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WWW.BRAMBLES.COM
ANNUAL REPORT 2010
WE’RE
BUILDING A
STRONGER
FOUNDATION
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.
BRAM021 Annual Report Cover v7a FA.indd 1
10/9/10 6:39:03 PM
INVESTOR
INFORMATION
BRAMBLES LIMITED
Level 40, Gateway
1 Macquarie Place
Sydney NSW 2000
Australia
Telephone: 61 (0) 9256 5222
Facsimile: 61 (0) 9256 5299
Website: www.brambles.com
Brambles Limited has a primary listing on the
Australian Securities 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 AGM will be held at 2.00pm (AEDT)
on Thursday, 18 November 2010 at:
The Wesley Theatre
Wesley Conference Centre
220 Pitt Street
Sydney NSW 2000
A live webcast of the meeting will be
broadcast on www.brambles.com
DIVIDEND
The Directors have declared a final dividend
of 12.5 Australian cents per share, which will
be 20% franked. The dividend will be paid on
Thursday, 14 October 2010.
Shareholders may elect to receive dividend
payments in Australian dollars or Pounds
sterling, by contacting Brambles’ share
registry, Link Market Services Limited.
The relevant contact details are set out
in Shareholder Information on page 50.
BRAMBLES BUSINESS UNITS
CHEP Americas
8517 South Park Circle
Orlando FL 32819-9040
United States of America
Telephone: 1 407 370 2437
Facsimile: 1 407 363 5354
Email: chep_americas@chep.com
Website: www.chep.com
CHEP EMEA
Weybridge Business Park
Addlestone Road, Addlestone
Surrey KT15 2UP
United Kingdom
Telephone: 44 (0) 1932 850 085
Facsimile: 44 (0) 1932 850 144
Email: info.emea@chep.com
Website: www.chep.com
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
Email: ap.marketing@chep.com
Website: www.chep.com
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: recall.communications@recall.com
Website: www.recall.com
WE’RE
BUILDING A
STRONGER
FOUNDATION
CONTENTS
001 _ Letter from the Chairman and the CEO
002 _ Performance summary
004 _ Operational and financial review
012 _ Treasury and risk review
014 _ Board of Directors
016 _ Executive leadership team
018 _ Corporate governance statement
031 _ Directors’ report – remuneration report
045 _ Directors’ report – other information
050 _ Shareholder information
053 _ Financial report – financial statements
114 _ Financial report – Directors’ declaration
115 _ Financial report – independent auditors’ report
117 _ Auditors’ independence declaration
118 _ Five year financial performance summary
119 _ Glossary
IBC _ Investor information
Brambles Limited
ABN 89 118 896 021
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I
LETTER FROM THE
CHAIRMAN AND THE CEO
rambles’ performance for the 2010
financial year highlighted the Group’s
resilience in challenging conditions.
Sales revenue was up 3% over the 2009
financial year, while free cash flow after
dividends increased strongly. Our operating
profit was up 1% and we continue to generate
a strong return on capital.
It has been a year of leadership transition for Brambles. In October
2009, the Board appointed Tom Gorman as CEO after the retirement of
Mike Ihlein. The Company has reorganised its leadership team to drive
development of profitable growth opportunities and shareholder
returns in the years to come. Our two primary businesses, CHEP and
Recall, provide a solid foundation on which we can build as they have
strong customer bases, market positions, competitive strengths and
growth prospects.
Brambles’ financial position is robust. We strengthened our funding
position during the year by completing a US$750 million issue into
the US 144A bond market and we have US$1.9 billion in committed
undrawn credit facilities.
Brambles’ net new business wins for the 2010 financial year were
US$53 million as we continued to expand our existing businesses and
enter into new sectors and geographies. CHEP’s expansion in regions
such as China, India, Central and Eastern Europe and Latin America
was a highlight, as was the consistent growth in the Document
Management Solutions service line that underpinned Recall’s strong
sales revenue increase.
In October 2009, we announced the Better Everyday program in CHEP
USA. This program is now well underway. The program represents a
significant upgrade in quality and service in the CHEP USA business.
It is generating positive feedback from customers and net new
business wins since it began. The program deals with three key areas
for CHEP USA: building on our previous initiatives to improve pallet
quality; making it easier for customers to do business with us; and
realigning our sales and marketing organisation.
DIVIDEND
The Board has declared a final dividend of 12.5 Australian cents per
share, 20% franked and payable on 14 October 2010 to shareholders
on the Company’s register on 22 September 2010. This took the total
dividend for the 2010 financial year to 25 Australian cents per share,
compared with 30 Australian cents per share for the 2009 financial
year, when there was a higher interim dividend prior to the onset of
the global economic downturn. The Board has retained the Dividend
Reinvestment Plan for the 2010 final dividend.
BOARD AND CORPORATE GOVERNANCE
In November 2009, John Mullen joined the Board as a Non-executive
Director. John brings significant international logistics and business
experience from 15 years at DHL Express, including five years as CEO.
Our thanks go to David Gosnell, who retired from the Board in March
2010 after four years as a Non-executive Director to concentrate on
his executive role at UK-based premium drinks company Diageo plc.
The Board reviews best practice in corporate governance on an ongoing
basis. Please refer to the Corporate Governance Statement on pages
18 to 30 for more details. In line with its commitment to sustainable
business practices, Brambles will publish its 2010 Sustainability
Report on its website before the 2010 Annual General Meeting.
SAFETY
Brambles’ safety performance continued to improve during the 2010
financial year. The 12-month rolling Brambles Injury Frequency Rate
(a combined measure of lost-time injuries, modified duties and medical
treatments) was 21.9 per million man hours at 30 June 2010. This was
an improvement of 5% from 30 June 2009. There were no fatalities in
the period. The Group remains committed to its goal of Zero Harm and
has developed a new three-year strategy focused on further improving
our overall safety performance.
OUTLOOK
We have considerable opportunities to grow our business and
anticipate an increase in both sales revenue and profit as economic
growth returns in our key markets.
GRAHAM KRAEHE AO
Chairman
TOM GORMAN
Chief Executive Officer
BRAMBLES LIMITED ANNUAL REPORT 2010
1
PERFORMANCE
SUMMARY
Resilient sales revenue performance
across all regions amid ongoing
challenging economic conditions.
Strong cash flow reflects disciplined
capital controls and the underlying strength
of our CHEP and Recall businesses.
Robust balance sheet position and
responsible financial management.
SALES REVENUE BY BUSINESS UNIT
9%
18%
Net new business wins1 of US$53 million,
reflecting strong performance of
established and emerging businesses.
36%
Recall US$740
CHEP Americas US$1,534M
CHEP EMEA US$1,483M
CHEP Asia-Pacific US$391M
37%
Better Everyday program launched in
CHEP USA, delivering improved service
and quality standards.
CHEP Asia-Pacific US$391M
CHEP Americas US$1,534M
Recall US$740M
CHEP EMEA US$1,483M
Continuing operations
Sales revenue
Operating profit
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Earnings per share (EPS) (US cents)
Basic EPS from continuing operations
Basic EPS
Cash flow and balance sheet
Cash flow from operations
Free cash flow after dividends
Net debt
Net debt/EBITDA (times)
EBITDA/net finance costs (times)
Gearing (net debt/(net debt plus equity))
Brambles Value Added (at fixed exchange rates)
Total dividend (Australian cents per share)
2010
US$M
2009
US$M
% CHANGE
(ACTUAL
EXCHANGE
RATES)
% CHANGE
(CONSTANT
CURRENCY 2)
3%
1%
2%
(1)%
1%
(2)%
–
(3)%
(1)%
(5)%
(3)%
(6)%
4,146.8
4,018.6
724.5
443.9
4.9
448.8
31.5
31.8
882.3
344.1
1,759.3
1.5
10.7
51.9%
215.4
25.0
718.2
434.0
18.6
452.6
31.3
32.6
722.4
141.9
2,143.4
1.8
10.0
60.0%
297.4
30.0
1 Brambles defines net new business wins as the change in sales revenue in the period resulting from business won or lost in that period and the previous 12 months.
Net new business is calculated on a constant currency basis.
2 Brambles calculates constant currency by translating results into US dollars at the exchange rates applicable during the prior corresponding period.
2
BRAMBLES LIMITED ANNUAL REPORT 2010
25.0C
TOTAL DIVIDEND
(AUSTRALIAN CENTS)
$4,146.8M
SALES REVENUE
(US$)
$882.3M
CASH FLOW FROM OPERATIONS
(US$)
$724.5M
OPERATING PROFIT
(US$)
31.8C
EARNINGS PER SHARE
(US CENTS)
17%
RETURN ON CAPITAL INVESTED
SALES REVENUE 4
(US$ MILLION)
Recall
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
4,359
3,869
4,019
17%
4,147
17%
18%
3,522
16%
38%
17%
37%
36%
37%
39%
OPERATING PROFIT 3, 4
(US$ MILLION)
Recall
CHEP Americas
CHEP EMEA
777
CHEP Asia-Pacific
38%
38%
36%
38%
36%
8%
8%
9%
8%
9%
Recall
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
1,067
12%
932
9%
42%
669
45%
37%
36%
10%
9%
9%
42%
39%
10%
761
14%
34%
43%
9%
16%
31%
43%
10%
Recall
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
CASH FLOW FROM OPERATIONS 3, 4
BASIC EARNINGS PER SHARE 4
(US$ MILLION)
Recall
CHEP Americas
752
CHEP EMEA
CHEP Asia-Pacific
11%
40%
41%
8%
867
847
10%
37%
42%
15%
756
43%
14%
35%
35%
49%
913
14%
31%
(US CENTS)
45.9
28.0
21.5
31.3
31.5
45%
Recall
CHEP Americas
CHEP EMEA
11%
7%
2%
10%
CHEP Asia-Pacific
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
3 Excludes unallocated Brambles Headquarters costs.
4 Continuing operations.
BRAMBLES LIMITED ANNUAL REPORT 2010
3
NEW BUSINESS WINS
Brambles’ net new business wins in the 2010 financial year were
US$53 million, reflecting a solid win rate in CHEP EMEA and CHEP
Asia-Pacific and a strong contribution from Recall. The annualised
value of net new business won during the period was positive in all
business units, totalling US$75 million. Since the introduction of the
Better Everyday program in October 2009, the annualised value of net
new business wins for CHEP USA has been US$18 million.
DIVIDEND
The Board declared a final dividend of 12.5 Australian cents per share,
20% franked and payable on 14 October 2010 to shareholders on the
Company’s register on 22 September 2010. Including the interim
dividend of 12.5 Australian cents per share, total dividends declared
in the 2010 financial year were 25.0 Australian cents per share
(2009: 30.0 Australian cents per share).
The Board kept the Dividend Reinvestment Plan (DRP) active during
2010. The Board has set the price at which Brambles allots shares
under the DRP as the arithmetic average of the daily volume-weighted
average sale price of all Brambles shares traded on the Australian
Securities Exchange in the ordinary course of trading during a
nominated 10 trading days, less a discount of 2.5%.
OPERATIONAL AND
FINANCIAL REVIEW
GROUP OVERVIEW
Brambles reported sales revenue of US$4,146.8 million for the
financial year ended 30 June 2010, up 3% on the prior corresponding
period. Operating profit before finance costs and tax was
US$724.5 million, up 1%. Profit after tax from continuing operations
was US$443.9 million, up 2%.
Cash flow was strong, reflecting tight financial controls and a
reduction in capital expenditure. Cash flow from continuing operations
increased US$159.9 million to US$882.3 million. Free cash flow after
dividends increased US$202.2 million to US$344.1 million.
The result, in particular the strong cash flow performance and robust
balance sheet, highlighted Brambles’ stability and resilience during a
period of continued challenging economic conditions. The Group is
focused on driving the next phase of growth.
Growth in sales revenue in the 2010 financial year of 3% was driven by
CHEP Europe, Middle East and Africa (EMEA), CHEP Asia-Pacific and
Recall, which offset the impact on the Group’s financial results of a
decline in sales revenue in CHEP Americas. Brambles delivered a 6%
increase in second-half sales revenue compared with the same period
in the 2009 financial year as established and developing regions
generated new business, balancing subdued underlying conditions
in some regions.
Developing CHEP regions including China, India, Central and Eastern
Europe and the Middle East delivered particularly strong growth rates.
Investment in these CHEP regions is ongoing, along with other growth
initiatives throughout the Group.
The Better Everyday program has delivered a higher pallet quality
standard to CHEP USA customers. This initiative, which began in
October 2009, has positioned CHEP USA for future profitable growth
and enabled it to regain positive sales momentum.
Recall delivered strong profit growth and an improvement in return
on capital. Recall benefited from new sales conversion, cost efficiency
programs undertaken in the previous financial year and ongoing strong
demand in its Document Management Solutions service line.
Earnings per share of 31.8 US cents was down 2%. This was lower
than the increase in profit from continuing operations due to the
inclusion of higher profits from discontinued operations in the 2009
financial year.
4
BRAMBLES LIMITED ANNUAL REPORT 2010
SALES AND PROFIT SUMMARY
Sales revenue
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
Recall
Total sales revenue
Operating profit
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
Recall
Brambles HQ
Operating profit
Net finance costs
Profit before tax
Tax expense
Profit from continuing operations
Profit from discontinued operations
Profit for the year
2010
US$M
2009
US$M
% CHANGE
(ACTUAL
EXCHANGE
RATES)
% CHANGE
(CONSTANT
CURRENCY)
1,533.6
1,482.6
390.9
3,407.1
739.7
4,146.8
235.2
324.9
77.8
637.9
123.1
(36.5)
724.5
(109.6)
614.9
(171.0)
443.9
4.9
448.8
1,556.9
1,452.6
323.4
3,332.9
685.7
4,018.6
229.0
286.5
57.9
573.4
95.9
48.9
718.2
(120.9)
597.3
(163.3)
434.0
18.6
452.6
(1)%
2%
21%
2%
8%
3%
3%
13%
34%
11%
28%
1%
9%
3%
(5)%
2%
(1)%
(3)%
1%
3%
(1)%
2%
–
(1)%
11%
9%
6%
19%
(3)%
11%
(2)%
3%
(1)%
(5)%
(6)%
(6)%
Weighted average number of shares (millions)
1,411.3
1,388.3
Basic EPS1 (US cents)
Basic EPS1 (Australian cents)
31.8
36.1
32.6
43.7
(2)%
(17)%
1 Earnings per share includes discontinued operations.
BRAMBLES LIMITED ANNUAL REPORT 2010
5
OPERATIONAL AND
FINANCIAL REVIEW
CONTINUED
Underlying profit2
Underlying profit
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
Recall
Brambles HQ
Underlying profit
Net finance costs
Underlying profit before tax
Tax expense
Underlying profit after finance costs and tax
Underlying EPS (US cents)
ROCI
Brambles Value Added (BVA) at fixed exchange rates
Reconciliation of Underlying profit to operating profit
US$M
Underlying profit
Significant items:
CHEP USA – pallet quality program
CHEP USA – Walmart net transition impact
Restructuring:
Facilities and operations rationalisation
CHEP USA accelerated scrapping of 7 million surplus pallets
FX gain on capital repatriation from foreign subsidiary
Other
Total Significant items
Operating profit
2010
US$M
2009
US$M
% CHANGE
(ACTUAL
EXCHANGE
RATES)
% CHANGE
(CONSTANT
CURRENCY)
237.1
329.5
78.4
645.0
124.6
(36.2)
733.4
(109.6)
623.8
(173.6)
450.2
31.9
17%
215.4
434.4
327.5
61.1
823.0
104.3
(26.7)
900.6
(120.9)
779.7
(245.4)
534.3
38.5
21%
297.4
(45)%
1%
28%
(22)%
19%
(36)%
(19)%
9%
(20)%
29%
(16)%
(17)%
(47)%
(1)%
5%
(25)%
11%
(9)%
(22)%
11%
(24)%
34%
(19)%
(20)%
2010
2009
BEFORE TAX
AFTER TAX
BEFORE TAX
AFTER TAX
733.4
450.2
900.6
534.3
–
–
(11.4)
2.5
–
–
(8.9)
724.5
–
–
(7.8)
1.5
–
–
(6.3)
443.9
(77.4)
(29.0)
(54.3)
(99.0)
77.3
–
(182.4)
718.2
(47.1)
(17.7)
(46.0)
(60.3)
77.3
(6.5)
(100.3)
434.0
Significant items
In response to the challenging economic environment in 2009, Brambles implemented a number of initiatives to improve its cost structure,
underpin future operating performance and meet customer requirements. The costs incurred in 2010 represent the conclusion of these initiatives.
2 The difference in growth rates between operating profit and Underlying profit reflects the impact of Significant items recognised outside of Underlying profit
(US$8.9 million in the 2010 financial year; US$182.4 million in the 2009 financial year).
6
BRAMBLES LIMITED ANNUAL REPORT 2010
BUSINESS UNIT OPERATIONS REVIEW
CHEP AMERICAS
2010
US$M
2009
US$M
% CHANGE
(ACTUAL
EXCHANGE
RATES)
% CHANGE
(CONSTANT
CURRENCY)
1,533.6
1,556.9
(1)%
(3)%
(1)%
0pp
3%
0pp
Sales revenue
Operating profit
Operating profit margin
Significant items:
Pallet quality program
Walmart net transition impact
Restructuring – facilities and
operations
Accelerated pallet scrapping
Underlying profit
Underlying profit margin
229.0
15%
77.4
29.0
–
99.0
205.4
434.4
235.2
15%
–
–
4.4
(2.5)
1.9
237.1
15%
(45)%
(47)%
28%
(13)pp
(13)pp
Cash flow from operations
285.7
267.0
ROCI
14%
26%
SALES
CHEP Americas’ sales revenue was US$1,533.6 million, down 1% on
the prior corresponding period as continued growth in CHEP Canada,
CHEP Latin America and LeanLogistics partially offset a decline in
sales revenue in CHEP USA.
CHEP USA’s sales revenue was down 5%, reflecting a reduction in
pricing and mix (2%) and pallet issue volumes (3%). The lower pallet
issue volumes comprised a decline in organic issue volumes (2%) and
the impact of lost business (1%).
CHEP Canada’s sales revenue was up 12% as issue volumes rose.
CHEP Latin America’s sales revenue was up 7% on volume growth
throughout the region. LeanLogistics delivered a 9% increase in sales
revenue as it continued to expand.
CHEP Americas’ net new business in the year was negative
US$9 million. However, the annualised value of business won in the
2010 financial year was positive at US$2 million. CHEP USA won
new or expanded business during the year with more than 1,000
customers as it extended its reach with small and medium-sized
customers. CHEP USA won business during the year with major brands
including consumer lawn and gardening products company Scott’s
Miracle-Gro and fresh fruit and vegetable producer Del Monte. The
annualised value of net new business in CHEP USA since the
introduction of the Better Everyday program in October 2009 has
been US$18 million.
PROFIT
CHEP Americas’ operating profit was US$235.2 million, up 3% from the
2009 financial year. Underlying profit was US$237.1 million, down 45%
on the prior corresponding period. The difference between operating
profit and Underlying profit primarily reflects the impact of the
US$205.4 million of Significant items that CHEP Americas recognised
in the 2009 financial year from CHEP USA quality investments,
Walmart transition costs and accelerated pallet scrapping. In the 2010
financial year, CHEP Americas recognised quality investments within
Underlying profit, rather than as Significant items. Quality investments
in CHEP USA in 2010 totalled US$108.5 million, comprising
US$37.0 million of investment under the USA pallet quality program
and US$71.5 million of investment under the Better Everyday program,
US$8.5 million below the October 2009 estimate.
Direct costs rose in the 2010 financial year, primarily as a result
of a US$19.3 million increase in costs from storing, handling and
transporting idle pallets in CHEP USA. The average number of idle
pallets for the year was approximately 4 million. There were also costs
associated with converting customers from new to repaired pallets.
Costs associated with the irrecoverable pooling equipment provision
(IPEP) were higher than trend in the first half of the 2010 financial
year, reflecting the outcomes of audits completed in the period.
These costs returned to trend in the second half.
CHEP USA has completed the accelerated scrapping of 7 million excess
pallets that Brambles announced in February 2009. This was 12 months
ahead of schedule and US$2.5 million below management’s original
estimate.
CASH FLOW AND RETURN ON CAPITAL
CHEP Americas increased its cash flow from operations by
US$18.7 million over the prior corresponding period to US$285.7 million.
This reflected favourable working capital movements and lower capital
expenditure, more than offsetting the lower Underlying profit.
CHEP USA further reduced its commitment to buying new pallets
during the period. The higher quality of the repaired pool enabled more
customers that had previously required new pallets to transfer their
volumes to repaired pallets. CHEP USA also reduced the proportion of
imported customer volumes that used new pallets.
Return on capital invested was 12 percentage points lower at 14%,
reflecting the reduction in Underlying profit.
QUALITY INITIATIVES
The Better Everyday program to improve quality and service within
CHEP USA is driving an improved performance, reflected in the positive
win rate since the program began and an ongoing reduction in customer
pallet rejections. CHEP USA is now delivering 100% of all issues at
the US Plus repair specification or higher, although demand for the
higher US Premium repair specification remains lower than originally
anticipated. As a result, Brambles expects ongoing costs of the Better
Everyday program from the 2013 financial year to be US$25 million
per annum.
BRAMBLES LIMITED ANNUAL REPORT 2010
7
OPERATIONAL AND
FINANCIAL REVIEW
CONTINUED
CHEP EMEA
CHEP ASIA-PACIFIC
2010
US$M
2009
US$M
% CHANGE
(ACTUAL
EXCHANGE
RATES)
% CHANGE
(CONSTANT
CURRENCY)
1,482.6
1,452.6
324.9
22%
286.5
20%
2%
13%
2pp
1%
11%
2pp
Sales revenue
Operating profit
Operating profit margin
Significant items:
Restructuring – facilities
and operations
4.6
329.5
22%
41.0
327.5
23%
1%
(1)pp
(1)%
(1)pp
Underlying profit
Underlying profit margin
Cash flow from operations
411.7
372.7
Cash flow from operations
ROCI
23%
23%
ROCI
Sales revenue
Operating profit
Operating profit margin
Significant items:
Restructuring – facilities
and operations
Underlying profit
Underlying profit margin
2010
US$M
2009
US$M
% CHANGE
(ACTUAL
EXCHANGE
RATES)
% CHANGE
(CONSTANT
CURRENCY)
21%
34%
2pp
28%
1pp
3%
9%
1pp
5%
0pp
390.9
323.4
77.8
20%
0.6
78.4
20%
94.1
21%
57.9
18%
3.2
61.1
19%
9.8
19%
SALES
CHEP EMEA’s sales revenue was up 2% compared with the prior
corresponding period at US$1,482.6 million. CHEP Europe’s sales
revenue was in line with the prior corresponding period as net new
business wins offset a decline in pallet sales revenue in the UK and
Spain and a slow rate of recovery in the automotive sector.
CHEP Central and Eastern Europe delivered a 24% increase in sales
revenue as a result of ongoing business expansion. CHEP Middle East
and Africa increased sales revenue by 28% as volumes continued to
grow strongly.
CHEP EMEA’s net new business wins were US$30 million. In June
2010, CHEP announced its first major pallet supply contract in Turkey,
with Unilever. CHEP has also reached agreement on commercial terms
to supply Procter & Gamble in Turkey. During the 2010 financial year,
pallet business expansion included British Sugar in the UK, as well as
paper product manufacturer Sofidel and oils distributor Bunge in
Poland. The annualised value of net business CHEP EMEA won during
the period was US$39 million.
