
purposes, taken to have been granted on 1 March 2008.
61. Kevin Shuba and Jasper Judd became Executive Leadership
Team members on 1 February 2008. Their remuneration for
the Year includes the prior seven months where they were not
members of the Executive Leadership Team.
Luke mayhew
Chairman of the Remuneration Committee
20 August 2008
Brambles Limited 2008 Annual Report 77
Directors’ Report – Other Information
The information presented in this report relates to the consolidated
entity, the Brambles Group, consisting of Brambles Limited and
the entities it controlled at the end of, or during the year ended
30 June 2008.
PrinCiPAL ACTiviTy
The principal activity of the Group during the financial year was the
provision of support services, in which it is a leading global provider.
There were no significant changes in the nature of the Group’s
principal activity during the year.
rEviEW oF oPErATionS And rESuLTS
A review of the Group’s operations, a review of the results of those
operations and details of any significant changes in its state of affairs
during the year, are given in the Chairman’s Review on page 13,
the Chief Executive Officer’s Report on page 15 and in the Business
Reviews on pages 18 to 23.
Information about the financial position of the Group is included in
Financial Performance on pages 10 and 11 and in the Financial
Review on pages 40 to 43.
mATTErS SinCE THE End oF THE FinAnCiAL yEAr
The Directors are not aware of any matter or circumstance that has
arisen since 30 June 2008 that has significantly affected or may
significantly affect the operations of the Group, the results of those
operations or the state of affairs of the Group in future financial
years, except as may be stated elsewhere in the Chairman’s Review
on page 13, the Chief Executive Officer’s Report on page 15, the
Business Reviews on pages 18 to 23 and the Financial Review on
pages 40 to 43.
BuSinESS STrATEgiES And ProSPECTS For FuTurE
FinAnCiAL yEArS
The business strategies and prospects for future financial years,
together with likely developments in the operations of the Group in
future financial years and the expected results of those operations
known at the date of this Report, are set out in the Chairman’s
Review on page 13, the Chief Executive Officer’s Report on page 15,
the Business Reviews on pages 18 to 23 and the Financial Review
on pages 40 to 43. Further information in relation to such matters
has not been included because the Directors believe it would be
likely to result in unreasonable prejudice to the Group.
dividEndS
The Directors have declared a final dividend of 17.5 Australian cents
per share, which will be 10% franked. The dividend will be paid on
Thursday, 9 October 2008 to shareholders on the register on Friday,
19 September 2008. On 10 April 2008, an interim dividend was
paid, which was 17 Australian cents per share and 10% franked.
On 11 October 2007, a final dividend for the year ended 30 June
2007 was paid, which was 17 Australian cents per share and 20%
franked. The unfranked component of each dividend paid during the
year was conduit foreign income.
dirECTorS
The name of each person who was a Director of Brambles Limited
at any time during, or since the end of, the year, and the period for
which they were a Director during the year are set out below. The
qualifications, experience and special responsibilities for continuing
Directors are set out on pages 26 and 27.
D R Argus AO
M E Doherty
A G Froggatt
D P Gosnell
H-O Henkel
M F Ihlein
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
D A Mezzanotte
J Nasser AO
D J Turner
1 July 2007 to 6 February 2008
1 December 2007 to date
1 July 2007 to date
1 July 2007 to date
1 July 2007 to 16 November 2007
1 July 2007 to date
1 July 2007 to date
1 July 2007 to date
1 July 2007 to date
1 July 2007 to date
1 July 2007 to 4 April 2008
1 July 2007 to 14 January 2008
1 July 2007 to 16 November 2007
SECrETAry
Details of the qualifications and the experience of the Company
Secretary of Brambles Limited are as follows: Robert Gerrard joined
Brambles in 2003. Prior to joining Brambles, he was General
Counsel to, and Company Secretary of, Roc Oil Company Limited;
Group Legal Manager, Cairn Energy plc; General Counsel to, and
Company Secretary of, Command Petroleum Limited; and a solicitor
with Allen Allen & Hemsley. He holds a Masters of Law (LLM) from
the University of Sydney and a Bachelor of Science (BSc) degree
from the University of New South Wales. He is a Solicitor of the
Supreme Court of New South Wales.
78 Brambles Limited 2008 Annual Report
dirECTorS’ mEETingS
Details of the general frequency of Board meetings and membership of Board Committees are given in the Corporate Governance Report
on pages 47 to 50. The following table shows the actual Board and Committee meetings held during the year and the number attended
by each Director or Committee member. (In addition to the meetings below, during the year the Non-executive Directors also held two
informal meetings which the Executive Directors did not attend.)
Board meetings
Regular
Special
Special
Committees
Audit
Committee
meetings
Remuneration
Committee
meetings
Nominations
Committee
meetings
(a)
(b)
(a)
(b)
(a)
(b)
(a)
(b)
(a)
(b)
(a)
(b)
6
4
9
9
5
9
9
9
9
9
5
5
5
6
4
7
8
5
9
9
9
9
9
5
4
5
2
–
2
2
2
2
2
2
2
2
2
2
2
2
–
2
2
1
2
2
2
2
2
2
2
2
2
2
–
–
–
5
4
1
3
–
–
–
–
2
2
–
–
–
5
4
1
3
–
–
–
–
–
–
–
7
–
–
7
7
6
–
–
–
–
–
–
–
7
–
–
7
7
5
–
–
–
–
4
–
7
–
3
–
–
–
1
7
–
3
–
3
–
7
–
3
–
–
–
1
7
–
2
–
3
–
1
–
–
–
5
–
5
–
–
3
–
3
–
1
–
–
–
4
–
5
–
–
2
–
D R Argus AO(c)
M E Doherty(d)
A G Froggatt
D P Gosnell
H-O Henkel(e)
M F Ihlein
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
D A Mezzanotte(f)
J Nasser AO(g)
D J Turner(e)
(a) This column refers to the number of meetings held while the Director was a member of the Board or relevant Committee which the
Director was eligible to attend.
(b) This column refers to the number of meetings attended during the period the Director was a member of the Board or relevant Committee
which the Director was eligible to attend.
(c) Don Argus retired as a Director on 6 February 2008.
(d) Liz Doherty was appointed as a Director with effect from 1 December 2007.
(e) Hans-Olaf Henkel and David Turner retired as Directors on 16 November 2007.
(f) Dave Mezzanotte resigned as a Director on 4 April 2008.
(g) Jac Nasser resigned as a Director on 14 January 2008.
Brambles Limited 2008 Annual Report 79
Directors’ Report – Other Information (continued)
dirECTorS’ dirECTorSHiPS oF oTHEr LiSTEd ComPAniES
The following lists the directorships held by the Directors in listed companies (other than Brambles Limited) since 30 June 2005 and the
period for which each directorship has been held.
Director
M E Doherty
A G Froggatt
D P Gosnell
M F Ihlein
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
Listed company
SABMiller plc
AXA Asia Pacific Holdings Limited
Billabong International Limited
Brambles Industries Limited
Brambles Industries plc
Scottish & Newcastle plc
Brambles Industries Limited
Brambles Industries plc
Brambles Industries Limited
Brambles Industries plc
Brambles Industries Limited
Brambles Industries plc
Spark Infrastructure Group
Westfield Group:
–
Westfield Holdings Limited
–
Westfield America Trust
(director of responsible entity,
Westfield America Management Limited)
Period directorship held
2006 to current
2008 to current
2008 to current
2006
2006
2003 to 2007
2006
2006
2004 to 2006
2004 to 2006
2004 to 2006
2004 to 2006
2005 to current
1985 to current
1996 to current
–
Westfield Trust (director of responsible
entity, Westfield Management Limited)
1985 to current
Brambles Industries Limited
Brambles Industries plc
Commonwealth Bank of Australia
Symbion Health Limited
Bluescope Steel Limited
Brambles Industries Limited
Brambles Industries plc
Djerriwarrh Investments Limited
National Australia Bank Limited
Brambles Industries Limited
Brambles Industries plc
WH Smith plc
2006
2006
2003 to current
2001 to 2007
2002 to current
2005 to 2006
2005 to 2006
2002 to current
1997 to 2005
2005 to 2006
2005 to 2006
2006 to current
WH Smith Retail Holdings Limited
2005 to 2006
80 Brambles Limited 2008 Annual Report
inTErESTS in SECuriTiES
Pages 69 and 72 of the Remuneration Report include details
of the relevant interests of Directors in shares and other securities
of Brambles Limited.
indEmniTiES
Indemnities provided to the Directors and officers in accordance
with the constitution of Brambles Limited are detailed in Note
35 on pages 147 to 149. Insurance policies are in place to cover
Directors and executive officers, however, the terms of the policies
prohibit disclosure of the details of the insurance cover and the
premiums paid.
EmPLoyEE, EnvironmEnT And rESEArCH And
dEvELoPmEnT
The Sustainability Report on pages 28 to 39 sets out, amongst other
things, information relating to environmental and employee matters.
Information about the Group’s activities in relation to research and
development is set out on page 37.
EnvironmEnTAL rEguLATion
Details of the Group’s compliance with significant environmental
regulations and its environmental performance are set out in the
Sustainability Report on pages 31 to 34.
SHArE CAPiTAL, oPTionS And SHArE rigHTS
Details of the changes in the issued share capital of Brambles
Limited and options and share rights outstanding over Brambles
Limited shares at the year end are given in Notes 27 and 28 on
pages 128 to 132. No options or share rights over the shares
of Brambles Limited’s controlled entities for the year ended
30 June 2008 were granted during that year or since the end
of that year to the date of this report.
SHArE Buy-BACkS
On 21 September 2007, Brambles Limited announced that,
subject to shareholder approval, it intended to buy-back up to
141,903,916 of its ordinary shares on-market, should appropriate
opportunities arise. Shareholder approval was given at the
AGM on 16 November 2007 and a 12 month buy-back period
commenced on 17 November 2007. 42,409,560 ordinary
shares were bought-back and cancelled during the year ended
30 June 2008, representing 3.07% of the issued capital of
Brambles Limited as at 30 June 2008, for a total consideration of
A$427 million. The buy-back has been suspended at the date of
this Report. The buy-back was carried out to implement Brambles’
ongoing capital management initiatives.
PrinCiPAL riSkS And unCErTAinTiES
The principal risks and uncertainties facing Brambles are described
in Section 7.2 of the Corporate Governance Report.
rESPonSiBiLiTy STATEmEnT
For the purposes of compliance with the UK Disclosure and
Transparency Rules, the Directors confirm that to the best of their
knowledge, the management report (which comprises the Directors’
Report – Other Information and the other sections of the Annual
Report referred to in it) includes a fair review of the development and
performance of the business and the position of Brambles Limited
and the Group taken as a whole, together with a description of the
principal risks and uncertainties that they face.
non-AudiT SErviCES
The amount of US$464,000 was paid or is payable to
PricewaterhouseCoopers, the Group’s auditors, for non-audit services
provided during the year by them (or another person or firm on
their behalf). These services primarily related to tax advice and due
diligence work on an acquisition. The Audit Committee has reviewed
the provision of non-audit services by PricewaterhouseCoopers and
its related practices and provided the Directors with formal written
advice of a resolution passed by the Audit Committee. Consistent
with this advice, the Directors are satisfied that the provision of non-
audit services by PricewaterhouseCoopers and its related practices
did not compromise the auditor independence requirements of the
Act for the following reasons: the nature of the non-audit services
provided for the year; the quantum of non-audit fees compared to
overall audit fees; and the pre-approval, monitoring and ongoing
review requirements under the Audit Committee Charter and the
Charter of Audit Independence in relation to non-audit work.
The auditors have also provided the Audit Committee with a letter
confirming that, in their professional judgement, as at 20 August
2008, they have maintained their independence in accordance with
their firm’s requirements, with the provisions of APES 110 – Code of
Ethics for Professional Accountants, the applicable provisions of the
Act, and other professional and regulatory requirements in Australia.
On the same basis, they also confirm that the objectivity of the audit
engagement partners and the audit staff is not impaired.
AudiTorS’ indEPEndEnCE dECLArATion
A copy of the auditors’ independence declaration as required under
Section 307C of the Act is set out on page 153.
AnnuAL gEnErAL mEETing
The AGM will be held at 10.00am (AEDT) on 25 November 2008
at Level 3, Overseas Passenger Terminal, Circular Quay West Street,
The Rocks, Sydney, NSW 2000.
This Directors’ Report is made in accordance with a resolution of
the Board.
g J kraehe Ao
Chairman
m F ihlein
Chief Executive Officer
20 August 2008
Brambles Limited 2008 Annual Report 81
Shareholder Information
dirECTorS
g J kraehe Ao
(Non-executive Chairman)
m E doherty
(Chief Financial Officer)
A g Froggatt
(Non-executive Director)
d P gosnell
(Non-executive Director)
m F ihlein
(Chief Executive Officer)
S P Johns
(Non-executive Director)
S C H kay
(Non-executive Director)
C L mayhew
(Non-executive Director)
ComPAny SECrETAry
r n gerrard
rEgiSTErEd oFFiCE
Brambles Limited
Level 40, Gateway
1 Macquarie Place
Sydney NSW 2000
Australia
ACN 118 896 021
Telephone: 61 (0) 2 9256 5222
Facsimile: 61 (0) 2 9256 5299
WEBSiTE
www.brambles.com
SToCk ExCHAngE LiSTingS
Brambles’ ordinary shares have a primary listing on the Australian
Securities Exchange and a secondary listing (where ordinary shares
traded are settled via CDIs) on the London Stock Exchange.
82 Brambles Limited 2008 Annual Report
SHArE rEgiSTrArS
Online access to shareholding and CDI holding information is available
to investors through the Link Market Services and Equiniti websites.
ordinary shareholders
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Australia
Locked Bag A14
Sydney South NSW 1235
Australia
Telephone: 1300 883 073 (freecall within Australia)
61 (0) 2 8280 7143 (from outside Australia)
Facsimile: 61 (0) 2 9287 0303
Email:
registrars@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
Cdi holders
For CDI holders who use the Equiniti (formerly Lloyds TSB Registrars)
corporate nominee service (including former BIP shareholders who
held their shares in certificated form), contact:
Equiniti Corporate Nominees Limited
Aspect House, Spencer Road
Lancing BN99 6DA
United Kingdom
Telephone: 0845 640 6090 (UK only)
44 (0) 121 415 7047 (from outside the UK)
Facsimile: 0871 384 2100* (UK only)
44 (0) 1903 702 424 (from outside the UK)
* Calls to this number will be charged at 8p per minute from a BT landline.
Other telephony providers’ costs may vary.
Website: www.shareview.co.uk
For CDI holders who are CREST participants (including former BIP
shareholders who held their shares in dematerialised form through
CREST) contact:
Euroclear UK & Ireland Limited
33 Cannon Street
London EC4M 5SB
United Kingdom
Telephone: 08459 645 648 (option 4) (UK only)
44 (0) 8459 645 648 (option 4)
(from outside the UK)
Facsimile: 020 7849 0134 (UK only)
44 (0) 20 7849 0134 (from outside the UK)
Website: www.euroclear.co.uk
AnnuAL gEnErAL mEETing
The Brambles Limited 2008 AGM will be held at 10.00 am (AEDT) on 25 November 2008 at Level 3, Overseas Passenger Terminal,
Circular Quay West Street, The Rocks, Sydney, NSW 2000.
FinAnCiAL CALEndAr
Final dividend 2008
Ex dividend date – Monday, 15 September 2008
Record date – Friday, 19 September 2008
Payment date – Thursday, 9 October 2008
2009 (Provisional)
Announcement of interim results – end February
Interim dividend – mid April
Announcement of final results – end August
Final dividend – mid October
AGM – November
AnALySiS oF HoLdErS oF EQuiTy SECuriTiES AS AT 18 AuguST 2008
Substantial shareholders
Brambles has been notified of the following substantial shareholdings:
Holder
Barclays Global Investors Australia Limited
Commonwealth Bank of Australia and its subsidiaries
1 Percentages are as disclosed in substantial holding notices given to Brambles Limited.
number of ordinary shares on issue and distribution of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Number of
ordinary shares
86,819,740
147,161,197
Holders
39,042
41,236
7,144
4,205
231
91,858
% of issued
ordinary
share capital 1
6.04
10.63
Shares
21,833,565
101,272,250
51,948,952
91,570,493
1,117,041,083
1,383,666,343
The number of security investors holding less than a marketable parcel of 59 securities (based on a market price of A$8.48 on 18 August 2008)
is 1,254 and they hold a total of 49,853 securities.
number of options/rights on issue and distribution of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Holders
17
1,235
73
89
13
1,427
Options
11,366
1,936,881
582,958
2,825,934
2,905,992
8,263,131
Brambles Limited 2008 Annual Report 83
Shareholder Information (continued)
Twenty largest ordinary shareholders
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
ANZ Nominees Limited (Cash Income A/C)
Cogent Nominees Pty Limited
Queensland Investment Corporation
ANZ Nominees Limited (SL Cash Income A/C)
AMP Life Limited
Australian Reward Investment Alliance
Citicorp Nominees Pty Limited
Fleet Nominees Pty Limited
Australian Foundation Investment Company Limited
14 UBS Nominees Pty Ltd
15 RBC Dexia Investor Services Australia Nominees Limited
16
17
Citicorp Nominees Pty Ltd
Argo Investments Limited
18 RBC Dexia Investor Services Australia Nominees Pty Limited (BKCUST A/C)
19
Perpetual Trustee Company Limited
20 UBS Wealth Management Australia Nominees Pty Limited
Number of ordinary shares % of share capital
273,278,166
225,939,296
220,732,330
87,408,370
73,453,943
34,845,085
14,103,257
11,864,739
10,348,355
9,517,512
8,313,330
6,566,899
5,869,840
5,477,362
5,299,917
4,818,505
4,252,106
4,191,324
4,161,923
4,083,942
19.75
16.33
15.95
6.32
5.31
2.52
1.02
0.86
0.75
0.69
0.60
0.47
0.42
0.40
0.38
0.35
0.31
0.30
0.30
0.30
Percentage of total holdings of 20 largest holders
1,014,526,201
73.32
The ANZ Nominees Limited (Cash Income A/C) holding includes the nominee holding of ordinary shares underlying the CDIs which trade on
the London Stock Exchange.
voting rights: ordinary shares
Brambles Limited’s constitution provides that each member entitled to attend and vote may attend and vote in person or by proxy, by attorney
or, where the member is a body corporate, by representative. On a show of hands, every member present in person, by proxy, by attorney or,
where the member is a body corporate, by representative and having the right to vote on a resolution has one vote.
On a poll, every member present in person, by proxy, by attorney or, where the member is a body corporate, by representative and having the
right to vote on the resolution has one vote for each ordinary share held.
voting rights: options/share rights
Options over ordinary shares and performance share rights do not carry any voting rights.
84 Brambles Limited 2008 Annual Report
Financial Report
for the year ended 30 June 2008
indEx
Consolidated income statement
Parent entity income statement
Balance sheets
Statements of recognised income and expense
Cash flow statements
notes to the financial statements
1.
2.
3.
4.
5.
6.
7.
8.
9.
Basis of preparation
Significant accounting policies
Critical accounting estimates and judgements
Segment information
Profit from ordinary activities – continuing operations
Special items – continuing operations
Employment costs – continuing operations
Net finance costs
Income tax
10. Earnings per share
11. Dividends
12. Discontinued operations
13. Business combination
14. Cash and cash equivalents
15. Trade and other receivables
16.
Inventories
17. Derivative financial instruments
18. Other assets
19.
Investments
20. Property, plant and equipment
21. Goodwill
22.
Intangible assets
23. Trade and other payables
24. Borrowings
25. Provisions
26. Retirement benefit obligations
27. Contributed equity
28. Share-based payments
29. Reserves and retained earnings
30. Financial risk management
31. Cash flow statement – additional information
32. Commitments
33. Contingencies
34. Auditors’ remuneration
35. Related party information
36. Events after balance sheet date
directors’ declaration
independent auditors’ report
Page
86
87
88
89
90
91
91
98
99
101
102
103
103
104
107
108
109
110
112
112
114
114
114
115
117
118
119
120
120
123
124
128
129
132
135
144
145
146
147
147
149
150
151
Brambles Limited 2008 Annual Report 85
Consolidated income statement
for the year ended 30 June 2008
Continuing operations
Sales revenue
Other income
Operating expenses
Share of results of joint ventures
and associates
operating profit1
Finance revenue
Finance costs
net finance costs
Profit before tax
Tax expense
Before
special
items
uS$m
note
2008
Special2
items
uS$m
result
for the
year
uS$m
Before
special
items
US$m
2007
Special2
items
US$m
Result
for the
year
US$m
5a 4,358.6
5a
181.5
–
–
4,358.6 3,868.8
181.5
160.9
–
–
3,868.8
160.9
5b, 6a
(3,499.1)
(16.3)
(3,515.4)
(3,101.2)
(136.8)
(3,238.0)
19c
5.9
–
5.9
4.3
–
1,046.9
(16.3)
1,030.6
932.8
(136.8)
10.5
(160.0)
8
(149.5)
897.4
6a, 9
(270.9)
–
–
–
(16.3)
36.7
20.4
1.8
10.5
(160.0)
(149.5)
39.4
(99.3)
(59.9)
881.1
872.9
(234.2)
(287.2)
646.9
585.7
1.8
27.7
–
–
–
(136.8)
(15.2)
(152.0)
829.9
4.3
796.0
39.4
(99.3)
(59.9)
736.1
(302.4)
433.7
857.6
Profit from continuing operations
Profit from discontinued operations
12b, 12c
626.5
–
Profit for the year attributable to
members of the parent entity
626.5
22.2
648.7
613.4
677.9
1,291.3
Earnings per share (cents)
10
Total
– Basic
– Diluted
Continuing operations
– Basic
– Diluted
46.0
45.7
45.9
45.6
83.4
82.3
28.0
27.7
1 Operating profit for 2008 is after expensing:
CHEP USA: quality and innovation costs
CHEP USA: Walmart transition costs
(20.6)
(10.9)
(31.5)
5d
–
–
–
(20.6)
(10.9)
(31.5)
2 Special items comprise impairments, exceptional items, fair value adjustments and amortisation of acquired non-goodwill intangible assets
(other than software). Exceptional items are items of income or expense which are considered to be outside the ordinary course of business
and are, either individually or in aggregate, material to Brambles or to the relevant business segment. Refer to Notes 6 and 12c.