PROFIT
CHEP EMEA’s operating profit was US$324.9 million, up 13%, reflecting
the cost impact of facilities and operations rationalisation in the 2009
financial year. Underlying profit was up 1% to US$329.5 million. Cost
efficiencies largely offset increased investment in the quality of the
European pallet pool. Costs associated with the IPEP returned to trend
in the second half, having been higher than normal in the first half.
CASH FLOW AND RETURN ON CAPITAL
CHEP EMEA’s cash flow from operations was US$411.7 million, up
US$39.0 million from the prior corresponding period, reflecting lower
capital expenditure and strong working capital controls. Return on
capital invested was in line with the 2009 financial year at 23%.
SALES
CHEP Asia-Pacific’s sales revenue was US$390.9 million, up 21% on
the prior corresponding period, reflecting the strength of the Australian
dollar and strong sales growth in China. Sales revenue from China was
US$5.8 million higher on increased sales volumes to both the fast-moving
consumer goods and automotive sectors. In CHEP Australia, there was
continued expansion of the reusable plastic containers and display
pallet businesses. Sales revenue from both the pallets and automotive
container businesses increased in CHEP India and CHEP South East Asia.
CHEP Asia-Pacific’s net new business wins for the period were
US$15 million, reflecting ongoing wins throughout the region. The
annualised value of net business CHEP Asia-Pacific won during the
period was US$11 million. Customers with which CHEP Australia
secured new or extended business in the period included Primo Small
Goods and drinks manufacturer Fryers.
PROFIT
CHEP Asia-Pacific’s operating profit was US$77.8 million, up 34%
compared with the prior corresponding period, reflecting higher sales
revenue and the cost of Significant items from facilities and operations
rationalisation in the 2009 financial year. The benefit of this
rationalisation in cost efficiencies and reduced overheads in the 2010
financial year largely offset higher depreciation costs in Australia and
China resulting from capital investment in recent growth initiatives.
Underlying profit was US$78.4 million, up 28%.
CASH FLOW AND RETURN ON CAPITAL
CHEP Asia-Pacific’s cash flow from operations was US$94.1 million,
up US$84.3 million compared with the prior corresponding period.
This reflected the increase in profit and lower capital expenditure
given the rollout of reusable plastic containers contracts in the 2009
financial year. Return on capital invested increased 2 percentage
points to 21%, reflecting the increased profit.
8
BRAMBLES LIMITED ANNUAL REPORT 2010
RECALL
ADDITIONAL FINANCIAL INFORMATION
2010
US$M
2009
US$M
% CHANGE
(ACTUAL
EXCHANGE
RATES)
% CHANGE
(CONSTANT
CURRENCY)
Capital expenditure on property, plant and equipment
(accruals basis)
US$M
2010
2009
CHANGE
Sales revenue
Operating profit
Operating profit margin
Significant items:
Restructuring – facilities
and operations
Underlying profit
Underlying profit margin
739.7
123.1
17%
1.5
124.6
17%
685.7
95.9
14%
8.4
104.3
15%
8%
28%
3pp
2%
19%
2pp
19%
2pp
11%
2pp
Cash flow from operations
121.7
106.9
ROCI
13%
12%
SALES
Recall’s sales revenue was US$739.7 million, up 8% compared with
the prior corresponding period. Carton volume growth was 6% in
the Document Management Solutions (DMS) service line. This was
partially offset by a decline in volumes in the Secure Destruction
Services (SDS) service line. Sales revenue excluding SDS was up
10%. At 30 June 2010, world paper prices had returned to pre-Global
Financial Crisis levels, which improved SDS recycled paper revenues
in the second half of the 2010 financial year.
Recall’s net new business for the period was US$17 million, reflecting
strong sales momentum, particularly in the DMS service line. The
annualised value of Recall’s net business won in the 2010 financial
year was US$23 million.
PROFIT
Recall’s operating profit was US$123.1 million, up 28% compared with
the prior corresponding period, reflecting the higher sales revenue, the
cost of facilities and operations rationalisation in the 2009 financial
year and the benefits of this rationalisation in the 2010 financial year.
Investments in information technology and marketing were higher
in the 2010 financial year. Underlying profit was US$124.6 million,
up 19%.
CASH FLOW AND RETURN ON CAPITAL
Recall’s cash flow from operations was US$121.7 million, up
US$14.8 million compared with the prior corresponding period,
reflecting the increased profit. Return on capital invested increased
1 percentage point to 13%.
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
Recall
Brambles HQ
204.5
173.2
67.0
444.7
53.8
0.3
290.8
234.4
92.7
617.9
52.4
2.1
86.3
61.2
25.7
173.2
(1.4)
1.8
Total capital expenditure
498.8
672.4
173.6
Capital expenditure was US$498.8 million, down US$173.6 million
compared with the prior corresponding period. This predominantly
reflected a reduction in pallet purchase requirements in CHEP USA
and CHEP Europe, and the investment in the prior corresponding period
in the Australian reusable plastic container business.
Total pallet capital expenditure was US$349.7 million, compared
with US$462.1 million in the prior corresponding period. Other capital
expenditure related primarily to supporting growth in Recall and
CHEP’s expansion into developing regions.
Cash flow
US$M
2010
2009
CHANGE
Underlying profit
733.4
900.6
(167.2)
Significant items within ordinary
activities
–
(106.4)
Depreciation and amortisation
444.0
418.4
EBITDA
Capital expenditure
Proceeds from disposals
Working capital movement
Irrecoverable pooling equipment
provision
Provisions/other
Cash flow from operations
Significant items outside ordinary
activities
Cash flow from operations
(incl. Significant items)
Financing costs and tax
Free cash flow
Dividends paid
1,177.4
1,212.6
(496.5)
(683.8)
88.0
14.7
111.2
(12.5)
882.3
104.6
25.8
97.8
(34.6)
722.4
830.2
672.5
(281.6)
(253.0)
548.6
419.5
(204.5)
(277.6)
Free cash flow after dividends
344.1
141.9
(52.1)
(49.9)
(2.2)
106.4
25.6
(35.2)
187.3
(16.6)
(11.1)
13.4
22.1
159.9
157.7
(28.6)
129.1
73.1
202.2
Cash flow from operations increased US$159.9 million to
US$882.3 million as lower capital expenditure more than offset the
reduction in EBITDA. Free cash flow was up US$129.1 million to
US$548.6 million. This was more than sufficient to cover dividends
paid of US$204.5 million, leaving free cash flow after dividends of
US$344.1 million, up US$202.2 million.
BRAMBLES LIMITED ANNUAL REPORT 2010
9
OPERATIONAL AND
FINANCIAL REVIEW
CONTINUED
Lower proceeds from disposals reflected a reduction in compensations
from customers for irrecoverable equipment.
Brambles continues to manage working capital tightly. Average
debtors days fell to 45 days in the year from 46 days in the prior
corresponding period.
Significant items included spending on facilities and operations
rationalisation throughout Brambles and accelerated pallet scrapping
in CHEP USA.
Brambles Value Added (BVA)
In 2010, Brambles continued to focus on the use of BVA which forms
the core component of short term incentive arrangements for all senior
executives, including Executive Directors.
US$M AT FIXED JUNE 2009 FX RATES
2010
2009
CHANGE
Finance costs
Net finance costs were US$109.6 million, down from US$120.9 million
in the 2009 financial year. The reduction in net finance costs reflected
lower borrowings and lower benchmark interest rates, partially offset
by higher borrowing margins and fees on debt refinanced during the
2009 financial year.
Tax
Brambles’ effective tax rate applying to both operating profit and
Underlying profit for the 2010 financial year was 27.8%. This was
broadly in line with the 27.3% rate that applied to operating profit and
lower than the 31.5% rate that applied to Underlying profit in the 2009
financial year. The reduction in the effective tax rate on Underlying
profit was primarily a result of the net reversal of tax provisions
following the receipt of a tax ruling and the resolution of an open tax
issue, which allowed the Group to benefit prior year tax losses.
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
Recall
Brambles HQ
Total BVA
38.1
165.3
28.2
138.5
159.8
26.2
(100.4)
5.5
2.0
231.6
324.5
(92.9)
9.0
(25.2)
(6.4)
(20.7)
15.4
(4.5)
215.4
297.4
(82.0)
BVA for continuing operations was US$215.4 million in the 2010
financial year, a decrease of US$82.0 million on the 2009 financial year
at fixed June 2009 exchange rates. The reduction primarily reflected
the decline in profitability in CHEP Americas.
In CHEP Americas, BVA was US$38.1 million, down US$100.4 million,
because of a reduction in sales, increased costs associated with pallet
storage and quality initiatives and an increase in the irrecoverable
pooling equipment provision expense. Average Capital Invested
increased because of the impact of excess pallet holdings in CHEP
USA. This increase, combined with the lower profit resulted in ROCI
of 14% for CHEP Americas, down from 26% in the previous
corresponding period.
In CHEP EMEA, BVA grew US$5.5 million to US$165.3 million. This was
primarily due to a reduction in Average Capital Invested driven by a
reduction in pallet holdings and tight working capital management.
CHEP EMEA’s ROCI remained at 23%.
CHEP Asia-Pacific’s BVA increased US$2.0 million to US28.2 million,
driven by the growth in new business in Australia, China and India.
ROCI increased to 21%.
The largest increase in BVA was in Recall where BVA increased by
US$15.4 million to US$9.0 million as sales growth and the benefits
of restructuring drove an increase in Underlying profit. Recall’s
ROCI increased to 13%.
10
BRAMBLES LIMITED ANNUAL REPORT 2010
STRATEGY AND GROWTH
As it moves into the 2011 financial year, Brambles has increased its
emphasis on innovation and has a number of areas of strategic focus
to pursue profitable growth opportunities that are expected to deliver
strong returns for shareholders.
These areas of focus include:
–
–
–
further expansion in all regions into new products and platforms;
ongoing investment in CHEP in emerging regions;
utilising CHEP’s extensive network in the USA to increase
penetration with small to mid-sized customers;
expansion of CHEP’s automotive business into unpenetrated regions
and intercontinental flows;
expansion of LeanLogistics, including internationally; and
continued growth in Recall’s document management business
and digital capability.
–
–
–
Emerging regions have been an increasingly important contributor to
CHEP’s sales revenue over recent years. The business plans to continue
to increase its investment in these regions to participate in high-growth
economies worldwide.
CHEP USA is building upon recent initiatives that addressed some
issues with its products and services to existing customers and
entering a renewed growth phase. A key focus will be on small to
mid-sized customers, which are underserved today. CHEP’s network
scale and experience positions it strongly to address this opportunity.
CHEP will continue to explore opportunities to roll out variations to
its existing pallet offerings and non-pallet platforms in all its regions.
This opportunity is particularly clear in those regions in which CHEP
has historically been focused on one or two products only.
CHEP can also leverage the global position of its existing multi-
domestic businesses – particularly those in which inter-country or
inter-continental flows play a big part. The first step in this effort is
the establishment of a global automotive business to link the existing
domestic automotive businesses that CHEP has around the world.
Brambles is also expanding the global footprint of LeanLogistics,
the transport management business it acquired in 2008, and further
integrating LeanLogistics into the logistics functions across CHEP.
Recall has successfully accelerated its growth and improved its
performance over the past three years. Its compound annual sales
revenue growth rate is 6% over the past six years and all regions are
contributing to that growth. This is expected to continue into 2011.
In particular, organic volume growth in the Document Management
Solutions service line has been the underpinning driver for Recall in
recent years. This service line remains a significant opportunity for
Recall as it is under-penetrated.
Today, there is also a significant complementary opportunity for Recall
to work with clients to meet their digital needs – as there has been an
explosion in the volume of data that needs to be managed.
BRAMBLES LIMITED ANNUAL REPORT 2010
11
TREASURY AND
RISK REVIEW
CAPITAL STRUCTURE
Brambles manages its capital structure so as to maintain a solid
investment grade credit rating. At 30 June 2010, Brambles held
investment grade credit ratings of BBB+ from Standard & Poor’s
and Baa1 from Moody’s Investor Services.
Bank borrowing facilities are generally structured on a multi-currency,
revolving basis and currently have maturities ranging to December
2013. Borrowings under the facilities are floating-rate, unsecured
obligations with covenants and undertakings typical for these types
of arrangements.
In determining its 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. Initiatives available to Brambles to achieve
its desired capital structure include adjusting the amount of dividends
paid to shareholders, returning capital to shareholders, buying-back
share capital, issuing new shares, selling assets to reduce debt and
varying the maturity profile of borrowings.
Brambles has adopted a financial policy to target a net debt to EBITDA
ratio of less than 1.75x to 1. At 30 June 2010, the ratio was 1.5x to 1.
During the year ended 30 June 2010 (Year), Brambles continued to
operate a Dividend Reinvestment Plan. The participation rate for each
of the 2009 final dividend and the 2010 interim dividend was 37%,
which resulted in US$120 million of cash being retained within the
business in the Year.
TREASURY POLICIES
Brambles’ treasury function is responsible for the management of
certain financial risks within Brambles. Key treasury activities include
liquidity management, interest rate and foreign exchange risk
management, and securing access to short and long term sources of
debt finance at competitive rates. These activities are conducted on
a centralised basis in accordance with Board policies and guidelines,
through standard operating procedures and delegated authorities.
These policies provide the framework whereby Treasury arranges
and implements lines of credit from its financiers, selects and deals
in approved financial derivatives for hedging purposes and generally
executes Brambles’ financial strategy.
Brambles’ policies with respect to interest and exchange rate risk
and appropriate hedging instruments are described below and further
information is contained in Note 29 (pages 96 to 103) including a
sensitivity analysis (page 98 and page 100) with respect to these
financial instruments.
Standard financial derivatives are used by Brambles to manage financial
exposures in the normal course of business. No derivatives are used for
speculative purposes. Derivatives are transacted predominantly with
relationship banks which have a reasonable understanding of Brambles’
business operations. Individual credit limits are assigned to those
banks, thereby limiting exposure to credit-related losses in the event
of non-performance by a counterparty.
Treasury prepares formal reports each month, which are circulated to
the Chief Financial Officer and other senior finance executives. These
reports include key Treasury statistical and sensitivity analysis, funding
utilisation/capacity and commentary on other significant matters.
FUNDING AND LIQUIDITY
Brambles funded its operations during the Year through existing equity,
retained cash flow and borrowings. Funding is generally sourced from
relationship banks and debt capital market investors on a medium to
long term basis. Operating leases are also entered into for office and
operational locations and certain plant and equipment.
12
BRAMBLES LIMITED ANNUAL REPORT 2010
Net debt at 30 June 2010 was US$1,759.3 million, down
US$384.1 million from 30 June 2009, reflecting the significant cash
generated from the business and lower dividend payment. Net debt
has now reduced by US$666.9 million over the last two financial years
which provides added financial flexibility for the Group.
To further diversify funding sources and lengthen maturities, Brambles
raised US$750 million in the United States 144A bond market in March
2010. The note issue comprised US$500 million ten year notes and
US$250 million five year notes and the proceeds were used to repay
bank borrowings.
The average term to maturity of total credit facilities increased from
3.3 years at 30 June 2009 to 3.6 years at 30 June 2010.
Key financial ratios continue to reflect the strong balance sheet position
and remain well within the financial covenants included in Brambles’
major financing agreements, with net debt to EBITDA at 1.5x (2009:
1.8x) and EBITDA interest cover at 10.7x to 1 (2009: 10x to 1).
At 30 June 2010, the Group had committed credit facilities including
bonds and notes totalling US$3.8 billion. Undrawn borrowing capacity
totalled US$1.9 billion.
The maturity profile of the Group’s borrowing facilities and outstanding
bonds is shown in the table below.
MATURITY PROFILE OF BORROWING FACILITIES
AND OUTSTANDING BONDS
(US$ BILLIONS)
1.0
0.5
0
<1 yr
1–2 yrs
2–3 yrs
3–4 yrs
4–5 yrs
>5 yrs
Undrawn facilities
Bonds/notes
Bank debt
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 requires the level of fixed rate debt to be within
40% to 70% of total forecast debt arising over the immediate 12 month
period, decreasing to 20% to 60% for debt maturities of one to two
years, 10% to 50% for debt maturities of two to three years and 0% to
50% for debt maturities extending beyond three years.
As at 30 June 2010, 62% of Brambles’ weighted average interest
bearing debt over the next 12 months was at fixed interest rates
(2009: 41%). The weighted average maturity period was 4.9 years
(2009: 3.6 years). The fair value of all interest rate swap instruments
was US$1.8 million net gain (2009: US$18.1 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. Given the
nature of its operations, these exposures are not significant.
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
on foreign currency profits and net investment balances.
At the end of the Year, the fair value of foreign exchange instruments
was US$2.0 million net gain (2009: US$0.5 million net gain).
SIGNIFICANT RISKS AND UNCERTAINTIES
The significant risks and uncertainties facing Brambles are
described below. These are “net” risks, rated as the most significant
for the Group as a whole after taking into account current mitigating
actions. The strategies and processes applied for managing these risks
are described in section 7 of the Corporate Governance Statement on
pages 25 to 27.
–
Economic cycle – Brambles has operations spread across a diverse
range of countries and territories. It is subject to risks related to
global economic and business conditions. These may affect, among
other things, profitability, demand for Brambles’ services and
solvency of counterparties.
Business environment changes – Brambles has operations spread
across a diverse range of countries and territories. It is subject
to risks related to rapid and sustained changes in the business
environment, which may invalidate aspects of its current business
models. These changes could include fuel prices, lumber supply and
the structure of customers’ supply chains. These may affect, among
other things, profitability and demand for Brambles’ services.
Competition and retention of major customers – Brambles operates
in a competitive environment. Many of the markets in which
Brambles operates are served by numerous competitors and are
subject to the threat of new entrants. In addition, the concentration
of distributors in certain areas could lead to shifts in bargaining
position and intensity of competition. The above risks could have
an impact on market structure, penetration, revenue, profitability,
economies of scale and the value of existing assets.
–
–
–
–
–
–
–
–
–
–
–
Insufficient growth – Brambles is subject to the risk of not selecting
the optimal corporate strategy, business model, financial structure
or capital allocation, including the pace of expansion into emerging
markets. As these are central to the value of shareholders’
investment and protection of Brambles’ assets, Brambles may
be unable to capture the full value of its growth opportunities.
Obsolescence of pallet platform – New technologies in pallet design
or components could influence alternative supply chain solutions.
This would, over time, have an impact on revenue, cost base,
economies of scale and the value of CHEP’s existing assets.
Innovation – Brambles is subject to the risk of not being able
to optimise innovations in its services, products, processes and
commercial solutions, including capturing the full value of any
innovations that support its growth opportunities. This could have
an impact on revenue, profitability, economies of scale and the value
of existing assets.
Operational improvement – Brambles is subject to the risk
that it may be unable to capture the full value of operational
improvement opportunities. This could result in a reduced ability
to control costs or a reduction in control of CHEP’s equipment pool.
Equipment quality – Satisfaction of CHEP customers may fluctuate
with the customers’ perceived views of equipment quality which, in
turn, is influenced by the effectiveness of the quality standards that
CHEP employs in its equipment pool. Brambles is subject to the risk
that it may not optimise these standards, thereby adversely
affecting customer satisfaction with the CHEP service offering and/
or the operating and capital costs of the equipment pool.
People capability – Brambles is subject to the risk of not attracting,
developing and retaining high performing individuals in the optimum
organisational structure, which could result in it not having
sufficient quality and quantity of people to meet its growth and
business objectives.
Market communication – Brambles is subject to risks relating
to market expectations, which may lead to a loss of investor
confidence in the business and its management.
Systems and technology – Brambles relies on the continuing
operation of its information technology and communications
systems, including those in CHEP’s global data centre. Failure
to optimise these systems, to successfully implement new systems,
or an extended systems interruption event, could impair Brambles’
ability to provide its services effectively. This could damage its
reputation and, in turn, have an adverse effect on its ability to
attract and retain customers.
Regulatory compliance – Material changes in the regulatory and
legal environments in which Brambles’ businesses operate may give
rise to the risk of an adverse impact on aspects of its current
business models. These may affect, among other things, licences to
operate, profitability and a reduced ability to control costs. Material
changes in Brambles’ ability to comply with the regulatory
environment, including competition laws and cross jurisdictional
laws, could give rise to litigation and, in turn, affect reputation,
profitability and licences to operate.
BRAMBLES LIMITED ANNUAL REPORT 2010
13
BOARD OF
DIRECTORS
01. TONY FROGGATT
NON-EXECUTIVE DIRECTOR
01
02
03
02. TOM GORMAN
CHIEF EXECUTIVE OFFICER
03. GREG HAYES
CHIEF FINANCIAL OFFICER
04. STEPHEN JOHNS
NON-EXECUTIVE DIRECTOR
05. CAROLYN KAY
NON-EXECUTIVE DIRECTOR
06. GRAHAM KRAEHE AO
NON-EXECUTIVE CHAIRMAN
04
07. LUKE MAYHEW
NON-EXECUTIVE DIRECTOR
08. JOHN MULLEN
NON-EXECUTIVE DIRECTOR
09. BRIAN SCHWARTZ AM
NON-EXECUTIVE DIRECTOR
05
06
07
08
09
14
BRAMBLES LIMITED ANNUAL REPORT 2010
01. TONY FROGGATT 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 62.
02. TOM GORMAN CHIEF EXECUTIVE OFFICER
Chairman of the Executive Leadership Team
Joined Brambles as Group President, CHEP Europe, Middle East and
Africa in March 2008 and became Chief Executive Officer in November
2009. Previously, Tom had a long career with the Ford Motor Company,
and served as President, Ford Australia from March 2004 until January
2008. Before joining Ford, he worked for the Bank of Boston. Tom holds a
Bachelor of Arts degree in Economics and International Relations from
Tufts University and an MBA with distinction from Harvard Business
School. Age 50.
03. GREG HAYES CHIEF FINANCIAL OFFICER
Member of the Executive Leadership Team
Joined Brambles as Chief Financial Officer in November 2009. Previously
Greg was the Chief Executive Officer and Group Managing Director of
Tenix Pty Limited, and prior to that Chief Financial Officer and later,
Interim Chief Executive Officer of AGL. He has also held senior executive
roles at Westfield Holdings Limited and Southcorp Limited. Greg holds a
Master of Applied Finance degree from Macquarie University and a
Graduate Diploma in Accounting and Bachelor degree in Arts from
Flinders University. Greg is a member of the Institute of Chartered
Accountants in Australia and has attended the Advanced Management
Programme at Harvard Business School. Age 52.
04. STEPHEN JOHNS 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 Leighton Holdings Limited and the
Westfield Group, Chairman of Spark Infrastructure Group and a director
of Sydney Symphony Limited. Previously Stephen had a long executive
career with Westfield where he held a number of senior 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 and a Fellow of the
Institute of Company Directors. Age 63.
05. CAROLYN KAY 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 and The Sydney Institute
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, a member of Chief Executive Women
and was awarded a Centenary Medal for services to Australian society
in business leadership. Age 49.
06. GRAHAM KRAEHE AO 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
Chief Executive Officer of Pacific BBA and 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 67.
07. LUKE MAYHEW 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. In March 2010 he retired as
Chairman of Pets at Home Group Limited after the business was sold
to private equity. 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. Luke is the Chairman
of the British Retail Consortium. Age 57.