The consolidated income statement should be read in conjunction with the accompanying notes.
86 Brambles Limited 2008 Annual Report
Parent entity income statement
for the year ended 30 June 2008
Continuing operations
Revenue
Other income
Operating expenses
operating profit
Finance revenue
Finance costs
net finance revenue
Profit before tax
Tax expense
Profit for the year
Before
special
items
uS$m
2008
Special
items
uS$m
result
for the
year
uS$m
Before
special
items
US$m
2007
Special
items
US$m
note
5a
5a
5b, 6b
–
–
–
–
1,061.4
(250.3)
8
811.1
811.1
6b, 9
(240.0)
571.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,061.4
446.9
(250.3)
(70.5)
811.1
376.4
811.1
376.4
(240.0)
(113.1)
571.1
263.3
–
–
(6.4)
(6.4)
–
–
–
(6.4)
(1.2)
(7.6)
Result
for the
year
US$m
–
–
(6.4)
(6.4)
446.9
(70.5)
376.4
370.0
(114.3)
255.7
The parent entity income statement should be read in conjunction with the accompanying notes.
Brambles Limited 2008 Annual Report 87
Balance sheets
as at 30 June 2008
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other assets
Total current assets
non-current assets
Other receivables
Investments
Property, plant and equipment
Goodwill
Intangible assets
Deferred tax assets
Derivative financial instruments
Other assets
Total non-current assets
Total assets
LiABiLiTiES
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Tax payable
Provisions
Total current liabilities
non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Retirement benefit obligations
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Total liabilities
net assets
EQuiTy
Contributed equity
Reserves
Retained earnings
Parent entity interest
minority interest
Total equity
The balance sheets should be read in conjunction with the accompanying notes.
88 Brambles Limited 2008 Annual Report
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
note
14
15
16
17
18
15
19
20
21
22
9
17
18
23
24
17
25
24
17
25
26
9
23
0.6
104.8
829.0
45.1
4.4
51.7
130.4
791.6
33.5
6.7
41.1
5.4
0.5 –
– –
– –
7.3 –
1,035.0
1,003.3
13.2
0.6
9.1
16.9
9.0 14,883.6 12,234.2
23.5
6,921.3
6,113.6
3,698.9
3,219.9
676.1
186.9
606.1
150.3
8.8
4.3
0.8
3.1
1.9
0.3
– –
– –
– –
– –
– –
– –
4,601.8
4,014.1 21,804.9 18,347.8
5,636.8
5,017.4 21,818.1 18,348.4
850.7
806.0
91.5
6.0
54.9
74.2
64.3
0.5
74.7
111.9
1,077.3
1,057.4
– –
– –
– –
5.4
– –
5.4
0.5
0.5
2,439.5
2,063.0
5.0 –
2.7
49.8
63.4
–
45.7
29.6
443.5
389.8
– –
– –
– –
– –
17.1
9.2
4,487.4
2,850.7
3,016.0
2,537.3
4,492.4
2,850.7
4,093.3
3,594.7
4,497.8
2,851.2
1,543.5
1,422.7 17,320.3 15,497.2
27 13,778.6 14,062.8 13,778.6 14,062.8
29 (14,671.5) (14,881.5) 3,139.0
1,178.7
29
2,436.1
2,241.1
402.7
255.7
1,543.2
1,422.4 17,320.3 15,497.2
29
0.3
0.3
– –
1,543.5
1,422.7
17,320.3 15,497.2
Statements of recognised income and expense
for the year ended 30 June 2008
Actuarial (losses)/gains on defined benefit pension plans:
– Continuing
– Discontinued
Exchange differences on translation of:
– Foreign operations
– Entities disposed taken to profit
Cash flow hedges:
– Losses taken to equity
– Transferred to profit or loss
Income tax:
– On items taken directly to or transferred directly from equity
– On items transferred to profit or loss
Net income recognised directly in equity
Profit for the year
Total recognised income and expense for the year
attributable to members of the parent entity
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
(34.5)
–
33.3
(33.4)
– –
– –
note
26e
26e
263.5
131.7
2,003.1
1,209.6
–
8.4
(3.8)
(0.1)
(0.2)
(5.0)
9a
9a
9.1
–
4.0
1.9 –
– –
– –
– –
– –
–
–
234.2
140.7
2,003.1
1,209.6
648.7
1,291.3
571.1
255.7
882.9
1,432.0 2,574.2
1,465.3
Adjustment to opening retained earnings for AASB 117: Leases
29
(2.5) –
The statements of recognised income and expense should be read in conjunction with the accompanying notes.
Brambles Limited 2008 Annual Report 89
Cash flow statements
for the year ended 30 June 2008
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Dividends received from joint ventures and associates
Interest received
Interest paid
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
note
4,998.7
4,653.3
(3,467.9)
(3,380.0)
1,530.8
1,273.3
5.2
9.6
7.0
39.5
(146.4)
(93.3)
– –
– –
– –
– –
0.2
(2.3)
0.9
(5.1)
Income taxes paid on operating activities
(232.9)
(182.5)
(246.9)
(118.9)
net cash inflow/(outflow) from operating activities
31c
1,166.3
1,044.0
(249.0)
(123.1)
6.6
2,427.6
–
(152.7)
(64.3)
(19.9)
(869.4)
(670.2)
133.8
131.1
(18.4)
–
0.3
(16.1)
(0.4)
– –
– –
– –
– –
– –
– –
–
(853.1)
1.8
1,038.0
3,440.2
(811.4)
1,701.2 1,038.0
2,587.1
2,280.3
5,377.0
(2,010.6)
(5,146.1)
95.1
38.5
(21.3)
75.6
– –
– –
–
52.3
(6.4)
20.8
(392.0)
(1,527.5)
(392.0)
(1,527.5)
–
(950.3)
–
(950.3)
(444.8)
(604.0)
(444.8) –
(433.5)
(2,796.6)
(784.5)
(2,463.4)
(78.6)
(51.4)
126.9
19.8
68.1
129.4
48.9
126.9
4.5
0.6 –
0.3 –
5.4
0.6
0.6
Cash flows from investing activities
Proceeds from disposal of businesses
Income tax paid on disposal of businesses
Acquisition of subsidiaries, net of cash acquired
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchases of intangible assets
Loan outflows with associates and subsidiaries
Loan inflows with associates and subsidiaries
net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Net inflow/(outflow) from option costs and hedge borrowings
Proceeds from issue of ordinary shares
Buy-back of ordinary shares
Cash Alternative at Unification
Dividends paid to Brambles’ shareholders
net cash used in financing activities
net (decrease)/increase in cash and cash equivalents
Cash and deposits, net of overdrafts, at beginning of the year
Effect of exchange rate changes
Cash and deposits, net of overdrafts, at end of the year
31a
The cash flow statements should be read in conjunction with the accompanying notes.
90 Brambles Limited 2008 Annual Report
Notes to and forming part of the financial statements
for the year ended 30 June 2008
noTE 1. BASiS oF PrEPArATion
These financial statements present the consolidated results
of Brambles Limited (ACN 118 896 021) (Company) and
its subsidiaries (Brambles or the Group) for the year ended
30 June 2008.
The financial statements comply with International Financial
Reporting Standards (IFRS). This general purpose financial report
has been prepared in accordance with Australian Equivalents
to International Financial Reporting Standards (AIFRS) and in
accordance with the requirements of the Corporations Act 2001
(Act). They comply with applicable accounting standards and
other authoritative pronouncements of the Australian Accounting
Standards Board (AASB) and the Urgent Issues Group (UIG).
The financial statements are drawn up in accordance with the
conventions of historical cost accounting, except for derivative
financial instruments and financial assets and liabilities at fair
value through profit or loss.
References to 2008 and 2007 are to the financial years ended
30 June 2008 and 30 June 2007 respectively.
Details of Unification, whereby Brambles Limited acquired
all the share capital of Brambles Industries Limited and
Brambles Industries plc under separate schemes of arrangement
on 4 December 2006, are set out in the Brambles 2007
Annual Report.
noTE 2. SigniFiCAnT ACCounTing PoLiCiES
The policies set out below have been consistently applied to all the
years presented.
new accounting standards and interpretations
At 30 June 2008, certain new accounting standards and
interpretations have been published that will become mandatory
in future reporting periods. Brambles has not elected to early-adopt
these new or amended accounting standards and interpretations.
The expected impact of these changed accounting requirements
should not materially alter Brambles’ accounting policies at the
date of this report.
AASB 8: Operating Segments and AASB 2007–3: Amendments
to Australian Accounting Standards are applicable to annual
reporting periods beginning on or after 1 January 2009. AASB 8
requires adoption of a management approach to reporting segment
performance. The application of AASB 8 may result in additional
disclosures in the financial report.
AASB 101: Presentation of Financial Statements, AASB 2007–8:
Amendments to Australian Accounting Standards and AASB
2007–10: Further Amendments to Australian Accounting
Standards are applicable to annual reporting periods beginning
on or after 1 January 2009. AASB 101 requires the presentation
of a statement of comprehensive income and makes changes to
the statement of changes in equity, but will not affect any of the
amounts recognised in the financial statements. If a prior period
adjustment or reclassification is made in the financial statements,
a third balance sheet as at the beginning of the comparative period
will need to be disclosed.
AASB 123: Borrowing Costs and AASB 2007–6: Amendments
to Australian Accounting Standards are applicable to annual
reporting periods beginning on or after 1 January 2009. AASB 123
removes the option to expense all borrowing costs and will require
the capitalisation of all borrowing costs directly attributable to the
acquisition, construction or production of a qualifying asset.
AASB 2008–1: Amendments to Australian Accounting Standard –
Share-based Payments: vesting Conditions and Cancellations
is applicable for annual reporting periods beginning on or after
1 January 2009 and clarifies that only service conditions and
performance conditions constitute vesting conditions and that
other features of a share-based payment are not vesting conditions.
It also specifies that all cancellations, whether by the entity or by
other parties, should receive the same accounting treatment. The
amendment is not expected to affect the accounting for Brambles’
share-based payments.
Revised AASB 3: Business Combinations, AASB 127: Consolidated
and Separate Financial Statements and AASB 2008–3:
Amendments to Australian Accounting Standards arising from
AASB 3 and AASB 127 are operative for annual reporting periods
beginning on or after 1 July 2009, but may be applied earlier.
Brambles has not yet decided when it will apply the revised
standards, which generally apply only prospectively to transactions
that occur after the application date of the standard. Any impact will
therefore depend on whether Brambles enters into any business
combinations subsequent to adoption.
AASB 2008–7: Amendments to Australian Accounting Standards –
Cost of an Investment in a Subsidiary, Jointly Controlled Entity or
Associate is applicable to annual reporting periods commencing on
or after 1 January 2009 and will require that all dividends received
from investments in subsidiaries, joint ventures and associates be
recognised as revenue, even if they are paid out of pre-acquisition
profits. However, the investments may need to be tested for
impairment following the dividend payment. If a new intermediate
parent entity is created in internal reorganisations, it will measure its
investment in subsidiaries at the carrying amounts of the net assets
of the subsidiary acquired rather than the subsidiaries’ fair value.
IFRIC 16: Hedges of a Net Investment in a Foreign Operation
is applicable to annual reporting periods beginning on or after
1 October 2008. This interpretation provides guidance on identifying
foreign currency risks that qualify as hedged risk in the hedge of net
investments in foreign operations. IFRIC 16 also provides guidance
on determining amounts to be reclassified from equity to profit or loss
for both the hedging instrument and hedged items. Brambles will
apply IFRIC 16 from 1 July 2009, but it is not expected to have any
impact on the Group’s financial report.
Brambles Limited 2008 Annual Report 91
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 2. SigniFiCAnT ACCounTing PoLiCiES (continued)
Basis of consolidation
The consolidated financial statements of Brambles include the
financial statements of Brambles Limited and all its legal subsidiaries.
The consolidation process eliminates all inter-entity accounts and
transactions. The financial statements of overseas subsidiaries have
been prepared in accordance with overseas accounting practices
and, for consolidation purposes, have been adjusted to comply with
AIFRS. The financial statements of all subsidiaries are prepared for
the same reporting period.
On acquisition, the assets and liabilities and contingent liabilities
of a subsidiary are measured at their fair values at the date of
acquisition. Any excess of the cost of acquisition over the fair values
of the identifiable net assets acquired is recognised as goodwill.
Any deficiency of the cost of acquisition below the fair values of
the identifiable net assets acquired (i.e. discount on acquisition)
is credited to the income statement in the period of acquisition.
The interest of minority shareholders is stated at the minority’s
proportion of the fair values of the assets and liabilities recognised.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal,
as appropriate.
investment in controlled entities
Shares in controlled entities, as recorded in the parent entity, are
recorded at cost.
investment in joint ventures and associates
Investments in associates, where Brambles exercises significant
influence, and other joint venture entities are accounted for using
the equity method in the consolidated financial statements, and
include any goodwill arising on acquisition. Under this method,
Brambles’ share of the profits or losses of associates and joint
ventures is recognised in the consolidated balance sheet and its
share of movements in reserves is recognised in consolidated
reserves. Cumulative movements are adjusted against the cost
of the investment.
If Brambles’ share of losses in an associate or joint venture exceeds
its interest in the associate or joint venture, Brambles does not
recognise further losses unless it has incurred obligations or made
payments on behalf of its associate or joint venture.
Loans to equity accounted associates and joint ventures under
formal loan agreements are long term in nature and are included
as investments.
Where there has been a change recognised directly in the joint
venture’s or associate’s equity, Brambles recognises its share of
any changes as a change in equity.
non-current assets held for sale
Non-current assets and disposal groups classified as held for sale
are measured at the lower of carrying amount and fair value less
costs to sell.
Non-current assets and disposal groups are classified as held for sale
if their carrying amount will be recovered through a sale transaction
rather than through continuing use. This condition is regarded as
met only when the sale is highly probable and the asset (or disposal
group) is available for immediate sale in its present condition.
Management must be committed to the sale which should be
expected to qualify for recognition as a completed sale within one
year from the date of classification.
discontinued operations
The trading results for business operations disposed during the year
or classified as held for sale are disclosed separately as discontinued
operations in the income statement. The amount disclosed includes
any related impairment losses recognised and any gains or losses
arising on disposal.
Comparative amounts for the prior year are restated in the income
statement to include current year discontinued operations.
Segment reporting
Brambles’ primary segment for reporting purposes is by business as
Brambles’ risks and rates of return are affected predominantly by the
difference in the products and services between business streams.
Secondary segment information is reported geographically.
Primary segment information is further analysed between continuing
and discontinued operations.
Presentation currency
The consolidated and parent entity financial statements are
presented in US dollars.
Brambles has selected the US dollar as its presentation currency
for the following reasons:
–
a significant portion of Brambles’ activity is denominated in
US dollars; and
–
the US dollar is widely understood by Australian, UK and
international investors and analysts.
Foreign currency
Items included in the financial statements of each of Brambles’
entities are measured using the functional currency of each entity.
Foreign currency transactions are translated into the functional
currency of each entity using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions, and from the translation
at year-end rates of monetary assets and liabilities denominated in
foreign currencies, are recognised in the income statement, except
where deferred in equity as qualifying cash flow hedges or qualifying
net investment hedges.
92 Brambles Limited 2008 Annual Report
Non-monetary assets and liabilities carried at fair value that are
denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Gains
and losses arising on retranslation are recognised directly in equity.
The results and cash flows of Brambles Limited, subsidiaries,
joint ventures and associates are translated into US dollars using
the average exchange rates for the period. Where this average is
not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, the exchange rate on
the transaction date is used. Assets and liabilities of Brambles
Limited, subsidiaries, joint ventures and associates are translated
into US dollars at the exchange rate ruling at the balance sheet
date. Following Unification, the share capital of Brambles Limited
is translated into US dollars at historical rates. All resulting exchange
differences arising on the translation of Brambles’ overseas and
Australian entities are recognised as a separate component of equity.
The financial statements of foreign subsidiaries, joint ventures and
associates that report in the currency of a hyperinflationary economy
are restated in terms of the measuring unit current at the balance
sheet date before they are translated into US dollars.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate.
The principal exchange rates affecting Brambles were:
Average
2008
2007
US$:A$
US$:euro
US$:£
0.9040
1.4835
2.0111
0.7901
1.3187
1.9520
Year end
30 June 2008
0.9629
1.5793
1.9936
30 June 2007
0.8519
1.3580
2.0116
revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to Brambles and the revenue can be
reliably measured. Revenue is measured at the fair value of the
consideration received or receivable. Amounts disclosed as revenue
are net of duties and taxes paid (Goods and Services Tax and local
equivalents).
Revenue for services is recognised when invoicing the customer
following the provision of the service and/or under the terms of
agreed contracts in accordance with agreed contractual terms in
the period in which the service is provided.
other income
Other income includes net gains on disposal of property, plant and
equipment in the ordinary course of business, which are recognised
when control of the property has passed to the buyer. Amounts
arising from compensation for irrecoverable pooling equipment are
recognised only when it is probable that they will be received.
Dividends
Dividend revenue is recognised when the shareholders’ right to
receive the payment is established.
Finance revenue
Interest revenue is recognised as the interest accrues (using
the effective interest method, which is the rate that exactly
discounts estimated future cash receipts through the expected
life of the financial instrument) to the net carrying amount of
the financial asset.
Borrowing costs
Borrowing costs are recognised as expenses in the year in which
they are incurred, except where they are included in the cost of
qualifying assets.
The capitalisation rate used to determine the amount of borrowing
costs to be capitalised is the weighted average interest rate applicable
to the entity’s outstanding borrowings during the year. No borrowing
costs were capitalised in 2008 or 2007.
Pensions and other post-employment benefits
Payments to defined contribution pension schemes are charged
as an expense as they fall due. Payments made to state-managed
retirement benefit schemes are dealt with as payments to defined
contribution schemes where Brambles’ obligations under the
schemes are equivalent to those arising in a defined contribution
pension scheme.
A liability in respect of defined benefit pension schemes is
recognised in the balance sheet, measured as the present value
of the defined benefit obligation at the reporting date less the
fair value of the pension scheme’s assets at that date. Pension
obligations are measured as the present value of estimated future
cash flows discounted at rates reflecting the yields of high quality
corporate bonds.
The costs of providing pensions under defined benefit schemes are
calculated using the projected unit credit method, with actuarial
valuations being carried out at each balance sheet date. Past service
cost is recognised immediately to the extent that the benefits are
already vested, and otherwise is amortised on a straight-line basis
over the average period until the benefits become vested.
Actuarial gains and losses arising from differences between
expected and actual returns, and the effect of changes in actuarial
assumptions are recognised in full through the statement of
recognised income and expense in the period in which they arise.
The costs of other post-employment liabilities are calculated in
a similar way to defined benefit pension schemes and spread
over the period during which benefit is expected to be derived
from the employees’ services, in accordance with the advice of
qualified actuaries.
Brambles Limited 2008 Annual Report 93
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 2. SigniFiCAnT ACCounTing PoLiCiES (continued)
Executive and employee option plans
Incentives in the form of share-based compensation benefits are
provided to executives and employees under share option and
performance share schemes approved by shareholders.
Options and share awards are fair valued by qualified actuaries at
their grant dates in accordance with the requirements of AASB 2:
Share-based Payments, using a binomial model. The cost of
equity-settled transactions is recognised, together with a
corresponding increase in equity, on a straight-line basis over
the period in which the performance conditions are fulfilled,
ending on the date on which the relevant employees become
fully entitled to the award (vesting date).
Executives and employees in certain jurisdictions are provided cash
incentives calculated by reference to the options and awards under
the share option schemes (phantom shares). These phantom shares
are fair valued on initial grant and at each subsequent reporting date.
The cost of such phantom shares is charged to the income statement
over the relevant vesting periods, with a corresponding increase
in provisions.
The fair value calculation of options granted excludes the impact of
any non-market vesting conditions. Non-market vesting conditions
are included in assumptions about the number of options that
are expected to become exercisable. At each balance sheet date,
Brambles reviews its estimate of the number of options that are
expected to become exercisable. The employee benefit expense
recognised each period takes into account the most recent estimate.
Special items
Special items comprise impairments, exceptional items, fair value
adjustments and amortisation of acquired non-goodwill intangible
assets (other than software). Exceptional items are items of income
or expense which are considered to be outside the ordinary course
of business and are, either individually or in aggregate, material
to Brambles or to the relevant business segment. Such items are
likely to include, but are not restricted to, gains or losses on the sale
or termination of operations, the cost of significant reorganisations
or restructuring, and impairment charges on tangible or intangible
assets. The Directors consider that this presentation best assists
the users of Brambles’ financial statements in their understanding
of the underlying business results.
Assets
Cash and cash equivalents
For purposes of the cash flow statement, cash includes deposits
at call with financial institutions and other highly liquid investments
which are readily convertible to cash on hand and are subject to
an insignificant risk of changes in value, net of outstanding bank
overdrafts. Bank overdrafts are presented within borrowings in the
balance sheet.
receivables
Trade receivables due within one year do not carry any interest
and are recognised at amounts receivable less an allowance for
any uncollectible amounts. Trade receivables are recognised when
services are provided and settlement is expected within normal
credit terms.
Bad debts are written-off when identified. A provision for doubtful
receivables is established when there is a level of uncertainty as to
the full recoverability of the receivable, based on objective evidence.
Significant financial difficulties of the debtor, probability that the
debtor will enter liquidation, receivership or bankruptcy, and default
or significant delay in payment are considered indicators that the
trade receivable is doubtful. The amount of the provision has been
measured as the difference between the carrying amount of the
trade receivables and the estimated future cash flows expected to
be received from the relevant debtors. When a trade receivable for
which a provision had been recognised becomes uncollectible in
a subsequent period, it is written off against the provision account.
Subsequent recoveries of amounts previously written off are credited
against other expenses in the income statement.
inventories
Stock and stores on hand are valued at the lower of cost and net
realisable value and, where appropriate, provision is made for
possible obsolescence. Work in progress, which represents partly-
completed work undertaken at pre-arranged rates but not invoiced
at the balance sheet date, is recorded at the lower of cost or net
realisable value.