08. JOHN MULLEN NON-EXECUTIVE DIRECTOR
(INDEPENDENT)
Member of the Remuneration Committee
Joined Brambles as a Non-executive Director in November 2009.
Currently a non-executive director of Telstra Corporation Limited and
MAp Airports Limited. John had a distinguished career with the DHL
Group from 1994 to 2009, ultimately becoming Chief Executive Officer of
DHL Express in 2006. He has served as a Director of Deutsche Post World
Net, the parent company of DHL Express, and Embarq Corporation. His
executive career with the TNT Group from 1984 to 1994 culminated in
the role of Chief Executive Officer of TNT Express Worldwide, which he
held from 1990 to 1994. He is currently Chairman of the US National
Foreign Trade Council and a member of the Advisory Council for the
AGSM. Age 55.
09. BRIAN SCHWARTZ AM NON-EXECUTIVE DIRECTOR
(INDEPENDENT)
Member of the Audit Committee
Joined Brambles as a Non-executive Director in March 2009. Currently
Deputy Chairman and a non-executive director of Insurance Australia
Group Limited and a non-executive director of the Westfield Group. He is
also Deputy Chairman of Football Federation Australia. In March 2009 he
retired as CEO of Investec Bank (Australia) Limited, although he remains
as a consultant to the bank. Having joined Ernst & Young in 1979, Brian
became a partner in 1985. From 1998 to 2004 he was CEO of Ernst &
Young Australia and a member of the Ernst & Young Global Executive
Board. Brian is a Fellow of the Institute of Chartered Accountants in
Australia. Age 57.
BRAMBLES LIMITED ANNUAL REPORT 2010
15
EXECUTIVE
LEADERSHIP TEAM
01. TOM GORMAN CHIEF
EXECUTIVE OFFICER
02. GREG HAYES CHIEF
FINANCIAL OFFICER
03. JIM INFINGER
GROUP SENIOR VICE PRESIDENT
AND CHIEF INFORMATION
OFFICER
04. JASPER JUDD GROUP
SENIOR VICE PRESIDENT
AND HEAD OF INNOVATION
05. PETER MACKIE
GROUP PRESIDENT,
CHEP ASIA-PACIFIC
06. ELTON POTTS GROUP
PRESIDENT AND CHIEF
OPERATING OFFICER, RECALL
07. JIM RITCHIE GROUP
PRESIDENT, CHEP AMERICAS
01
02
03
04
05
06
08
09
08. KEVIN SHUBA
GROUP SENIOR VICE PRESIDENT
AND CUSTOMER DEVELOPMENT
OFFICER
07
09. NICK SMITH
GROUP SENIOR VICE PRESIDENT,
HUMAN RESOURCES
10. DOLPH WESTERBOS
GROUP PRESIDENT,
CHEP EUROPE, MIDDLE EAST
AND AFRICA
10
16
BRAMBLES LIMITED ANNUAL REPORT 2010
01. TOM GORMAN CHIEF EXECUTIVE OFFICER
Joined Brambles as Group President, CHEP Europe, Middle East and
Africa in March 2008 and became Chief Executive Officer in November
2009. Previously, Tom had a long career with the Ford Motor Company,
and served as President, Ford Australia from March 2004 until January
2008. Before joining Ford, he worked for the Bank of Boston. Tom holds a
Bachelor of Arts degree in Economics and International Relations from
Tufts University and an MBA with distinction from Harvard Business
School. Age 50.
02. GREG HAYES CHIEF FINANCIAL OFFICER
Joined Brambles as Chief Financial Officer in November 2009. Previously
Greg was the Chief Executive Officer and Group Managing Director of
Tenix Pty Limited, and prior to that Chief Financial Officer and later,
Interim Chief Executive Officer of AGL. He has also held senior executive
roles at Westfield Holdings Limited and Southcorp Limited. Greg holds a
Master of Applied Finance degree from Macquarie University and a
Graduate Diploma in Accounting and Bachelor degree in Arts from
Flinders University. Greg is a member of the Institute of Chartered
Accountants in Australia and has attended the Advanced Management
Programme at Harvard Business School. Age 52.
03. JIM INFINGER GROUP SENIOR VICE PRESIDENT
AND CHIEF INFORMATION OFFICER
Joined Brambles in October 2009. Previously, he was Senior Vice
President & Chief Information Officer with Harman Industries and has
held CIO roles for Raytheon and CompUSA. He has also worked for
Siemens Nixdorf, ICL Fujitsu and Wal-Mart Stores. Jim is a member of
the advisory boards of Oracle, HP, SAP, Microsoft, AT&T and Cisco. He is
also a member of the Project Management Institute and the Society for
Information Management. He holds a Master of Science degree in
Systems Management from the Florida Institute of Technology and a
Bachelor of Science degree in Computer Information Systems from the
Southwest Texas State University. Age 53.
04. JASPER JUDD GROUP SENIOR VICE PRESIDENT
AND HEAD OF INNOVATION
Joined Brambles in 2002. Prior to his appointment as Group Senior Vice
President and Head of Innovation in March 2010, he served as Group
Senior Vice President, Strategic Development for two years. Other previous
roles were Acting Chief Financial Officer, Brambles; Group Financial
Controller; Interim Senior Vice President and Chief Financial Officer, CHEP
Europe; and General Manager, Finance and Administration. Before joining
Brambles, he was Chief Financial Officer of Brainspark and held senior
financial positions at a number of other companies including Booker. Jasper
is a member of the Institute of Chartered Accountants in England and
Wales and graduated from Cambridge University with a Master of Arts.
Age 49.
05. PETER MACKIE GROUP PRESIDENT, CHEP ASIA-PACIFIC
Became Group President, CHEP Asia-Pacific in May 2010, having been
acting Group President, CHEP Europe, Middle East and Africa from
November 2009 to April 2010. Previously, Peter held the positions of
President, CHEP Europe and Senior Vice President, Customer Service for
CHEP in Europe, where he focussed on delivering an improved customer
experience and growing the European pooling network. Peter has also held
the positions of Vice President, Strategy, CHEP Europe and Managing
Director, CHEP UK and Ireland. Before joining CHEP in 2001, Peter held
senior roles with Boots and The BOC Group. Peter is a qualified chartered
engineer and has an MBA from London Business School. Age 44.
06. ELTON POTTS GROUP PRESIDENT AND
CHIEF OPERATING OFFICER, RECALL
Became President and Chief Operating Officer of Recall in April 2007,
having been appointed Chief Operating Officer of Recall in December
2006. He joined Brambles in 2002 as Vice President, Controller for CHEP
USA, becoming Vice President, Asset Management for CHEP USA in the
same year and Senior Vice President, Asset Management for CHEP USA in
2003. Before joining Brambles, Elton held various operations and finance
roles with Owens-Corning and Newell Rubbermaid. He holds a Bachelor
degree in Financial Management from Clemson University and an MBA
from Capital University. Age 46.
07. JIM RITCHIE GROUP PRESIDENT, CHEP AMERICAS
Joined CHEP in June 2009 as President, CHEP USA, before taking on the
role of Group President, CHEP Americas in January 2010. Jim has more
than 25 years’ experience in the logistics industry. Prior to joining CHEP,
he was President & Chief Executive Officer of YRC Logistics, building that
company from inception to $1.4 billion in revenue and 5,750 employees
worldwide. He previously held executive positions at Ryder Integrated
Logistics, leading that company’s Consumer Products & Retail group.
Jim received his Bachelor degree in Architecture & Industrial Design
from California State University. Age 50.
08. KEVIN SHUBA GROUP SENIOR VICE PRESIDENT
AND CUSTOMER DEVELOPMENT OFFICER
Has worked with CHEP since 1996, serving as President, CHEP USA
from November 2006 until his appointment as Group President,
CHEP Americas in February 2008. Kevin was appointed Group Senior
Vice President and Customer Development Officer in January 2010.
His previous roles at CHEP include Senior Vice President, New Business
Development and Senior Vice President, Sales and Business Development.
Before CHEP, he worked for insurance company Mason-McBride 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 51.
09. NICK SMITH GROUP SENIOR VICE PRESIDENT,
HUMAN RESOURCES
Joined Brambles in November 2007. Previously, he was Group Human
Resources Director for Inchcape, the international automotive retail group.
Prior to this Nick spent a number of years in the telecommunications
industry, firstly with British Telecom and then with Cable & Wireless.
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, has a Bachelor of Science (Economics) degree in International
Politics and an MBA. Age 49.
10. DOLPH WESTERBOS GROUP PRESIDENT, CHEP EUROPE
MIDDLE EAST AND AFRICA
Joined Brambles in April 2010 as Group President, CHEP Europe, Middle
East and Africa (EMEA). Prior to joining Brambles, he held a number of
executive positions at Dell, most recently as Vice President, Solutions
& Services, EMEA. This role included responsibility for Dell’s services,
software and data centre business, managing sales revenue of
US$2.5 billion across more than 50 countries. Before joining Dell, Dolph
was President, EMEA and Senior Vice President, Asia, for ModusLink, a
global provider of supply chain, IT and business process outsourcing
services to technology companies. Dolph worked 12 years for ModusLink,
holding senior management positions in operations, sales and marketing,
strategy, IT and e-business. He has worked and lived in the USA, Asia and
Europe. He has a Masters degree in Management from the Graduate
School of Business at Stanford University. Age 46.
BRAMBLES LIMITED ANNUAL REPORT 2010
17
CORPORATE GOVERNANCE
STATEMENT
INTRODUCTION
Brambles is a global provider of pallet and container pooling and
information management services and operates in over 45 countries.
It is therefore subject to an extensive range of legal, regulatory and
governance requirements. Brambles is committed to observing the
requirements applicable to publicly listed companies in Australia.
The Board is 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,
such as the amendments to the ASX Corporate Governance Council
Corporate Governance Principles and Recommendations (CGPR) on
diversity, board selection processes, briefings and remuneration that
will be effective, for Brambles, from 1 July 2011.
This Corporate Governance Statement outlines the key components
of Brambles’ governance framework in place during the year ended
30 June 2010 (Year), by reference to the CGPR. During the Year, the
Board believes Brambles met or exceeded all the requirements of
the CGPR.
A checklist summarising Brambles’ compliance with the CGPR is
included at the end of this Statement. Various documents referred
to in this Statement have been posted in the “Corporate Governance”
section of the Brambles website at www.brambles.com. The checklist
includes more detailed guidance on the location of all the governance-
related documents available at www.brambles.com.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR
MANAGEMENT AND OVERSIGHT
1.1 Role of the Board and executive management
1.1.1 ROLE OF THE BOARD AND EXECUTIVE MANAGEMENT
The Board has overall responsibility for overseeing the effective
management and control of the Group on behalf of Brambles’
shareholders, and 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 has adopted a schedule of matters reserved to it for
decision, a copy of which can be found at www.brambles.com,
and further details of which are in section 1.1.2.
The roles of the Chairman and executive management, led by the
Chief Executive Officer, are separated and clearly defined:
–
the Chairman, Graham Kraehe, is responsible for leadership of
the Board, setting the Board’s agenda, conducting Board meetings,
facilitating effective communication with shareholders and the
conduct of shareholder meetings; and
executive management, led by the Chief Executive Officer, Tom Gorman,
has been delegated responsibility for the management of Brambles
within the control and authority framework referred to 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.
–
The Non-executive Directors constructively challenge the development
of strategy. They review the performance of management in meeting
agreed 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.
18
BRAMBLES LIMITED ANNUAL REPORT 2010
The structure of the Board ensures that no individual or group
of individuals dominates the Board’s decision-making process.
The Brambles Executive Leadership Team assists in 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 include:
>
>
>
leading the implementation of change processes.
Zero Harm;
development of strategy; and
innovation; and
–
–
Biographical details for the members of the Executive Leadership Team
are shown on page 17.
1.1.2 RESPONSIBILITIES OF THE BOARD
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 schedule of matters reserved to the Board for decision 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 and annual review of the effectiveness of
Brambles’ systems of internal control and risk management
processes; and
the appointment of key senior executives.
–
–
–
–
The Board has delegated some of its responsibilities to the Audit,
Nominations and Remuneration committees. The charters of the 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. The Board is also supported
by the Executive Leadership Team and the Group Risk Committee,
which are management committees. Details of these Board and
executive management committees are set out in sections 1.1.1, 2.4,
4.1, 7.2.3 and 8.1 and the committee charters can be found at
www.brambles.com.
1.1.3 ALLOCATION OF INDIVIDUAL RESPONSIBILITIES
Formal letters of appointment, which are contracts for service but not
contracts of employment, have been put in place for all Non-executive
Directors. The letters set out the key terms and conditions of their
engagement, including time commitments, corporate expectations
and, if appropriate, any special duties or assignments. A template
letter of appointment for a Non-executive Director is available at
www.brambles.com.
Senior executives have employment contracts setting out their term
of office, rights and responsibilities and entitlements on termination,
and job descriptions setting out their duties.
1.2 Performance evaluation of senior executives
Brambles has a well established performance management and
development planning process, which is used throughout the Group.
The process involves objective setting consistent with Brambles’
remuneration policy and targets, for cash and equity-based incentive
plans set by the Remuneration Committee. Personal development
planning, half year reviews and full year appraisals feed into a
performance rating, leading to the assessment of annual bonuses.
Senior executives (including Executive Directors and the Executive
Leadership Team) all participate in this process, which is overseen
by the Remuneration Committee.
Performance evaluations for senior executives, including Executive
Directors and the Executive Leadership Team, were carried out during
the Year in accordance with this process.
1.2.1 INDUCTION OF SENIOR EXECUTIVES
Business units have procedures for the induction of senior executives,
to assist them in participating fully and actively in management
decision-making at the earliest opportunity after commencing their
new roles.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
At the date of the Directors’ Report, the Board consists of nine
members, with two Executive Directors (the Chief Executive Officer
and the Chief Financial Officer) and seven Non-executive Directors.
The biographies for each of the current Directors, shown on page 15,
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.
The table below sets out the names of the Directors in office at the
date of the Directors’ 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 2010 Annual
General Meeting (AGM), and when they are next due for re-election.
2.1 Independent Directors
2.1.1 INDEPENDENT DECISION-MAKING
The Board recognises the importance of independent judgement
and constructive debate on all issues under consideration. With
the approval of the Chairman, 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 Chairman holds meetings with the Non-executive Directors from
time to time, including meetings at scheduled sessions, without the
presence of the Executive Directors or other executives. The Non-
executive Directors meet without the Chairman present on such
occasions as may be considered appropriate.
2.1.2 INDEPENDENT DIRECTORS
The Board has considered the independence of each of the Directors
in office as at the date of the Directors’ Report and concluded that
all Non-executive Directors are independent. Therefore the Board has
a majority of independent directors. In reaching this conclusion, 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, except for 525,330 shares (being 0.04% of
Brambles’ issued share capital at the date of this Statement), CBA’s
relevant interests in Brambles shares are exercised either as a
superannuation trustee; a life company holding statutory funds;
a responsible entity or manager of a managed investment scheme;
under an investment mandate; by external managers unrelated to the
CBA group; or subject to client direction. 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 because of the manner
in which CBA’s relevant interests in Brambles shares are held.
In considering the matters in Box 2.1 of the CGPR, the Board
considered that a customer was material if it accounted for more than
2% of Brambles’ consolidated gross revenue and that a supplier was
material if Brambles accounted for more than 2% of the supplier’s
consolidated gross revenue.
NAME
YEAR
APPOINTED
1
YEAR LAST
ELECTED
EXECUTIVE OR
NON-EXECUTIVE
INDEPENDENT
SEEKING ELECTION/
RETIRING AND SEEKING
RE-ELECTION IN 2010
NEXT DUE FOR
RE-ELECTION
A G Froggatt
T J Gorman
G J Hayes
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
J P Mullen
B M Schwartz AM
2006
2009
2009
2004
2006
20052
2005
2009
2009
2008
Non-executive
-
-
2009
2009
2009
2007
2009
2009
Executive
Executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Yes
No
No
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
No
No
No
Yes
No
No
2011
2010
2010
2012
2012
2012
2010
2012
2012
1 For the purposes of this table, the year appointed is the year the relevant Director was first elected to the Boards of Brambles or BIL and BIP, as the case may be.
2 Graham Kraehe also served as a director from 2000 to 2004, then re-joined the Board in 2005.
BRAMBLES LIMITED ANNUAL REPORT 2010
19
CORPORATE GOVERNANCE
STATEMENT CONTINUED
2.1.3 REGULAR ASSESSMENTS
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. The Board also makes
an annual assessment of the independence of each Non-executive
Director. If the Board concludes that a Director has lost their status as
an independent director, that conclusion will be advised to the market
in a timely manner.
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.
2.2 Independent Chairman
The Board has concluded that the Chairman is independent and that
his other positions do not prevent him from devoting sufficient time
to perform the role effectively. As the Chairman is independent,
the Board does not consider it necessary to appoint a lead
independent director.
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 fostering
constructive relations between Executive and Non-executive Directors.
2.3 Roles of Chairman and Chief Executive Officer
The roles of Chairman and Chief Executive Officer are exercised by
two different individuals and are clearly documented, as discussed in
section 1.1.1 of this Statement. The Chairman does not have a history
of employment with Brambles.
2.4 Nominations Committee
2.4.1 PURPOSE OF THE NOMINATIONS COMMITTEE
The objective 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.
2.4.2 CHARTER
A copy of the Nominations Committee’s Charter giving full details
of its duties and responsibilities can be found at www.brambles.com.
The Nominations Committee’s Charter also sets out its composition,
structure, membership requirements and the procedures for inviting
non-members to attend meetings. The Committee is authorised to seek
any information it requires from any Group employee or from any other
source, including obtaining outside legal or other independent
professional advice.
20
BRAMBLES LIMITED ANNUAL REPORT 2010
2.4.3 COMPOSITION OF THE NOMINATIONS COMMITTEE
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.
Details of Nominations Committee meetings held during the Year and
attendance at those meetings, are set out in the Directors’ Report –
Other Information on page 46.
2.4.4 RESPONSIBILITIES
The Nominations Committee discharges its 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
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 responsibilities envisaged in the appointment;
on any re-appointment of a Non-executive Director on the conclusion
of their specified term of office, undertaking a process of review of
the retiring Non-executive Director’s performance during the period
from their appointment or most recent re-appointment, as the case
may be, to 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
fulfilling 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.
>
–
–
–
–
–
–
–
2.4.5 SELECTION AND APPOINTMENT PROCESS AND RE-ELECTION
OF DIRECTORS
The Board is conscious of the need to ensure that proper processes are
in place to deal with succession issues at Board level. This requires the
Board to assess periodically the skills and expertise 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 appointee and suitable candidates, the preparation of a brief
including a description of the role and capabilities required and the
engagement of independent recruitment organisations.
During the 2009 year, the Board recognised the need for a non-executive
director with substantial international business experience and
knowledge of the transport and logistics industries. As a result,
John Mullen was appointed as a Non-executive Director in November
2009. During the second half of the Year, the Board, with the assistance
of the Nominations Committee, conducted a review of its skills set
(including its geographic experience). The Board will continue
to seek to appoint new members in future years having regard to that
review and to succeed existing Directors as they retire, ensuring an
appropriate balance of skills and experience is maintained.
A Non-executive Director’s formal letter of appointment (see section
1.1.3) sets out, among other things, the time commitment required and
specifies that the Director should consult with the Chairman before
accepting any additional commitments which may impact on their role.
Any Non-executive Directors who are standing for election or re-
election at the next AGM are asked to consider their other significant
commitments and specifically acknowledge to Brambles that they will
have sufficient time to meet what is expected of them as Directors of
Brambles. 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 46.
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.
The Non-executive Directors’ formal letters of appointment 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.
2.5 Process for evaluating the performance of the Board,
its committees and Directors
The Board and its committees carry out both internal and external
evaluations, with the form of evaluation being determined each
year. For the Year, the Board undertook an internal evaluation of its
performance as a whole and the performance of each of its committees
as well as an evaluation of the performance of Luke Mayhew, the only
Non-executive Director who is standing for re-election at the 2010 AGM.
The evaluations involved the completion of a questionnaire by each of
the Directors and executive management on matters relevant to the
performance of the Board, its committees and Luke Mayhew. The Board
and committee reviews were subsequently presented to, and reviewed
by, the Board and each committee respectively. The Chairman reviewed
the results of Luke Mayhew’s performance evaluation with him.
2.5.1 INDUCTION AND EDUCATION
Newly appointed Directors receive appropriate induction and training,
specifically tailored to their needs. Appointees are provided with
an information pack including governance policies and business
information, taken to visit operating sites, hold meetings with major
shareholders and receive 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, operational site visits and
meetings with major customers.
2.5.2 ACCESS TO INFORMATION
The Board receives accurate, timely and clear information so that it may
effectively discharge its duties and responsibilities. Where necessary,
Directors seek clarification or request the provision of further
information to assist with their decision-making processes. The Board
committee charters document the committees’ unrestricted rights to
seek information from any Group employee or from any other source.
Presentations to the Board are frequently made by senior executives.
2.5.3 THE BOARD AND THE COMPANY SECRETARY
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 45.
2.6 DIVERSITY
During the Year Brambles reviewed its diversity policy in the context of
the 2010 amendments to the CGPR. An updated diversity policy will
be launched in the first half of the 2011 year. Brambles is developing
measurable gender objectives in line with the guidance provided in
the CGPR.
PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE
DECISION-MAKING
3.1 Establish a 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.
BRAMBLES LIMITED ANNUAL REPORT 2010
21
CORPORATE GOVERNANCE
STATEMENT CONTINUED
Brambles’ Code of Conduct includes the following schedules:
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Corporate Social Responsibility Policy;
Speaking Up Policy;
Continuous Disclosure and Communications Policy;
Group Guidelines for Serious Incident Reporting;
Environmental Policy;
Competition Compliance Policy;
Health and Safety Policy;
Securities Trading Policy;
Risk Management; and
Guidelines for Document Management.
The policies listed above set out the reporting responsibilities of
specified individuals, or in some cases, all employees. The Audit
Committee is responsible for monitoring compliance with the Speaking
Up Policy and at each meeting receives a report on investigations into
any matters raised under that policy. The Board also receives a copy of
that report. A copy of the Code of Conduct is at www.brambles.com.
3.1.1 PURPOSE OF THE CODE OF CONDUCT
The Code of Conduct defines how Brambles relates to its shareholders,
employees, customers, suppliers and the community. It includes
Brambles’ general principles on business integrity. All employees
are expected to conduct business in accordance with the laws and
regulations of the countries in which the business is located, and
in a manner so as to enhance the reputation of Brambles.
3.1.2 APPLICATION OF THE CODE OF CONDUCT
The Code of Conduct has been translated into 17 languages, so that
it can be used to form part of employees’ terms and conditions of
employment. Non-executive Directors are required to agree to comply
with the Code of Conduct and to acknowledge that their performance
assessments will include an element on conformity with the Code.
The Code of Conduct is not intended to be all-encompassing. There are
areas in which Brambles expects its businesses to develop detailed
policies in accordance with local requirements. The Code of Conduct
provides a set of guiding principles that may be supplemented with
additional local policies. It provides a common behavioural framework.
Brambles implements the Code of Conduct through a variety of
induction and training programs. During the Year, ongoing training took
place with the aim of enhancing employees’ compliance with certain of
the policies under the Code.
The Code of Conduct requires Brambles’ contractors to adhere to
Brambles’ health and safety, environmental and serious incident
reporting standards and requires consultants or professional advisers
who are engaged to undertake work for the Group to comply with the
Continuous Disclosure and Communications Policy.
3.2 Securities trading policy
Details of Brambles Limited securities held by Directors are set out
on pages 39, 40 and 42. The Board has put in place a Securities Trading
Policy covering dealings in securities by:
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Directors;
senior executives;
all individuals located in Brambles’ Headquarters;
any other person who is notified that they are subject to the policy
from time to time; and
their related persons,
–
(collectively Designated Persons).
22
BRAMBLES LIMITED ANNUAL REPORT 2010
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. It can be found
at www.brambles.com.
Under the Securities Trading Policy, Designated Persons 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 Designated Person declares
that he or she does not possess any price sensitive, non-public
information.
Any dealings in Brambles Limited securities by a Director or a member
of the Executive Leadership Team must be reported to Brambles within
two business days of effecting such dealings. The ASX is notified of
Directors’ transactions within applicable time limits.
The Securities Trading Policy applies to Brambles’ equity-based awards
under the incentive plans described in the Remuneration Report. The
policy prohibits Designated Persons from acquiring financial products
or entering into arrangements which have the effect of limiting
exposure to the risk of price movements of Brambles securities.
The Securities Trading Policy also prohibits Designated Persons from
using their securities in Brambles Limited as security for a margin loan.
Brambles takes compliance with the Securities Trading Policy seriously.
A breach of the policy by any employee will be regarded as a breach of
their conditions of employment and may result in termination.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL
REPORTING
4.1 Establish an Audit Committee
Brambles confirms that, in accordance with ASX Listing Rule 12.7,
it has had an Audit Committee throughout the Year.
4.1.1 PURPOSE OF THE 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;
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making recommendations to the Board in relation to the
appointment or removal of the external auditors, the approval of
their remuneration and the terms of their engagement, including the
rotation of external audit engagement partners;
assessing whether the Committee is satisfied that the independence
of the external auditors has been maintained, having regard to any
non-audit related services;
reviewing and monitoring the policy on the engagement of the
external auditors to supply non-audit services (set out in the
Charter of Audit Independence, a copy of which can be found
at www.brambles.com), taking into account relevant legal and
ethical guidance regarding the provision of non-audit services
by the external auditors; and
–
reporting to the Board, identifying any matters relating to the above
in respect of which it considers that action or improvement is
needed and making recommendations as to the steps to be taken.
a year without executive management being present. A copy of the
Audit Committee’s Charter, which is reviewed annually, can be found at
www.brambles.com.
4.2 Structure of the Audit Committee
4.2.1 COMPOSITION OF THE AUDIT COMMITTEE
The Audit Committee has three members and is chaired by Stephen
Johns, an independent Director.
4.2.2 IMPORTANCE OF INDEPENDENCE
The Audit Committee is comprised entirely of Non-executive Directors,
all of whom the Board considers to be independent.
4.2.3 TECHNICAL EXPERTISE
The Board considers that each of the members of the Audit Committee
has recent and relevant financial and accounting experience and an
understanding of accounting and financial issues relevant to the
industries in which Brambles operates.
The members of the Audit Committee, including details of their
relevant qualifications, are as follows:
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Stephen Johns had a long executive career with Westfield where he
held a number of senior positions including that of Finance Director
from 1985 to 2002. He is currently a non-executive director of
Leighton Holdings Limited and the Westfield Group and Chairman of
Spark Infrastructure Group. He holds a Bachelor of Economics
degree from the University of Sydney and is a Fellow of the Institute
of Chartered Accountants in Australia and a Fellow of the Institute
of Company Directors.
Carolyn Kay is a director of CBA and an External Board Member of
Allens Arthur Robinson. She 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. Carolyn holds Bachelor degrees in Law and Arts from the
University of Melbourne and a Graduate Diploma in Management
from the AGSM. She is a Fellow of the Australian Institute of
Company Directors.
Brian Schwartz is the Deputy Chairman and a non-executive director
of Insurance Australia Group Limited and a non-executive director
of the Westfield Group. He had a long career at Ernst & Young,
holding a number of senior positions including that of CEO Ernst &
Young Australia from 1998 to 2004. He is a Fellow of the Institute
of Chartered Accountants in Australia.
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Stephen Johns, Carolyn Kay and Brian Schwartz were members of the
Committee throughout the Year; David Gosnell, a former independent
Non-executive Director of Brambles, was a member of the Committee
during the Year until his retirement from the Board on 31 March 2010.
He is the Managing Director of Global Supply and Procurement for
Diageo plc and holds a Bachelor of Science degree in Electrical and
Electronic Engineering from Middlesex University, England.
4.3 Audit Committee Charter
4.3.1 CHARTER
The Audit Committee has a Charter which includes its duties and
responsibilities, composition, structure, membership requirements,
authority, access rights and sets out a procedure for inviting non-
members to attend its meetings. The Charter requires the Audit
Committee to meet with internal and external auditors at least once
4.3.2 RESPONSIBILITIES
The Audit Committee discharges its responsibilities by meeting
regularly throughout the year and, among other matters:
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reviewing, and challenging where necessary, the actions and
judgment of management in relation to full year and half year
financial reports and other announcements relating to those reports
prepared for release to the ASX, regulators and the public, 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;
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, monitoring compliance with the Charter of Audit
Independence and pre-approving the performance by the external
auditors of any non-audit related work and any proposed fees to be
paid to the external auditors for that work, for which its approval is
required by the Charter of Audit Independence. The Charter 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, 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.
The Audit Committee is also responsible for monitoring the Brambles
Speaking Up Policy, that it is communicated properly and complied with
throughout Brambles, and for monitoring that appropriate protection
against victimisation and dismissal is given to Brambles employees
who make certain disclosures in the public interest.
4.3.3 MEETINGS
Details of the number of Audit Committee meetings held during the
Year, and attendance at those meetings, are set out in the Directors’
Report – Other Information on page 46. Minutes of meetings are
included in the papers for subsequent Board meetings.
BRAMBLES LIMITED ANNUAL REPORT 2010
23
CORPORATE GOVERNANCE
STATEMENT CONTINUED
4.3.4 REPORTING
The Chairman of the Audit Committee reports to the Board on
the Committee’s proceedings and on all matters relevant to the
Committee’s duties and responsibilities.
4.4 EXTERNAL AUDITOR
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.
The Audit Committee is responsible for making recommendations
on the selection, appointment, evaluation and removal of external
auditors, setting fees and ensuring that the external auditors’
engagement partners are rotated at appropriate intervals.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
5.1 Establish a continuous disclosure policy
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:
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reinforce Brambles’ commitment to the continuous disclosure
obligations imposed by law and to describe the processes
implemented by it to ensure compliance;
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
outline Brambles’ commitment to communicating effectively
with shareholders and encouraging shareholder participation
in shareholder meetings.
–
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The Continuous Disclosure and Communications Policy takes into
account the matters listed in Box 5.1 of the CGPR. A copy can be found
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:
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significant announcements are released directly to the market via
the ASX. Copies of these announcements are immediately placed on
www.brambles.com.
Brambles conducts investor and analyst briefings as a part of its
investor relations programme. No new materials or price sensitive
information is provided at those briefings unless it has been
previously or is simultaneously released to the market. Presentation
materials are placed on Brambles’ website.
www.brambles.com 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.
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24
BRAMBLES LIMITED ANNUAL REPORT 2010
5.1.1 COMMENTARY ON FINANCIAL RESULTS
The Audit Committee Charter requires the Committee to review the
clarity of financial reports.
A review of operations and activities for the Year is included on pages
4 to 11. Presentations of the full and half year results are made to the
investment community immediately after they are released to the
market. Live webcasts of these presentations are transmitted via, and
presentation materials are placed on, the Brambles website.
5.1.2 ELIMINATING SURPRISE ON TERMINATION ENTITLEMENTS
Details of the termination entitlements of Brambles’ Chief Executive
Officer, Chief Financial Officer and other Key Management Personnel
are disclosed on pages 36 and 37 of the Directors’ Report –
Remuneration Report.
PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS
Shareholders play an important role in the governance of Brambles
by electing the Board, whose task it is to govern on their behalf.
The Chairman regularly meets major investors to understand their
issues and concerns and discuss particular matters relating to
Brambles’ governance and strategy. The Chief Executive Officer,
Chief Financial Officer and other senior executives meet major
investors to understand their issues and concerns and discuss
company performance 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.
Executive management provide information on shareholder activity
and trading to the Board, along with shareholder feedback and copies
of analysts’ reports.
As a new shareholder communications initiative, a newsletter on the
half year results and executive management changes was produced
and sent to shareholders in April 2010.
6.1 Establish a communications policy
As disclosed in section 5.1, the Board has adopted a Continuous
Disclosure and Communications Policy, which outlines Brambles’
commitment to communicating effectively with shareholders and
encouraging shareholder participation in shareholder meetings.
A copy can be found at www.brambles.com.
6.1.1 ELECTRONIC COMMUNICATION
Brambles takes all of the measures to make effective use of electronic
communication that are outlined in Box 6.1 of the CGPR.
Brambles posts a copy of all announcements made to the ASX on
www.brambles.com. On release, significant announcements are
highlighted in the “Latest News” area on the home page of the website.
Presentations to investors, analysts or media during briefings
and copies of speeches and presentations made by the Chairman
and Chief Executive Officer at general meetings are released as
regulatory announcements and posted on www.brambles.com after
release. Briefings and general meetings are also webcast live, via
www.brambles.com.
All of the ASX regulatory releases and notices of meetings that
Brambles Limited has published since it was listed in December 2006
are available on www.brambles.com, as are several years’ history of
such documents relating to BIL, prior to Unification.
Shareholders are asked to elect whether they would like to receive
shareholder communications in printed form or provide an email
address and be sent an electronic notification when a communication is
available on www.brambles.com, instead of a hard copy. Shareholders
who do not respond are sent a printed notification of availability of the
annual report and hard copies of all other communications.
Shareholders may electronically appoint proxies and lodge proxy
instructions for items of business to be considered at general meetings,
or have the option of lodging direct votes.
Each business unit has a risk and control committee, which conducts
an in-depth review of the business unit’s risk profile. These profiles
underpin the Group-level risk profile. The business unit risk profiles and
accompanying mitigation plans were evaluated by Group Presidents,
senior management at Brambles Headquarters, the Group Risk
Committee and the Board. Legal obligations and the reasonable
expectations of stakeholders, such as shareholders, customers,
employees, subcontractors, suppliers and the community in general
were taken into account when preparing and updating mitigation plans.
During the Year, a comprehensive review of the internal control and risk
management system was carried out. This resulted in the adoption of a
new risk management framework which took effect on 1 July 2010.
Details of the new framework are set out in section 7.2.1.
6.1.2 MEETINGS
AGMs provide an opportunity for the Board to communicate with
investors, through presentations on Brambles’ businesses and current
trading. Shareholders are encouraged to attend AGMs and to
participate and use the 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. Answers to frequently asked
questions are given during presentations to AGMs. Shareholders may
also ask questions at AGMs without having registered their questions
in this manner.
6.1.3 COMMUNICATION WITH BENEFICIAL OWNERS
Beneficial owners of shares, investors or members of the public
are encouraged to register for free email alerts, so that they may
stay up to date on major news announcements made by Brambles.
There is a link to the Email Alerts registration area of the website
on the home page of www.brambles.com. Users of the Email Alerts
service may customise the types of announcements that they receive.
6.1.4 WEBSITE
Brambles encourages shareholders to make full use of
www.brambles.com and to provide an email address to the
share registry so that they may be sent email notifications when
shareholder communications are available. 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.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
7.1 Establish policies for the oversight and management of
material business risks
7.1.1 RISK MANAGEMENT POLICIES
The Board is responsible for the establishment, and reviewing the
effectiveness of the Group’s system of internal control and risk
management. During the Year, the Board was supported in this role
by management, in particular by the Group Risk Committee, the Audit
Committee (in relation to financial reporting risks) and the Group’s
internal audit function. The Group Risk Committee’s responsibilities are
described in section 7.2.3 of this Statement. The Audit Committee’s
responsibilities are described in section 4.3.2 of this Statement.
7.2 Reporting on effective management of material business risks
7.2.1 RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM
Management is responsible for the development, implementation
and management of systems that:
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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.
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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:
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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;
biannual management declarations at country, regional and global
levels confirming, among other matters, the adequacy of internal
control procedures, the effectiveness of risk management systems
and compliance with the Code of Conduct and all regulatory and
statutory requirements;
an internal audit function, described in section 7.2.2 of this Statement;
a risk management function;
a risk and control committee for each of its business units; and
other sources of independent assurance, such as environmental
audits, occupational health and safety audits and reports from
the external auditors.
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During the Year, the biannual management declarations process was
reviewed. The questionnaires sent to management were simplified with
the aim of improving the quality of responses and focusing on financial
controls. A web-based system was developed to enable the
questionnaires to be completed more easily and to facilitate rigorous
tracking across periods.
BRAMBLES LIMITED ANNUAL REPORT 2010
25
CORPORATE GOVERNANCE
STATEMENT CONTINUED
The key elements of Brambles’ business risk management systems
during the Year are set out below:
Risk control – risks to the achievement of business objectives were
identified through a process of examination between the Group Risk
Committee, Brambles’ risk management team, the business unit
Group Presidents, business unit risk and control committees and
functional process owners. Key business risks were also identified
and analysed during regular management reporting and discussions.
The identified risks were assessed in terms of their underlying causes,
business consequences, external variables, current internal control
effectiveness, likelihood of occurrence, overall risk priority and risk
mitigation status. The resulting net risk and control profiles were
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 formed part of the Board’s annual
review of the effectiveness of the systems of internal control.
Risk monitoring – there was regular reporting of key risk events, such
as safety incidents, litigation and serious incidents (as defined in the
Code of Conduct). In addition to regular monitoring by the Group
Risk Committee and Brambles’ risk management team, risks and
controls were reassessed by business unit risk and control committees
on at least a biannual basis. The outcome of those assessments
and details of progress in implementing risk improvement programs
were signed off by Group Presidents and reported to the Group Vice
President, Risk and Audit. In addition, a report on the effectiveness
of the management of business risks was provided to the Group Risk
Committee and the Board. The effectiveness of specific business risk
controls and risk improvement programs were also periodically
reviewed by internal audit as part of the FY10 internal audit program,
and the results reported to the Audit Committee.
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;
conducting the review of Brambles’ risk profiles, as described
in section 7.1.1 of this Statement;
receiving twice-yearly reports from the Group Risk Committee
(and, from 1 July 2010, from the Executive Leadership Team) on the
effectiveness of internal control and risk management systems for
Brambles’ material business risks, being the report required by
Recommendation 7.2 of the CGPR;
receiving twice-yearly written assurances from the Chief Executive
Officer and Chief Financial Officer, as described in section 7.3 of this
Statement; and
receiving reports from the Audit Committee, which has a
responsibility to assist the Board in reviewing internal financial
controls.
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26
BRAMBLES LIMITED ANNUAL REPORT 2010
New Risk Management Framework
During the Year, management continued to take actions to improve the
risk management and internal control system. In particular, a
comprehensive review of that system was carried out. This resulted in
the adoption of a new risk management framework which took effect
on 1 July 2010. The objectives of the new risk management framework
are as follows:
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to incorporate effective risk management as part of Brambles’
strategic planning process;
to require business operating plans to address the effective
management of key risks;
to develop internal audits plans to concentrate efforts on providing
assurance on the viability and value of risk mitigation/management
processes;
to embed a stronger risk management culture;
to improve allocation of capital to reflect business risks;
to seek competitive advantage through increased certainty of
achieving agreed organisational and business objectives; and
to continue to fulfil governance requirements for risk management.
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To strengthen the relationship between risk management and strategic
and operational planning, from 1 July 2010, the Chief Executive Officer,
through the Executive Leadership Team (see section 1.1), has principal
responsibility for risk management. A Brambles Headquarters risk and
control committee has also been established. It is chaired by the
Chief Financial Officer and its members include key functional heads.
The Executive Leadership Team will be supported by the Group Vice
President, Risk and Audit and all risk and control committees now
report to it. The changes to the risk management structure introduced
by the new framework replace the risk management and reporting role
of the Group Risk Committee.
7.2.2 INTERNAL AUDIT FUNCTION
The internal audit function is independent of the external auditor.
Brambles’ internal audit function carries out risk-based audits under an
annual plan approved by the Audit Committee. The internal audit team
makes an independent appraisal of the adequacy and effectiveness of
Brambles’ risk management and internal control system, to provide
assurance to the Audit Committee and the Board.
The head of internal audit has direct access to the Chairman of the
Audit Committee. Both the Audit Committee and the internal audit
team have unrestricted access to management and the right to seek
information and explanations.
7.2.3 GROUP RISK COMMITTEE
The Group Risk Committee was a management committee. During the
Year, it assisted the Board in fulfilling its responsibilities to review
Brambles’ policies on risk oversight and management and to satisfy
itself that management has developed and implemented a sound
system of risk management and internal control.
The Committee members were Greg Hayes (Chief Financial Officer
and Committee Chairman), senior executives from each business unit
and from Brambles’ accounting, risk and internal audit, legal and
secretarial functions. A copy of the Group Risk Committee’s Charter
can be found at www.brambles.com.
With the adoption of the new risk management framework, from 1 July
2010, the Group Risk Committee’s risk management and reporting role
has been assumed by the Executive Leadership Team, supported by the
Group Vice President, Risk and Audit. Further details are in section 7.2.1.
7.3 Chief Executive Officer and Chief Financial Officer declaration
The Board receives written assurances from the Chief Executive
Officer and Chief Financial Officer that the declaration provided
under section 295A of the Corporations Act 2001 (Cth)(Act) is founded
on a sound system of risk management and internal control and that
the system is operating effectively in all material respects in relation
to financial reporting risks. The Board receives these assurances in
advance of approving both the annual and interim financial statements.
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
8.1 Establish a remuneration committee
8.1.1 PURPOSE OF THE REMUNERATION COMMITTEE
The objective and purpose of the Remuneration 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.
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8.1.2 CHARTER
The Remuneration Committee has a Charter which includes its
duties and responsibilities, composition, structure, membership
requirements, authority, access rights and sets out a procedure
for inviting non-members to attend its meetings. A copy of the
Remuneration Committee’s Charter, which is reviewed annually,
can be found at www.brambles.com.
8.1.3 COMPOSITION OF REMUNERATION COMMITTEE
The Remuneration Committee is comprised entirely of Non-executive
Directors, all of whom are independent. The four members of the
Remuneration Committee are Luke Mayhew (Committee Chairman),
Tony Froggatt, Graham Kraehe and John Mullen. The Remuneration
Committee meets at least three times a year. Details of the number
of Remuneration Committee meetings held during the Year and
attendance at those meetings, are set out in the Directors’ Report –
Other Information on page 46.
8.1.4 RESPONSIBILITIES OF THE REMUNERATION COMMITTEE
The Remuneration Committee discharges its 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.
8.1.5 REMUNERATION POLICY
Details of Brambles’ remuneration policy can be found in the Directors’
Report – Remuneration Report on pages 31, 32, 33 and 41.
The remuneration of the Chairman of Brambles is determined by
the Remuneration Committee. The remuneration of the other Non-
executive Directors is determined by the Executive Directors, with the
Non-executive Directors taking no part in the discussion or decision
relating to their remuneration. In setting remuneration, advice is
sought from external remuneration consultants.
During the Year, the Committee monitored the Productivity
Commission’s recommendations on executive remuneration and the
Government’s response to those recommendations. The Committee
anticipates that Brambles will be well placed to comply with the
expected legislative changes in FY11.
8.2 Comparison of remuneration structures
There is a clear distinction between the structure of Non-executive
Directors’ remuneration and that of the Executive Directors and
executive management. Brambles has taken account of the guidelines
for executive remuneration packages in Box 8.1 of the CGPR and
the guidelines for non-executive director remuneration in Box 8.2 of
the CGPR. Further details can be found in the Directors’ Report –
Remuneration Report on pages 31, 32, 33 and 41.
BRAMBLES LIMITED ANNUAL REPORT 2010
27
CORPORATE GOVERNANCE
STATEMENT CONTINUED
The following checklist summarises Brambles’ compliance with the CGPR and contains cross references to the sections of this Statement and
to the exact location of information disclosed at www.brambles.com.
PRINCIPLE/RECOMMENDATION
REFERENCE
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Recommendation 1.1
Role of the board and management
Recommendation 1.2
Performance evaluation of senior executives
Corporate Governance Statement: 1.1
Corporate Governance Statement: 1.2
Recommendation 1.3
Companies should provide the following information in the corporate governance statement:
–
an explanation of any departures from Recommendations 1.1, 1.2 or 1.3
Not applicable
–
whether a performance evaluation for senior executives has taken place in the
reporting period and whether it was in accordance with the process disclosed
Corporate Governance Statement: 1.2
A statement of matters reserved for the board, or the board charter or the statement of
areas of delegated authority to senior executives should be made publicly available, ideally
by posting it to the company’s website in a clearly marked corporate governance section
www.brambles.com
See “Corporate Governance”, “Board
of Directors”, “Role of the Board”.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
Recommendation 2.1
Independent directors
Recommendation 2.2
Independent chairman
Recommendation 2.3
Roles of chairman and chief executive officer
Recommendation 2.4
Nomination committee
Corporate Governance Statement: 2.1
Corporate Governance Statement: 2.2
Corporate Governance Statement: 2.3
Corporate Governance Statement: 2.4
Recommendation 2.5
Process for evaluating the performance of the board, its committees and directors
Corporate Governance Statement: 2.5
Recommendation 2.6
Companies should provide the following information in the corporate
governance statement:
Corporate Governance Statement:
–
–
–
the skills, experience and expertise relevant to the position of director held by each
director in office at the date of the annual report
the names of the directors considered by the board to constitute independent directors
and the company’s materiality thresholds
the existence of any of the relationships listed in Box 2.1 and an explanation of why
the board considers a director to be independent, notwithstanding the existence of
those relationships
–
a statement as to whether there is a procedure agreed by the board for directors
to take independent professional advice at the expense of the company
–
the period of office held by each director in office at the date of the annual report
2
2.1.2
2.1.2
2.1.1
2
–
–
the names of members of the nomination committee and their attendance at meetings
of the committee, or where a company does not have a nomination committee, how
the functions of a nomination committee are carried out
2.4.3 and Directors’ Report – Other
Information, page 46.
whether a performance evaluation for the board, its committees and directors
has taken place in the reporting period and whether it was in accordance with the
process disclosed
2.5
–
an explanation of any departures from Recommendations 2.1, 2.2, 2.3, 2.4, 2.5 or 2.6
Not applicable
The following material should be made publicly available, ideally by posting it to
the company’s website in a clearly marked corporate governance section:
–
a description of the procedure for the selection and appointment of new directors
and the re-election of incumbent directors
–
–
the charter of the nomination committee or a summary of the role, rights,
responsibilities and membership requirements for that committee
the board’s policy for the nomination and appointment of directors
www.brambles.com
See “Corporate Governance”, “Board of
Directors”, “Board Succession Planning
and Renewal”.
www.brambles.com
See “Corporate Governance”,
“Committees of the Board”,
“Nominations Committee”.