Cost is determined on a first-in, first-out basis and, where relevant,
includes an appropriate portion of overhead expenditure. Net
realisable value is the estimated selling price in the ordinary course
of business, less estimated costs of completion and costs to make
the sale.
recoverable amount of non-current assets
At each reporting date, Brambles assesses whether there is any
indication that an asset, or cash generating unit to which the asset
belongs, may be impaired. Where an indicator of impairment exists,
Brambles makes a formal estimate of recoverable amount. The
recoverable amount of an asset is the greater of its fair value less
costs to sell and its value in use.
Where the carrying value of an asset exceeds its recoverable amount,
the asset is considered to be impaired and is written down to its
recoverable amount. The impairment loss is recognised as a special
item of expense in the income statement in the reporting period in
which the write-down occurs.
The expected net cash flows included in determining recoverable
amounts of non-current assets are discounted to their present
values using a market risk adjusted discount rate.
94 Brambles Limited 2008 Annual Report
Property, plant and equipment
Property, plant and equipment (PPE) is stated at cost, net of
depreciation and any impairment, except land which is shown at cost
less impairment. Cost includes expenditure that is directly attributable
to the acquisition of assets, and, where applicable, an initial estimate
of the cost of dismantling and removing the item and restoring the
site on which it is located.
Subsequent expenditure is capitalised only when it is probable that
future economic benefits associated with the expenditure will flow
to Brambles. Repairs and maintenance are expensed in the income
statement in the period they are incurred.
Depreciation is charged in the financial statements so as to write-off
the cost of all PPE, other than freehold land, to their residual value
on a straight-line or reducing balance basis over their expected useful
lives to Brambles. Residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
The expected useful lives of PPE are generally:
–
Buildings
–
Pooling equipment
50 years
5–10 years
–
Other plant and equipment (owned and leased) 3–20 years
The cost of improvements to leasehold properties is amortised over
the unexpired portion of the lease, or the estimated useful life of the
improvement to Brambles, whichever is the shorter.
Provision is made for irrecoverable pooling equipment based
on experience in each market. The provision is presented within
accumulated depreciation.
The carrying values of PPE are reviewed for impairment when
circumstances indicate their carrying values may not be recoverable.
Assets are assessed within the cash generating unit to which
they belong. Any impairment losses are recognised in the
income statement.
The recoverable amount of PPE is the greater of its fair value less
costs to sell and its value in use. value in use is determined as
estimated future cash flows discounted to their present value using
a pre-tax discount rate reflecting current market assessments of the
time value of money and the risk specific to the asset.
PPE is derecognised upon disposal or when no future economic
benefits are expected to arise from continued use of the asset. Any
net gain or loss arising on derecognition of the asset is included in
the income statement and presented as other income in the period
in which the asset is derecognised.
goodwill
Goodwill is carried at cost less accumulated impairment losses.
Goodwill is not amortised.
Goodwill represents the excess of the cost of an acquisition over
the fair value of Brambles’ share of the net identifiable assets of
the acquired subsidiary, joint venture or associate at the date of
acquisition. Goodwill on acquisitions of subsidiaries is included
in intangible assets. Goodwill on acquisitions of joint ventures
and associates is included in investments in joint ventures
and associates.
Upon acquisition, any goodwill arising is allocated to each cash
generating unit expected to benefit from the acquisition. Goodwill
is tested annually for impairment, or more frequently if events or
changes in circumstances indicate that it might be impaired. An
impairment loss is recognised when the recoverable amount of
the cash generating unit is less than its carrying amount.
On disposal of an operation, goodwill associated with the disposed
operation is included in the carrying amount of the operation when
determining the gain or loss on disposal.
intangible assets
Intangible assets acquired are capitalised at cost, unless acquired as
part of a business combination in which case they are capitalised at
fair value as at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less provisions for amortisation
and impairment.
The costs of acquiring and developing computer software for internal
use are capitalised as intangible non-current assets where it is used
to support a significant business system and the expenditure leads
to the creation of a durable asset.
Useful lives have been established for all non-goodwill intangible
assets. Amortisation charges are expensed in the income statement
on a straight-line basis over those useful lives. Estimated useful lives
are reviewed annually.
The expected useful lives of intangible assets are generally:
–
Customer lists and relationships
–
Computer software
3–20 years
3–7 years
There are no non-goodwill intangible assets with indefinite lives.
Intangible assets are tested for impairment where an indicator
of impairment exists, either individually or at the cash generating
unit level.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and
the carrying amount of the asset and are recognised in the income
statement when the asset is derecognised.
Liabilities
Payables
Trade and other creditors represent liabilities for goods and services
provided to Brambles prior to the end of the financial year which
remain unpaid at the reporting date. The amounts are unsecured
and are paid within normal credit terms.
Non-current payables are discounted to present value using the
effective interest method.
Provisions
Provisions for liabilities are made on the basis that, due to a past
event, the business has a constructive or legal obligation to transfer
economic benefits that are of uncertain timing or amount. Provisions
are measured at the present value of management’s best estimate
at the balance sheet date of the expenditure required to settle the
obligation. The discount rate used is a pre-tax rate that reflects
current market assessments of the time value of money and the
risks appropriate to the liability.
Brambles Limited 2008 Annual Report 95
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
income tax
The income tax expense or benefit for the year is the tax payable
or receivable on the current year’s taxable income based on the
national income tax rate for each jurisdiction, adjusted by changes
in deferred tax assets and liabilities attributable to temporary
differences between the tax bases of assets and liabilities and
their carrying amounts in the financial statements, and to unused
tax losses.
Deferred tax is accounted for using the balance sheet liability
method in respect of temporary differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax basis used in the computation of taxable
profit, calculated using tax rates which are enacted or substantively
enacted by the balance sheet date.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary
differences and losses. The carrying amount of deferred tax assets
is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are not recognised:
–
Where the deferred tax arises from the initial recognition of an
asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; or
–
In respect of temporary differences associated with investments
in subsidiaries, joint ventures and associates where the timing of
the reversal of the temporary differences can be controlled and it
is probable that the temporary differences will not reverse in the
foreseeable future.
Current and deferred tax attributable to amounts recognised directly
in equity are also recognised directly in equity.
Financial assets
Brambles classifies its financial assets in the following categories:
financial assets at fair value through profit or loss and loans and
receivables. The classification depends on the purpose for which
the financial assets were acquired.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial
assets held for trading. A financial asset is classified in this category
if acquired principally for the purpose of selling in the short term.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
noTE 2. SigniFiCAnT ACCounTing PoLiCiES (continued)
Where discounting is used, the increase in the provision due
to the passage of time is recognised as a finance cost in the
income statement.
interest bearing liabilities
Borrowings are initially recognised at fair value, net of transaction
costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the borrowing proceeds (net of
transaction costs) and the redemption amount is recognised in
the income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless Brambles has
an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.
Employee entitlements
Employee entitlements are provided by Brambles in accordance
with the legal and social requirements of the country of employment.
Principal entitlements are for annual leave, sick leave, long service
leave and contract entitlements. Annual leave and sick leave
entitlements are presented within trade and other payables.
Liabilities for annual leave, as well as those employee entitlements
which are expected to be settled within one year, are measured at
the amounts expected to be paid when they are settled. All other
employee entitlement liabilities are measured at the estimated
present value of the future cash outflows to be made in respect
of services provided by employees up to the reporting date.
dividends
A provision for dividends is only recognised where the dividends
have been declared prior to the reporting date.
Leases
Leases are classified at their inception as either operating or finance
leases based on the economic substance of the agreement so as to
reflect the risks and benefits incidental to ownership.
Operating leases
The minimum lease payments under operating leases, where the
lessor effectively retains substantially all of the risks and benefits
of ownership of the leased item, are recognised as an expense on
a straight-line basis over the term of the lease.
Finance leases
Finance leases, which effectively transfer substantially all of the risks
and benefits incidental to ownership of the leased item to Brambles,
are capitalised at the inception of the lease at the fair value of
the leased asset or, if lower, present value of the minimum lease
payments, and disclosed as property, plant and equipment held
under lease. A lease liability of equal value is also recognised.
Lease payments are allocated between finance charges and a
reduction of the lease liability so as to achieve a constant period rate
of interest on the lease liability outstanding each period. The finance
charge is recognised as a finance cost in the income statement.
Capitalised lease assets are depreciated over the shorter of the
estimated useful life of the assets and the lease term.
96 Brambles Limited 2008 Annual Report
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies for
hedge accounting.
At that point in time, any cumulative gain or loss on the hedging
instrument recognised in equity is kept in equity until the forecast
transaction occurs.
If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in equity is transferred to net
profit or loss for the year.
For all other cash flow hedges, the gains or losses that are recognised
in equity are transferred to the income statement in the same year in
which the hedged firm commitment affects the net profit and loss,
for example when the future sale actually occurs.
When the hedged firm commitment results in the recognition of an
asset or a liability, then, at the time the asset or liability is recognised,
the associated gains or losses that had previously been recognised in
equity are included in the initial measurement of the acquisition cost
or other carrying amount of the asset or liability.
Net investment hedges
Hedges for net investments in foreign operations are accounted for
similarly to cash flow hedges.
Any gain or loss on the hedging instrument that is determined to be
an effective hedge is recognised directly in equity and the ineffective
portion is recognised in the income statement.
Gains and losses accumulated in equity are included in the income
statement when the foreign operation is partially disposed or sold.
Derivatives that do not qualify for hedge accounting
Where derivatives do not qualify for hedge accounting, gains or
losses arising from changes in their fair value are taken directly
to net profit or loss for the year.
Contributed equity
Ordinary shares including share premium are classified as
contributed equity. No gain or loss is recognised in the income
statement on the purchase, sale, issue or cancellation of
Brambles’ own equity instruments.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction from the proceeds
of issue.
Financial assets are recognised on Brambles’ balance sheet when
Brambles becomes a party to the contractual provisions of the
instrument. Derecognition takes place when Brambles no longer
controls the contractual rights that comprise the financial instrument,
which is normally the case when the instrument is sold, or all the
cash flows attributable to the instrument are passed through to an
independent third party.
derivatives and hedging instruments
Derivative instruments used by Brambles, which are used solely
for hedging purposes (ie to offset foreign exchange and interest
rate risks), comprise interest rate swaps, caps, collars, forward rate
agreements and forward foreign exchange contracts. Such derivative
instruments are used to alter the risk profile of Brambles’ existing
underlying exposure in line with Brambles’ risk management policies.
Derivative financial instruments are stated at fair value. The fair
value of forward exchange contracts is calculated by reference to
current forward exchange rates for contracts with similar maturities
at the balance sheet date. The fair value of interest rate swap
contracts is calculated as the present value of the forward cash
flows of the instrument after applying market rates and standard
valuation techniques.
For the purposes of hedge accounting, hedges are classified as either
fair value hedges, cash flow hedges or net investment hedges.
Fair value hedges
Fair value hedges are derivatives that hedge exposure to changes
in the fair value of a recognised asset or liability, or an unrecognised
firm commitment. In relation to fair value hedges which meet the
conditions for hedge accounting, any gain or loss from remeasuring
the hedging instrument at fair value is recognised immediately in
the income statement.
Any gain or loss attributable to the hedged risk on remeasurement
of the hedged item is adjusted against the carrying amount of the
hedged item and recognised in the income statement. Where the
adjustment is to the carrying amount of a hedged interest-bearing
financial instrument, the adjustment is amortised to the income
statement such that it is fully amortised by maturity.
Hedge accounting is discontinued prospectively if the hedge is
terminated or no longer meets the hedge accounting criteria.
In this case, any adjustment to the carrying amounts of the
hedged item for the designated risk for interest-bearing financial
instruments is amortised to the income statement following
termination of the hedge.
Cash flow hedges
Cash flow hedges are derivatives that hedge exposure to variability
in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability, or a highly probable
forecast transaction.
In relation to cash flow hedges to hedge forecast transactions which
meet the conditions for hedge accounting, the portion of the gain or
loss on the hedging instrument that is determined to be an effective
hedge is recognised directly in equity and the ineffective portion is
recognised in the income statement.
Brambles Limited 2008 Annual Report 97
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 2. SigniFiCAnT ACCounTing PoLiCiES (continued)
Earnings per share (EPS)
Basic EPS is calculated as net profit attributable to members of the
parent entity, adjusted to exclude costs of servicing equity (other
than dividends), divided by the weighted average number of ordinary
shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members of
the parent entity, adjusted for:
–
Costs of servicing equity (other than dividends) and preference
share dividends;
–
The after-tax effect of dividends and finance costs associated
with dilutive potential ordinary shares that have been recognised
as expenses;
–
Other non-discretionary changes in revenues or expenses
during the year that would result from the dilution of potential
ordinary shares;
and divided by the weighted average number of ordinary shares and
dilutive potential ordinary shares, adjusted for any bonus element.
rounding of amounts
As Brambles is a company of a kind referred to in ASIC Class Order
98/0100, relevant amounts in the financial statements and Directors’
Report have been rounded to the nearest hundred thousand
US dollars or, in certain cases, to the nearest thousand US dollars.
noTE 3. CriTiCAL ACCounTing ESTimATES
And JudgEmEnTS
In applying its accounting policies, Brambles has made estimates
and assumptions concerning the future, which may differ from the
related actual outcomes. Those estimates and assumptions which
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial
year are discussed below.
irrecoverable pooling equipment provisioning
Loss or damage is an inherent risk of pooling equipment operations.
CHEP’s pooling equipment operations around the world differ
in terms of business model, market dynamics, customer and
distribution channel profiles, contractual arrangements and
operational details. Brambles conducts audits on a regular basis
to confirm the existence and the condition of its pooling equipment
assets, and monitors its pooling equipment operations using
detailed key performance indicators (KPIs).
The irrecoverable pooling equipment provision is determined by
reference to historical statistical data in each market, including the
outcome of audits and relevant KPIs, together with management
estimates of future equipment losses.
impairment of goodwill
Brambles’ business units undertake an impairment review process
annually to ensure that goodwill balances are not carried at amounts
that are in excess of their recoverable amounts. The recoverable
amount of the goodwill in continuing operations is determined based
on value in use calculations undertaken at the cash generating unit
level. These calculations require the use of key assumptions which
are set out in note 21.
income taxes
Brambles is a global company and is subject to income taxes
in many jurisdictions around the world. Significant judgement
is required in determining the provision for income taxes on a
worldwide basis. There are many transactions and calculations
undertaken during the ordinary course of business for which the
ultimate tax determination is uncertain. Brambles recognises
liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome
of these matters is different from amounts provided, such
differences will impact the current and deferred tax provisions
in the period in which such outcome is obtained.
Provisions on divestments
Brambles has made provisions in relation to vendor warranties and
other matters associated with the divestments made in 2007 and
prior years. These provisions have been established by management
using information currently available. Where the eventual outcome
of these matters is different from amounts currently provided, such
differences will impact profits in the period in which such outcome
is recognised.
98 Brambles Limited 2008 Annual Report
noTE 4. SEgmEnT inFormATion
Brambles’ continuing business segments are CHEP (pallet and container pooling) and Recall (information management). Discontinued
operations primarily comprises the Cleanaway UK and Asian businesses (waste management), which were divested in 2007.
Intersegment revenue during the period was immaterial.
By business segment
CHEP
Recall
Continuing operations
Discontinued operations
Total
By geographic origin
Europe
Americas
Australia/New Zealand
Rest of World
Total – continuing operations
Discontinued operations
Total
By business segment
CHEP
Recall
Brambles HQ
Continuing operations
Discontinued operations
Total
Total income
2008
uS$m
2007
US$m
Sales revenue
2008
uS$m
2007
US$m
3,790.5
3,374.5
3,610.3
3,218.4
749.6
655.2
748.3
650.4
4,540.1
4,029.7
4,358.6
3,868.8
–
252.1
–
252.1
4,540.1
4,281.8 4,358.6
4,120.9
1,768.7
1,576.7
1,737.2
1,539.8
2,047.8
1,843.2
1,914.7
1,737.4
580.1
143.5
487.6
122.2
568.2
138.5
473.9
117.7
4,540.1
4,029.7
4,358.6
3,868.8
–
252.1
–
252.1
4,540.1
4,281.8
4,358.6
4,120.9
operating profit1
2007
2008
US$m
uS$m
Comparable
operating profit2
2008
uS$m
2007
US$m
Special items,
before tax
2008
uS$m
2007
US$m
944.7
121.9
845.2
86.5
945.2
128.4
845.2
118.5
(36.0)
(135.7)
(26.7)
(30.9)
(0.5) –
(6.5)
(9.3)
(32.0)
(104.8)
1,030.6
796.0
1,046.9
932.8
(16.3)
(136.8)
1.2
858.3
–
40.6
1.2
817.7
1,031.8
1,654.3
1,046.9
973.4
(15.1)
680.9
1 Operating profit is segment revenue less segment expense and excludes net finance costs.
2 Comparable operating profit is profit before special items, finance costs and tax which the Directors consider to be a useful measure of
underlying business performance. The difference between comparable operating profit and operating profit in the segment report is due
to special items.
Brambles Limited 2008 Annual Report 99
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 4. SEgmEnT inFormATion (continued)
By business segment
CHEP
Recall
Brambles HQ
Continuing operations
Discontinued operations
Total
By geographic origin
Europe
Americas
Australia/New Zealand
Rest of World
Total – continuing operations
Discontinued operations
Total
By business segment
CHEP
Recall
Brambles HQ
Capital expenditure
(including acquisitions)
2007
US$m
2008
uS$m
depreciation
and amortisation
2008
uS$m
2007
US$m
810.7
652.7
410.3
362.1
88.1
0.3
66.5
0.8
47.8
0.5
41.6
0.6
899.1
720.0
458.6
404.3
–
24.7
– –
899.1
744.7
458.6
404.3
339.5
411.6
73.2
74.8
259.9
367.2
63.0
29.9
899.1
720.0
–
899.1
24.7
744.7
Segment assets
2008
uS$m
2007
US$m
Segment liabilities
2008
uS$m
2007
US$m
4,340.0
3,810.0
1,129.8
1,022.8
18.5
20.2
767.4
179.7
116.8
715.8
151.4
135.7
Continuing operations segment assets and liabilities
5,488.3
4,853.0
1,063.9
1,002.9
104.8
130.4
2,531.0
2,127.3
18.0
8.8
16.9
7.4
3.1
23.5
54.9
74.7
443.5
389.8
– –
5,636.8
5,017.4
4,093.3
3,594.7
2,275.7
1,974.3
2,329.1
2,128.5
700.2
183.3
622.8
127.4
5,488.3
4,853.0
Cash and borrowings
Current tax balances
Deferred tax balances
Equity-accounted investments
Total assets and liabilities
By geographic origin
Europe
Americas
Australia/New Zealand
Rest of World
Total
100 Brambles Limited 2008 Annual Report
noTE 5. ProFiT From ordinAry ACTiviTiES – ConTinuing oPErATionS
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
a) revenue and other income – continuing operations
Sales revenue
Net gains on disposals of property, plant and equipment
Other operating income
Other income
Total income
b) operating expenses – continuing operations
Employment costs (Note 7)
Service suppliers:
– Transport
– Repairs and maintenance
– Subcontractors and other service suppliers
Raw materials and consumables
Occupancy
Depreciation of property, plant and equipment
Irrecoverable pooling equipment provision expense
Amortisation:
– Software
– Acquired intangible assets (other than software)
– Deferred expenditure
Other
c) net foreign exchange gains and losses – continuing operations
Net losses included in operating profit
Net losses included in net finance costs
4,358.6
3,868.8
46.4
135.1
181.5
42.7
118.2
160.9
4,540.1
4,029.7
787.9
739.4
813.2
294.9
501.5
195.7
217.3
414.0
91.2
722.0
239.7
497.5
182.7
184.0
362.2
90.2
34.5
33.5
6.5
3.6
6.0
2.6
155.1
178.2
3,515.4
3,238.0
(1.4)
(12.0)
(13.4)
(4.0)
(6.7)
(10.7)
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
–
–
– –
– –
– –
6.4
6.4
d) CHEP uSA operating costs
In February 2008, Brambles announced that, over the next two years, CHEP would invest in excess of US$100 million in operational and
capital initiatives focused on quality improvement and innovation. Operating expenses for 2008 include additional costs of US$20.6 million
within CHEP USA as a result of this initiative.
Operating expenses for 2008 also include transition costs of US$10.9 million within CHEP USA as a result of Walmart’s decision to
modify management of pallet flows within its network in the USA.
These costs have been separately disclosed to facilitate an understanding of Brambles’ underlying business results.
Brambles Limited 2008 Annual Report 101
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 6. SPECiAL iTEmS – ConTinuing oPErATionS
a) Consolidated
Amortisation of acquired intangible assets (other than software)
Exceptional items:
– Restructuring and Unification costs1
– Reset of tax cost bases on Unification2
– Adviser costs – share register activity3
– Recall restructuring costs4
Special items from continuing operations
Amortisation of acquired intangible assets (other than software)
Exceptional items:
– Stamp duty on Unification1
– Restructuring and Unification costs1
– Recall restructuring costs4
Special items from continuing operations
2008
Before tax
uS$m
Tax After tax
uS$m
uS$m
(6.5)
0.7
(5.8)
(4.6)
–
(4.7)
(0.5)
4.1
31.6
0.2
0.1
(16.3)
36.7
(0.5)
31.6
(4.5)
(0.4)
20.4
Before tax
US$m
2007
Tax
US$m
After tax
US$m
(6.0)
0.7
(5.3)
(28.8)
(76.0)
(26.0)
–
(23.4)
7.5
(28.8)
(99.4)
(18.5)
(136.8)
(15.2)
(152.0)
1 During 2007, Brambles incurred UK stamp duty of US$28.8 million on Unification. Brambles also incurred advisers’ fees (US$49.4 million)
and employment-related and office closure costs (US$26.6 million) totalling US$76.0 million in connection with the restructuring and
Unification. The net tax charge of US$23.4 million in 2007 includes US$29.0 million transitional withholding tax expense as a result of
Unification. In 2008, further advisers’ fees of US$1.6 million, and employment-related and other costs of US$3.0 million were incurred in
relation to the restructure.
2 During 2008, following receipt of a private ruling from the Australian Taxation Office, a tax benefit of US$31.6 million was recognised on the
reset of Australian tax cost bases as a result of Unification.
3 As a consequence of the share register activity first disclosed to the Australian Securities Exchange on 8 August 2007, Brambles incurred
advisers’ fees of US$4.7 million during 2008.