28
BRAMBLES LIMITED ANNUAL REPORT 2010
PRINCIPLE/RECOMMENDATION
REFERENCE
PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING
Recommendation 3.1
Establish a code of conduct
Recommendation 3.2
Securities trading policy
Recommendation 3.3
Companies should provide the following information in the corporate
governance statement:
Corporate Governance Statement: 3.1
Corporate Governance Statement: 3.2
–
an explanation of any departures from Recommendations 3.1, 3.2 or 3.3
Not applicable
The following material should be made publicly available, ideally by posting it
to the company’s website in a clearly marked corporate governance section:
–
–
any applicable code of conduct or a summary
the trading policy or a summary
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
Recommendation 4.1
Establish an audit committee
Recommendation 4.2
Structure of the audit committee
Recommendation 4.3
Audit committee charter
Recommendation 4.4
Companies should provide the following information in the corporate governance
statement:
www.brambles.com
See “Corporate Governance”, “Other”,
“Brambles Code of Conduct”
(which incorporates the Securities
Trading Policy as Schedule 8).
Corporate Governance Statement: 4.1
Corporate Governance Statement: 4.2
Corporate Governance Statement: 4.3
–
–
the names and qualifications of those appointed to the audit committee and their
attendance at meetings of the committee, or, where a company does not have
an audit committee, how the functions of an audit committee are carried out
the number of meetings of the audit committee
Corporate Governance Statement: 4.3
and Directors’ Report – Other
Information, page 46.
–
an explanation of any departures from Recommendations 4.1, 4.2, 4.3 or 4.4
Not applicable
The following material should be made publicly available, ideally by posting it to the
company’s website in a clearly marked corporate governance section:
–
–
the audit committee charter
information on procedures for the selection and appointment of the external auditor,
and for the rotation of external audit engagement partners
www.brambles.com
See “Corporate Governance”,
“Committees of the Board”, “Audit
Committee”.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
Recommendation 5.1
Establish a continuous disclosure policy
Corporate Governance Statement: 5.1
Recommendation 5.2
Companies should provide the following information in the corporate governance
statement:
–
an explanation of any departures from Recommendations 5.1 or 5.2
Not applicable
The policies or a summary of those policies designed to guide compliance with Listing
Rule disclosure requirements should be made publicly available, ideally by posting them
to the company’s website in a clearly marked corporate governance section
www.brambles.com
See “Corporate Governance”, “Other”,
“Brambles Code of Conduct” (which
incorporates the Continuous
Disclosure and Communications Policy
as Schedule 3).
PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS
Recommendation 6.1
Establish a communications policy
Corporate Governance Statement: 6.1
Recommendation 6.2
Companies should provide the following information in the corporate governance
statement:
–
an explanation of any departures from Recommendations 6.1 or 6.2
Not applicable
The company should describe how it will communicate with its shareholders publicly,
ideally by posting this information on the company’s website in a clearly marked
corporate governance section
www.brambles.com
See “Corporate Governance”, “Other”,
“Brambles Code of Conduct” (which
incorporates the Continuous
Disclosure and Communications Policy
as Schedule 3).
BRAMBLES LIMITED ANNUAL REPORT 2010
29
CORPORATE GOVERNANCE
STATEMENT CONTINUED
PRINCIPLE/RECOMMENDATION
REFERENCE
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
Recommendation 7.1
Establish policies for the oversight and management of material business risks
Corporate Governance Statement: 7.1
Recommendation 7.2
Reporting on effective management of material business risks
Recommendation 7.3
Chief Executive Officer and Chief Financial Officer declaration
Corporate Governance Statement: 7.2
Corporate Governance Statement: 7.3
Recommendation 7.4
Companies should provide the following information in the corporate governance
statement:
–
an explanation of any departures from Recommendations 7.1, 7.2, 7.3 or 7.4
Not applicable
–
–
whether the board has received the report from management under
Recommendation 7.2
Corporate Governance Statement: 7.2
whether the board has received assurance from the chief executive officer (or
equivalent) and the chief financial officer (or equivalent) under Recommendation 7.3
Corporate Governance Statement: 7.3
The following material should be made publicly available, ideally by posting it to the
company’s website in a clearly marked corporate governance section:
–
a summary of the company’s policies on risk oversight and management of
material business risks
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
Recommendation 8.1
Establish a remuneration committee
Recommendation 8.2
Comparison of remuneration structure
Recommendation 8.3
Companies should provide the following information in the corporate governance
statement:
www.brambles.com
See “Corporate Governance”,
“Risk Management”.
Corporate Governance Statement: 8.1
Corporate Governance Statements:
8.1.2 and Directors’ Report –
Remuneration Report pages 31, 32, 33
and 41.
–
the names of the members of the remuneration committee and their attendance
at meetings of the committee, or where a company does not have a remuneration
committee, how the functions of a remuneration committee are carried out
Corporate Governance Statement:
8.1.3 and Directors’ Report – Other
Information, page 46.
–
the existence and terms of any schemes for retirement benefits, other than
superannuation, for non-executive directors
Not applicable
–
an explanation of any departures from Recommendations 8.1, 8.2 or 8.3
Not applicable
The following material should be made publicly available, ideally by posting it to the
company’s website in a clearly marked corporate governance section:
–
the charter of the remuneration committee or a summary of the role, rights,
responsibilities and membership requirements for that committee
–
a summary of the company’s policy on prohibiting entering into transactions in
associated products which limit the economic risk of participating in unvested
entitlements under any equity-based remuneration schemes
www.brambles.com
See “Corporate Governance”,
“Committees of the Board”,
“Remuneration Committee”.
www.brambles.com
See “Corporate Governance”,
“Other”, “Brambles Code of Conduct”
(which incorporates the Securities
Trading Policy as Schedule 8).
30
BRAMBLES LIMITED ANNUAL REPORT 2010
DIRECTORS’ REPORT –
REMUNERATION REPORT
Last year, in recognition of the tough market conditions, Brambles’
financial performance and the need to tightly control costs, the
Company took the following actions:
–
–
executive salaries were frozen for financial year 2010;
salaries below the Executive Leadership Team were also frozen,
with small increases at lower levels being limited to any exceptional
performers who were paid below market level; and
short term bonuses, if awarded at all, were extremely modest and
significantly lower than in previous years.
–
In the past year Brambles has continued to have a strong focus on
cost control and bonus and share awards for 2010 under Brambles’
Short Term Incentive plan have reflected the Company’s performance.
All outstanding Long Term Incentive awards will require improved
performance to vest.
The year did see significant changes to Brambles’ executive leadership,
including the appointment of a new Chief Executive Officer, Tom Gorman,
the former Group President, CHEP EMEA and a new Chief Financial
Officer, Greg Hayes. All new executive appointments were considered
by the Remuneration Committee and we are comfortable that the
remuneration is reasonable, appropriate and in line with similar roles
elsewhere.
After four years of no change, the Chairman initiated a review of
Non-executive Director fees to ensure they properly reflected local
market rates and the appropriate relativity between his fees and
those of other Non-executive Directors. Increases in Non-executive
Directors’ fees will be largely offset by a reduction in the Chairman’s fees.
In 2011 we will revisit Brambles’ remuneration policy to ensure that
there continues to be a close alignment between executive reward and
the delivery of key business objectives, and that there are effective
incentives and rewards for the delivery of strong sustainable returns
for shareholders. Meanwhile I believe that this Remuneration Report
demonstrates that the current incentive arrangements, which were
approved by shareholders in 2008, have proved to be fit for purpose
in a difficult economic environment as well as being in line with recent
government regulation.
Finally we have further simplified the Remuneration Report. It remains
challenging to do that and to also ensure all formal disclosures are
properly included. I believe this is another step in the right direction.
During the year a number of senior executives left the business.
These were managed under the provisions of the relevant employment
contracts.
LUKE MAYHEW
Non-executive Director and
Chairman of the Remuneration Committee
CONTENTS
1. Background
2. Remuneration Committee
3. Remuneration policy and structure
4. Performance of Brambles
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).
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 2010 (Year),
have been a member of the Executive Leadership Team (ELT)
of Brambles (Key Management Personnel).
This report includes all disclosures required by the Corporations Act
2001 (Cth)(Act), regulations made under that 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
(Company) and the Group.
2. REMUNERATION COMMITTEE
The Remuneration Committee (Committee) operates under delegated
authority from Brambles’ Board. The Committee’s responsibilities
include recommending overall remuneration policy to the Board,
approving the remuneration arrangements for the Executive Directors,
the ELT and the Company Secretary and reviewing the remuneration
policy and individual arrangements for other executives.
More detail on the Remuneration Plan and the Committee’s
membership, Charter, activities and advisers, can be found on the
Brambles website at www.brambles.com under “Corporate
Governance”, “Committees of the Board”, “Remuneration Committee”.
3. REMUNERATION POLICY AND STRUCTURE
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.
When setting and reviewing remuneration levels for the Executive
Directors and other members of the ELT, the Committee considers the
experience, responsibilities and performance of the individual and takes
into account 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.
BRAMBLES LIMITED ANNUAL REPORT 2010
31
DIRECTORS’ REPORT –
REMUNERATION REPORT
CONTINUED
The structure of Brambles’ current incentive arrangements was
approved by shareholders at the 2008 Annual General Meeting. These
plans received a 96% vote in favour and amended the previous long
term incentive plans approved by shareholders in 2006. The Board
made a minor amendment to the 2006 Share Plan rules in 2009. This
change stipulates that executives who leave the Company under
certain circumstances, such as retirement or redundancy, would not
receive accelerated vesting of their STI Share Awards and would
instead need to wait until the completion of the three-year
performance period to receive any awards.
Remuneration is divided into those components which are not directly
linked to target capability and company performance (that is, they are
“Fixed”), and those components which are variable and are directly
linked to Brambles’ financial performance and the delivery of personal
and safety objectives (that is, they are “At Risk”).
3.1 Fixed remuneration
Fixed remuneration generally consists of base salary and benefits.
However, as is common elsewhere, the Chief Executive Officer, who is
based in Australia, is provided with an annual Total Fixed Remuneration
(TFR) amount and has flexibility as to the precise mixture of cash and
benefits he receives within that amount. This may include motor
vehicles, club membership, and disability and life insurance. Executives
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.
Vesting date ↓
(3rd anniversary of
equity award date)
Equity award date↓
(Normally made late August)
The manner in which the awards operate is summarised in the
following diagram:
STI CASH AWARD
Size determined by
performance against
Key Performance
Indicators (see
section 4.1 for
details) for the Year.
STI SHARE AWARD
Size normally
derived from size of
STI cash award.
Awards vest subject
to continued
employment at 3rd
anniversary of grant.
=
LTI SHARE AWARD
Size calculated as %
of salary/TFR.
TSR – Out
performance of
median ranked
company.
Full vesting for out
performance of 25%.
Sales revenue
CAGR with
BVA hurdle.
↑ Start of
Financial Year 1
End of ↑
Financial Year 3
PERFORMANCE PERIOD
The market value at the date of grant of all equity awards made to any
person in any financial year should not normally (and did not during the
Year) exceed two times their TFR or equivalent. The STI and LTI share
awards have a maximum life of six years from grant date.
3.2 At Risk remuneration
In addition to those elements of remuneration which are Fixed, a
significant element of executives’ 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 in terms of Brambles’ overall financial
performance and sustainable returns for all shareholders. The
proportion of executives’ remuneration packages at risk is illustrated
in section 3.3.
Brambles’ Securities Trading Policy applies to awards granted under
the incentive arrangements described above. That policy prohibits
designated persons 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 condition 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.
At Risk remuneration is provided to Brambles’ executives 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 sections 7.2 and 7.3.
Brambles’ At Risk remuneration includes three different types of
award, an STI cash award, STI share award and an LTI share award.
Total Shareholder Return (TSR) measures the returns that a company
has provided for its shareholders, reflecting share price movements
and reinvestment of dividends over a specified period. Definitions
of BVA, TSR, and Compound Annual Growth Rate (CAGR) and the
methods by which they are calculated are included in the Glossary
on pages 119 to 120.
More detailed information on Brambles’ current incentive
arrangements is set out in section 4, and in the relevant plan rules,
which can be found on the Brambles website.
3.3 Remuneration packages – Fixed vs. At Risk
Brambles’ executive remuneration mix is heavily tied to performance.
At Risk remuneration is performance based and is made up of
short term and long term incentives. It represents approximately
65-70% of the executive’s remuneration package (based on target
performance for STI and using the fair market value for share awards).
The following bar graph illustrates the remuneration mix. It shows the
potential remuneration mix if an executive hits all targets and the mix
based on actual payments, including STI cash awards made in respect
to the Year, and STI and LTI share awards that vested during the
Year. Share awards that vested during the Year were granted as at
29 August 2007. As shown in the following graph, the actual
remuneration of executives is between 41% and 68% less than the
potential, due to low STI payments and LTI share awards not vesting
during the Year.
32
BRAMBLES LIMITED ANNUAL REPORT 2010
100%
80%
37%
60%
I
N
O
T
A
R
E
N
U
M
E
R
REMUNERATION MIX SHOWING POTENTIAL AT TARGET AND ACTUAL
37%
34%
34%
37%
37%
37%
37%
34%
37%
Fixed
STI
LTI
30%
0%
34%
33%
40%
15%
0%
9%
0%
8%
0%
33%
25%
34%
0%
34%
0%
34%
18%
18%
0%
28%
34%
0%
13%
33%
0%
19%
34%
0%
3%
20%
0%
33% 33%
29%
29%
33%
33%
33%
33%
29%
29%
29%
29%
29%
29%
29%
29%
33%
33%
29%
29%
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T J GORMAN1
G J HAYES1
J L INFINGER1
J R A JUDD1
P S MACKIE1
E E POTTS
J D RITCHIE1
K J SHUBA1
N P SMITH
R J WESTERBOS1
EXECUTIVES
Details of the percentages of the STI cash award expected to be paid
to Disclosable Executives and the percentages of STI cash award
forfeited in respect to performance during the Year, are shown below.
REMUNERATION MIX SHOWING POTENTIAL AT TARGET AND ACTUAL
Actual STI cash paid and forfeited in 2010
100%
4.1 STI Key Performance Indicators
As outlined in section 3.2, executives have the opportunity to receive an
annual STI cash and share award based on performance against KPIs
(the share element vests three years after the award).
Fixed
STI
LTI
1 The potential remuneration shown is for the entire 12 month period, but these executives did not hold their current position for the whole Year.
34%
34%
The STI financial KPIs chosen for the Year (in addition to personal
strategic and safety objectives) were Brambles Value Added (BVA) and
34%
37%
Cash Flow from Operations (Cash Flow), plus (for the CEO and the
CFO) Profit After Tax (PAT). For CHEP and Recall Group Presidents,
33%
34%
KPIs included Brambles BVA and their respective business unit (CHEP
or Recall) BVA and Cash Flow.
0%
8%
33%
13%
33%
19%
25%
0%
0%
0%
29%
29%
33%
33%
33%
33%
33%
A focus on BVA helps ensure the efficient use of capital within
33%
Brambles. PAT captures interest and tax charges which are not directly
incorporated in BVA. The reintroduction of Cash Flow in 2010 was to
ensure a heightened focus on the generation of cash for the Company.
This measure will continue to be used as an STI KPI in 2011.
J L INFINGER1
J R A JUDD
N P SMITH
K J SHUBA
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A
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 significantly 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 following table.
NAME
80%
37%
37%
I
60%
N
O
T
A
Executive Directors
R
E
30%
N
U
T J Gorman
40%
M
E
R
15%
0%
34%
G J Hayes
20%
33% 33%
Current Key
Management Personnel
29%
29%
0%
ACTUAL STI CASH AS A %
OF MAXIMUM STI CASH
37%
FOR YEAR ENDED
30 JUNE 2010
37%
% OF MAXIMUM STI
CASH FORFEITED
37%
37%
FOR YEAR ENDED
30 JUNE 2010
0%
28%
34%
0%
9%
34%
34%
0%
34%
0%
65%
57%
0%
3%
35%
18%
43%
18%
29%
29%
29%
29%
29%
29%
29%
29%
l
a
i
t
n
e
t
o
P
l
a
u
t
c
A
l
a
u
t
c
A
l
a
i
t
n
e
t
o
P
l
a
u
t
c
A
l
a
i
t
n
e
t
o
P
l
a
u
t
c
A
l
a
i
t
n
e
t
o
P
l
a
i
t
n
e
t
o
P
T J GORMAN1
G J HAYES1
J D RITCHIE1
R J WESTERBOS1
P S MACKIE1
P S Mackie
63%
l
a
u
t
c
A
56%
57%
l
a
u
t
c
A
l
a
i
t
n
e
t
o
P
E E POTTS
37%
EXECUTIVES
42%
J L Infinger
J R A Judd
E E Potts
44%
43%
58%
J D Ritchie
K J Shuba
N P Smith
R J Westerbos
41%
39%
44%
67%
59%
61%
56%
33%
4. PERFORMANCE OF BRAMBLES
Brambles’ remuneration policy is directly linked to its performance,
both in terms of financial performance 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 Key Performance Indicators (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 remuneration 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 section 4.2.1. The table in section 4.2.1 shows the level
of vesting of awards triggered by performance over those periods.
1 The potential remuneration shown is for the entire 12 month period, but these executives did not hold their current position for the whole Year.
BRAMBLES LIMITED ANNUAL REPORT 2010
33
DIRECTORS’ REPORT –
REMUNERATION REPORT
CONTINUED
Performance against KPIs in 2010
KPIs
LEVEL OF PERFORMANCE ACHIEVED DURING
THE YEAR2
Brambles BVA
Brambles PAT
Brambles Cash Flow
CHEP Americas BVA
Between Threshold and Target
Between Target and Maximum
Achieved Target
Below Threshold
CHEP Americas Cash Flow
Achieved Target
CHEP EMEA BVA
Between Target and Maximum
CHEP EMEA Cash Flow
Achieved Target
CHEP Asia-Pacific BVA
Between Target and Maximum
CHEP Asia-Pacific Cash Flow
Achieved Target
Recall BVA
Between Target and Maximum
Recall Cash Flow
Achieved Target
In addition to financial measures, which comprise 60-70% of each
member of the ELT’s STI, 30-40% of each STI is based on the
achievement of personal non-financial measures such as the delivery
of objectives relating to business strategy, growth, customer, people
and talent management and safety. For example, the Group President
CHEP Americas’ personal objectives included KPIs associated with the
delivery of the Better Everyday program.
Brambles regards the safety of its people as a major priority and the
ELT has Group-wide oversight of the Zero Harm Charter. This means
that all ELT members will lose any STI entitlement under their safety
objective if a fatality occurs anywhere in the Brambles Group.
The table in section 3.3 illustrates the impact of the above results
on the level of STI cash award payable and forfeited during the Year.
4.2 Equity award vesting conditions
As outlined in section 3.2, Disclosable Executives also have the
opportunity to receive equity awards in the form of LTI share awards.
Vesting only occurs three years from the date of award and depends on
Brambles’ TSR performance relative to the S&P/ASX100 Index over a
three year performance period (Performance Period), as well as, in the
most recent awards, Brambles’ performance against sales revenue
growth and BVA hurdles, as described in the following tables.
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 of time.
Details of the equity awards granted to Disclosable Executives and the
performance hurdles which apply to each of the awards are set out
in section 7.2. The table in section 4.2.1 illustrates 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 2009 and to 30 June 2010.
4.2.1 PERFORMANCE AWARDS UNDER THE 2004 AND 2006
PERFORMANCE SHARE PLANS
Awards under the above Performance 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.
Level of vesting of LTI and Enhanced STI share awards based on TSR performance
AWARDS MADE
DURING FINANCIAL YEAR
PERFORMANCE
CONDITION
START OF PERFORMANCE
PERIOD
RANKING PERFORMANCE
(OUT OF 100)
VESTING TRIGGERED
(% OF ORIGINAL AWARD)
VESTING TRIGGERED
(% OF ORIGINAL AWARD)
PERIOD TO 30 JUNE 2009
PERIOD TO 30 JUNE 2010
20073
20083
Relative TSR4
21 February 2007
Relative TSR4
1 July 2007
814
684
N/A
N/A
The following table provides similar details for awards which have yet to be tested.
0% Enhanced STI Awards
0% LTI Awards
0% Enhanced STI Awards
0% LTI Awards
AWARDS MADE
DURING FINANCIAL YEAR
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 2010
20095
20105
Relative TSR4
1 July 2008
Relative TSR4
1 July 2009
544
604
0% LTI Awards
0% LTI Awards
2 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 coming year’s financial targets for incentive purposes. Brambles’ BVA
performance for the Year is however, set out on page 10.
3 These performance share rights were granted under the 2006 Share Plan prior to its amendment in November 2008. 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 will lapse.
4 The average ranking of the Company’s TSR against the S&P/ASX 100 Index.
5 These performance share rights were granted under the 2006 Share Plan. Rights under this Plan vest on the third anniversary of their grant date. 50% of the award will
vest subject to meeting a relative TSR performance condition. The balance of the award will vest subject to sales revenue growth and BVA performance. The vesting
matrix for this component of the 2010 award is detailed at section 4.2.2.
34
BRAMBLES LIMITED ANNUAL REPORT 2010
4.2.2 LTI AWARD VESTING CONDITIONS
In November 2008, shareholders approved changes to the 2006
Share Plan, to introduce two sets of performance hurdles, each
with equal weighting.
Half of the LTI share award continues to be measured on relative TSR,
now based on the extent to which the Brambles TSR over the
Performance Period exceeds the TSR of the median ranked company
in the S&P/ASX100 Index over the three year period. The other half of
the LTI share award is measured against the achievement of profitable
growth objectives. The growth element of the LTI share award is
designed to incentivise both long term revenue and BVA growth. Vesting
is based on achievement of sales revenue with three year performance
hurdles set on a compound annual growth rate basis. The sales revenue
growth targets are underpinned by BVA hurdles. This is designed to
drive profitable business growth, to ensure quality of earnings is
maintained at a strong level and to deliver increased shareholder value.
Both sales revenue growth and BVA are measured in constant currency.
The target matrix is set by the Remuneration Committee and approved
by the Board for each LTI award and published in the subsequent
Remuneration Report and Financial Statements. This allows the Board
to set targets for each LTI share award which reward strong
performance in the light of the prevailing and forecast economic and
trading conditions.
The following table provides the vesting framework for the relevant
awards made during the Year. These targets are lower than those set
for 2009-2011 to reflect the significantly different global economic
and market conditions. If current performance is maintained until the
performance hurdles are assessed, the awards will not vest.
LTI performance matrix for financial years 2010 to 2012
VESTING %
CUMULATIVE THREE YEAR BVA
US$M AT FIXED JUNE 2009 FX RATES
800
–
30%
50%
70%
90%
100%
1,000
30%
50%
70%
90%
100%
100%
1,200
50%
70%
90%
100%
100%
100%
SALES REVENUE CAGR*
3%
4%
5%
6%
7%
8%
*Three year compound annual growth rate (CAGR) over base year
4.2.3 ALL EMPLOYEE SHARE PLAN
At the 2008 Annual General Meeting, shareholders gave approval
to an all employee share plan (MyShare), which was implemented
in January 2009.
Since the initial launch, more than 20% of Brambles employees
from more than 25 countries have elected to participate in MyShare.