4 During 2007, Recall incurred US$26.0 million on restructuring its Global, North American, European and Asia Pacific operations. This
included redundancy and related costs, software writedowns and AUSDOC integration costs. A further US$0.5 million was incurred in 2008.
b) Parent entity
During 2007, the parent entity incurred US$6.4 million (US$7.6 million after tax) of Unification costs relating to foreign exchange options
taken out for the Cash Alternative.
102 Brambles Limited 2008 Annual Report
noTE 7. EmPLoymEnT CoSTS – ConTinuing oPErATionS
Wages and salaries
Social security costs
Share-based payment expense
Pension costs:
– Defined contribution plans
– Defined benefit plans
Other post-employment benefits
The average monthly number of employees in continuing operations was:
CHEP
Recall
Brambles HQ
noTE 8. nET FinAnCE CoSTS
Finance revenue
Bank accounts and short term deposits
Other
Finance costs
Interest expense on bank loans and borrowings
Other
Net finance (costs)/revenue
Consolidated
2008
uS$m
652.2
74.0
18.0
20.3
4.6
18.8
2007
US$m
611.6
69.5
20.0
14.7
7.7
15.9
787.9
739.4
Parent entity
2008
uS$m
2007
US$m
– –
– –
– –
– –
– –
– –
– –
2008
7,456
4,773
76
2007
7,466
4,762
99
12,305
12,327
–
2008
2007
– –
– –
– –
–
7.8
2.7
38.5
– –
0.9
1,061.4
10.5
39.4
1,061.4
446.9
446.9
(141.4)
(97.5)
(250.3)
(70.5)
(18.6)
(160.0)
(149.5)
(1.8)
– –
(99.3)
(250.3)
(70.5)
(59.9)
811.1
376.4
Brambles Limited 2008 Annual Report 103
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
222.7
176.6
242.9
114.3
(26.8)
(5.4)
(2.9) –
195.9
171.2
240.0
114.3
44.6
133.7
(15.6)
9.3
38.3
(3.1)
0.6
131.2
– –
– –
– –
– –
234.2
302.4
240.0
114.3
(0.6)
0.7
– –
233.6
303.1
240.0
114.3
(7.4)
(1.7)
(4.0)
(1.9)
(9.1)
(5.9)
– –
– –
– –
881.1
264.3
8.1
(17.5)
–
6.8
13.5
(15.9)
20.0
(15.6)
(29.5)
736.1
220.8
11.2
(4.8)
(1.8)
3.6
31.2
(7.0)
36.1
(3.1)
16.2
811.1
243.3
370.0
111.0
– –
(2.9) –
– –
– –
– –
– –
–
– –
2.1
(0.4)
1.2
234.2
302.4
240.0
114.3
(0.6)
0.7
– –
233.6
303.1
240.0
114.3
noTE 9. inComE TAx
a) Components of tax expense
Amounts recognised in the income statement
Current income tax – continuing operations:
– Income tax charge
– Prior year adjustments
Deferred tax – continuing operations:
– Origination and reversal of temporary differences
– Previously unrecognised tax losses
– Prior year adjustments
Tax expense – continuing operations
Tax (benefit)/expense – discontinued operations (Note 12b)
Tax expense recognised in the income statement
Amounts recognised in the statement of recognised income and expense
– On actuarial losses on defined benefit pension plans
– On losses on revaluation of cash flow hedges
Tax benefit recognised directly in the statement of
recognised income and expense
b) reconciliation between tax expense and accounting profit before tax
Profit before tax – continuing operations
Tax at standard Australian rate of 30% (2007: 30%)
Effect of tax rates in other jurisdictions
Prior year adjustments
Items not subject to taxation
Current year tax losses not recognised
Foreign withholding tax – unrecoverable
Change in tax rates
Non-deductible expenses
Prior year tax losses recouped
Other
Tax expense – continuing operations
Tax (benefit)/expense – discontinued operations (Note 12b)
Total income tax expense
104 Brambles Limited 2008 Annual Report
c) Components of and changes in deferred tax assets
Deferred tax assets shown in the balance sheet are
represented by temporary differences attributable to:
Amounts recognised in the income statement
Employee benefits
Provisions
Losses available against future taxable income
Other
Amounts directly recognised in equity
Share-based payments
Set-off of deferred tax liabilities
Net deferred tax assets
Changes in deferred tax assets were as follows:
At 1 July
Charged to the income statement
Credited/(charged) directly to equity
Acquisition of subsidiary
Offset against deferred tax liabilities
Currency variations
At 30 June
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
14.8
17.4
102.5
42.4
177.1
11.9
20.8
112.3
36.8
181.8
3.3
7.7
(171.6)
(186.4)
8.8
3.1
3.1
17.6
(10.7)
(73.5)
4.1
2.7
8.7
0.9
8.8
(2.1)
–
61.1
–
3.1
–
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
–
Deferred tax assets are recognised for carried forward tax losses to the extent that the realisation of the related tax benefit through future
taxable profits is probable. At reporting date, Brambles has unused tax losses of US$458.7 million (2007: US$538.7 million) available for
offset against future profits. A deferred tax asset has been recognised in respect of US$276.8 million (2007: US$301.0 million) of such losses.
The benefit for tax losses will only be obtained if:
–
Brambles derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses
to be realised;
–
Brambles continues to comply with the conditions for deductibility imposed by tax legislation; and
–
No changes in tax legislation adversely affect Brambles in realising the benefit from the deductions for the losses.
No deferred tax asset has been recognised in respect of the remaining unused tax losses of US$181.9 million (2007: US$237.7 million)
due to the unpredictability of future profit streams in the relevant jurisdictions. Other than China losses of US$13.4 million which will expire
in 2012, all other losses may be carried forward indefinitely.
Brambles Limited 2008 Annual Report 105
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 9. inComE TAx (continued)
d) Components and changes in deferred tax liabilities
Deferred tax liabilities shown in the balance sheet are
represented by temporary differences attributable to:
Amounts recognised in the income statement
Accelerated depreciation for tax purposes
Other
Amounts recognised in the statement of recognised income and expense
On actuarial losses on defined benefit pension plans
On cash flow hedges
Set-off of deferred tax assets
Net deferred tax liabilities
Changes in deferred tax liabilities were as follows:
At 1 July
Charged to the income statement
Credited to the statement of recognised income and expense
Acquisition of subsidiary
Offset against deferred tax asset
Currency variations
At 30 June
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
541.9
64.1
606.0
507.7
62.3
570.0
7.4
1.7
9.1
5.2
1.0
6.2
(171.6)
(186.4)
443.5
389.8
389.8
265.9
27.6
(8.3)
6.9
8.7
18.8
64.9
(2.1)
–
61.1
–
443.5
389.8
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
– –
At reporting date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax
liabilities have not been recognised in the consolidated financial statements was US$1,790.9 million (2007: US$1,756.2 million). No liability
has been recognised in respect of these differences because Brambles is in a position to control the timing of the reversal of the temporary
differences and it is probable that such differences will not reverse in the foreseeable future. Unremitted earnings totalled US$2,032.4 million
(2007: US$1,985.4 million), of which US$109.9 million relates to earnings post Unification.
106 Brambles Limited 2008 Annual Report
noTE 10. EArningS PEr SHArE
Earnings per share
– Basic
– Diluted
– Basic, before special items
From continuing operations
– Basic
– Diluted
– Basic, before special items
From discontinued operations
– Basic
– Diluted
– Basic, before special items
Consolidated
2008
2007
uS cents US cents
46.0
45.7
44.5
45.9
45.6
44.5
0.1
0.1
–
83.4
82.3
39.6
28.0
27.7
37.8
55.4
54.6
1.8
Options and performance share rights granted under the employee option plans are considered to be potential ordinary shares and have
been included in the determination of diluted earnings per share to the extent to which they are dilutive. Details are set out in Note 28.
a) Weighted average number of shares outstanding during the year
Used in the calculation of basic earnings per share
Adjustment for share options and performance share rights
Used in the calculation of diluted earnings per share
Weighted average number of converted, lapsed or cancelled potential
ordinary shares included in diluted earnings per share
b) reconciliations of earnings used in calculating earnings per share
Basic and diluted earnings per share
Profit from continuing operations attributable to ordinary shareholders
Profit from discontinued operations, after minority interests
Profit attributable to ordinary shareholders used in calculating basic earnings per share
2008
million
2007
million
1,409.2
1,548.3
8.9
20.0
1,418.1
1,568.3
8.2
7.3
2008
uS$m
2007
US$m
646.9
1.8
433.7
857.6
648.7
1,291.3
Brambles Limited 2008 Annual Report 107
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 11. dividEndS
a) dividends paid during the year
Brambles Limited
Dividend per share (in Australian cents)
Franked amount at 30% tax (in Australian cents)
Cost (in US$ million)
Payment date
b) dividend declared after reporting date
Brambles Limited
Dividend per share (in Australian cents)
Franked amount at 30% tax (in Australian cents)
Cost (in US$ million)
Payment date
Dividend record date
interim
2008
17.0
1.7
223.4
Final
2007
17.0
3.4
221.4
10 April 2008
11 October 2007
Final
2008
17.5
1.75
208.9
9 october 2008
19 September 2008
2008
uS$m
14.0
2007
US$m
38.6
As this dividend had not been declared at the reporting date, it is not reflected in the financial statements.
c) Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
The amounts above represent the balance of the franking account as at the end of the year, adjusted for:
–
Franking credits that will arise from the payment of the current tax liability;
–
Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
–
Franking credits that will arise from dividends recognised as receivables at the reporting date; and
–
Franking credits that may be prevented from being distributed in subsequent financial years.
The dividends declared by Brambles Limited after reporting date will be franked to the extent indicated out of existing franking credits
or out of franking credits arising from the payment of income tax in the year ending 30 June 2009.
108 Brambles Limited 2008 Annual Report
noTE 12. diSConTinuEd oPErATionS
a) description
The divestments of Cleanaway UK and Cleanaway Asia were recognised in first half 2007, which concluded the divestment program announced
in November 2005. These businesses are presented as discontinued operations in this financial report.
There were a number of minor disposals in 2008, the impact of which is immaterial in aggregate.
b) income statement and cash flow information – discontinued operations
Total revenue
Operating expenses
Profit before tax and special items
Special items (Note 12c)
Profit before tax from discontinued operations
Tax benefit/(expense):
– On profit before tax and special items
– On special items (Note 12c)
Total tax benefit/(expense) from discontinued operations
Profit for the year from discontinued operations
Net cash (outflow)/inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net (decrease)/increase in cash from discontinued operations1
1 Net increase in cash from discontinued operations excludes proceeds from disposal of businesses.
Consolidated
2008
uS$m
–
–
–
1.2
1.2
–
0.6
0.6
1.8
(4.7)
–
–
(4.7)
2007
US$m
252.1
(211.5)
40.6
817.7
858.3
(12.9)
12.2
(0.7)
857.6
39.3
(21.4)
(0.5)
17.4
Brambles Limited 2008 Annual Report 109
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 12. diSConTinuEd oPErATionS (continued)
c) Special items – discontinued operations
Exceptional items:
– Gain recognised on completed disposals1
Special items from discontinued operations
Exceptional items:
– Gain recognised on completed disposals:
– Cleanaway UK2
– Cleanaway Asia3
– Other1
– Restructuring and Unification costs4
Special items from discontinued operations
Consolidated
2008
Before tax
uS$m
Tax After tax
uS$m
uS$m
1.2
1.2
0.6
0.6
1.8
1.8
Before tax
US$m
2007
Tax
US$m
After tax
US$m
788.6
12.3
19.8
(3.0)
1.5
(1.1)
11.8
–
790.1
11.2
31.6
(3.0)
817.7
12.2
829.9
1 In 2008, net favourable provision adjustments of US$1.2 million (US$1.8 million after tax) were recognised in respect of divestments
completed in 2007 and prior years. In 2007, net favourable provision adjustments of US$19.8 million (US$31.6 million after tax) were
recognised.
2 In 2007, Brambles completed the sale of Cleanaway UK and received proceeds of US$1,109.0 million. The pre-tax profit on sale recognised
in 2007 was US$788.6 million (US$790.1 million after tax). Allowing for costs incurred in 2006 of US$11.2 million, the total profit on sale
was US$777.4 million (US$778.9 million after tax).
3 In 2007, Brambles recognised a gain of US$12.3 million (US$11.2 million after tax) on the sale of Cleanaway Asia for proceeds of
US$31.6 million. The divestment program to sell Cleanaway Asia commenced in 2006 during which a loss of US$25.0 million was
recognised to reduce the carrying amount of the disposed assets to estimated fair value less cost to sell. Overall, the net loss on sale was
US$12.7 million (US$13.8 million after tax).
4 In 2007, further amounts of US$3.0 million (US$3.0 million after tax) were incurred in respect of redundancies, office closure and expenses
associated with Brambles Industrial Services headquarters which were closed during 2007.
noTE 13. BuSinESS ComBinATion
a) Brambles Limited
On 4 December 2006, Brambles completed Unification of the dual-listed companies structure (DLC structure). Unification has been
accounted for as a reverse acquisition whereby for financial reporting purposes Brambles Limited has been treated as being acquired by
the existing Brambles consolidated group which comprised Brambles Industries Limited (BIL), Brambles Industries plc (BIP) and controlled
entities. Brambles Limited had a net asset deficiency of A$10.2 million at the date of the reverse acquisition.
Brambles Limited was incorporated on 21 March 2006 with a share capital of A$2 and had no trading activity until 4 December 2006
when it became the legal parent company of BIL and BIP on Unification.
On Unification, Brambles Limited issued shares on a one-for-one basis to those BIL and BIP shareholders who did not elect to participate in
the Cash Alternative. The Unification reserve of US$15,385.8 million represents the difference between the Brambles Limited share capital
measured at fair value on 4 December 2006, and the carrying value of BIL and BIP share capital at that date.
110 Brambles Limited 2008 Annual Report
b) Acquisitions
On 4 March 2008, Brambles announced it had agreed to purchase 100% of the issued share capital of LeanLogistics, Inc, a leading provider
of technology-based transport and supply chain solutions in the USA. Change of control was effective on 7 March 2008.
For the period from 7 March 2008 to 30 June 2008, LeanLogistics contributed revenue of US$3.3 million and incurred a loss after
tax of US$1.2 million. These results are included within the CHEP Americas business segment. If the acquisition had occurred on
1 July 2007, Brambles’ revenue for 2008 would have been US$7.6 million higher and profit after tax for 2008 US$0.6 million lower,
after allowing for finance costs.
The fair value of the LeanLogistics assets acquired, liabilities assumed and goodwill were as follows:
Cash paid
Direct costs relating to the acquisition
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
2008
uS$m
44.7
2.4
47.1
13.8
33.3
The goodwill acquired is attributable to the profitability of the acquired business and anticipated synergies with CHEP’s existing operations.
The fair values of assets and liabilities acquired, including intangibles such as customer contracts, were established using professional valuers,
where relevant.
On acquisition of LeanLogistics, assets acquired and liabilities assumed were:
Cash and cash equivalents
Trade and other receivables
Other current assets
Property, plant and equipment
Intangible assets
Current and deferred tax assets
Trade and other payables
Borrowings
Current and deferred tax liabilities
Net assets
Cash outflow on acquisition of LeanLogistics was as follows:
Cash and cash equivalents acquired
Cash consideration
Net cash outflow
Acquiree’s
carrying amount Fair value
uS$m
uS$m
0.9
1.6
0.1
0.3
1.0
2.7
6.6
(2.7)
(0.3)
–
(3.0)
3.6
0.9
1.6
0.1
0.3
17.5
2.8
23.2
(2.7)
(0.3)
(6.4)
(9.4)
13.8
2008
uS$m
0.9
(47.1)
(46.2)
In addition to the LeanLogistics acquisition, there were a number of minor acquisitions in 2008 and 2007, the impacts of which were
immaterial in aggregate.
Brambles Limited 2008 Annual Report 111
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 14. CASH And CASH EQuivALEnTS
Cash at bank and in hand
Short term deposits
Consolidated
2008
uS$m
62.8
42.0
2007
US$m
112.8
17.6
Short term deposits have initial maturities varying between 7 days and 3 months.
Refer to Note 30 for financial instruments disclosures.
noTE 15. TrAdE And oTHEr rECEivABLES
Current
104.8
130.4
5.4
Parent entity
2008
uS$m
2007
US$m
5.4
– –
0.6
0.6
Trade receivables
Provision for doubtful receivables (a)
Net trade receivables
Proceeds of business disposals
Other debtors
Accrued and unbilled revenue
non-current
Receivables from subsidiaries
Other receivables
532.4
540.6
(7.6)
(9.5)
524.8
531.1
5.7
172.2
126.3
829.0
5.0
178.4
77.1
791.6
– –
– –
– –
– –
0.5 –
– –
0.5 –
–
9.1
9.1
– 14,883.6 12,234.2
9.0
– –
9.0
14,883.6 12,234.2
(a) Provision for doubtful receivables
Trade receivables are non-interest bearing and are generally on 30–90 day terms. A provision for doubtful receivables is established when
there is a level of uncertainty as to the full recoverability of the receivable, based on objective evidence. A provision of US$2.0 million
(2007: US$0.9 million) has been recognised as an expense in the current year for specific trade and other receivables for which such
evidence exists.
Movements in the provision for doubtful receivables were as follows:
At 1 July
Charge for the year
Amounts written off/reversed
Foreign exchange differences
At 30 June
9.5
4.2
15.0
5.2
(6.9)
(11.7)
0.8
7.6
1.0
9.5
–
– –
– –
– –
– –
–
112 Brambles Limited 2008 Annual Report
At 30 June, the ageing analysis of trade receivables by reference to due dates was as follows:
Not past due
Past due 0–30 days but not impaired
Past due 31–60 days but not impaired
Past due 61–90 days but not impaired
Past 90 days but not impaired
Impaired
Consolidated
2008
uS$m
410.8
72.5
16.3
10.7
14.5
7.6
2007
US$m
408.2
66.6
21.3
11.9
23.1
9.5
532.4
540.6
Parent entity
2008
uS$m
2007
US$m
– –
– –
– –
– –
– –
– –
– –
At 30 June 2008, trade receivables of US$114.0 million (2007: US$122.9 million) were past due but not doubtful. These trade
receivables comprise customers who have a good debt history and are considered recoverable.
At 30 June 2008, trade receivables of US$7.6 million (2007: US$9.5 million) were considered to be impaired. A provision of
US$7.6 million (2007: US$9.5 million) has been recognised for doubtful receivables.
Other debtors primarily comprise GST/vAT recoverable, loss compensation receivables and certain balances arising from outside
Brambles’ ordinary business activities, such as deferred proceeds on sale of property, plant and equipment.
At 30 June 2008, other balances within trade and other receivables of US$70.9 million (2007: US$76.4 million) were past due but
not considered to be impaired. No specific collection issues have been identified with these receivables. An ageing of these receivables
was as follows:
Past due 0–30 days but not impaired
Past due 31–60 days but not impaired
Past due 61–90 days but not impaired
Past 90 days but not impaired
9.2
9.8
2.4
49.5
70.9
9.1
10.7
2.6
54.0
76.4
– –
– –
– –
– –
– –
At 30 June 2008, other balances within trade and other receivables of US$0.1 million (2007: US$1.1 million) were considered to be impaired.
A provision of US$0.1 million (2007: US$1.1 million) has been recognised for these doubtful receivables.
Receivables from subsidiaries are unsecured, committed advances repayable in September 2009.
Refer to Note 30 for other financial instruments disclosures.
Brambles Limited 2008 Annual Report 113
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 16. invEnToriES
Raw materials and consumables
Work in progress
Consolidated
2008
uS$m
32.3
12.8
45.1
2007
US$m
25.0
8.5
33.5
Inventory write-downs recognised as an expense during the year amounted to US$0.1 million (2007: US$21.6 million). The expense
has been included in raw materials and consumables in the consolidated income statement.
noTE 17. dErivATivE FinAnCiAL inSTrumEnTS
2008
uS$m
Consolidated
2007
US$m
Current assets
2008
uS$m
Current liabilities
2007
US$m
Interest rate swaps – cash flow hedges
Forward foreign exchange contracts – cash flow hedges
Forward foreign exchange contracts – held for trading
Interest rate swaps – cash flow hedges
Refer to Note 30 for other financial instruments disclosures.
noTE 18. oTHEr ASSETS
Current
Prepayments
Current tax receivable
non-current
Prepayments
3.1
0.1
1.2
4.4
2.5
–
4.2
6.7
5.8
– –
0.2 –
6.0
0.5
0.5
non-current assets non-current liabilities
4.3
1.9
2.7 –
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
33.7
18.0
51.7
33.7
7.4
41.1
– –
7.3 –
7.3 –
0.8
0.3
– –
114 Brambles Limited 2008 Annual Report
noTE 19. invESTmEnTS
a) Joint ventures
Brambles has investments in the following joint ventures, all of which are unlisted jointly controlled entities, which are accounted for using
the equity method.
name (and nature of business)
CISCO – Total Information Management Pte. Limited
(Information management)
General de Archivo Y Deposito, SA1
(Document management services)
Recall Becker GmbH & Co. KG
(Document management services)
Place of incorporation
Singapore
Consolidated
% interest held
at reporting date
June
2008
June
2007
49%
49%
Spain
100%
49%
Germany
50%
50%
1 Effective 2 April 2008, Brambles acquired the remaining 51% interest in General de Archivo Y Deposito, SA (GADSA). From that date, GADSA
has been consolidated as a subsidiary within the Recall segment.
b) movement in carrying amount of investments in joint ventures and associates
At 1 July
Acquisitions and advances
Share of results after income tax (Note 19c)
Dividends received/receivable
Disposals and repayments
Foreign exchange differences
Transfer to investments in controlled entities
Other movements
At 30 June
Consolidated
2008
uS$m
2007
US$m
23.5
23.1
–
5.9
(5.2)
(0.4)
2.8
(9.2) –
(0.5)
16.9
0.4
4.3
(7.0)
(1.9)
1.0
3.6
23.5
Brambles Limited 2008 Annual Report 115
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 19. invESTmEnTS (continued)
c) Share of results of joint ventures and associates
Continuing operations
Trading revenue
Expenses
Profit from ordinary activities before tax
Income tax on ordinary activities
Profit for the year
d) Share of assets and liabilities of joint ventures and associates
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets – continuing operations
e) Share of commitments and contingent liabilities of joint ventures and associates
Contingent liabilities
Lease commitments
Total – continuing operations
f) investments in controlled entities
Investments in controlled entities – at cost
Consolidated
2008
uS$m
2007
US$m
17.4
(10.5)
6.9
(1.0)
5.9
4.0
16.4
20.4
2.5
1.0
3.5
14.4
(9.3)
5.1
(0.8)
4.3
3.2
23.4
26.6
1.3
1.8
3.1
16.9
23.5
0.7
2.0
2.7
0.7
1.9
2.6
Parent entity
2008
uS$m
2007
US$m
6,921.3
6,113.6
This amount when added to the net intercompany receivables of US$10,396.2 million (2007: US$9,383.5 million) reflects the total
carrying value of Brambles Limited’s investment in subsidiaries. These amounts are eliminated on consolidation and are assessed for
impairment at each reporting period.
116 Brambles Limited 2008 Annual Report
noTE 20. ProPErTy, PLAnT And EQuiPmEnT
At 1 July 2006
Cost
Accumulated depreciation
Net carrying amount
year ended 30 June 2007
Opening net carrying amount
Additions
Acquisition of subsidiaries
Disposals
Other transfers
Depreciation charge
Irrecoverable pooling equipment provision expense
Foreign exchange differences
Closing net carrying amount
At 30 June 2007
Cost
Accumulated depreciation
Net carrying amount
year ended 30 June 2008
Opening net carrying amount
Additions
Acquisition of subsidiaries
Disposals
Disposal of subsidiaries
Other transfers
Depreciation charge
Irrecoverable pooling equipment provision expense
Foreign exchange differences
Closing net carrying amount
At 30 June 2008
Cost
Accumulated depreciation
Net carrying amount
Consolidated
Land and Plant and
buildings equipment
uS$m
uS$m
Total
uS$m
103.7
4,705.3
4,809.0
(32.0)
(1,860.3)
(1,892.3)
71.7 2,845.0
2,916.7
71.7
2,845.0
2,916.7
7.2
0.6
(17.8)
21.5
713.9
721.1
1.3
1.9
(92.1)
(109.9)
(27.6)
(6.1)
(6.8)
(355.4)
(362.2)
–
5.7
(90.2)
(90.2)
142.9
148.6
82.1 3,137.8
3,219.9
126.2
5,148.6
5,274.8
(44.1)
(2,010.8)
(2,054.9)
82.1 3,137.8
3,219.9
82.1
3,137.8
3,219.9
12.4
838.8
851.2
1.4
(4.1)
(0.2)
(1.2)
7.0
8.4
(79.9)
(84.0)
(1.0)
(1.2)
(27.3)
(28.5)
(7.6)
(406.4)
(414.0)
–
7.3
(91.2)
(91.2)
231.0
238.3
90.1 3,608.8
3,698.9
145.9
5,935.8
6,081.7
(55.8)
(2,327.0) (2,382.8)
90.1 3,608.8
3,698.9
The net carrying amounts above include plant and equipment held under finance lease US$2.8 million (2007: US$2.1 million); leasehold
improvements US$7.1 million (2007: US$22.6 million); and capital work in progress US$18.3 million (2007: US$83.1 million).
Brambles Limited 2008 Annual Report 117
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 21. goodWiLL
a) net carrying amounts and movements during the year
At 1 July
Carrying amount
year ended 30 June
Opening net carrying amount
Acquisition of subsidiaries
Disposal of subsidiaries
Other transfers
Impairment loss
Foreign exchange differences
Closing net carrying amount
At 30 June
Gross carrying amount
Accumulated impairment
Net carrying amount
Consolidated
2008
uS$m
2007
US$m
606.1
562.1
606.1
44.7
(14.0) –
(2.2)
– –
41.5
676.1
562.1
7.9
(0.4)
36.5
606.1
676.1
606.1
– –
676.1
606.1
b) Segment-level summary of net carrying amount
Goodwill acquired through business combinations is allocated to cash generating units (CGU), which are the smallest identifiable
groupings of Brambles’ cash generating assets. A segment-level summary of the goodwill allocation is presented as follows:
CHEP
Recall
Total goodwill
128.2
547.9
676.1
91.4
514.7
606.1
c) recoverable amount testing – continuing operations
The recoverable amount of the goodwill in continuing operations is determined based on value in use calculations undertaken at the CGU
level. The value in use is calculated using a discounted cash flow methodology covering a 10 year period with an appropriate terminal value
at the end of that period.
Based on the impairment testing, the recoverable amounts of goodwill in the CGUs related to continuing operations at reporting date
were fully supported.
The following describes the key assumptions on which management has based its cash flow projections:
Cash flow forecasts
Cash flow forecasts are based on the most recent financial projections covering a maximum period of five years. Cash flows beyond
that period are extrapolated using estimated growth rates. Financial projections are based on assumptions that represent management’s
best estimates.
growth rates
Growth rates ranging from nil to 4% were used beyond the period covered in the financial projections. They are based on management’s
expectations for future performance and do not normally exceed the long term growth rate for the business in which the CGU operates.
Terminal value
The terminal value calculated after year 10 is determined using the stable growth model, having regard to the weighted average cost of
capital and terminal growth factor appropriate to each CGU.
discount rates
Discount rates used are the pre-tax weighted average cost of capital (WACC) and include a premium for market risks appropriate to each
country in which the CGU operates. WACCs ranged between 8.0% and 22.8%.
Sensitivity
Any reasonable change to the above key assumptions would not cause the carrying value of the CGU to materially exceed its
recoverable amount.
118 Brambles Limited 2008 Annual Report
noTE 22. inTAngiBLE ASSETS
At 1 July 2006
Gross carrying amount
Accumulated amortisation
Net carrying amount
year ended 30 June 2007
Opening carrying amount
Additions
Acquisition of subsidiaries
Disposals
Other transfers
Amortisation charge
Foreign exchange differences
Closing carrying amount
At 30 June 2007
Gross carrying amount
Accumulated amortisation
Net carrying amount
year ended 30 June 2008
Opening carrying amount
Additions
Acquisition of subsidiaries
Disposals
Disposal of subsidiaries
Other transfers
Amortisation charge
Foreign exchange differences
Closing carrying amount
At 30 June 2008
Gross carrying amount
Accumulated amortisation
Net carrying amount
Other intangible assets primarily comprise acquired customer lists and agreements.
Consolidated
other
uS$m
Software
uS$m
Total
uS$m
248.3
104.6
352.9
(153.2)
(44.6)
(197.8)
95.1
60.0
155.1
95.1
60.0
7.6
–
(0.3)
7.1
(33.5)
4.1
80.1
8.5
4.4
(0.8)
(0.6)
(8.6)
7.3
70.2
155.1
16.1
4.4
(1.1)
6.5
(42.1)
11.4
150.3
276.9
125.9
402.8
(196.8)
(55.7)
(252.5)
80.1
70.2
150.3
70.2
150.3
80.1
16.5
8.8
(1.6)
(0.2)
1.7
20.9
–
–
18.2
29.7
(1.6)
(0.2)
27.2
14.1
13.1
(34.5)
(10.1)
(44.6)
0.4
7.5
7.9
83.6
103.3
186.9
314.5
174.3
488.8
(230.9)
(71.0)
(301.9)
83.6
103.3
186.9
Brambles Limited 2008 Annual Report 119
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 23. TrAdE And oTHEr PAyABLES
Current
Trade payables
GST/vAT and other payables
Accruals and deferred income
non-current
Payables to subsidiaries
Other liabilities
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
341.0
111.5
398.2
850.7
302.2
108.3
395.5
806.0
– –
– –
– –
– –
–
17.1
17.1
–
4,487.4
2,850.7
9.2
– –
9.2
4,487.4
2,850.7
Trade payables and other current payables are non-interest bearing and are generally settled on 30–90 day terms.
Refer to Note 30 for financial instruments disclosures.
noTE 24. BorroWingS
Current
Unsecured:
– Bank overdraft
– Bank loans1
– Accrued interest on loan notes
– Finance lease liabilities (Note 32)
– Deferred consideration on acquisitions
non-current
Unsecured:
– Bank loans1
– Loan notes2
– Finance lease liabilities (Note 32)
36.7
39.7
14.3
0.8
–
3.5
43.7
15.3
1.6
0.2
91.5
64.3 –
– –
– –
– –
– –
– –
– –
2,012.5
1,637.1
5.0 –
425.0
425.0
2.0
0.9
– –
– –
2,439.5
2,063.0
5.0 –
Total borrowings
2,531.0
2,127.3
5.0 –
1 Unsecured bank loans include the following: (i) revolving loans in various currencies priced off LIBOR and drawn under multi-currency global
banking facilities with US$1,905.0 million drawn under banking facilities maturing November 2010 and US$103.1 million drawn under
banking facilities maturing August 2012 and (ii) various regional banking facilities providing local currency funding to certain subsidiaries.
Included in bank loans is a borrowing of US$79.8 million (2007: US$68.6 million) which has been designated as a hedge of the net
investment in Brambles’ European subsidiaries and is being used to partially hedge Brambles’ exposure to foreign exchange risks on these
investments.
2 Notes issued in respect of US$425.0 million US private placement in August 2004. The terms of the note are (i) Series A US$171.0 million
5.39% Guaranteed Senior Unsecured Notes due 4 August 2011; (ii) Series B US$157.5 million 5.77% Guaranteed Senior Unsecured Notes
due 4 August 2014; and (iii) Series C US$96.5 million 5.94% Guaranteed Senior Unsecured Notes due 4 August 2016.
Refer to Note 30 for financial instruments disclosures.
120 Brambles Limited 2008 Annual Report
a) Borrowing facilities and credit standby arrangements
Total facilities:
– Committed borrowing facilities
– Loan notes
– Credit standby/uncommitted arrangements
Facilities used at reporting date:
– Committed borrowing facilities
– Loan notes
– Credit standby/uncommitted arrangements
Facilities unused at reporting date:
– Committed borrowing facilities
– Credit standby/uncommitted arrangements
Total credit facilities by currency:
– US dollar
– Sterling
– Euro
– Other
Consolidated
2008
uS$m
2007
US$m
3,647.5
3,267.5
425.0
162.0
425.0
62.6
4,234.5
3,755.1
2,018.9
1,646.3
425.0
61.3
425.0
34.3
2,505.2
2,105.6
1,628.6
1,621.2
100.7
28.3
1,729.3
1,649.5
2008
million
2007
million
US$
1,915.5
1,595.3
£
€
US$
755.0
459.0
88.8
745.0
426.1
82.5
Borrowing facilities are arranged by Brambles on behalf of its subsidiaries. Funding is generally sourced from relationship banks on a medium
to long term basis. The expiry dates of committed facilities range out to calendar year 2012. The average term of maturity of these facilities
and the US private placement notes is equivalent to 2.2 years (2007: 3.2 years). All facilities are structured on an unsecured, revolving basis
and are guaranteed as described in Note 33a. Extension of each facility is normally pursued prior to the date of expiry.
Brambles Limited 2008 Annual Report 121
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 24. BorroWingS (continued)
b) Borrowing facilities maturity profile
maturity
2008
Less than 1 year
1–2 years
2–3 years
3–4 years
4–5 years
Over 5 years
2007
Less than 1 year
1–2 years
2–3 years
3–4 years
4–5 years
Over 5 years
Type
Consolidated
Facilities debt drawn1 Headroom
uS$m
uS$m
uS$m
Bank loans/overdrafts/finance leases
679.2
Bank loans/finance leases
4.3
63.9
2.8
615.3
1.5
Bank loans/finance leases
2,975.6
1,910.0
1,065.6
Loan notes/finance leases
Bank loans
Loan notes
171.4
150.0
254.0
171.4
103.1
254.0
–
46.9
–
4,234.5 2,505.2
1,729.3
Bank loans/overdrafts/finance leases
Bank loans/finance leases
Finance leases
81.0
830.0
0.1
40.0
357.4
0.1
41.0
472.6
–
Bank loans/finance leases
2,419.0
1,283.1
1,135.9
Loan notes
Loan notes
171.0
254.0
171.0
254.0
–
–
3,755.1
2,105.6
1,649.5
1 Debt drawn represents the principal value of loan notes and borrowings debited against the relevant facilities to reflect the correct amount of
funding headroom. This amount may differ from the carrying amount of loan notes and borrowings measured on the basis of amortised cost
as determined under the effective interest method.
122 Brambles Limited 2008 Annual Report
noTE 25. ProviSionS
At 1 July 2007
Current
Non-current
Charge to income statement:
– Additional provisions
– Unused amounts reversed
Utilisation of provision
Acquisition of subsidiaries
Unwinding of discount
Currency variations
At 30 June 2008
Current
Non-current
Consolidated
Employee Business
disposals
entitlements
uS$m
uS$m
other
uS$m
Total
uS$m
52.0
3.4
55.4
38.2
–
21.7
42.2
63.9
38.2
0.1
38.3
111.9
45.7
157.6
3.9
(4.4)
0.8
(3.0)
42.9
(7.4)
(55.3)
(18.8)
(10.7)
(84.8)
–
–
4.2
42.5
38.1
4.4
–
–
7.0
1.3
0.2
3.0
1.3
0.2
14.2
51.6
29.9
124.0
11.3
40.3
24.8
5.1
74.2
49.8
Employee entitlements provision comprises US$7.9 million (2007: US$6.4 million) for long service leave, US$1.8 million for phantom shares
(2007: US$6.4 million) and US$32.8 million (2007: US$42.6 million) for other employee related obligations (other than those resulting from
pension plans). None of these amounts related to phantom shares which had vested at reporting date. US$3.5 million (2007: US$3.0 million)
of the long service leave provision has been recognised as current as it is expected to vest within one year from reporting date. The remaining
balance of long service leave of US$4.4 million (2007: US$3.4 million) is expected to vest within the next two to ten years and has been
discounted to present value.
Other provisions comprise nil (2007: US$2.9 million) for restructuring and Unification costs, US$3.3 million (2007: US$11.3 million) for
litigation and customer disputes and US$26.6 million (2007: US$24.1 million) for other known exposures.
Brambles Limited 2008 Annual Report 123
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 26. rETirEmEnT BEnEFiT oBLigATionS
a) defined contribution plans
Brambles operates a number of defined contribution retirement benefit plans for qualifying employees. The assets of these plans are held
in separately administered trusts or insurance policies. In some countries, Brambles’ employees are members of state-managed retirement
benefit plans. Brambles is required to contribute a specified percentage of payroll costs to the retirement benefit plan to fund benefits.
The only obligation of Brambles with respect to defined contribution retirement benefit plans is to make the specified contributions.
US$20.3 million (2007: US$14.7 million) representing contributions paid and payable to these plans by Brambles at rates specified in
the rules of the plans relating to continuing operations has been recognised as an expense in the income statement.
b) defined benefit plans
Brambles operates a number of defined benefit pension plans. The majority of the plans are self-administered and the plans’ assets are
held independently of Brambles’ finances. Under the plans, the employees are entitled to retirement benefits based upon a percentage
of final salary. No other post-retirement benefits are provided. The plans are funded plans.
The plan assets and the present value of the defined benefit obligation recognised in Brambles’ balance sheet are based upon the most
recent formal actuarial valuations which have been updated to 30 June 2008 by independent professionally qualified actuaries and take
account of the requirements of AASB 119. The present value of the defined benefit obligation, the related current service cost and past
service cost were measured using the projected unit credit method.
In addition to the principal defined benefit plans included in disclosures below, Brambles has a number of other arrangements in several
countries that are either defined benefit pension plans or have certain defined benefit characteristics. Each of these arrangements has
been assessed as immaterial separately and in aggregate and they have not been subjected to an independent AASB 119 valuation.
c) Balance sheet amounts
The amounts recognised in Brambles’ balance sheet in respect of defined benefit plans were as follows:
Present value of defined benefit obligations
Fair value of plan assets
Net liability recognised in the balance sheet
Consolidated
2008
uS$m
2007
US$m
242.5
216.8
(179.1)
(187.2)
63.4
29.6
Brambles has no legal obligation to settle this liability with an immediate contribution or additional one-off contributions. Brambles
intends to continue to make contributions to the plans at the rates recommended by the funds’ actuaries. Refer Note 26(i).
124 Brambles Limited 2008 Annual Report
d) income statement amounts
The amounts recognised in Brambles’ income statement in respect of defined benefit plans were as follows:
Current service cost
Interest cost
Expected return on plan assets
Net benefit expense included in employment cost (Note 7)
e) Statement of recognised income and expense amounts
Actuarial gains and losses reported in the statement of recognised income and expense were as follows:
Actuarial (losses)/gains recognised during the year:
– Continuing operations
– Discontinued operations
Cumulative actuarial (losses)/gains recognised
f) defined benefit obligation
Changes in the present value of the defined benefit obligation were as follows:
At 1 July
Current service cost
Interest cost
Contributions from plan members
Actuarial gains and losses
Currency variations
Benefits paid
Disposal of subsidiaries
At 30 June
Consolidated
2008
uS$m
2007
US$m
4.9
12.7
6.6
12.1
(13.0)
(11.0)
4.6
7.7
(34.5)
–
(34.5)
33.3
(33.4)
(0.1)
(9.5)
25.0
216.8
602.1
4.9
12.7
0.9
13.9
(1.9)
(4.8)
6.6
12.1
1.0
17.2
32.6
(16.1)
–
(438.7)
242.5
216.8
A number of the defined benefit pension arrangements are closed to new entrants. Under the projected unit method, the current service
cost of these arrangements will increase as a percentage of payroll as the members of the plan approach retirement.
Brambles Limited 2008 Annual Report 125
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 26. rETirEmEnT BEnEFiT oBLigATionS (continued)
g) Plan assets
Assets held in the plans fell within the following categories:
Equities
Bonds
Insurance bonds
Cash
Other
Changes in the fair value of the plan assets were as follows:
At 1 July
Expected return on plan assets
Actuarial gains and losses
Currency variations
Contributions from the sponsoring employers
Contributions from plan members
Benefits paid
Disposal of subsidiaries
At 30 June
The actual return on plan assets was US$(7.8) million (2007: US$28.2 million).
2008
Fair value
uS$m
86.2
31.5
8.4
19.1
33.9
Consolidated
2007
Fair value
US$m
112.0
21.4
6.9
11.9
35.0
%
48.1
17.6
4.7
10.7
18.9
179.1
100.0
187.2
2008
uS$m
187.2
13.0
(20.7)
(4.9)
8.4
0.9
%
59.8
11.4
3.7
6.4
18.7
100.0
2007
US$m
453.1
11.0
17.2
26.9
11.9
1.0
(4.8)
(16.1)
–
(317.8)
179.1
187.2
126 Brambles Limited 2008 Annual Report
h) Principal actuarial assumptions
Principal actuarial assumptions (expressed as weighted averages) used in determining Brambles’ defined benefit obligations were:
Europe
other
than uk
uk
At 30 June 2008
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Retail price inflation
Return on equities
Return on bonds
Return on cash
At 30 June 2007
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Retail price inflation
Return on equities
Return on bonds
Return on cash
5.2%
4.0%
6.1%
4.2%
8.3%
6.6%
5.0%
4.9%
3.3%
5.8%
3.6%
8.0%
6.0%
4.5%
4.0%
3.5%
5.9%
2.5%
7.8%
4.9%
3.0%
3.8%
3.0%
5.4%
2.1%
7.8%
4.6%
2.5%
South
Africa
8.0%
8.0%
10.5%
8.0%
13.5%
11.0%
9.0%
5.0%
5.5%
8.0%
5.5%
10.0%
8.0%
8.0%
Assumptions about mortality are made using actuarial tables, for example 115% of standard table PA00 based on members’ years of birth
and incorporating the medium cohort projections of longevity improvements for the UK schemes. Using these tables, the life expectancy of
a UK pensioner aged 65 today would be 89 years for both men and women.
The expected return on plan assets is based on market expectations at the beginning of the period for returns over the entire life of the
benefit obligation.
i) Employer contributions
During the year, employer contributions to the main defined benefit plans ranged between 11% and 17% of pensionable pay.
The obligation to contribute to the various defined benefit plans is covered by trust deeds and/or legislation. Funding levels and
contributions for these plans are based on regular actuarial advice. Comprehensive actuarial valuations are made at no more than
three yearly intervals. Additional annual contributions of US$4.2 million (2007: US$3.9 million) are being paid to remove the
identified deficits over a period of 7.5 years.
Contributions paid to the plans during 2008 were US$8.4 million (2007: US$11.9 million) of which nil (2007: US$3.0 million) related
to discontinued operations. It is estimated that the amount of contributions to be paid to the plans during 2009 will be US$8.7 million.
j) Historical summary
The history of experience adjustments is as follows:
– On plan liabilities
– On plan assets
Information for years prior to 2005 is not available.
2008
uS$m
(13.8)
(20.6)
Consolidated
2007
US$m
16.3
17.2
2006
US$m
4.3
31.1
2005
US$m
47.4
38.2
Brambles Limited 2008 Annual Report 127
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 27. ConTriBuTEd EQuiTy
Parent entity
Total ordinary shares, of no par value, issued and fully paid:
At 1 July 2006
Issued on Unification on 4 December 2006
Issued during the year on the exercise of options
Shares purchased on-market and cancelled
At 30 June 2007
At 1 July 2007
Issued during the year on the exercise of options
Shares purchased on-market and cancelled
At 30 June 2008
Consolidated
Total ordinary shares, of no par value, issued and fully paid:
At 1 July 2006
Issued on incorporation of Brambles Limited
Created on Unification
Bought-back under the Cash Alternative
Issued on the exercise of options
Purchased on-market and cancelled post Unification
Exchange fluctuations on translation
At 30 June 2007
At 1 July 2007
Issued on the exercise of options
Purchased on-market and cancelled
At 30 June 2008
Shares
uS$m
2
–
1,552,676,321
15,526.7
4,345,716
(141,536,975)
20.8
(1,484.7)
1,415,485,064
14,062.8
1,415,485,064
14,062.8
10,475,382
(42,409,560)
52.3
(336.5)
1,383,550,886
13,778.6
1,624,631,252
2
–
(93,863,994)
26,254,779
(141,536,975)
–
957.2
–
14,435.5
–
94.5
(1,484.7)
60.3
1,415,485,064
14,062.8
1,415,485,064
14,062.8
10,475,382
(42,409,560)
52.3
(336.5)
1,383,550,886
13,778.6
Ordinary shares of Brambles Limited entitle the holder to participate in dividends and the proceeds on any winding up of the Company
in proportion to the number of shares held.