The number of shares purchased by employees (Acquired Shares) as
at 30 June 2010 is 723,849 (excluding shares acquired through the
dividend share plan). At the end of March 2011, the first full cycle of
MyShare will be completed when Brambles makes a matching number
of shares available to employees. It is anticipated that this allocation
will result in the MyShare employee shareholding representing 0.1%
of issued capital. On completion of the first full cycle of MyShare, a
review will be undertaken.
Members of the ELT are eligible to participate in MyShare. Shares
purchased under MyShare are included in section 5.5, whereas
matching share rights (Matching Awards) allocated during the Year
are shown in section 5.6.
BRAMBLES LIMITED ANNUAL REPORT 2010
35
5.1.4 G J HAYES
Greg Hayes commenced as Chief Financial Officer on
16 November 2009 and became an Executive Director of Brambles
on 1 December 2009.
Greg Hayes’ contract provides for the following remuneration package:
–
–
base salary of A$1,250,000; and
participation in Brambles’ incentive plans in line with current policy:
>
STI opportunity of 60% of base salary (target) and 90%
(maximum);
Grant of STI share awards, the value of which will match the STI
payment each year; and
Grant of annual LTI share awards equal to 130% of base salary.
>
>
5.2 Service contracts
Current Executive Directors and Key Management Personnel are on
continuing contracts which may be terminated without cause by the
employer giving 12 months’ notice, or by the employee giving six
months’ notice, with payments in lieu of notice calculated by reference
to TFR/annual base salary. The termination conditions for Jim Ritchie,
Kevin Shuba, Elton Potts and Jim Infinger include payments in lieu of
notice calculated by reference to annual base salary and health
insurance benefits. These standard service contracts require that any
termination payments made would be reduced by any value to be
received under any new employment.
Other than Peter Mackie6, executives remunerated on a base salary
approach receive pension contributions of 15% of base salary.
DIRECTORS’ REPORT –
REMUNERATION REPORT
CONTINUED
5. EXECUTIVE DIRECTORS AND DISCLOSABLE EXECUTIVES
5.1 Executive Director changes
The following changes occurred in respect to Brambles’ Executive
Directors during the Year. Each of the departures was managed
under the provisions of the existing employment contracts. The details
were disclosed to the ASX on 6 October 2009 (in respect to Mike Ihlein
and Tom Gorman) and 5 November 2009 (in respect to Liz Doherty and
Greg Hayes).
5.1.1 M F IHLEIN
Mike Ihlein retired as Chief Executive Officer and an Executive Director
on 1 November 2009. He agreed to remain in Brambles’ employ until
1 March 2010 to assist with the transition to the new Chief Executive
Officer. On retirement from Brambles, Mike Ihlein received the
following payments:
–
–
–
–
six months’ TFR (inclusive of payment in lieu of notice period);
payment for any accrued annual leave and long service leave at the
date of retirement;
pro-rated STI payment based on performance against objectives for
the Year; and
relevant good leaver treatment in respect of his previously granted
awards under the 2006 Share Plan.
5.1.2 M E DOHERTY
Liz Doherty resigned from the Board on 16 November 2009. Her
employment with Brambles ceased on 30 November 2009. On
cessation of employment she received the following:
–
–
12 months’ TFR (inclusive of payment in lieu of notice period); and
a payment in consideration for the unvested Brambles shares that
Liz Doherty was granted on joining in December 2007. These shares
were granted to her in consideration for the long term incentive
shares that she forfeited on leaving Tesco.
5.1.3 T J GORMAN
Tom Gorman was appointed by the Board to succeed Mike Ihlein as
Chief Executive Officer on 1 November 2009 and became an Executive
Director of Brambles on 1 December 2009.
Tom Gorman’s contract provides for the following remuneration
package:
–
–
TFR comprising salary and all other benefits (other than incentive
plans) of A$1,800,000; and
participation in Brambles’ incentive plans in line with current policy:
>
>
STI opportunity of 45% of TFR (target) and 67% (maximum);
grant of STI share awards, the value of which will match the STI
payment each year; and
grant of annual LTI share awards equal to 115% of TFR.
>
6 Peter Mackie receives employer superannuation (pension) contributions of 21% of base salary for income up to £153,700 and 15% of base salary for any amount
above £153,700.
36
BRAMBLES LIMITED ANNUAL REPORT 2010
Contract terms for executives
NAME AND ROLE(S)
Executive Directors
CONTRACT TYPE AND ANY SPECIAL TERMS
SALARY/TFR AS AT 30 JUNE 2010
UNLESS INDICATED
Thomas Joseph Gorman
Group President, CHEP Europe, Middle East and Africa until
31 October 2009. Chief Executive Officer from 1 November 2009.
Continuing contract.
TFR (including pension contributions)
amount of A$1,800,000
Continuing contract.
Base salary of A$1,250,000
Gregory John Hayes
Chief Financial Officer from 16 November 2009.
Former Executive Directors
Michael Francis Ihlein
Chief Executive Officer until 1 November 2009.
Mary Elizabeth Doherty
Chief Financial Officer until 16 November 2009.
Continuing contract. On death, estate
entitled to 1.3 times TFR amount.
Continuing contract. On death, estate
entitled to 1.3 times TFR amount.
TFR (including pension contributions)
amount of A$2,363,000 as at date
of cessation of employment
(1 March 2010)
TFR (including pension contributions)
of A$1,260,000 as at date of cessation
of employment (30 November 2009)
Current Key Management Personnel
James David Ritchie
President, CHEP USA until 14 January 2010.
Group President, CHEP Americas from 15 January 2010.
Rudolph Joseph Westerbos
Group President CHEP Europe, Middle East and Africa from
19 April 2010.
Kevin John Shuba
Group President, CHEP Americas until 14 January 2010.
Group Senior Vice President and Customer Development Officer
from 15 January 2010.
E Elton Potts
Group President and Chief Operating Officer, Recall
Peter Stewart Mackie
President, CHEP Europe until 31 October 2009.
Acting Group President, CHEP Europe, Middle East and Africa
from 1 November 2009 to 18 April 2010.
Group President, CHEP Asia-Pacific from 19 April 2010.
Nicholas Peter Smith
Group Senior Vice President, Human Resources
Jasper Rayner Augusto Judd
Group Senior Vice President – Strategic Development until
15 March 2010. Group Senior Vice President and Head of
Innovation from 16 March 2010.
James Louis Infinger
Group Senior Vice President and Chief Information Officer
from 19 October 2009.
Former Senior Executive
Craig Andrew van der Laan de Vries7
Group President, CHEP Asia-Pacific and Global Head
of Mergers and Acquisitions until 18 December 2009.
Continuing contract.
Base salary of US$530,000
Continuing contract.
Base salary of €390,000
Continuing contract.
Base salary of US$530,000
Continuing contract.
Base salary of US$530,000
Continuing contract.
Base salary of A$550,000
Continuing contract.
Base salary of A$575,000
Continuing contract.
Base salary of A$500,000
Continuing contract.
Base salary of US$425,000
Continuing contract. On death, estate
entitled to 0.5 times TFR amount and
0.5 times average annual STI paid to
him over three previous years.
TFR (including pension contributions)
amount of A$1,025,000 as at date
of cessation of employment
(18 December 2009).
7 Craig van der Laan received payment in lieu of a 12 month notice period, calculated by reference to annual TFR and the average STI cash award received over the previous
three years.
BRAMBLES LIMITED ANNUAL REPORT 2010
37
DIRECTORS’ REPORT –
REMUNERATION REPORT
CONTINUED
5.3 Total remuneration and benefits for the Year
The following table shows details of the total remuneration and benefits provided to the Disclosable Executives for the Year, together with prior
year comparatives. This includes one-off contractual payments to departing executives. The TFR amounts shown for Tom Gorman, Mike Ihlein,
Liz Doherty and Craig van der Laan, are those to which they were entitled for the Year, and which they elected to receive in a combination of one
or more of the following elements: cash salary payments; pension contributions; and motor vehicle benefits.
SHORT TERM EMPLOYEE BENEFITS
POST
EMPLOYMENT
BENEFITS
OTHER
SHARE-BASED PAYMENT
NAME
YEAR
CASH/
SALARY/
TFR/FEES
US$’000
CASH
BONUS
US$’000
NON-
MONETARY
BENEFITS8
US$’000
SUPER-
ANNUATION
US$’000
TERMINATION/
SIGN-ON
PAYMENTS/
RETIREMENT
BENEFITS
US$’000
OTHER
US$’000
TOTAL
BEFORE
EQUITY
US$’000
OPTIONS/
AWARDS
US$’000
AS %
OF TOTAL
TOTAL
US$’000
Executive Directors
T J Gorman
G J Hayes
20109
2009
20109
2009
Former Executive Directors
M F Ihlein14
M E Doherty14
Totals
20109
2009
20109
2009
2010
2009
1,408
770
709
–
1,492
2,006
488
973
4,097
3,749
Current Key Management Personnel
J L Infinger
J R A Judd
P S Mackie
E E Potts
J D Ritchie
K J Shuba
N P Smith
R J Westerbos
2010
2009
20109
2009
2010
2009
2010
2009
2010
2009
2010
2009
20109
2009
2010
2009
Former Senior Executive
C A van der Laan14
20109
Totals
2009
2010
2009
301
–
592
701
443
–
513
497
509
–
563
554
544
461
146
–
425
945
4,036
3,158
692
94
349
–
191
19
1
–
441
209
–
–
–
1,482
94
99
–
252
41
276
–
278
53
164
–
184
–
296
54
65
–
–
76
38
56
21
457
78
375
–
4
5
136
–
–
–
56
–
8
4
1
–
3
–
–
3
1,614
224
583
12
27
80
95
–
–
–
–
–
122
80
37
–
66
55
69
–
67
80
66
–
75
71
76
62
16
–
–
–
472
268
–
–
–
–
1,080
–
1,554
–
2,634
–
–
–
–
–
–
–
–
–
217
–
–
–
–
–
445
–
1,876
–
2,538
–
48
21
–
–
–
–
–
–
48
21
10
–
–
–
17
–
18
18
13
–
19
19
–
–
1
–
–
–
78
37
2,366
984
1,154
–
3,222
2,044
2,098
994
8,840
4,022
822
–
914
802
941
–
876
648
1,025
–
849
648
917
577
676
–
2,301
1,024
9,321
3,699
438
293
288
–
952
1,543
16%
23%
20%
–
23%
43%
(351)
(20%)
323
1,327
2,159
25%
–
–
2,804
1,277
1,442
–
4,174
3,587
1,747
1,317
10,167
6,181
291
–
242
354
122
–
320
407
375
–
243
373
120
106
–
–
26%
1,113
–
21%
31%
12%
–
27%
39%
27%
–
22%
37%
12%
16%
–
–
–
1,156
1,156
1,063
–
1,196
1,055
1,400
–
1,092
1,021
1,037
683
676
–
(1,028)
(81%)
999
685
2,239
49%
–
–
1,273
2,023
10,006
5,938
8 Non-monetary benefits include car parking, personal/spouse travel, club membership, motor vehicles, relocation and storage costs and fringe benefits tax.
9 The year-on-year comparison of remuneration costs is affected by the movement of exchange rates from A$1=US$0.7479 for 2009 to A$1=US$0.8813 for 2010.
Note: Footnote 14 appears on page 39.
38
BRAMBLES LIMITED ANNUAL REPORT 2010
5.4 Equity-based awards
The following table shows details of equity-based awards made to the
Disclosable Executives during the Year. STI and LTI share awards were
made under the 2006 Share Plan, the terms and conditions of which
are available in sections 7.2 and 7.3 (see plan numbers 18-20).
Matching Awards were made under MyShare, the terms and conditions
of which are available in sections 7.2 and 7.3 (plan numbers 28-40).
Neither Dolph Westerbos or Craig van der Laan were awarded
equity-based awards during the Year.
EQUITY-BASED
AWARDS
NUMBER
VALUE AT GRANT
US$’00010
NAME
TYPE OF AWARD
Executive Directors
T J Gorman
STI
LTI
G J Hayes
MyShare Matching
Total
STI
LTI
Total
Former Executive Directors
M F Ihlein14
MyShare Matching
Total
M E Doherty14
MyShare Matching
Total
Current Key Management Personnel
J L Infinger
STI
LTI
J R A Judd
P S Mackie
E E Potts
J D Ritchie
K J Shuba
N P Smith
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
15,158
311,168
668
326,994
–
405,870
405,870
483
483
440
440
60,092
68,490
135
128,717
8,305
75,162
878
84,345
4,504
48,604
593
53,701
8,487
94,564
611
103,662
–
65,266
224
65,490
–
111,034
611
111,645
10,753
86,436
737
97,926
78
1,329
4
–
1,733
1,733
3
3
2
2
310
292
1
603
43
321
5
369
23
208
3
234
44
404
3
451
–
279
1
280
–
474
4
478
56
369
4
429
5.5 Shareholdings
The table below shows details of Brambles Limited ordinary shares in
which the Disclosable Executives held relevant interests, being issued
shares held by them and their related parties.
Over the five year period commencing from the date of employment
with Brambles, the Chief Executive Officer must, as a minimum,
achieve and maintain a shareholding equal to 150% of TFR before tax.
Other members of the ELT must, as a minimum, achieve and maintain
a shareholding equal to 75% of TFR or 100% of base salary before tax.
ORDINARY SHARES
BALANCE AT THE START
OF THE YEAR
CHANGES
DURING
THE YEAR
BALANCE AT
THE END OF
THE YEAR11 12
Executive Directors
T J Gorman
G J Hayes
Former Executive Directors14
1,411
M F Ihlein
M E Doherty
245
–
783,524
10,151
685
–
489
441
Current Key Management Personnel
J L Infinger
J R A Judd
P S Mackie
E E Potts
J D Ritchie
K J Shuba
N P Smith
R J Westerbos
Former Senior Executive14
–
135
50,590
14,809
245
50,689
609
7,437
–
39,941
28,033
18,419
292
–
754
–
93013
–
784,01315
10,59216
13513
65,399
85413
58,126
39,941
46,452
1,04613
–
C A van der Laan
15,000
34,779
49,779
10 The total value of the relevant equity award(s) is valued as at the date of grant
using the methodology set out in section 7.1. The minimum possible future value
of all awards yet to vest is zero, and is based on the performance/service
conditions not being met. The maximum possible future value of awards yet to
vest is equal to the value at grant.
11 On 31 July 2010 the following Disclosable Executives acquired ordinary shares
under MyShare, which are held by Computershare Nominees CI Limited:
Tom Gorman (76), Jim Infinger (42), Jasper Judd (77), Peter Mackie (77),
Elton Potts (69), Jim Ritchie (69), Kevin Shuba (69) and Nick Smith (77).
12 Of which Computershare Nominees CI Limited holds 592 shares for Liz Doherty,
1,029 for Jasper Judd, 867 for Elton Potts, 224 for Jim Ritchie and 864 for
Kevin Shuba.
13 Held by Computershare Nominees CI Limited.
14 Closing balances are shown as at cessation of employment for former
employees. Mike Ihlein’s employment ceased on 1 March 2010, Liz Doherty’s
employment ceased on 30 November 2009 and Craig van der Laan’s
employment ceased on 18 December 2009.
15 Of which 115,000 shares were held by UBS Wealth Management Australia Pty
Limited for the Ihlein Family Superannuation Fund, 1,000 shares were held in
the form of CREST Depository Interests by Citibank and 781 shares were held
by Computershare Nominees CI Limited.
16 Of which 592 shares were held by Computershare Nominees CI Limited.
BRAMBLES LIMITED ANNUAL REPORT 2010
39
DIRECTORS’ REPORT –
REMUNERATION REPORT
CONTINUED
5.6 Interests in options/share rights17
The table below shows details of options/share rights over Brambles Limited ordinary shares in which the Disclosable Executives held relevant
interests, in the form of:
–
–
options, being awards made under the 2001 Option Plans;
share rights, being awards made before 30 June 2004 under the 2001 Share Plans, awards made on 21 October 2005 under the 2004 Share
Plans, and awards made on 19 January 2007, 29 August 2007 and 27 August 2008 under the 2006 Share Plan;
Matching Awards being share rights awarded during the Year under MyShare.
–
BALANCE AT
THE START OF
THE YEAR
GRANTED DURING THE YEAR
EXERCISED DURING THE YEAR18
LAPSED DURING THE YEAR
NAME
NUMBER
NUMBER20 21
VALUE AT
GRANT US$’000
NUMBER
VALUE AT
EXERCISE
US$'000
NUMBER
VALUE AT
LAPSE
US$’00022
BALANCE
AT THE END
OF THE
YEAR19
VESTED AND
EXERCISEABLE
AT END OF YEAR
NUMBER
NUMBER
Executive Directors
T J Gorman
G J Hayes
219,688
–
326,994
405,870
1,411
1,733
Former Executive Directors
M F Ihlein14
M E Doherty14
809,734
246,453
483
440
Current Key Management Personnel
J L Infinger
J R A Judd
P S Mackie
E E Potts
J D Ritchie
K J Shuba
N P Smith
–
128,717
177,446
110,041
210,106
123,368
334,421
97,463
84,345
53,701
103,662
65,490
111,645
97,926
Former Senior Executive
3
2
603
369
234
451
280
478
429
–
–
–
–
–
13,93123
6,27823
9,95523
58,71823
134,53424
–
–
–
–
–
–
95
40
66
291
833
–
–
–
–
–
546,682
405,870
–
–
110,038
567
700,179
68,71323
–
–
28,668
17,701
27,109
37,538
28,136
–
246,893
–
128,717
148
219,192
91
139,763
140
276,704
266
92,602
145
283,396
–
–
195,389
–
–
–
–
–
–
–
–
–
C A van der Laan14
442,662
–
–
34,77923
237
49,507
255
358,376
17 Of the awards detailed in section 7.3 the following plan numbers are relevant to Disclosable Executives: Tom Gorman (3-8, 12-14, 18-20); Greg Hayes (19-20); Mike Ihlein
(10, 12-14, 24-35); Liz Doherty (9, 12-14, 24-33); Jim Infinger (18-20, 36-40); Jasper Judd, Peter Mackie, and Elton Potts (3-8,12-14,18-20,24-40); Jim Ritchie (15-20,
36-40), Kevin Shuba (1-8, 12-14, 19-20, 24-40); Nick Smith (12-14, 18-20, 24-40) and Craig van der Laan (3-8, 12-14). Lapses occurred for Mike Ihlein, Jasper Judd,
Peter Mackie, Elton Potts, Kevin Shuba and Craig van der Laan from plan numbers 4 and 5. Jasper Judd, Peter Mackie, Elton Potts, Kevin Shuba and Craig van der Laan
exercised from plan number 3. In addition Kevin Shuba exercised from plan numbers 1 and 2. Jim Ritchie exercised an award from plan number 15, and his awards under
plan number 17 lapsed.
18 Of the options/rights exercised during the Year, no monies were paid on exercise, with the exception of Kevin Shuba who paid US$417,529 on exercise of 104,010 options
during the Year.
19 Since the end of the Year, on 30 July 2010 the following Executive Directors and Key Management Personnel received Matching Awards under MyShare: Tom Gorman (76),
Jim Infinger (42), Jasper Judd (77), Peter Mackie (77), Elton Potts (69), Jim Ritchie (69), Kevin Shuba (69) and Nick Smith (77).
20 During the Year, 3,582,251 performance share rights were granted under the 2006 Share Plan, of which 326,326 were granted to Tom Gorman and 405,870 were granted
to Greg Hayes, prior to their appointment as Executive Directors.
21 During the Year, 537,154 Matching Awards were granted under MyShare, of which 483 were granted to Mike Ihlein and 440 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 25 November 2008. 668 Matching Awards were granted to Tom Gorman under
MyShare. Tom Gorman’s application to continue to participate in MyShare was accepted before he became an Executive Director.
22 “Lapse” in this context means that the award was forfeited due to either the service or performance conditions not being met.
23 Vested during the Year.
24 Of which 9,326 vested during the Year.
Note: Footnote 14 appears on page 39.
40
BRAMBLES LIMITED ANNUAL REPORT 2010
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.
Since 1 January 2007, Non-executive Directors’ fees have been fixed
and denominated in US dollars and then converted each month into the
currency of the country in which each individual Non-executive Director
resides. Following four years of unchanged fees, during the Year the
Chairman initiated a review of Non-executive Director fees and the
relativity between his fee and those of other Non-executive Directors.
The aim of the review was to simplify the structure of the fees and
ensure they properly reflect current market rates. At the completion
of the review, it was decided that effective from 1 February 2010,
Non-executive Directors’ fees would be denominated in Australian
dollars, other than for UK based Non-executive Directors whose fees
would be denominated in Pounds Sterling. This review led to a
reduction in the Chairman’s fee and an increase in other Non-executive
Directors’ fees.
This review established the following fee structure:
Chairman
Australia based Non-executive Directors
UK based Non-executive Directors25
Fee supplement for Audit Committee
Chairman26
Fee supplement for Remuneration
Committee Chairman25 26
A$543,333
A$173,000
£80,000
A$36,000
£15,000
The next fee review will take effect from 1 January 2011.
6.2 Non-executive Directors’ appointment letters
Directors are appointed for an unspecified term but are subject to
election by shareholders at the first Annual General Meeting 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 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.
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.
Details of the years in which the Non-executive Directors are next
due for re-election by shareholders are shown in the Corporate
Governance Statement in section 2.
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. The
full names of the Non-executive Directors and the dates of any changes
in Non-executive Directors are shown in the Directors’ Report – Other
Information.
Any contributions to personal superannuation or pension funds on
behalf of the Non-executive Directors are deducted from their overall
fee entitlements.
25 Luke Mayhew, the Remuneration Committee Chairman, is currently the only UK based Non-executive Director.
26 The fee supplement is only payable to a Committee Chairman who is not also the Board Chairman.
BRAMBLES LIMITED ANNUAL REPORT 2010
41
DIRECTORS’ REPORT –
REMUNERATION REPORT
CONTINUED
Table 6.3 Non-executive Directors’ remuneration for the Year
SHORT TERM
EMPLOYEE
BENEFITS
POST EMPLOYMENT
BENEFITS
SHARE-BASED
PAYMENT
NAME
YEAR
DIRECTORS’ FEES
US$’000
SUPERANNUATION
US$’000
OTHER27
US$’000
TOTAL BEFORE EQUITY
US$’000
OPTIONS/AWARDS
US$’000
TOTAL
US$’000
Current Non-executive Directors
A G Froggatt
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
J P Mullen
B M Schwartz AM
Former Non–executive Director
D P Gosnell
Totals
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
125
108
155
136
122
108
448
471
138
133
84
–
122
33
85
113
1,279
1,102
8
10
8
12
11
10
40
21
5
5
8
–
11
3
3
4
94
65
–
–
–
–
–
–
4
4
1
–
–
–
–
–
31
22
36
26
133
118
163
148
133
118
492
496
144
138
92
–
133
36
119
139
1,409
1,193
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
133
118
163
148
133
118
492
496
144
138
92
–
133
36
119
139
1,409
1,193
6.4 Non-executive Directors’ shareholdings
Non-executive Directors are encouraged 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
BALANCE AT THE
START OF THE YEAR
CHANGES
DURING
THE YEAR
BALANCE AT
THE END OF
THE YEAR
Current Non-executive Directors
A G Froggatt28
S P Johns29
S C H Kay30
G J Kraehe AO31
C L Mayhew32
J P Mullen
14,890
47,500
13,400
61,561
16,500
–
–
–
–
–
–
–
14,890
47,500
13,400
61,561
16,500
–
B M Schwartz AM33
10,000
354
10,354
Former Non-executive Director
D P Gosnell34
14,450
–
14,450
27 “Other” includes personal/spouse travel and fringe benefits tax.