128 Brambles Limited 2008 Annual Report
noTE 28. SHArE-BASEd PAymEnTS
On Unification, options and performance share rights over BIL and BIP shares held by employees and former employees were cancelled and
replaced by options and performance share rights over Brambles Limited shares on substantially similar terms. This has been accounted for
as a modification without incremental value under AASB 2: Share-based Payments and did not result in any additional remuneration expense.
The Remuneration Report sets out details relating to the employee option plans (pages 73 to 74), together with details of options and
performance share rights issued to Directors (page 66). Options and performance share rights granted by Brambles do not result
in an entitlement to participate in share issues of any other corporation.
Set out below are summaries of options and performance share rights granted under the plans.
a) grants over BiL shares pre-unification, now over Brambles Limited shares
Exercise
price
A$
Balance
at 1 July
granted
during
the year
2008
grant date
Expiry date
options
7 Aug 2001
1 Jul 2008
19 Dec 2001
19 Dec 2007
18 Jan 2002
18 Jul 2007
2 Apr 2002
2 Apr 2008
5 Sep 2002
5 Sep 2008
18 Nov 2002
18 May 2008
6 Mar 2003
6 Mar 2009
25 Jun 2003
25 Dec 2008
10 Sep 2003
10 Sep 2009
14 Oct 2003
14 Oct 2009
4 Mar 2004
4 Mar 2010
27 May 2004
27 Nov 2007
27 Jun 2005
27 Dec 2008
Total options
Performance share rights
7 Aug 2001
7 Aug 2007
7 Aug 2001
7 Aug 2007
19 Dec 2001
19 Dec 2007
2 Apr 2002
2 Apr 2008
5 Sep 2002
5 Sep 2008
6 Mar 2003
6 Mar 2009
10 Sep 2003
10 Sep 2009
4 Mar 2004
4 Mar 2010
24 Nov 2004
4 Mar 2010
8 Sep 2004
8 Sep 2010
4 Apr 2005
5 April 2011
21 Oct 2005
22 Oct 2011
Total performance share rights
Total
11.24
9.63
10.41
9.51
7.08
6.09
4.32
4.74
4.75
4.66
5.31
5.63
8.20
–
–
–
–
–
–
–
–
–
–
–
–
278,300
12,434
410,064
19,128
2,331,673
349,616
61,188
432,815
1,063,258
665,398
218,744
1,691,425
1,606,346
9,140,389
49,230
133,472
34,735
951
285,451
5,894
266,380
183,776
44,581
3,432,576
16,152
2,758,494
7,211,692
16,352,081
–
–
–
–
–
–
326,824
122,590
–
155,586
–
Exercised
during
the year
–
–
(247,017)
–
Forfeited
during
the year
Balance
at 30 June
–
278,300
(12,434)
(163,047)
(19,128)
(900,083)
(1,431,590)
(307,316)
–
(105,991)
(890,368)
(665,398)
(63,158)
(42,300)
(61,188)
–
(50,300)
–
–
(1,517,926)
(173,499)
(151,276)
(2,564)
1,452,506
(4,848,533)
(1,956,050)
2,335,806
–
–
(16,745)
(951)
(98,670)
(4,375)
(240,009)
(183,776)
(33,982)
(49,230)
(133,472)
(17,990)
–
(182,352)
(1,519)
(7,302)
–
–
(3,294,230)
(52,947)
(16,152)
–
–
–
–
–
4,429
–
19,069
–
10,599
85,399
–
(258,632)
(237,007)
2,262,855
(4,147,522)
(681,819)
2,382,351
(8,996,055)
(2,637,869)
4,718,157
5.93
7.10
7.70
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Weighted average exercise price of options A$
6.64
There were 1,261,908 options and 121,155 performance share rights exercisable at 30 June 2008.
Brambles Limited 2008 Annual Report 129
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 28. SHArE-BASEd PAymEnTS (continued)
Balance
at 1 July
granted
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance
at 30 June
2007 (summarised)
Total options
Total performance share rights
Total over BIL shares
Weighted average exercise price
of options over BIL shares
30,216,234
13,364,272
43,580,506
A$
6.36
–
–
–
–
Weighted average share price at the date of exercise
Weighted average remaining contractual life at 30 June
(17,687,660)
(3,388,185)
(4,104,936)
(2,047,644)
9,140,389
7,211,692
(21,792,596)
(5,435,829)
16,352,081
5.69
9.14
A$
years
2008
12.73
2.0
6.64
2007
11.57
2.2
b) grants over BiP shares pre-unification, now over Brambles Limited shares
2008
grant date
Expiry date
options
Exercise
price
£
Balance
at 1 July
granted
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance
at 30 June
5 Sep 2002
5 Sep 2008
10 Sep 2003
10 Sep 2009
4 Mar 2004
4 Mar 2010
2.33
1.72
2.11
Total options
Performance share rights
19 Dec 2001
19 Dec 2007
2 Apr 2002
2 Apr 2008
5 Sep 2002
5 Sep 2008
10 Sep 2003
10 Sep 2009
4 Mar 2004
4 Mar 2010
8 Sep 2004
9 Sep 2010
21 Oct 2005
22 Oct 2011
Total performance share rights
Total
–
–
–
–
–
–
–
727,483
286,194
218,744
1,232,421
9,187
951
98,693
66,603
44,581
1,188,980
1,048,482
2,457,477
3,689,898
Weighted average exercise price of options £
2.15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(131,835)
(595,648)
(90,084)
(63,158)
–
–
(285,077)
(595,648)
(9,187)
(951)
(72,051)
(47,919)
(33,982)
(1,077,650)
(53,800)
–
–
(21,172)
(5,509)
–
(45,057)
(74,877)
–
196,110
155,586
351,696
–
–
5,470
13,175
10,599
66,273
919,805
(1,295,540)
(146,615)
1,015,322
(1,580,617)
(742,263)
1,367,018
2.09
2.33
1.89
There were 351,696 options and 97,176 performance share rights exercisable at 30 June 2008.
130 Brambles Limited 2008 Annual Report
Balance
at 1 July
granted
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance
at 30 June
2.15
2007
5.37
2.9
Balance
at 30 June
2,041,506
2,210,790
28,406
36,365
125,250
2007 (summarised)
Total options
Total performance share rights
Total over BIP shares
Weighted average exercise price
of options over BIP shares
7,608,644
5,854,936
13,463,580
£
2.12
–
–
–
–
Weighted average share price at the date of exercise
Weighted average remaining contractual life at 30 June
c) grants over Brambles Limited shares issued subsequent to unification
(4,180,499)
(2,195,724)
(2,131,811)
(1,265,648)
1,232,421
2,457,477
(6,312,310)
(3,461,372)
3,689,898
1.86
£
years
2.61
2008
5.85
2.7
2008
grant date
Expiry date
Performance share rights
19 Jan 2007
31 Aug 2012
29 Aug 2007
30 Aug 2013
26 Feb 2008
2 Dec 2013
19 Mar 2008
2 Mar 2014
28 Apr 2008
29 Apr 2014
Exercise
price
Balance
at 1 July
granted
during
the year
Exercised
during
the year
Forfeited
during
the year
–
–
–
–
–
2,588,281
–
–
–
–
–
2,316,576
28,406
36,365
125,250
(226,112)
(4,763)
(320,663)
(101,023)
–
–
–
–
–
–
Total performance share rights
2,588,281
2,506,597
(230,875)
(421,686)
4,442,317
There were 2,112 performance share rights exercisable at 30 June 2008.
2007 (summarised)
Total performance share rights
Weighted average fair value of grants during the year
Weighted average share price at the date of exercise
Weighted average remaining contractual life at 30 June
Balance
at 1 July
granted
during
the year
Exercised
during
the year
Forfeited
during
the year
Balance
at 30 June
–
2,764,530
(93,304)
(82,945)
2,588,281
A$
A$
years
2008
10.03
11.41
4.6
2007
9.43
12.75
5.2
There were no grants, 132,643 exercises and 1,771,882 forfeits in options and performance share rights over Brambles Limited shares
between the end of the financial year and 19 August 2008.
Brambles Limited 2008 Annual Report 131
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 28. SHArE-BASEd PAymEnTS (continued)
d) Fair value calculations
The fair value of equity-settled options and performance share rights was determined as at grant date, using a binomial valuation methodology.
The values calculated do not take into account the probability of options and performance share rights being forfeited prior to vesting, as a
probability adjustment is made when computing the share-based payment expense.
The significant inputs into the valuation models for the equity-settled grants made during the year were:
Weighted average share price
Expected volatility
Expected life
Annual risk-free interest rate
Expected dividend yield
2008
2007
A$ grants A$ grants
A$13.18 A$13.35
22%
22%
2.8–3.0 years 2.6 years
5.94–6.77%
2.2–3.5%
6.1%
2.2%
The expected volatility was determined based on a two-year historic volatility of Brambles’ share prices.
e) Share-based payment expense – continuing operations
Brambles recognised a total expense of US$18.0 million (2007: US$20.0 million) relating to share-based payments for continuing operations.
Of this amount, US$2.3 million (2007: US$2.2 million) related to phantom shares.
noTE 29. rESErvES And rETAinEd EArningS
Reserves
Retained earnings
Minority interests in reserves and retained earnings
2008
uS$m
2007
US$m
(14,671.5) (14,881.5)
2,436.1
2,241.1
(12,235.4) (12,640.4)
0.3
0.3
132 Brambles Limited 2008 Annual Report
a) movements in reserves and retained earnings – Consolidated
reserves
Foreign
currency
Share-
based
Hedging payments translation unification
uS$m
uS$m
uS$m
uS$m
year ended 30 June 2007
Opening balance
Actuarial gains on defined benefit plans
Foreign exchange differences
Cash flow hedges:
– Fair value gains/(losses)
– Tax on fair value gains
– Transfers to net profit
– Tax on transfers to net profit
Share-based payments:
– Expense recognised during the year
– Shares issued
– Tax on expense recognised during the year
Buy-back of ordinary shares
Created on Unification
Dividends paid
FCTR on entities disposed taken to profit
Net profit for the year
Closing balance
year ended 30 June 2008
Opening balance
Adjustment for AASB 117 Leases (Recall USA)1
Actuarial loss on defined benefit plans
Foreign exchange differences
Cash flow hedges:
– Fair value gains/(losses)
– Tax on fair value gains
– Transfers to net profit
Share-based payments:
– Expense recognised during the year
– Shares issued
– Tax on expense recognised during the year
Buy-back of ordinary shares
Dividends paid
Net profit for the year
Closing balance
5.1
48.4
245.6
–
62.4
–
–
–
–
–
–
–
(42.8)
–
–
(0.2)
0.1
(5.0)
1.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20.8
(18.9)
11.3
–
–
–
–
–
– (15,385.8)
–
8.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
retained
earnings
uS$m
other
uS$m
158.4
1,534.4
–
8.9
–
–
–
–
–
–
–
–
–
–
–
–
3.9
–
–
–
–
–
–
–
–
–
–
(588.5)
–
1,291.3
1.8
61.6
273.6 (15,385.8)
167.3
2,241.1
1.8
61.6
273.6 (15,385.8)
167.3
2,241.1
–
–
0.2
(3.8)
1.7
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
14.8
(13.9)
3.3
–
–
263.3
–
–
–
–
–
–
–
–
–
(55.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2.5)
(27.1)
–
–
–
–
–
–
–
–
(424.1)
648.7
(0.2)
65.8
481.4 (15,385.8)
167.3 2,436.1
1 Upon transition to AIFRS on 1 July 2005, an adjustment was made to comply with AASB 117: Leases, which requires operating leases with
a fixed rental increase to be amortised on a straight line basis over the life of the lease. Upon completion of a review of leases during first
half 2008, a further adjustment for fixed rental increases has been made to increase other liabilities by US$4.1 million, increase deferred tax
assets by US$1.6 million and decrease opening retained earnings by US$2.5 million. The impact on profit for 2007 was not material and
therefore prior year comparatives have not been amended.
Brambles Limited 2008 Annual Report 133
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 29. rESErvES And rETAinEd EArningS (continued)
b) movements in reserves and retained earnings – Parent entity
reserves
Share-
based
Foreign
payments translation
uS$m
uS$m
currency retained
earnings
uS$m
year ended 30 June 2007
Opening balance
Foreign exchange differences
Share-based payments:
–Shares to be issued
Buy-back of ordinary shares
Net profit for the year
Closing balance
year ended 30 June 2008
Opening balance
Foreign exchange differences
Share-based payments:
–Shares to be issued
Buy-back of ordinary shares
Dividends paid
Net profit for the year
Closing balance
–
–
–
1,209.6
11.9
–
–
–
(42.8)
–
11.9 1,166.8
–
–
–
–
255.7
255.7
11.9
1,166.8
255.7
–
2,003.1
12.7
–
–
–
–
(55.5)
–
–
24.6 3,114.4
–
–
–
(424.1)
571.1
402.7
As a result of Unification, Brambles Limited is only permitted to declare dividends out of profits generated by it subsequent to
4 December 2006.
c) nature and purpose of reserves
Hedging reserve
This comprises the cumulative portion of the gain or loss of cash flow hedges that are determined to be effective hedges. Amounts
are recognised in the income statement when the associated hedged transaction is recognised or the hedge or a portion thereof
becomes ineffective.
Share-based payments reserve
This comprises the cumulative share-based payment expense recognised in the income statement in relation to options and performance
share rights issued but not yet exercised. Refer to Note 28 for further details.
Foreign currency translation reserve
This comprises cumulative exchange differences arising from the translation of the financial statements of foreign subsidiaries, net of qualifying
net investment hedges. The relevant accumulated balance is recognised in the income statement on disposal of a foreign subsidiary.
unification reserve
As described in Note 13, on Unification Brambles Limited issued shares on a one-for-one basis to those BIL and BIP shareholders who did
not elect to participate in the Cash Alternative. The Unification reserve of US$15,385.8 million represents the difference between the Brambles
Limited share capital measured at fair value on 4 December 2006, and the carrying value of the share capital of BIL and BIP at that date.
other
This comprises the merger reserve created at the time of the formation of the DLC, following internal reorganisations within BIP, and the
capital redemption reserve created in 2006 as a result of the cancellation of BIP shares.
134 Brambles Limited 2008 Annual Report
noTE 30. FinAnCiAL riSk mAnAgEmEnT
Brambles is exposed to a variety of financial risks: market risk (including the effect of fluctuations in interest rates and exchange rates), liquidity
risk and credit risk.
Brambles’ overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects
on the financial performance of Brambles.
Brambles uses standard derivative financial instruments to manage its risk exposure in the normal course of business. Brambles does not trade
in financial instruments for speculative purposes. Hedging activities are conducted through Brambles’ Treasury department on a centralised
basis in accordance with Board policies and guidelines through standard operating procedures and delegated authorities.
Policies with respect to financial risk management and hedging activities are discussed below and should be read in conjunction with detailed
information contained in the Financial Review on pages 42 to 43.
a) Fair values
Set out below is a comparison by category of the carrying amounts and fair values of financial instruments recognised in the balance sheet.
With the exception of loans and receivables, all other financial assets are classified as financial assets at fair value through profit or loss.
Financial assets
– Cash at bank and in hand (Note 14)
– Short term deposits (Note 14)
– Trade receivables (Note 15)
– Interest rate swaps (Note 17)
– Forward foreign currency contracts (Note 17)
Financial liabilities
– Trade payables (Note 23)
– Bank overdrafts (Note 24)
– Bank loans (Note 24)
– Loan notes (Note 24)
– Finance lease liabilities (Note 24)
– Deferred consideration on acquisitions (Note 24)
– Interest rate swaps (Note 17)
– Forward foreign currency contracts (Note 17)
Financial assets
– Cash at bank and in hand (Note 14)
– Receivables from subsidiaries (Note 15)
Financial liabilities
– Payables to subsidiaries (Note 23)
– Bank loans (Note 24)
Consolidated
Carrying amount
2008
uS$m
2007
US$m
Fair value
2008
uS$m
2007
US$m
62.8
42.0
112.8
17.6
62.8
42.0
524.8
531.1
524.8
7.4
1.3
4.4
4.2
7.4
1.3
112.8
17.6
531.1
4.4
4.2
341.0
302.2
341.0
302.2
36.7
3.5
36.7
3.5
2,052.2
1,680.8
2,052.2
1,680.8
439.3
440.3
438.2
423.3
2.8
–
8.5
0.2
2.5
0.2
0.5
–
2.8
–
8.5
0.2 –
2.5
0.2
0.5
Parent entity
Carrying amount
2008
uS$m
2007
US$m
Fair value
2008
uS$m
2007
US$m
5.4
0.6
5.4
0.6
14,883.6 12,234.2 14,883.6 12,234.2
4,487.4
2,850.7
4,487.4
2,850.7
5.0
–
5.0 –
For forward foreign exchange contracts, the net fair value is taken to be the unrealised gain or loss at balance date calculated by reference to
the current forward rates for contracts with similar maturity dates. Fair value for other financial assets and liabilities has been calculated by
discounting future cash flows at prevailing interest rates for the relevant yield curve.
Brambles Limited 2008 Annual Report 135
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 30. FinAnCiAL riSk mAnAgEmEnT (continued)
b) market risk
Brambles has the following risk policies in place with respect to market risk.
interest rate risk
Brambles’ exposure to potential volatility in finance costs, predominantly US and Australian dollars, is managed by maintaining a mix of fixed
and floating-rate instruments within select target bands over defined periods. In most cases, interest rate derivatives are used to achieve these
targets synthetically.
The following table sets out the financial instruments exposed to interest rate risk at reporting date:
Financial assets (floating rate)
Cash at bank
Short term deposits
Receivables from subsidiaries
Weighted average effective interest rate
Financial liabilities (floating rate)
Bank overdrafts
Bank loans
Interest rate swaps (notional value)
Payables to subsidiaries
Net exposure to cash flow interest rate risk
Weighted average effective interest rate
Financial liabilities (fixed rate)
Loan notes
Finance lease liabilities
Deferred consideration on acquisitions
Interest rate swaps (notional value)
Net exposure to fair value interest rate risk
Weighted average effective interest rate
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
62.8
112.8
5.4
0.6
42.0
17.6
– –
–
– 14,883.6 12,234.2
104.8
130.4 14,889.0 12,234.8
3.8%
3.0%
7.9%
6.8%
36.7
3.5
– –
2,052.2
1,680.8
5.0 –
(738.9)
(505.6)
– –
–
–
4,487.4
2,850.7
1,350.0
1,178.7 4,492.4
2,850.7
5.7%
5.7%
7.9%
6.8%
439.3
440.3
2.8
–
2.5
0.2
738.9
505.6
1,181.0
948.6
5.7%
5.8%
– –
– –
– –
– –
– –
– –
interest rate swaps – cash flow hedges
Brambles enters into various interest rate risk management transactions for the purpose of managing finance costs to achieve more stable and
predictable finance expense results. The instruments primarily used are interest rate swaps and caps.
During 2008, Brambles entered into or maintained interest rate swap transactions with various banks hedging variable rate borrowings in
US and Australian dollars. The purpose of the interest rate swaps was to hedge variable interest expense under borrowings against rising
interest rates. Interest rate swaps achieve this by synthetically converting the variable interest rate payment into a fixed interest liability
on the dates on which interest is payable on the underlying debt. The fair value of these contracts at reporting date was US$(1.1) million
(2007: US$3.9 million).
The terms of the contracts have been negotiated to match the projected drawdowns and rollovers of variable rate bank debt.
136 Brambles Limited 2008 Annual Report
The gain or loss from re-measuring the interest rate swaps at fair value is deferred and recognised in the hedging reserve in equity,
to the extent that the hedge is effective, and reclassified into profit and loss when the hedged interest expense is recognised. Any
ineffective portion is charged to the income statement. For 2008 and 2007, all interest rate swaps were effective hedging instruments.
Sensitivity analysis
The following table sets out the sensitivity of Brambles’ financial assets and financial liabilities to interest rate risk applying the following
assumptions which are considered reasonably possible based on historic movements, future expectations and economic forecasts:
Consolidated
US dollar interest rates
Australian dollar interest rates
Sterling interest rates
Euro interest rates
Impact on profit after tax
Impact on equity
i
nterest rate risk
2008
lower rates higher rates
2007
lower rates higher rates
–150 bps +150 bps
–150 bps +150 bps
–100 bps +100 bps
–100 bps +100 bps
–75 bps +75 bps
–75 bps +75 bps
–50 bps +50 bps
–50 bps +50 bps
uS$m
uS$m
US$m
US$m
10.2
(6.3)
(10.2)
5.7
13.1
(5.3)
(13.1)
3.8
Based on financial instruments held at 30 June 2008, if interest rates were to parallel shift by the basis points in the different currencies noted
above with all other variables held constant, profit after tax for the year would have been US$10.2 million higher or US$10.2 million lower
(2007: US$13.1 million higher or US$13.1 million lower), mainly as a result of lower/higher interest expense on bank borrowings. The impact
on equity would have been US$6.3 million lower or US$5.7 million higher (2007: US$5.3 million lower or US$3.8 million higher) mainly as
a result of the incremental movement through the hedging reserve relating to the effective portion of cash flow hedges. Given its geographically
diverse operations, Brambles has interest rate exposure positions against a variety of currencies, but predominantly US dollar, Australian dollar,
sterling and euro.
Due to the financial restructuring arising from Unification which materially impacted the level and mix of borrowings, cash and other financial
instruments throughout 2007, the sensitivity results for 2007 which are based on market risks applying at reporting date are not considered
representative of the exposures held throughout the reporting period.
Parent entity
Australian dollar interest rates
Impact on profit after tax
Impact on equity
i
nterest rate risk
2008
lower rates higher rates
2007
lower rates higher rates
–100 bps +100 bps
–100 bps +100 bps
uS$m
(72.8)
–
uS$m
72.8
–
US$m
US$m
(65.5)
65.5
–
–
Based on financial instruments held at 30 June 2008, if interest rates were to parallel shift by –/+ 100 basis points with all other variables held
constant, profit after tax for the year for the parent entity would have been US$72.8 million lower/higher (2007: US$65.5 million lower/higher),
mainly as a result of lower/higher interest income/(expense) on interest bearing loans to/from subsidiaries. The intercompany loans to/from the
parent entity are denominated in Australian dollars.
Brambles Limited 2008 Annual Report 137
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 30. FinAnCiAL riSk mAnAgEmEnT (continued)
b) market risk (continued)
Foreign exchange risk
Exposure to foreign exchange risk generally arises in transactions affecting either the value of transactions translated back to the functional
currency of a subsidiary or affecting the value of assets and liabilities of overseas subsidiaries when translated back to the Group’s reporting
currency. Foreign exchange hedging is used when a transaction exposure exceeds certain thresholds and as soon as a defined exposure arises.
Currency profile
The following table sets out the currency mix profile of Brambles’ financial instruments at reporting date:
Consolidated
2008
Financial assets
– Cash at bank and in hand
– Short term deposits
– Interest rate swaps
– Forward foreign currency contracts
Financial liabilities
– Bank overdrafts
– Bank loans
– Loan notes
– Finance lease liabilities
– Interest rate swaps
– Forward foreign currency contracts
– Net investment hedge
2007
Financial assets
– Cash at bank and in hand
– Short term deposits
– Interest rate swaps
– Forward foreign currency contracts
Financial liabilities
– Bank overdrafts
– Bank loans
– Loan notes
– Finance lease liabilities
– Deferred consideration on acquisitions
– Interest rate swaps
uS
dollar
uS$m
Aust
dollar
uS$m
Sterling
uS$m
Euro
uS$m
other
uS$m
Total
uS$m
11.7
10.3
–
3.4
1.8
16.9
–
4.0
191.6
205.9
–
–
1,015.4
768.1
439.3
0.5
8.5
101.1
–
–
–
–
5.3
–
–
–
–
0.6
0.6
15.9
20.0
–
–
–
39.6
17.1
2.1
–
42.2
61.4
17.0
2.1
–
1.8
–
0.1
23.7
39.9
–
5.5
69.1
62.8
42.0
7.4
241.7
353.9
3.8
36.7
166.8
1,972.4
–
439.3
0.5
–
2.8
8.5
94.5
240.6
–
79.8
–
79.8
1,564.8
773.4
75.5
100.8
265.6
2,780.1
11.6
–
3.8
–
15.4
–
–
0.6
127.6
128.2
–
2.5
1,061.7
434.5
440.3
0.3
–
–
–
–
0.2
0.5
5.6
36.4
–
–
0.5
6.1
–
–
–
–
–
–
–
–
685.4
721.8
–
–
–
1.5
–
–
–
59.2
17.6
–
14.1
90.9
112.8
17.6
4.4
827.6
962.4
1.0
3.5
116.0
1,612.2
–
0.7
–
–
15.7
–
440.3
2.5
0.2
0.5
823.4
68.6
– Forward foreign currency contracts
111.4
96.2
600.1
– Net investment hedge
–
–
–
68.6
Parent entity
The parent entity’s financial instruments are all denominated in Australian dollars.
1,613.7
533.9
600.1
70.1
133.4
2,951.2
138 Brambles Limited 2008 Annual Report
Forward foreign exchange contracts – cash flow hedges
Brambles enters into forward foreign exchange contracts to hedge currency exposures arising from normal commercial transactions involving
the purchase and sale of equipment and services and other corporate expenditure and receipts.
During 2008, Brambles had entered into forward foreign exchange transactions with various banks in a variety of cross-currencies for terms
ranging up to six months. Most contracts create an obligation on Brambles to take receipt of or deliver a foreign currency which is used to
fulfil the foreign currency sale or purchase order.
The gain or loss from re-measuring the foreign exchange contracts at fair value is deferred and recognised in the hedging reserve in equity
to the extent that the hedge is effective and reclassified into profit and loss when the hedged item is recognised. Any ineffective portion is
charged to the income statement. For 2008 and 2007, all foreign exchange contracts were effective hedging instruments.
Foreign exchange contracts are fair valued by comparing the contracted rate to the current market rate for a contract with the same
remaining period to maturity. The fair value of these contracts at reporting date was US$0.1 million (2007: nil).
Forward foreign exchange contracts – held for trading
Brambles entered into forward foreign exchange contracts for the purpose of hedging various cross-border intercompany loans to overseas
subsidiaries. In this case, the forward foreign exchange contract provides an economic hedge against exchange fluctuations in the foreign
currency loan balance. The face value and terms of the foreign exchange contracts match the intercompany loan balances. Gains and losses
on realignment of the intercompany loan and foreign exchange contracts to spot rates are offset in the income statement. Consequently,
these foreign exchange contracts are not designated for hedge accounting purposes.
These contracts are fair valued by comparing the contracted rate to the current market rate for a contract with the same remaining period
to maturity. Any changes in fair values are taken to the income statement immediately. The fair value of these contracts at reporting date
was US$1.0 million (2007: US$4.2 million).
Hedge of net investment in foreign entity
Included in bank loans at 30 June 2008 is a borrowing of US$79.8 million (2007: US$68.6 million) denominated in euros. This loan has
been designated as a hedge of the net investment in Brambles’ European subsidiaries and is being used to partially hedge Brambles’ exposure
to foreign exchange risks on these investments. There was no ineffectiveness to be recorded from net investments in foreign entity hedges.
Sensitivity analysis
The following table sets out the sensitivity of Brambles’ financial assets and financial liabilities to foreign exchange risk
(transaction exposures only):
Consolidated
Exchange rate movement
Impact on profit after tax
Impact on equity
Foreign exchange risk
2008
lower rates higher rates
+10%
–10%
2007
lower rates higher rates
+10%
–10%
uS$m
uS$m
US$m
US$m
1.6
(5.6)
(1.3)
5.6
(0.1)
(4.8)
0.1
4.8
Based on the financial instruments held at 30 June 2008, if exchange rates were to weaken/strengthen by 10% with all other variables held
constant, profit after tax for the year would have been US$1.6 million higher or US$1.3 million lower (2007: US$0.1 million lower/higher).
The impact on equity would have been US$5.6 million lower/higher (2007: US$4.8 million lower/higher) mainly as a result of the incremental
movement through the foreign currency translation reserve relating to the effective portion of a net investment hedge.
Parent entity
The sensitivity of the parent entity’s financial assets and financial liabilities to foreign exchange risk (transaction exposures only) on profit
after tax and equity is not considered material.
Brambles Limited 2008 Annual Report 139
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 30. FinAnCiAL riSk mAnAgEmEnT (continued)
c) Liquidity risk
Brambles’ objective is to maintain adequate liquidity to meet its financial obligations as and when they fall due. Brambles funds its
operations through existing equity, retained cash flow and borrowings, principally from bank credit facilities. The credit facilities are generally
structured on a committed multi-currency revolving basis with maturities ranging out to August 2012. Borrowings under the facilities are
floating-rate, unsecured obligations with covenants and undertakings typical for these types of arrangements. To minimise foreign exchange
risks, borrowings are arranged in the currency of the relevant operating asset to be funded. Brambles also has access to further funding
through overdrafts, uncommitted and standby lines of credit, principally to manage day-to-day liquidity.
Refer to Note 24a for borrowing facilities and credit standby arrangements disclosures.
maturities of derivative financial assets and liabilities
The maturity of Brambles’ contractual cash flows on net and gross settled derivative financial instruments, based on the remaining period to
contractual maturity date, is presented below. Cash flows on interest rate swaps and forward foreign exchange contracts are discounted based
on forward interest rates applicable at reporting date.
Consolidated
2008
net settled
Interest rate swaps
gross settled
Forward foreign exchange contracts
– inflow
– (outflow)
2007
net settled
Interest rate swaps
gross settled
Forward foreign exchange contracts
– inflow
– (outflow)
year 1
uS$m
year 2
uS$m
year 3
uS$m
year 4
uS$m
Total
over 4 contractual
years cash flows
uS$m
uS$m
Carrying
amount
assets/
(liabilities)
uS$m
(2.6)
(0.9)
0.3
1.4
0.7
(1.1)
(1.1)
241.7
(240.6)
–
–
–
–
–
–
–
–
241.7
(240.6)
(1.5)
(0.9)
0.3
1.4
0.7
–
1.1
–
–
2.0
1.8
0.1
827.6
(823.4)
–
–
6.2
1.8
–
–
0.1
–
–
–
–
–
3.9
3.9
–
–
–
827.6
(823.4)
8.1
4.2
–
8.1
Parent entity
There are no derivative financial assets and liabilities held by the parent entity.
140 Brambles Limited 2008 Annual Report
maturities of non-derivative financial liabilities
The maturity of Brambles’ contractual cash flows on non-derivative financial liabilities, based on the remaining period to contractual maturity
date, is presented below. Refer to Note 24b for borrowing facilities maturity profile.
Consolidated
2008
Financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease liabilities
2007
Financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease liabilities
Deferred consideration on acquisitions
year 1
uS$m
year 2
uS$m
year 3
uS$m
year 4
uS$m
Total
over 4 contractual
years cash flows
uS$m
uS$m
Carrying
amount
uS$m
341.0
36.7
–
–
–
–
–
–
–
–
341.0
341.0
36.7
36.7
151.9
114.0
1,958.7
5.4
102.8 2,332.8 2,052.2
38.3
0.8
24.0
1.0
24.0
0.6
186.6
296.3
569.2
439.3
0.4
–
2.8
2.8
568.7
139.0 1,983.3
192.4
399.1 3,282.5 2,872.0
302.2
3.5
137.5
39.3
1.6
0.2
–
–
438.9
24.0
0.6
–
–
–
73.7
24.0
0.1
–
–
–
1,311.0
–
–
–
302.2
302.2
3.5
3.5
1,961.1
1,680.8
24.0
482.9
594.2
440.3
0.1
–
0.1
–
2.5
0.2
2.5
0.2
484.3
463.5
97.8
1,335.1
483.0 2,863.7
2,429.5
The maturity of the parent entity’s contractual cash flows on non-derivative financial liabilities, based on the remaining period to contractual
maturity date, is presented below.
Parent entity
2008
Financial liabilities
Payables to subsidiaries
Bank loans
2007
Financial liabilities
Payables to subsidiaries
year 1
uS$m
year 2
uS$m
year 3
uS$m
year 4
uS$m
Total
over 4 contractual
years cash flows
uS$m
uS$m
Carrying
amount
uS$m
–
–
4,487.4
–
–
5.0
–
2,850.7
–
–
–
–
–
4,487.4
4,487.4
–
5.0
5.0
– 2,850.7
2,850.7
Brambles Limited 2008 Annual Report 141
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 30. FinAnCiAL riSk mAnAgEmEnT (continued)
d) Credit risk exposure
Brambles is exposed to credit risk on its financial assets, which comprise cash and cash equivalents, trade and other receivables and derivative
financial instruments. This exposure to credit risks arises from the potential failure of counterparties to meet their obligations. The maximum
exposure to credit risk at the reporting date is the carrying amount of the financial instruments as set out in Note 30a. There is no significant
concentration of credit risk.
Brambles trades only with recognised, creditworthy third parties. Collateral is generally not obtained from customers.
Customers are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past
experience and industry reputation. Credit limits are set for each individual customer and approved by the credit manager in accordance with
an approved authority matrix. These credit limits are regularly monitored and revised based on historic turnover activity and credit performance.
In addition, overdue receivable balances are monitored and actioned on a regular basis.
Exposure to credit risk also arises from amounts receivable from unrealised gains on derivative financial instruments. At the reporting date, this
amount was US$8.4 million (2007: US$8.1 million). Brambles transacts derivatives with prominent financial institutions and has credit limits
in place to limit exposure to any potential non-performance by its counterparties.
e) Capital risk management
Brambles’ objective when managing capital is to ensure Brambles continues as a going concern as well as to provide a balance between
financial flexibility and balance sheet efficiency. In determining its optimal capital structure, Brambles considers the robustness of future cash
flows, potential funding requirements for growth opportunities and acquisitions, the cost of capital and ease of access to funding sources.
Brambles manages its capital structure to be consistent with a solid investment grade credit. To achieve its desired capital structure, Brambles
may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, sell assets to reduce debt or vary
the maturity profile of its borrowings.
Brambles considers its capital to comprise:
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total capital
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
2,531.0
2,127.3
104.8
130.4
2,426.2
1,996.9
5.0 –
5.4
(0.4)
0.6
(0.6)
1,543.5
1,422.7 17,320.3 15,497.2
3,969.7
3,419.6
17,319.9 15,496.6
142 Brambles Limited 2008 Annual Report
Under the terms of its major borrowing facilities, Brambles is required to comply with the following financial covenants:
–
the ratio of net debt to EBITDA is to be no more than 3.5 to 1; and
–
the ratio of EBITDA to net finance costs is to be no less than 3.5 to 1.
The following definitions apply in the calculation of these financial covenants:
–
EBITDA means Brambles’ consolidated operating profit (excluding exceptional items) before depreciation, amortisation, impairment, profit
of joint ventures and associates and certain fair value adjustments in respect of financial derivatives; and
–
net debt means Brambles’ consolidated total borrowings, excluding the impact of fair value adjustments in relation to hedge accounting,
less cash and cash equivalents.
Brambles has complied with these financial covenants for 2008 and prior years. At balance date, under these definitions,
the ratios were:
Total borrowings
Less: cash and cash equivalents
Net debt
EBITDA
Net finance costs
Net debt/EBITDA (times)
EBITDA/net finance cost (times)
Consolidated
2008
uS$m
2007
US$m
2,531.0
2,127.3
104.8
130.4
2,426.2
1,996.9
1,493.1
1,367.4
149.5
1.6
10.0
59.9
1.5
22.8
Brambles Limited 2008 Annual Report 143
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 31. CASH FLoW STATEmEnT – AddiTionAL inFormATion
a) reconciliation of cash
For the purpose of the cash flow statement, cash comprises:
Cash at bank and in hand (Note 14)
Short term deposits (Note 14)
Bank overdraft (Note 24)
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
62.8
42.0
(36.7)
112.8
5.4
0.6
17.6
(3.5)
– –
– –
68.1
126.9
5.4
0.6
b) non-cash financing or investing activities
There were no financing or investing transactions during the year which have had a material effect on the assets and liabilities of Brambles
that did not involve cash flows.
c) reconciliation of profit after tax to net cash flows from operating activities
Profit after tax
Adjustments for:
– Depreciation and amortisation
– Irrecoverable pooling equipment provision expense
– Net gains on disposals of property, plant and equipment
– Other valuation adjustments
– Net gains on disposal of businesses and investments
– Net gains after tax on completed disposals of discontinued operations
– Joint ventures and associates
– Equity-settled share-based payments
– Finance revenues and costs
Consolidated
2008
uS$m
2007
US$m
Parent entity
2008
uS$m
2007
US$m
648.7
1,291.3
571.1
255.7
458.6
404.3
90.2
(42.7)
(0.6)
(2.9)
(832.9)
2.8
20.8
91.2
(46.4)
(1.0)
(1.2)
(2.6)
(0.6)
14.8
12.7
– –
– –
– –
– –
– –
– –
– –
– –
6.3
(813.2)
(380.6)
Movements in operating assets and liabilities, net of acquisitions and disposals:
– Decrease/(increase) in trade and other receivables
35.9
(46.0)
(0.5) –
– Decrease/(increase) in prepayments
– Increase in inventories
– Decrease in deferred tax
– (Decrease)/increase in trade and other payables
– Decrease in tax payables
– Decrease in provisions
– Other
1.9
(9.7)
(1.0)
(5.9)
39.3
135.7
(2.1)
(38.8)
(30.3)
(4.1)
61.0
(3.0)
(37.6)
4.2
– –
– –
– –
– –
(2.4)
(4.6)
– –
(4.0)
6.4
Net cash inflow/(outflow) from operating activities
1,166.3
1,044.0
(249.0)
(123.1)
144 Brambles Limited 2008 Annual Report
noTE 32. CommiTmEnTS
a) Capital expenditure commitments
At 30 June 2008, Brambles’ continuing operations had commitments of US$66.3 million (2007: US$14.9 million) principally relating to
property, plant and equipment.
Capital expenditure in respect of continuing operations contracted for but not recognised as liabilities at reporting date were as follows:
Within one year
Between one and five years
Consolidated
2008
uS$m
2007
US$m
40.7
25.6 –
66.3
14.9
14.9
b) operating lease commitments
Brambles’ continuing operations are party to operating leases for offices, operational locations and plant and equipment. The leases have
varying terms, escalation clauses and renewal rights. Escalation clauses are rare and any impact is considered immaterial.
The future minimum lease payments under such non-cancellable operating leases are as follows:
Within one year
Between one and five years
After five years
Minimum lease payments
Consolidated
Plant
2007
US$m
24.4
42.2
6.9
occupancy
2008
uS$m
2007
US$m
148.4
512.5
453.4
136.4
472.9
421.8
73.5
1,114.3
1,031.1
2008
uS$m
31.7
50.8
1.0
83.5
During the year, operating lease expense of US$102.8 million (2007: US$134.9 million) was recognised in the income statement.
c) Finance lease commitments
Finance leases of plant and equipment are not a material feature of Brambles’ funding arrangements.
Finance lease commitments of Brambles’ continuing operations are payable as follows:
Within one year
Between one and five years
Minimum lease payments recognised as a liability
Consolidated
Plant
2008
uS$m
2007
US$m
0.8
2.0
2.8
1.6
0.9
2.5
Brambles Limited 2008 Annual Report 145
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 33. ConTingEnCiES
a) Brambles Limited and certain of its subsidiaries are parties to a deed of cross-guarantee which supports global financing credit
facilities available to certain Brambles’ subsidiaries. Total facilities available amount to US$3,616.4 million (2007: US$3,235.8 million)
of which US$2,008.1 million (2007: US$1,636.7 million) has been drawn.
Brambles Limited and certain of its subsidiaries are parties to a guarantee which supports the US Private Placement borrowing of
US$425.0 million (2007: US$425.0 million) by a subsidiary.
Brambles Limited has guaranteed repayment of certain facilities and financial accommodations made available to certain
Brambles’ subsidiaries. Total facilities available amount to US$398.5 million (2007: US$356.3 million), of which US$148.4 million
(2007: US$139.1 million) has been drawn.
b) Subsidiaries of Brambles Limited have contingent unsecured liabilities in respect of guarantees given relating to performance under
contracts entered into totalling US$122.2 million (2007: US$189.0 million), of which US$117.8 million (2007: US$104.4 million)
is also guaranteed by Brambles Limited and is included in (a) above.
c) A subsidiary has provided guarantees on a several basis in relation to a reduction in the share premium account of a subsidiary of
Brambles in favour of certain creditors which amounts to US$9.8 million (2007: US$12.8 million).
d) A subsidiary has guaranteed the lease obligations of third parties totalling US$31.8 million (2007: US$39.9 million). Subsidiaries of
Brambles Limited have provided guarantees to support lease facilities entered into by certain Brambles’ subsidiaries. Total facilities
available amount to US$22.3 million (2007: US$24.5 million), of which US$22.3 million (2007: US$24.5 million) has been drawn.
e) Environmental contingent liabilities
Brambles’ activities have included the treatment and disposal of hazardous and non-hazardous waste through subsidiaries and corporate
joint ventures. In addition, other activities of Brambles entail using, handling and storing materials which are capable of causing
environmental impairment.
As a consequence of the nature of these activities, Brambles has incurred and may continue to incur environmental costs and liabilities
associated with site and facility operation, closure, remediation, aftercare, monitoring and licensing. Provisions have been made in
respect of estimated environmental liabilities at all sites and facilities where obligations are known to exist and can be reliably measured.
However, additional liabilities may emerge due to a number of factors including changes in the numerous laws and regulations which
govern environmental protection, liability, land use, planning and other matters in each jurisdiction in which Brambles operates or has
operated. These extensive laws and regulations are continually evolving in response to technological advances, scientific developments and
other factors. Brambles cannot predict the extent to which it may be affected in the future by any such changes in legislation or regulation.
f)
In the ordinary course of business, Brambles becomes involved in litigation, most of which falls within Brambles’ insurance
arrangements. Provision has been made for known obligations where the existence of the liability is probable and can be reasonably
quantified. Receivables have been recognised where recoveries, for example from insurance arrangements, are virtually certain. As
the outcomes of these matters remain uncertain, contingent liabilities exist for possible amounts eventually payable that are in excess
of the amounts provided.
g) Brambles has given vendor warranties in relation to businesses sold in 2008 and prior years. Brambles has recognised the financial
impact of such vendor warranties and adjustments on the basis of information currently available. A contingent liability exists for any
amounts which may ultimately be borne by Brambles which are in excess of the amounts provided at 30 June 2008.
146 Brambles Limited 2008 Annual Report
noTE 34. AudiTorS’ rEmunErATion
PricewaterhouseCoopers (PwC) earned the following remuneration from Brambles during the year:
Consolidated
2008
2007
uS$’000 US$’000 uS$’000 US$’000
2007
Parent entity
2008
Amounts received or due and receivable by PwC (Australia) for:
Audit services:
– Audit and review of Brambles’ financial reports
– Other assurance services
Other services:
– Tax advisory services
Total remuneration of PwC (Australia)
Amounts received or due and receivable by related practices of PwC (Australia) for:
Audit services:
– Audit and review of Brambles’ financial reports
– Other assurance services
Other services:
– Tax advisory services
– Acquisition due diligence
Total remuneration of related practices of PwC (Australia)
30
30
30
1,650
1,781
96
97
1,746
1,878
258
46 –
2,004
1,924
4,175
3,829
4
477
4,179
4,306
73
133
206
4,385
2,494
–
2,494
6,800
30
– –
30
– –
30
– –
– –
– –
– –
– –
– –
– –
Total auditors’ remuneration
6,389
8,724
30
30
From time to time, Brambles employs PwC on assignments additional to their statutory audit duties where PwC, through their detailed
knowledge of the Group, are best placed to perform the services from an efficiency, effectiveness and cost perspective. The performance
of such non-audit related services is always balanced with the fundamental objective of ensuring PwC’s objectivity and independence as
auditors. To ensure this balance, the Board has established a policy whereby prior approval of the Audit Committee is required wherever
management recommends that PwC undertake non-audit work. Management consultancy, IT implementation and specialist internal audit
work will not be performed by PwC.
In 2008 and 2007, non-audit assignments primarily related to tax consulting advice and acquisition due diligence.
Auditors’ remuneration for the parent entity relates to the audit of the parent entity accounts. Auditors’ remuneration in relation to the
consolidated accounts is borne by a subsidiary.
noTE 35. rELATEd PArTy inFormATion
a) Brambles
Brambles comprises Brambles Limited and the entities which it controls.