28 Of which 7,000 shares were held by Christine Joanne Froggatt.
29 Of which 27,500 shares were held by Canzak Pty Limited and 20,000 shares were held by Caran Pty Limited.
30 Of which 8,500 shares were held by the Sarah Carolyn Hailes Kay Superannuation Fund.
31 Held by Invia Custodians for Graham John Kraehe Private Superannuation Fund.
32 Held by Worldwide Nominees Limited.
33 Held by Brian Schwartz and Arlene Schwartz as trustees for the Schwartz Superannuation Fund.
34 Held by Susan Gosnell.
42
BRAMBLES LIMITED ANNUAL REPORT 2010
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 by Ernst & Young
Transaction Advisory Services in accordance with the requirements of AASB 2: Share-based Payments, using a binomial model. Assumptions used
in the evaluations are outlined in Note 27 on page 92.
7.2 Summary of 2001, 2004 and 2006 plans
The table below contains details of the 2001 Share Plans, the 2001 Option Plans, the 2004 Share Plans and the 2006 Share Plan under which
former or current Executive Directors and Disclosable Executives unvested and/or unexercised awards which could affect remuneration in this
or future reporting periods.
PLAN
NATURE OF AWARD
SIZE OF AWARD
VESTING CONDITION
VESTING SCHEDULE
2001 Option
Plans
Share rights
% of salary/TFR
Time and relative
TSR hurdle (between
50th and 25th out
of 100)
38% vesting if TSR is
ranked 50th out of 100
companies. 100% vesting
if ranked 25th or better.
PERFORMANCE/
VESTING PERIOD
Three years, with
retests after four
and five years.
LIFE OF AWARD
Maximum of six years.
2001 Share Plans
Share rights
% of salary/TFR
Time and EPS CAGR
hurdle (between 7%
and 15% p.a.)
25th vesting if EPS CAGR
is 7% p.a. 100% vesting if
EPS CAGR is 15% p.a.
Three years, with
retests after four
and five years.
Maximum of six years.
2004 & 2006
Share Plans
(STI)
2004 & 2006
Share Plans
(Enhanced STI)
2004 & 2006
Share Plans (TSR
LTI)
2006 Share Plan
(TSR LTI) as
amended at the
2008 AGM
2006 Share Plan
(BVA LTI)
Share rights
up to 100% of size
of STI Cash Award
Time only.
100% vesting based on
continuous employment.
Three years.
Maximum of six years.
Share rights
Up to 50% of size
of STI Share
Award
Share rights
% of salary/TFR
Share rights
% of salary/TFR
Share rights
% of salary/TFR
Time and relative
TSR hurdle (between
37th and 25th out
of 100).
4% vesting if TSR is
ranked 37th out of 100
companies. 100% vesting
if 25th or better.
Time and relative
TSR hurdle (between
50th and 25th out
of 100)
30% vesting if TSR is
ranked 50th out of 100
companies. 100% vesting
if 25th or better.
Time and relative
TSR hurdle (between
50th and 25th out
of 100)
Time and sales
revenue growth and
BVA performance
40% vesting if TSR is
equal to the median
ranked company. 100%
vesting if 25% above the
median ranked company.
20% vesting occurs if
CAGR is 7% and BVA is
US$2,000 over three year
period. 100% vesting
occurs if CAGR is 11%
and BVA is US$2,200
over three year period.
Three years.
Maximum of six years.
Three years.
Maximum of six years.
Three years.
Maximum of six years.
Three years.
Maximum of six years.
MyShare
Matching
share rights
1:1 match for
every acquired
share purchased
Time and retention of
acquired shares
N/A
Two years from
first acquisition.
Automatic exercise on
second anniversary of
first acquisition.
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.
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 and share rights granted under the plans carry no dividends or voting rights35.
35 Awards granted under the 2004 Plans were formerly over both BIL and BIP shares.
BRAMBLES LIMITED ANNUAL REPORT 2010
43
DIRECTORS’ REPORT –
REMUNERATION REPORT
CONTINUED
PLANS UNDER WHICH
AWARDS MADE
PLAN
NUMBER
GRANT DATE
EXPIRY DATE
EXERCISE PRICE
VALUE AT GRANT
STATUS/VESTING DATE
2001 Option Plan36
2001 Share Plans36
2006 Share Plans
MyShare
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
4 March 2004
4 March 2004
19 January 200737 38
19 January 200738 40
19 January 200738 41
29 August 200737
29 August 200740
29 August 200741
26 February 200837 42
19 March 200843
28 April 200837
27 August 200837
27 August 200841
27 August 200844
1 June 2009
1 June 2009
1 June 2009
25 November 200937
25 November 200941
25 November 200944
31 March 200945
30 April 200945
29 May 200945
30 June 200945
31 July 200945
31 August 200945
30 September 200945
30 October 200945
30 November 200945
31 December 200945
29 January 201045
26 February 201045
31 March 201046
30 April 201046
31 May 201046
30 June 201046
30 July 201046
4 March 2010
A$5.31/£2.11 A$1.17/£0.44 100% exercisable from 4 March 2007
4 March 2010
31 August 201239
31 August 201239
31 August 201239
30 August 201339
30 August 201339
30 August 201339
2 December 201339
2 March 201439
29 April 201439
27 August 201439
27 August 201439
27 August 201439
1 July 2010
1 July 2011
1 October 2009
25 November 201539
25 November 201539
25 November 201539
1 April 2011
1 April 2011
1 April 2011
1 April 2011
1 April 2011
1 April 2011
1 April 2011
1 April 2011
1 April 2011
1 April 2011
1 April 2011
1 April 2011
1 April 2012
1 April 2012
1 April 2012
1 April 2012
1 April 2012
– A$4.67/£1.85 100% exercisable from 4 March 2007
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
A$12.60 100% exercisable from 19 January 2010
A$5.72 100% lapsed at 1 July 2009
A$6.97 100% lapsed at 1 July 2009
A$12.64 29 August 2010
A$6.75 29 August 2010
A$8.11 29 August 2010
A$9.39 100% lapsed at 30 November 2009
A$8.84 1 March 2011
A$8.01 28 April 2011
A$6.53 27 August 2011
A$5.99 27 August 2011
A$4.67 27 August 2011
A$5.75 100% vested at 1 June 2010
A$5.55 1 June 2011
A$5.68 100% lapsed at 30 September 2009
A$5.85 25 November 2012
A$5.85 25 November 2012
A$3.84 25 November 2012
A$5.09 31 March 2011
A$5.97 31 March 2011
A$5.91 31 March 2011
A$5.91 31 March 2011
A$5.67 31 March 2011
A$6.99 31 March 2011
A$7.79 31 March 2011
A$6.76 31 March 2011
A$6.30 31 March 2011
A$6.46 31 March 2011
A$6.23 31 March 2011
A$6.59 31 March 2011
A$7.00 31 March 2012
A$6.92 31 March 2012
A$6.31 31 March 2012
A$5.13 31 March 2012
A$5.18 31 March 2012
LUKE MAYHEW
Non-executive Director and Chairman of the Remuneration Committee
19 August 2010
36 All values in A$ relate to awards originally made over BIL shares, and in £ to
42 Awards granted on 19 March 2008 were, for pricing and vesting purposes, taken
awards made over BIP shares.
to have been granted on 1 March 2008.
37 STI awards vest on the third anniversary of their grant date, subject to
43 Awards granted on 26 February 2008 were, for pricing and vesting purposes,
continued employment.
38 Awards granted on 19 January 2007 were, for pricing and vesting purposes,
taken to have been granted on 30 August 2006.
39 Awards granted to Elton Potts, Tom Gorman, Kevin Shuba, Jim Infinger and
Jim Ritchie expire three years earlier than the date shown, or immediately after
vesting, if earlier.
40 Enhanced STI awards vest on the third anniversary of their grant date, subject
to continuing employment and meeting a TSR performance condition.
41 These LTI awards vest on the third anniversary of their grant date, subject to
continuing employment and meeting a TSR performance condition.
taken to have been granted on 1 December 2007.
44 These LTI awards vest on the third anniversary of their grant date, subject to
continuing employment and meeting a sales growth and BVA performance
condition.
45 These Matching Awards granted under MyShare vest on 31 March 2011, subject
to continuing employment and retention of the associated Acquired Shares.
On vesting they are automatically exercised.
46 These Matching Awards granted under MyShare vest on 31 March 2012, subject
to continuing employment and retention of the associated Acquired Shares.
On vesting they are automatically exercised.
44
BRAMBLES LIMITED ANNUAL REPORT 2010
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 2010 (Year).
PRINCIPAL ACTIVITIES
The principal activities of the Group during the Year were the provision
of pallet and container pooling and supply chain services and
information management services. Brambles is a leading global
provider of these services.
The Group’s principal operations comprise two main businesses, CHEP
and Recall. CHEP owns a pool of pallets and containers, which it issues,
collects and reissues through its network of service centres to
manufacturers, producers, distributors and retailers so that they may
transport their products safely and efficiently. In addition, CHEP
provides supply chain optimisation and transport management
services. Recall is a global leader in the management of information,
providing secure storage, digitisation, retrieval and destruction of
information in multiple media formats.
DIVIDENDS
The Directors have declared a final dividend of 12.5 Australian cents
per share, which will be 20% franked. The dividend will be paid on
Thursday, 14 October 2010 to shareholders on the register on
Wednesday, 22 September 2010. On 8 April 2010, an interim dividend
was paid, which was 12.5 Australian cents per share and 20% franked.
Depending on certain elections made by shareholders, a final dividend
for the year ended 30 June 2009 of 12.5 Australian cents per share,
20% franked, was paid either on 8 October 2009 or 27 October 2009.
The unfranked component of each dividend paid during the Year was
conduit foreign income.1
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 served as a Director are set out below. The qualifications,
experience and special responsibilities for Directors are set out on
page 15.
Mary Elizabeth Doherty
1 July 2009 to 16 November 2009
There were no significant changes in the nature of the Group’s principal
activities during the Year.
Anthony Grant Froggatt
1 July 2009 to date
Thomas Joseph Gorman
1 December 2009 to date
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 Letter from the Chairman and the CEO
on page 1, the Operational and Financial Review on pages 4 to 11 and
in the Treasury and Risk Review on pages 12 to 13.
Information about the financial position of the Group is included
in the Operational and Financial Review on pages 4 to 11 and in
the Performance Summary on pages 2 to 3.
MATTERS SINCE THE END OF THE FINANCIAL YEAR
The Directors are not aware of any matter or circumstance that has
arisen since 30 June 2010 up to the date of this Report 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 Letter from the Chairman and the CEO on page 1 and the
Operational and Financial Review on pages 4 to 11.
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 Letter from the
Chairman and the CEO on page 1 and the Operational and Financial
Review on pages 4 to 11. 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.
David Peter Gosnell
1 July 2009 to 31 March 2010
Gregory John Hayes
1 December 2009 to date
Michael Francis Ihlein
1 July 2009 to 1 November 2009
Stephen Paul Johns
1 July 2009 to date
Sarah Carolyn Hailes Kay
1 July 2009 to date
Graham John Kraehe AO
1 July 2009 to date
Christopher Luke Mayhew
1 July 2009 to date
John Patrick Mullen
1 November 2009 to date
Brian Martin Schwartz AM
1 July 2009 to date
SECRETARY
Details of the qualifications and the experience of the Company
Secretary of Brambles Limited are as follows: Robert Nies Gerrard
joined Brambles in 2003 as Senior Counsel and was appointed Group
Company Secretary in February 2008. 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 Bachelor of Science (BSc) and
Bachelor of Law (LLB) degrees from the University of New South
Wales. He is a Solicitor of the Supreme Court of New South Wales.
1 This means that no Australian dividend withholding tax was payable on the dividends that Brambles paid to non-resident shareholders.
BRAMBLES LIMITED ANNUAL REPORT 2010
45
DIRECTORS’ REPORT
– OTHER INFORMATION
CONTINUED
DIRECTORS’ MEETINGS
Details of the membership of Board committees are given in the Corporate Governance Statement on pages 20, 23 and 27. The following table
shows the actual Board and committee meetings held during the Year and the number attended by each Director or committee member.
DIRECTORS
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)
Current Directors
A G Froggatt
T J Gorman(c)
G J Hayes(c)
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
J P Mullen(g)
B M Schwartz AM
Former Directors
M E Doherty(d)
D P Gosnell(e)
M F Ihlein(f)
11
11
7
7
10
11
11
10
7
11
3
7
3
7
7
11
11
11
11
8
11
3
8
3
2
-
-
3
3
3
2
-
3
3
3
3
3
-
-
3
3
3
3
-
3
3
3
3
-
1
2
4
2
3
-
-
-
2
-
2
-
1
2
4
2
3
-
-
-
2
-
2
-
-
-
7
7
-
-
-
7
-
4
-
-
-
-
7
7
-
-
-
7
-
5
-
7
-
-
-
-
7
7
2
-
-
-
-
7
-
-
-
-
7
7
3
-
-
-
-
4
-
-
4
-
4
-
-
-
-
-
-
4
-
-
4
-
4
-
-
-
-
-
-
(a) 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.
(b) 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.
(c) Tom Gorman and Greg Hayes were appointed as Directors with effect from 1 December 2009.
(d) Liz Doherty resigned as a Director on 16 November 2009.
(e) David Gosnell resigned as a Director on 31 March 2010.
(f) Mike Ihlein retired as a Director on 1 November 2009.
(g) John Mullen was appointed a Director on 1 November 2009.
46
BRAMBLES LIMITED ANNUAL REPORT 2010
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 2007 and the period for
which each directorship has been held.
DIRECTOR
LISTED COMPANY
PERIOD DIRECTORSHIP HELD
A G Froggatt
AXA Asia Pacific Holdings Limited
T J Gorman
G J Hayes
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
J P Mullen(a)
Billabong International Limited
Scottish & Newcastle plc
None
None
Leighton Holdings Limited
Spark Infrastructure Group
Westfield Group:
Westfield Holdings Limited
Westfield America Trust (director of responsible entity, Westfield America
Management Limited)
Westfield Trust (director of responsible entity, Westfield Management Limited)
1985 to current
Commonwealth Bank of Australia
Bluescope Steel Limited
Djerriwarrh Investments Limited
WH Smith plc
Deutsche Post World Net
Embarq Corporation
Telstra Limited
2008 to current
2008 to current
2003 to 2007
-
-
2009 to current
2005 to current
1985 to current
1996 to current
2003 to current
2002 to current
2002 to current
2006 to current
2005 to 2009
2006 to 2009
2008 to current
2005 to current
2009 to current
2009 to current
B M Schwartz AM
Insurance Australia Group Limited
Westfield Group:
Westfield Holdings Limited
Westfield America Trust (director of responsible entity, Westfield America
Management Limited)
Westfield Trust (director of responsible entity, Westfield Management Limited)
2009 to current
(a) John Mullen was appointed a director of MAp Airports Limited on 1 July 2010.
INDEMNITIES
Indemnities provided to Directors and officers in accordance with
the constitution of Brambles Limited are detailed in Note 35 on
page 112. 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.
ENVIRONMENT, OCCUPATIONAL HEALTH AND SAFETY,
EMPLOYEES AND RESEARCH AND DEVELOPMENT
Brambles’ Environmental Policy is set by the Board. It applies in all
countries where Brambles operates and provides that Brambles will
act with integrity and respect for the community and the environment,
be committed to sound environmental practice in its daily operations,
that it is a minimum requirement that all Brambles operations
comply with all relevant environmental laws and regulations, that
all employees care for the environment by adopting a specified set
of environmental principles, that every business unit must ensure
that those principles are adhered to and that each business unit
should set environmental performance targets, monitor progress
and report results.
Regular environmental audits are conducted to evaluate compliance
with applicable laws and regulations and implementation of the
Environmental Policy. A copy of the complete Environmental Policy
is set out in Brambles’ Code of Conduct, which is available at
www.brambles.com.
The Board is responsible for setting Brambles’ Health and Safety Policy,
which states that Brambles is to provide and maintain a healthy and
safe working environment and to prevent injury, illness or impairment
to the health of employees, contractors, customers or the public.
Brambles is committed to achieving Zero Harm. The Zero Harm
Charter, which sets out the vision, values and behaviours and
commitment required to work safely and ensure environmental
compliance, is provided to all employees and, together with the
complete Health and Safety Policy, is on the Brambles website at
www.brambles.com.
The Chief Executive Officer together with the Group Presidents of
CHEP and the Group President and Chief Operating Officer of Recall
are responsible for policy implementation and safety performance.
BRAMBLES LIMITED ANNUAL REPORT 2010
47
DIRECTORS’ REPORT
– OTHER INFORMATION
CONTINUED
Health and safety performance indicators measure compliance with
corporate objectives and milestones, allow assessment of progress
and comparison with industry benchmarks and provide incentives
for improvement.
The principal safety performance measures are Brambles Injury
Frequency Rate (BIFR), Lost Time Injury Frequency Rate (LTIFR) and
Lost Time Injury Severity Rate (LTISR). BIFR measures the combined
number of fatalities, lost time injuries, modified duties and medical
treatments per million hours worked. 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. During the Year, Brambles
and CHEP used BIFR as their safety performance measure and Recall
used LTIFR and LTISR. Recall will transition to BIFR from the 2011
year and this will become the primary measure for the entire Group.
During the 2011 year a “balanced scorecard” approach to safety
performance measurement will be adopted, to help provide new
insights into safety performance and ways to improve upon it.
The balanced scorecard will replace LTIFR and LTISR through
the introduction of measures evaluating injury cost, employee
perception of safety performance and business compliance against
plans and strategies.
A global engagement survey was conducted in November 2009 to
obtain feedback from employees on Brambles as a place to work and
the progress made since the previous survey. Brambles achieved an
overall response rate to the survey of 89%, setting a new global
benchmark for the Group. Employee engagement at Brambles has
improved since the last survey. There are a number of programs in
place to further improve employee engagement. Another survey will
be carried out in the 2011 year.
Brambles is a member of a leadership development consortium with
CEDEP, the European Centre for Executive Development. In FY10
approximately 80 senior executives attended a number of development
activities and Brambles also ran a Next Generation Leaders program to
better equip high potential middle managers for future leadership roles.
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, sustainable and safer for use in the supply chain;
developing new pallets, containers and other supply chain platforms;
improving pallet and container repair equipment;
developing unique identifier technologies, including radio frequency
indentification; and
research into and development of new service offerings, information
technology and software solutions, and information and document
management processes.
–
–
–
–
ENVIRONMENTAL REGULATION
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. There were no material breaches of environmental
statutory requirements and no material prosecutions during the Year.
Brambles’ businesses comply with all relevant environmental laws and
regulations and none were involved in any material environmental
prosecutions during the Year.
INTERESTS IN SECURITIES
Pages 39, 40 and 42 of the Remuneration Report include details of
the relevant interests of Directors, and other Group Executives whose
details are required to be disclosed, in shares and other securities
of Brambles Limited.
SHARE CAPITAL, OPTIONS AND SHARE RIGHTS
Details of the changes in the issued share capital of Brambles Limited
and options, share rights and MyShare matching share rights
outstanding over Brambles Limited ordinary shares at the year end are
given in Notes 26 and 27 on pages 89 to 92. No options, share rights or
MyShare matching share rights over the shares of Brambles Limited’s
controlled entities were granted during or since the end of the Year to
the date of this Report.
Since the end of the Year to the date of this Report, the following
grants, exercises and forfeits in options, performance share rights and
MyShare matching share rights over Brambles Limited ordinary shares
have taken place, broken down by reference to the plan numbers
shown on page 44 of the Remuneration Report:
–
–
57,933 grants under plan 40;
4,978 exercises, resulting in the issue of fully paid ordinary shares:
3,551 under the 2009 MyShare offer (plan numbers 24 to 35) and
1,427 under the 2010 MyShare offer (plan numbers 36 to 40);
881,333 lapses: 5,090 under the 2009 MyShare offer (plan numbers
24 to 35), 6,665 under the 2010 MyShare offer, 198,142 under
plan 7, 663,669 under plan 8, 2,450 under plan 14 and 5,317 under
plan 20.
–
48
BRAMBLES LIMITED ANNUAL REPORT 2010
SHARE BUY-BACKS
No ordinary shares were bought-back and cancelled during the Year.
There is no current on-market buy-back in operation.
AUDITORS’ INDEPENDENCE DECLARATION
A copy of the auditors’ independence declaration as required under
section 307C of the Act is set out on page 117.
RISK MANAGEMENT
A discussion of Brambles’ risk profile, management and mitigation of
risks can be found in the Treasury and Risk Review on pages 12 and 13
and the Corporate Governance Statement on pages 25 to 27.
ANNUAL GENERAL MEETING
The AGM will be held at 2.00pm (AEDT) on 18 November 2010 at
The Wesley Theatre, Wesley Conference Centre, 220 Pitt Street,
Sydney NSW 2000.
This Directors’ Report is made in accordance with a resolution of
the Board.
G J KRAEHE AO
Chairman
T J GORMAN
Chief Executive Officer
19 August 2010
TREASURY POLICIES
A discussion of the implementation of treasury policies and mitigation
of treasury risks can be found in the Treasury and Risk Review on
pages 12 and 13.
NON-AUDIT SERVICES
The amount of US$184,000 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 implementation
of a compliance tracking system and tax consulting advice. 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 during 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 4 August 2010,
they have maintained their independence in accordance with their
firm’s requirements, with the provisions of APES 110 – Code of Ethics
for Professional Accountants and the applicable provisions of the Act.
On the same basis, they also confirmed that the objectivity of the audit
engagement partners and the audit staff is not impaired.
BRAMBLES LIMITED ANNUAL REPORT 2010
49
SHAREHOLDER
INFORMATION
DIRECTORS
G J Kraehe AO
(Non-executive Chairman)
A G Froggatt
(Non-executive Director)
T J Gorman
(Chief Executive Officer)
G J Hayes
(Chief Financial Officer)
S P Johns
(Non-executive Director)
S C H Kay
(Non-executive Director)
C L Mayhew
(Non-executive Director)
J P Mullen
(Non-executive Director)
B M Schwartz AM
(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 LISTING
Brambles’ ordinary shares are listed on the Australian Securities
Exchange and are traded under the stock code “BXB”.
SHARE REGISTRY
Online access to shareholding information is available to investors
through the Link Market Services website.
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:
Website: www.linkmarketservices.com.au
registrars@linkmarketservices.com.au
50
BRAMBLES LIMITED ANNUAL REPORT 2010
SHARE OPTIONS/RIGHTS REGISTRY
Employees or former employees of Brambles who have queries about
the following interests:
–
–
–
–
share options under the 2001 Option Plans;
performance share rights under the 2001, 2004 or 2006 share plans;
matching share rights under MyShare; or
shares acquired under MyShare or other share interests held
through Computershare Nominees CI Limited,
may contact Computershare Plan Managers.
Computershare Plan Managers Pty Limited
Attention: Brambles Employee Share Plans
GPO Box 658
Melbourne VIC 3001
Australia
Telephone: 1800 133 976 (within Australia)
61 (0) 3 9415 4659 (from outside Australia)
Facsimile: 61 (0) 3 9473 2458
Email:
Website: www.computershare.com/brambles
BramblesSharePlans@computershare.com.au
UNCERTIFICATED FORMS OF SHAREHOLDING
Brambles’ ordinary shares are held in uncertificated form. There are
two types of uncertificated holdings:
Issuer Sponsored Holdings: This type of holding is recorded on a
subregister of the Brambles share register, maintained by Brambles.