Borrowings under the bilateral bank credit facilities are undertaken by a limited number of Brambles subsidiaries. Funding of other subsidiaries
within Brambles is by way of intercompany loans, all of which are documented and carry commercial interest rates applicable to the currency
and terms of the loans.
The global financing credit facilities are supported by a deed of cross guarantee for which Brambles Limited charges Brambles’ borrowers a
commercially determined guarantee fee.
Dividends are declared within the group only as required for funding or other commercial reasons.
Brambles also has in place cost sharing agreements to ensure that relevant costs are taken up by the entities receiving the benefits.
All amounts receivable and payable by entities within Brambles and any interest thereon are eliminated on consolidation.
Brambles Limited 2008 Annual Report 147
Notes to and forming part of the financial statements
for the year ended 30 June 2008 (continued)
noTE 35. rELATEd PArTy inFormATion (continued)
b) material subsidiaries
The principal subsidiaries of Brambles during the year were:
name
CHEP
CHEP USA
CHEP Canada, Inc.
CHEP UK Limited
CHEP France SA
CHEP Deutschland GmbH
CHEP Espana SA
CHEP Mexico SA de Cv
CHEP Benelux Nederland Bv
CHEP Italia SRL
Brambles Enterprises Limited
CHEP South Africa (Proprietary) Limited
CHEP Australia Limited
CHEP Equipment Australia Pty Limited
CHEP (Shanghai) Company Limited
CHEP Technology Proprietary Limited
CHEP India Pvt Limited
recall
Recall Limited
Recall France SA
Recall Corporation, Inc.
Recall do Brasil Ltda
AUSDOC Holdings Pty Limited
Recall Information Management Pty Limited
Recall Equipment Australia Pty Limited
Brambles HQ
Brambles Industries Limited
Brambles Holdings (UK) Limited
Brambles International Finance Bv
Brambles USA Inc.
Brambles North America Incorporated
Brambles Finance plc
Brambles Finance Limited
Recall Deutschland GmbH
Place of incorporation
% interest held
at reporting date
2007
2008
USA
Canada
UK
France
Germany
Spain
Mexico
The Netherlands
Italy
UK
South Africa
Australia
Australia
China
Australia
India
UK
France
USA
Brazil
Australia
Australia
Australia
Australia
UK
The Netherlands
USA
USA
UK
Australia
Germany
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100 –
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
In addition to the list above, there are a number of other subsidiaries within Brambles which are mostly intermediary holding companies
or are dormant.
148 Brambles Limited 2008 Annual Report
Para 264(b) of the German trade law grants an exemption from the requirement to prepare individual audited statutory financial statements
and management reports for those German companies which are included within the consolidated group financial statements. Relief from
such German statutory reporting requirements will be taken in respect of Recall Deutschland GmbH & Co. KG as this entity is consolidated
within these Brambles’ financial statements.
Investments in subsidiaries are primarily by means of ordinary or common shares. All subsidiaries prepare accounts with a
30 June balance date.
c) Joint ventures and associates
Brambles’ share of the net results of joint ventures and associates is disclosed in Note 19.
d) other transactions
Other transactions entered into during the year with Directors of Brambles Limited; with Director-related entities; with key management
personnel (KMP, as set out in the Directors’ Report); or with KMP-related entities were on terms and conditions no more favourable than
those available to other employees, customers or suppliers and include transactions in respect of the employee option plans, contracts
of employment and reimbursement of expenses. Any other transactions were trivial or domestic in nature.
e) other related parties
A subsidiary has a non-interest bearing advance outstanding as at 30 June 2008 of US$1.297 million (2007: US$1.133 million) to
Brambles Custodians Pty Limited, the trustee under Brambles’ employee loan scheme. The advance is administered by Brambles
Custodians Pty Limited and enabled employees to acquire shares in BIL prior to Unification, pursuant to the terms and conditions
of the employee loan scheme approved by shareholders.
f) directors’ indemnities
Under its constitution, to the extent permitted by law, Brambles Limited indemnifies each person who is, or has been a Director or
Secretary of Brambles Limited against any liability which results from facts or circumstances relating to the person serving or having
served in the capacity of Director, Secretary, other officer or employee of Brambles Limited or any of its subsidiaries, other than:
(aa) in respect of a liability other than for legal costs:
(i) a liability owed to Brambles Limited or a related body corporate;
(ii) a liability for a pecuniary penalty order under section 1317G of the Act or a compensation order under section 1317H of the Act;
(iii) a liability that is owed to someone (other than Brambles Limited or a related body corporate) and did not arise out of conduct in
good faith; and
(bb) in respect of a liability for legal costs:
(i) in defending or resisting proceedings in which the person is found to have a liability for which they could not have been indemnified
under paragraph (aa) above;
(ii) in defending or resisting criminal proceedings in which the person is found guilty;
(iii) in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for making the order are found
by the Court to be established; or
(iv) in connection with proceedings for relief to any persons under the Act in which the Court denies the relief.
Paragraph (bb)(iii) above does not apply to costs incurred in responding to actions brought by ASIC or a liquidator as part of an investigation
before commencing proceedings for the Court order.
Under its Articles of Association, BIP indemnifies every person who is or was a Director, alternate Director or Company Secretary of the
company to the extent permitted by the Companies Act 1985 against all costs, charges, losses and liabilities incurred by them in the
proper execution of their duties or the proper exercise of their powers, authorities and directions.
Insurance policies are in place to cover Directors and executive officers, however the terms of the policies prohibit disclosure of the details
of the insurance cover and the premiums paid.
noTE 36. EvEnTS AFTEr BALAnCE SHEET dATE
Other than those outlined in the Directors’ Report, there have been no events that have occurred subsequent to 30 June 2008 that have
had a material impact on Brambles’ financial performance or position.
Brambles Limited 2008 Annual Report 149
Directors’ Declaration
In the opinion of the Directors of Brambles Limited:
(a) the financial statements and notes set out on pages 85 to 149 are in accordance with the Australian Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
and
(ii) giving a true and fair view of the financial position of Brambles and Brambles Limited as at 30 June 2008 and of their performance
for the year ended on that date;
(b) there are reasonable grounds to believe that Brambles Limited will be able to pay its debts as and when they become due and payable;
and
(c) the audited remuneration disclosures set out on pages 54 to 77 of the Directors’ Report comply with Accounting Standard AASB 124:
Related Party Disclosures and the Corporations Regulations 2001.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
g J kraehe Ao
Chairman
m F ihlein
Chief Executive Officer
20 August 2008
150 Brambles Limited 2008 Annual Report
Independent Auditors’ Report
to the members of Brambles Limited
pricewaterhousecoopers
aBn 52 780 433 757
Darling Park Tower 2
201 Sussex Street
GPO BOX 2650
SYDNEY NSW 1171
DX 77 Sydney Australia
Telephone +61 2 8266 0000
Facsimile +61 2 8266 9999
www.pwc.com/au
RepoRt on the financiaL RepoRt
We have audited the accompanying financial report of Brambles Limited (the Company), which comprises the balance sheet as at
30 June 2008, and the income statement, statement of recognised income and expense and cash flow statement for the year ended on
that date, a summary of significant accounting policies, other explanatory notes and the Directors’ declaration for both Brambles Limited and
Brambles. Brambles comprises the Company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The Directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian
Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes
establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that
are reasonable in the circumstances. In Note 1, the Directors also state, in accordance with Accounting Standard AASB 101 Presentation
of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the
financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.
auditors’ responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian
Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and
plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures
selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the
financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies
with the financial report.
For further explanation of an audit, visit our website http://www.pwc.com/au/financialstatementaudit.
Our audit did not involve an analysis of the prudence of business decisions made by Directors or management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Liability limited by a scheme approved under Professional Standards Legislation
Brambles Limited 2008 Annual Report 151
Independent Auditors’ Report
to the members of Brambles Limited (continued)
independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
auditors’ opinion
In our opinion:
(a) the financial report of Brambles Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and Brambles’ financial position as at 30 June 2008 and of their performance
for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
RepoRt on the RemuneRation RepoRt
We have audited the Remuneration Report included in pages 54 to 77 of the Directors’ Report for the year ended 30 June 2008.
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our
audit conducted in accordance with Australian Auditing Standards.
auditors’ opinion
In our opinion, the Remuneration Report of Brambles Limited for the year ended 30 June 2008 complies with section 300A of the
Corporations Act 2001.
matters relating to the electronic presentation of the audited financial report
This auditor’s report relates to the financial report and Remuneration Report of Brambles Limited (the Company) for the year ended
30 June 2008 included on the Brambles Limited web site. The Company’s Directors are responsible for the integrity of the Brambles
Limited web site. We have not been engaged to report on the integrity of this web site. The auditor’s report refers only to the financial
report and Remuneration Report named above. It does not provide an opinion on any other information which may have been hyperlinked
to/from these statements or the Remuneration Report. If users of this report are concerned with the inherent risks arising from electronic
data communications they are advised to refer to the hard copy of the audited financial report and Remuneration Report to confirm the
information included in the audited financial report and Remuneration Report presented on this web site.
PricewaterhouseCoopers
m G Johnson
Partner
Sydney
20 August 2008
m K Graham
Partner
Sydney
20 August 2008
152 Brambles Limited 2008 Annual Report
Auditors’ Independence Declaration
PricewaterhouseCoopers
ABn 52 780 433 757
Darling Park Tower 2
201 Sussex Street
GPO BOX 2650
SYDNEY NSW 1171
DX 77 Sydney Australia
Telephone +61 2 8266 0000
Facsimile +61 2 8266 9999
www.pwc.com/au
As lead auditor for the audit of Brambles Limited for the year ended 30 June 2008, I declare that to the best of my knowledge and belief,
there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Brambles Limited and the entities it controlled during the period.
m g Johnson
Partner
PricewaterhouseCoopers
Sydney
20 August 2008
Liability limited by a scheme approved under Professional Standards Legislation
Brambles Limited 2008 Annual Report 153
Five Year Financial Performance Summary
Continuing operations
Sales revenue
AIFRS
2008
uS$m
2007
uS$m
2006
uS$m
UK GAAP1
2004
uS$m
2005
uS$m
4,358.6 3,868.8 3,522.1 3,274.8
2,893.2
Comparable operating profit (before special items)
1,046.9
932.8
771.3
599.8
444.7
Net finance costs
Profit before tax (before special items)
Tax expense (before special items)
(149.5)
(59.9)
(111.8)
(130.1)
(126.1)
897.4
872.9
659.5
469.7
318.6
(270.9)
(287.2)
(229.4)
(160.4)
(102.8)
Profit from continuing operations (before special items)
626.5
585.7
430.1
309.3
215.8
Special items, after tax
Goodwill amortisation2
Profit from continuing operations, after tax
Profit from discontinued operations, after tax
Profit for the year
depreciation and amortisation (excluding goodwill)
– Continuing operations
– Discontinued operations
net capex on property, plant & equipment
– Continuing operations
– Discontinued operations
Cash flow
Cash flow from operations (after net capex)
Free cash flow
Dividends paid
Free cash flow after dividends
Balance sheet
Capital employed
Net debt
Equity
Employees
– Continuing operations
– Discontinued operations
Earnings per share (uS cents)
Basic
Before special items and goodwill amortisation:
– Brambles
– Continuing operations
dividend declared per share (Australian cents)
– Interim and final
– Special
20.4
(152.0)
(67.5)
–
–
–
3.8
–
646.9
433.7
362.6
313.1
1.8
857.6
1,101.8
135.7
648.7 1,291.3 1,464.4
448.8
458.6
404.3
412.0
393.0
–
–
80.7
212.4
(76.5)
(24.2)
115.1
100.9
216.0
383.4
194.0
735.6
517.8
474.7
443.3
448.9
–
21.3
133.6
222.4
155.0
782.3
726.5
900.7
903.9
412.6
490.2
559.7
622.2
444.8
604.0
296.7
256.5
(32.2)
(113.8)
263.0
365.7
716.0
450.2
242.1
208.1
3,969.7
3,419.6 4,643.1 4,595.6 4,576.0
2,426.2 1,996.9 1,690.1 2,208.3 2,541.0
1,543.5
1,422.7 2,953.0 2,387.3 2,035.0
12,305
12,327
12,249
11,813
11,854
–
1,841
14,043
15,759
16,345
12,305
14,168
26,292
27,572
28,199
46.0
83.4
86.7
26.4
12.9
44.5
44.5
39.6
37.8
38.3
25.5
26.8
18.3
21.8
12.8
34.5
–
17.0
–
25.0
34.5
21.5
20.0
–
–
1 Year 2004 is under UK GAAP. It has been reclassified into an AIFRS presentation format.
2 Goodwill amortisation ceased on adoption of AIFRS.
154 Brambles Limited 2008 Annual Report
Glossary
2001 option Plans
2001 Share Plans
2004 Share Plans
The Brambles Industries Limited 2001 Executive Share Option Plan and the Brambles Industries plc 2001
Executive Share Option Plan, incorporating Brambles Limited rollover amendments of 22 August 2006.
The Brambles Industries Limited 2001 Executive Performance Share Plan and the Brambles Industries
plc 2001 Executive Performance Share Plan, incorporating Brambles Limited rollover amendments of
22 August 2006.
The Brambles Industries Limited 2004 Performance Share Plan and the Brambles Industries plc 2004
Performance Share Plan, incorporating Brambles Limited rollover amendments of 22 August 2006.
2006 Share Plan
The Brambles Limited 2006 Performance Share Plan.
Act
Agm
AiFrS
ASx
The Corporations Act 2001 (Cth).
Annual General Meeting.
Australian Equivalents to International Financial Reporting Standards, used by Brambles to report its
financial results. In 2004 and prior years, Brambles reported under UK GAAP and Australian GAAP.
Australian Securities Exchange.
Average Capital invested (ACi)
This is calculated as a 12 month average of Capital Invested.
(CI – see definition below).
BiL
BiP
Board
Brambles Industries Limited, which was previously one of the two listed entities in the DLC structure.
Brambles Industries plc, which was previously one of the two listed entities in the DLC structure.
The Board of Brambles Limited.
Brambles, Brambles group or group
Brambles Limited and all of its related bodies corporate.
BvA
Brambles value Added or BvA represents the value generated over and above the cost of the capital used
to generate that value. It is calculated as comparable operating profit (COP) less (average capital invested
(ACI), at fixed June 2007 exchange rates, multiplied by Brambles’ weighted average pre-tax cost of
capital (WACC)).
BvA = COP – (ACI x WACC).
(Certain minor adjustments to BvA are also made in accordance with Brambles’ BvA Accounting Policy
and subject to the approval of Brambles’ Chief Financial Officer.)
CAgr
Compound Annual Growth Rate.
Capital invested (Ci)
Net assets before tax balances, cash, borrowings and accrued finance costs, but after adjustment
for accumulated net pre-tax special items, actuarial gains or losses and net equity adjustments for
equity-settled share-based payments.
Cash flow from operations (CFo)
Cash flow generated after net capital expenditure and before special items.
Cdi
CREST Depositary Interest, the mechanism by which ordinary shares are traded and settled on the
London Stock Exchange. One CDI represents an underlying beneficial interest in one ordinary share
of Brambles Limited.
Comparable operating profit (CoP)
Comparable operating profit is profit before special items, finance costs and tax, which the Directors
consider to be a useful measure of underlying business performance.
Constant currency
Constant currency relative performance is calculated by translating both current period and comparable
period results into US dollars at the actual monthly exchange rates applicable during the comparable period.
Its purpose is to show relative performance between periods before the translation impact of currency
fluctuations.
Continuing operations
Continuing operations refers to CHEP, Recall and Brambles HQ.
CrEST
CSr
The UK’s electronic registration and settlement system for equity security trading.
Corporate Social Responsibility.
discontinued operations
Operations which have been divested or which are held for sale.
Brambles Limited 2008 Annual Report 155
Glossary
(continued)
dLC
dmS
dPS
EPS
Dual-listed companies structure – a contractual arrangement between Brambles Industries Limited and
Brambles Industries plc under which they operated as if they were a single economic enterprise, whilst
retaining their separate legal identities, tax residencies and stock exchange listings. The Brambles Group
operated as a DLC from August 2001 to December 2006.
Document Management Solutions, a Recall service line.
Data Protection Services, a Recall service line.
Earnings per share.
Exceptional items
See Special items.
FmCg
Fast Moving Consumer Goods.
Free cash flow (FCF)
Cash flow generated by the business after net capital expenditure, finance costs and tax but excluding the
net cost of acquisitions and proceeds from business disposals.
gHg
fx
kPi(s)
Lean
LSE
LTi
LTiFr
LTiSr
Greenhouse Gas.
Foreign Exchange.
Key Performance Indicator(s).
Lean, or Lean thinking, is derived from the Toyota Production System and assists in the identification and
steady elimination of waste, the improvement of quality, production time and cost reduction.
London Stock Exchange.
Long Term Incentive.
Lost Time Injury Frequency Rate.
Lost Time Injury Severity Rate.
oHS&E
Occupational Health Safety and Environment.
organic growth
Growth from existing customers or from new customers acquired other than through a business acquisition.
PAT
rFid
roCi
rPC
SdS
Six Sigma
Special items
STi
TFr
TSr
uk gAAP
unification
vesting
Profit After Tax.
Radio Frequency Identification.
Return on Capital Invested (ROCI) is calculated as Comparable Operating Profit (COP) divided by Average
Capital Invested (ACI).
Reusable plastic container (relates to CHEP).
Secure Destruction Services, a Recall service line.
A methodology that uses facts, data and statistical analysis to improve business processes, grow sales,
reduce costs and improve quality and customer satisfaction.
Special items comprise impairments, exceptional items, fair value adjustments and amortisation of acquired
non-goodwill intangible assets (other than software). Exceptional items are items of income or expense
which are considered to be outside the ordinary course of business and are, either individually or in
aggregate, material to Brambles or to the relevant business segment.
Short Term Incentive.
Total Fixed Remuneration.
Total Shareholder Return.
Generally accepted accounting principles in the UK.
The unification of the dual-listed companies structure which operated between Brambles Industries Limited
and Brambles Industries plc under a new single Australian holding company, Brambles Limited.
When rights under share plan awards may first be exercised.
156 Brambles Limited 2008 Annual Report
Brambles Limited
ABN 89 118 896 021
10 Financial Performance
12 Chairman’s Review
14 Chief Executive Officer’s Report
16 Executive Leadership Team
18 CHEP
22 Recall
24 Board of Directors
28 Sustainability Report
40 Financial Review
44 Corporate Governance Report
54 Directors’ Report – Remuneration Report
78 Directors’ Report – Other Information
82 Shareholder Information
85 Financial Report – Financial Statements
150 Financial Report – Directors’ Declaration
151 Financial Report – Independent Auditors’ Report
153 Auditors’ Independence Declaration
154 Five Year Financial Performance Summary
155 Glossary
Inside back cover Directory, Annual General Meeting
and Dividend details
Our customers and their markets are in 45 countries ...
DIRECTORY
Brambles Limited
Level 40
Gateway
1 Macquarie Place
Sydney NSW 2000
Australia
Telephone: 61 (0) 2 9256 5222
Facsimile: 61 (0) 2 9256 5299
Website: www.brambles.com
Brambles Limited has a primary listing on
the Australian Securities Exchange and
a secondary listing on the London Stock
Exchange. The global headquarters of
Brambles is in Sydney, Australia.
All currency amounts in this report are in
US dollars unless otherwise specified.
Annual General Meeting
The 2008 Annual General Meeting of
Brambles Limited will be held on Tuesday,
25 November at 10.00am (AEDT) at:
Level 3
Overseas Passenger Terminal
Circular Quay West Street, The Rocks
Sydney NSW 2000
A live webcast of the meeting will be
broadcast on www.brambles.com.
Dividend
The final dividend of 17.5 Australian cents
per share is 10% franked for all shareholders
in Brambles Limited and will be paid on
9 October 2008.
Brambles Business Units
CHEP Americas
8517 South Park Circle
Orlando FL 32819-9040
United States of America
CDI holders will receive their dividend
payments as soon as possible after ordinary
shareholders, once fx transactions have been
completed.
Telephone: 1 407 370 2437
Facsimile: 1 407 355 6211
Email:
Website: www.chep.com
chep@brambles.com
CDIs holders who are also CREST
participants can expect to receive their
dividend payments via CREST electronic
Unmatched Stock Event (USE) messages,
once the cash has been received and
reconciled by Euroclear UK and Ireland,
taking note of their election (if any) of a
default payment currency option as detailed
in the Euroclear UK and Ireland international
service description.
For CDI holders who use the Equiniti
corporate nominee service, additional
processing time is required to print and mail
cheques, or, for holders who have completed
dividend mandate forms, to set up cash
transfers into their bank accounts. All CDI
holders who use the Equiniti corporate
nominee service will receive their dividends
in pounds sterling.
CHEP EMEA
1 Lamb Walk
London
SE1 3TT
United Kingdom
Telephone: 44 (0) 207 940 0080
Facsimile: 44 (0) 207 940 7876
CHEP Asia-Pacific
Level 6, Building C
11 Talavera Road,
North Ryde
NSW 2113
Australia
Telephone: 61 (0) 2 9856 2437
Facsimile: 61 (0) 2 9856 2404
Recall
One Recall Center
180 Technology Parkway
Norcross GA 30092
United States of America
Telephone: 1 770 776 1000
Facsimile: 1 770 776 1001
Email:
Website: www.recall.com
recall@brambles.com
CHEP
Recall
CHEP and Recall
Cover: Brian Soulsby, National ECR
and Supply Chain Manager of Colgate-
Palmolive and Matthew Jager, Team
Leader – Sales, CHEP Asia-Pacific.
Page 1: Andrew Letfallah, Recall
Sales Manager – Retail, has been
with Brambles for over seven years
and manages a sales team of 13.
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Brambles is committed to achieving Zero Harm, which
means zero injuries and zero environmental damage,
and has used a PEFC, Chain of Custody accredited
printer to produce this Annual Report.
The text pages of this Annual Report are printed on
PEFC Certified paper, which is an elemental chlorine
free pulp derived from sustainable forests. The paper
was manufactured at Australian Papers’ Wesley Vale
Mill under ISO 14001, an international environmental
standard.
BramBles limited 2008 AnnuAl RepoRt
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Customers, Markets, people
www.brambles.com