If your holding is recorded on the issuer sponsored subregister, you will
be allocated a Securityholder Reference Number or SRN, which is a
unique number used to identify your holding of ordinary shares in
Brambles.
Broker Sponsored Holdings: This type of holding is recorded on the
main Brambles share register. Shareholders who are sponsored by an
ASX market participant broker will be allocated a Holder Identification
Number or HIN. One HIN can relate to an investor’s shareholdings
in multiple companies. For example, a shareholder with a portfolio
of holdings which are managed by a broker would have the same HIN
for each shareholding.
SHARE SALE FACILITY
Ordinarily, Issuer Sponsored shareholders must establish a relationship
with a broker in order to sell their shares. However, Brambles’ share
registry provides Issuer Sponsored shareholders with an alternative to
traditional share sale services. If you would like to take advantage of
this service to sell your entire Brambles shareholding, please contact
Link Market Services using the contact details above. Please note that
under anti-money laundering regulations, Link Market Services may
require shareholders to complete an identification information form.
If you are a Broker Sponsored shareholder, please contact your broker
if you wish to sell your Brambles shares.
ANNUAL GENERAL MEETING
The Brambles Limited 2010 AGM will be held at 2.00pm (AEDT) on 18 November 2010 at The Wesley Theatre, Wesley Conference Centre,
220 Pitt Street, Sydney NSW 2000.
FINANCIAL CALENDAR
Final dividend 2010
Ex dividend date – Thursday, 16 September 2010
Record date – Wednesday, 22 September 2010
Payment date – Thursday, 14 October 2010
2011 (Provisional)
Announcement of interim results – mid February
Interim dividend – mid April
Announcement of final results – mid August
Final dividend – mid October
AGM – November
ANALYSIS OF HOLDERS OF EQUITY SECURITIES AS AT 16 AUGUST 2010
Substantial shareholders
Brambles has been notified of the following substantial shareholdings:
HOLDER
Baillie Gifford & Co
BlackRock Investment Management (Australia) Limited
Commonwealth Bank of Australia and its subsidiaries
Maple-Brown Abbott Limited
(a) 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
% OF ISSUED ORDINARY
(a)
SHARE CAPITAL
71,408,272
71,242,004
165,509,641
71,359,976
5.06
5.00
11.64
5.02
HOLDERS
36,679
33,889
5,815
3,451
179
SHARES
17,869,288
80,617,400
41,940,646
74,053,386
1,207,753,965
80,013
1,422,234,685
The number of members holding less than a marketable parcel of 97 ordinary shares (based on a market price of A$5.19 on 16 August 2010) is 4,889
and they hold a total of 227,598 ordinary shares. The voting rights of ordinary shares are described on page 52.
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
The voting rights of options, performance share rights and MyShare Matching Awards are described on page 52.
HOLDERS
OPTIONS/RIGHTS
1,778
124
46
99
13
2,060
577,208
278,783
292,381
4,214,023
2,699,790
8,062,185
BRAMBLES LIMITED ANNUAL REPORT 2010
51
SHAREHOLDER INFORMATION
CONTINUED
Twenty largest ordinary shareholders
NAME
1 HSBC Custody Nominees (Australia) Limited
2 J P Morgan Nominees Australia Limited
3 National Nominees Limited
4 Citicorp Nominees Pty Limited
5 Cogent Nominees Pty Limited
6 ANZ Nominees Limited
7 RBC Dexia Investor Services Australia Nominees Pty Limited
8 Australian Foundation Investment Company Limited
9 Australian Reward Investment Alliance
10 Citicorp Nominees Pty Limited
11 Citicorp Nominees Pty Limited
12 AMP Life Limited
13 HSBC Custody Nominees (Australia) Limited – A/C 2
14 Argo Investments Limited
15 UBS Wealth Management Australia Nominees Pty Ltd
16 Citicorp Nominees Pty Limited
17 Queensland Investment Corporation
18 Citicorp Nominees Pty Limited
19 Djerriwarrh Investments Limited
20 Perpetual Trustee Company Limited
NUMBER OF
ORDINARY SHARES
% OF SHARE CAPITAL
409,331,962
253,538,728
251,287,062
105,598,325
31,284,571
22,755,658
9,527,278
8,425,028
7,971,074
6,335,432
6,040,000
5,791,384
4,427,855
4,252,106
3,955,975
3,480,239
3,442,985
3,428,016
2,886,018
2,550,196
28.78%
17.83%
17.67%
7.42%
2.20%
1.60%
0.67%
0.59%
0.56%
0.45%
0.42%
0.41%
0.31%
0.30%
0.28%
0.24%
0.24%
0.24%
0.20%
0.18%
Percentage of total holdings of 20 largest holders
1,146,309,892
80.59%
Voting rights: ordinary shares
Brambles Limited’s constitution provides that each member entitled to
attend and vote may do so in person or by proxy, by attorney or, where
the member is a body corporate, by representative. The Directors may
also determine that at any general meeting, a member who is entitled
to attend and vote on a resolution at that meeting is entitled to a direct
vote in relation to that resolution. The Directors have prescribed rules
to govern direct voting which are available at www.brambles.com.
have determined that members who submit a direct vote will be
excluded on a vote by a show of hands.
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. The Directors have determined that votes cast by members who
submit a direct vote will be included on a vote by a poll, being one vote
for each ordinary share held.
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. The Directors
Voting rights: options/rights
Options over ordinary shares, performance share rights and MyShare
Matching Awards do not carry any voting rights.
52
BRAMBLES LIMITED ANNUAL REPORT 2010
FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2010
INDEX
PAGE
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to the financial statements
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
Basis of preparation
Significant accounting policies
Critical accounting estimates and judgements
Segment information
Profit from ordinary activities - continuing operations
Significant items - continuing operations
Employment costs - continuing operations
Net finance costs
Income tax
Earnings per share
Dividends
Discontinued operations
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other assets
Investments
Property, plant and equipment
Goodwill
Intangible assets
Trade and other payables
Borrowings
Provisions
Retirement benefit obligations
Contributed equity
Share-based payments
Reserves and retained earnings
Financial risk management
Cash flow statement - additional information
Commitments
Contingencies
Auditors’ remuneration
Key management personnel
Related party information
Events after balance sheet date
Parent entity financial information
Directors’ declaration
Independent auditors’ report
54
55
56
57
58
59
59
65
66
68
69
70
70
71
74
75
76
76
76
77
78
78
79
80
81
82
83
83
85
86
89
90
93
95
104
106
107
108
108
110
112
113
114
115
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BRAMBLES LIMITED ANNUAL REPORT 2010
53
CONSOLIDATED
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2010
Continuing operations
Sales revenue
Other income
Operating expenses
Share of results of joint ventures
Operating profit
Finance revenue
Finance costs
Net finance costs
Profit before tax
Tax expense
Profit from continuing operations
Profit from discontinued operations
Profit for the year attributable to members of the parent entity
Earnings per share (cents)
Total
– basic
– diluted
Continuing operations
– basic
– diluted
NOTE
2010
US$M
2009
US$M
5a
5a
5b
18c
8
9
12
10
4,146.8
4,018.6
97.0
96.7
(3,525.1)
(3,402.1)
5.8
724.5
2.8
5.0
718.2
7.1
(112.4)
(128.0)
(109.6)
(120.9)
614.9
597.3
(171.0)
(163.3)
443.9
4.9
448.8
434.0
18.6
452.6
31.8
31.7
31.5
31.4
32.6
32.5
31.3
31.2
The consolidated income statement should be read in conjunction with the accompanying notes.
Non-statutory measure:
Underlying profit
Underlying profit is profit from continuing operations before finance costs, tax and Significant items (refer Note 6). It is presented to assist users
of the financial statements to understand Brambles’ business results and reconciles with operating profit as follows:
Underlying profit
Significant items:
– restructuring costs
– foreign exchange gain on capital repatriation
– Walmart transition impact
– USA pallet quality program costs*
Operating profit
733.4
900.6
(8.9)
(153.3)
–
–
–
724.5
77.3
(29.0)
(77.4)
718.2
6a
6c
6d
6e
* In October 2009, CHEP USA launched its Better Everyday customer service and quality program. In FY10, spending under the Better Everyday program, together with
the final US$37 million spending under the USA pallet quality program announced in February 2008, have been presented within Underlying profit. In prior years, USA
pallet quality program costs were presented as Significant items. Comparatives have not been restated.
54
BRAMBLES LIMITED ANNUAL REPORT 2010
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CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2010
Profit for the year
Other comprehensive income:
NOTE
2010
US$M
2009
US$M
448.8
452.6
Actuarial losses on defined benefit pension plans
25e
(5.9)
(2.9)
Exchange differences:
– on translation of foreign operations
– on entities disposed taken to profit
Cash flow hedges
Income tax on other comprehensive income
Other comprehensive income for the year
Total comprehensive income for the year attributable to members of the parent entity
The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
28
28
28
9a
(71.2)
(262.6)
–
1.4
0.8
(0.6)
(14.2)
4.7
(74.9)
(275.6)
373.9
177.0
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BRAMBLES LIMITED ANNUAL REPORT 2010
55
CONSOLIDATED
BALANCE SHEET
AS AT 30 JUNE 2010
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other assets
Total current assets
Non-current assets
Other receivables
Investments
Property, plant and equipment
Goodwill
Intangible assets
Deferred tax assets
Derivative financial instruments
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Retirement benefit obligations
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Parent entity interest
Non-controlling interest
Total equity
NOTE
2010
US$M
2009
US$M
13
14
15
16
17
14
18
19
20
21
9
16
17
22
23
16
24
23
16
24
25
9
22
135.5
631.6
33.5
14.5
53.1
90.1
653.6
35.1
1.1
72.2
868.2
852.1
6.2
14.0
8.1
13.8
3,223.8
3,441.6
607.0
158.6
19.8
12.0
0.7
612.3
163.0
7.0
-
0.6
4,042.1
4,246.4
4,910.3
5,098.5
681.4
276.0
12.2
78.5
87.2
683.7
68.0
12.9
64.6
93.6
1,135.3
922.8
1,618.8
2,165.5
10.1
34.0
50.4
408.2
20.9
5.8
53.0
50.8
449.9
21.4
2,142.4
2,746.4
3,277.7
3,669.2
1,632.6
1,429.3
26
13,979.6
13,847.6
28
(15,007.4)
(14,938.7)
28
2,660.1
2,520.1
1,632.3
1,429.0
28
0.3
0.3
1,632.6
1,429.3
The consolidated balance sheet should be read in conjunction with the accompanying notes.
56
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CONSOLIDATED
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2010
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Dividends received from joint ventures
Interest received
Interest paid
Income taxes paid on operating activities
Net cash inflow from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchases of intangible assets
Proceeds from disposal of businesses
Costs incurred on disposal of businesses
Acquisition of subsidiaries, net of cash acquired
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Net inflow/(outflow) from hedge instruments
Proceeds from issues of ordinary shares
Dividends paid, net of Dividend Reinvestment Plan
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and deposits, net of overdrafts, at beginning of the year
Effect of exchange rate changes
Cash and deposits, net of overdrafts, at end of the year
The consolidated cash flow statement should be read in conjunction with the accompanying notes.
NOTE
2010
US$M
2009
US$M
4,658.5
4,575.7
(3,392.5)
(3,306.8)
1,266.0
1,268.9
5.9
2.9
7.1
8.0
(104.6)
(131.8)
(179.9)
(129.2)
30b
990.3
1,023.0
(496.5)
(683.8)
88.0
(33.2)
1.3
–
–
104.6
(24.3)
1.8
(4.8)
(0.1)
(440.4)
(606.6)
2,222.9
1,404.2
(2,541.2)
(1,513.5)
35.8
2.7
(7.9)
0.8
(204.5)
(277.6)
(484.3)
(394.0)
65.6
54.1
3.6
30a
123.3
22.4
68.1
(36.4)
54.1
BRAM021 Annual Report 2010 FINS v7 FA.indd 57
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BRAMBLES LIMITED ANNUAL REPORT 2010
57
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2010
Year ended 30 June 2009
Opening balance
Total comprehensive income
Share-based payments:
– expense recognised
– shares issued
– equity component of related tax
Transactions with owners in their capacity as owners:
– dividends declared
– issues of ordinary shares, net of transaction costs
– issues of ordinary shares under Dividend Reinvestment Plan
Closing balance
Year ended 30 June 2010
Opening balance
Total comprehensive income
Share-based payments:
– expense recognised
– shares issued
Transactions with owners in their capacity as owners:
– dividends declared
– issues of ordinary shares, net of transaction costs
– issues of ordinary shares under Dividend Reinvestment Plan
NOTE
SHARE
CAPITAL
US$M
RESERVES 1
US$M
RETAINED
EARNINGS
US$M
NON-
CONTROLLING
INTEREST
US$M
TOTAL
US$M
13,778.6
(14,671.5)
2,436.1
0.3
1,543.5
–
(272.5)
449.5
–
177.0
–
–
–
–
7.1
61.9
14.5
(6.3)
(2.9)
–
–
–
–
–
–
(365.5)
–
–
28
26
26
–
–
–
–
–
–
14.5
(6.3)
(2.9)
(365.5)
7.1
61.9
13,847.6
(14,938.7)
2,520.1
0.3
1,429.3
13,847.6
(14,938.7)
2,520.1
0.3
1,429.3
–
(70.3)
444.2
–
373.9
–
–
10.7
(9.1)
–
–
28
26
26
–
11.8
120.2
–
–
–
(304.2)
–
–
–
–
–
–
–
10.7
(9.1)
(304.2)
11.8
120.2
Closing balance
13,979.6
(15,007.4)
2,660.1
0.3
1,632.6
1 Refer Note 28 for further information on reserves.
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
58
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NOTES TO AND FORMING PART OF THE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
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 2010.
The financial statements comply with International Financial
Reporting Standards (IFRS). This general purpose financial report has
been prepared in accordance with Australian Accounting Standards
(AAS), other authoritative pronouncements of the Australian
Accounting Standards Board (AASB), the Urgent Issues Group
Interpretations (UIG) and the requirements of the Corporations Act
2001 (Act).
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 2010 and 2009 are to the financial years ended 30 June
2010 and 30 June 2009 respectively.
Details of Unification, whereby Brambles Limited acquired all the share
capital of Brambles Industries Limited (BIL) and Brambles Industries
plc (BIP) under separate schemes of arrangement on 4 December
2006, are set out in Brambles’ 2007 Annual Report.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements and all comparatives have
been prepared using the accounting policies set out below which
are consistent with the prior year, except for financial statements
presentation, segment reporting and financial instruments disclosures.
Financial statements presentation
Brambles has applied revised AASB 101: Presentation of Financial
Statements from 1 July 2009. The revised standard requires the
presentation of a statement of comprehensive income rather than a
statement of recognised income and expense. Additionally, a statement
of changes in equity is now disclosed as a primary statement rather
than in a note. Comparative information has been re-presented to
conform to the revised standard.
Segment reporting
Brambles has applied AASB 8: Operating Segments from 1 July 2009.
AASB 8 requires adoption of a management approach when reporting
segment performance. The information presented is based on
Brambles’ internal management reporting to the Chief Executive
Officer (CEO), being the chief operating decision-maker, and reflects
what the CEO uses when evaluating segment performance and
deciding how to allocate resources to operating segments.
There have been no changes to the definition of operating segments,
however additional disclosures are now included in the financial
statements. Geographic disclosures now present Australia separately.
Comparative figures have been provided.
Financial instruments disclosures
Brambles has applied the amendments to AASB 7: Financial
Instruments: Disclosures from 1 July 2009. These require disclosure
of fair value measurements by source of input using the following fair
value hierarchy:
–
Level 1 – the fair value is calculated using quoted prices in active
markets;
–
–
Level 2 – the fair value is estimated using inputs other than quoted
prices included in Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices);
and
Level 3 – the fair value is estimated using inputs for the asset or
liability that are not observable market data.
Comparative figures have been provided.
Other new accounting standards and interpretations
At 30 June 2010, certain other new accounting standards and
interpretations have been published that will become mandatory in
future reporting periods. Brambles has not early-adopted these new
or amended accounting standards and interpretations in 2010.
AASB 2009-8: Amendments to Australian Accounting Standards –
Group Cash-Settled Share-based Payment Transactions is applicable
to annual reporting periods beginning on or after 1 January 2010.
The amendments confirm that an entity receiving goods or services
in a group share-based payment arrangement must recognise an
expense for those goods or services regardless of which entity in the
group settles the transaction or whether the transaction is settled in
shares or cash. The amendments also clarify the measurement basis
for such transactions. The amendments are not expected to affect
Brambles’ accounting for share-based payments. Brambles will apply
the amendments from 1 July 2010.
AASB 9: Financial Instruments and AASB 2009-11: Amendments to
Australian Accounting Standards arising from AASB 9 are applicable to
annual reporting periods beginning on or after 1 January 2013. AASB 9
addresses the classification and measurement of financial assets and
may affect Brambles’ accounting for financial assets. Brambles is yet
to assess the full impact of this standard.
Basis of consolidation
The consolidated financial statements of Brambles include the assets,
liabilities and results of Brambles Limited and all its legal subsidiaries.
The consolidation process eliminates all inter-entity accounts and
transactions. Any financial statements of overseas subsidiaries that
have been prepared in accordance with overseas accounting practices
have been adjusted to comply with AAS before inclusion in the
consolidation process. 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 (ie discount on acquisition) is credited
to the income statement in the period of acquisition. The interest of
non-controlling shareholders is stated at the non-controlling proportion
of the fair values of the assets and liabilities recognised. With effect
from 1 July 2009, any acquisition-related transaction costs are
expensed in the period of acquisition.
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.
BRAM021 Annual Report 2010 FINS v7 FA.indd 59
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BRAMBLES LIMITED ANNUAL REPORT 2010
59
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Investment in controlled entities
Shares in controlled entities, as recorded in the parent entity, are
recorded at cost, less provision for impairment.
Investment in joint ventures
Investments in 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 post-acquisition profits or losses of the joint venture is recognised
in the income statement and its share of post-acquisition movements
in reserves is recognised in consolidated reserves. The cumulative
post-acquisition movements are adjusted against the carrying amount
of the investment.
If Brambles’ share of losses in a joint venture equals or exceeds its
interest in the joint venture, Brambles does not recognise further
losses unless it has incurred obligations or made payments on behalf
of the joint venture.
Loans to equity accounted 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 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.
Presentation currency
The consolidated and summarised parent entity financial statements
are presented in US dollars.
Brambles uses the US dollar as its presentation currency because:
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.
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 and joint
ventures 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 and joint
ventures are translated into US dollars at the exchange rate ruling at
the balance sheet date. 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 and joint ventures 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
2010
2009
Year end
30 June 2010
US$:A$
US$:€
US$:£
0.8813
0.7479
0.8498
1.3782
1.3822
1.2185
1.5733
1.6103
1.5051
30 June 2009
0.8114
1.4106
1.6637
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.
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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 Brambles’ right to receive the
payment is established. Dividends received from investments in
subsidiaries and joint ventures are recognised as revenue, even if they
are paid out of pre-acquisition profits.
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 2010 or 2009.
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 comprehensive income
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.
Executive and employee option plans
Incentives in the form of share-based compensation benefits are
provided to executives and employees under share option, performance
share and MyShare employee share plans approved by shareholders.
Options and performance 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 and performance shares 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
and performance shares that are expected to become exercisable.
The employee benefit expense recognised each period takes into
account the most recent estimate.
Significant items and Underlying profit
To assist users of the financial statements in understanding Brambles’
business results, Brambles discloses Significant items as a footnote to
its income statement.
Significant items are items of income or expense which are, either
individually or in aggregate, material to Brambles or to the relevant
business segment and:
–
outside the ordinary course of business (eg gains or losses on the
sale or termination of operations, the cost of significant
reorganisations or restructuring); or
part of the ordinary activities of the business but unusual due to
their size and nature.
–
Underlying profit is a non-statutory profit measure and represents
profit from continuing operations before finance costs, tax and
Significant items.
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.
BRAMBLES LIMITED ANNUAL REPORT 2010
61
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NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
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 is 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 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.
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
other plant and equipment (owned and leased)
50 years
5–10 years
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 within 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 or joint venture at the date of acquisition. Goodwill
on acquisitions of subsidiaries is included in intangible assets. Goodwill
on acquisitions of joint ventures is included in investments in joint
ventures.
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.
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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
3–10 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.
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.
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.
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BRAMBLES LIMITED ANNUAL REPORT 2010
63
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
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 and joint ventures 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 two 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.
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 activities
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 in other comprehensive income and reserves in
equity and the ineffective portion is recognised in the income
statement.
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.
64
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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 in other comprehensive income
and reserves 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.
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.
EPS on Underlying profit after finance costs and tax is calculated as
Underlying profit after finance costs and tax attributable to members
of the parent entity, divided by the weighted average number of
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 20.
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.
Refer to Note 9 for further details.
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.
Refer to Note 24 for further details.
BRAM021 Annual Report 2010 FINS v7 FA.indd 65
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BRAMBLES LIMITED ANNUAL REPORT 2010
65
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 4. SEGMENT INFORMATION
Brambles’ segment information is provided on the same basis as its internal management reporting to the CEO and reflects how Brambles is
organised and managed.
Brambles has five reportable segments, being CHEP Americas, CHEP EMEA, CHEP Asia-Pacific (pallet and container pooling businesses), Recall
(information management business) and Brambles HQ (corporate centre). Discontinued operations primarily comprise the Cleanaway businesses
(waste management), which were divested in 2006 and 2007.
Segment results shown are consistent with internal management reporting. Segment performance is measured on sales, Underlying profit, cash
flow from operations and Brambles Value Added (BVA). Underlying profit is the main measure of segment profit. A reconciliation between
Underlying profit and operating profit is set out as a footnote to the income statement.
Segment sales revenue is measured on the same basis as in the income statement. Segment sales revenue is allocated to segments based on the
business stream and physical location of the business unit that invoices the customer. Intersegment revenue during the year was immaterial.
There is no single external customer who contributed more than 10% of Group sales revenue.
Assets and liabilities are measured consistently in segment reporting and in the balance sheet. Assets and liabilities are allocated to segments
based on segment use and physical location. Cash, borrowings and tax balances are managed centrally and therefore not allocated to segments.
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
Recall
Brambles HQ
Total
By geographic origin
Americas
Europe
Australia
Other
Total
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
Recall
Brambles HQ
Continuing operations
Discontinued operations
Total
SALES REVENUE
CASH FLOW FROM
OPERATIONS 1
BRAMBLES
VALUE ADDED 2
2010
US$M
2009
US$M
2010
US$M
2009
US$M
2010
US$M
2009
US$M
1,533.6
1,556.9
1,482.6
1,452.6
390.9
323.4
3,407.1
3,332.9
739.7
685.7
–
–
4,146.8
4,018.6
285.7
411.7
94.1
791.5
121.7
(30.9)
882.3
267.0
372.7
9.8
649.5
106.9
(34.0)
722.4
38.1
165.3
28.2
231.6
9.0
(25.2)
215.4
138.5
159.8
26.2
324.5
(6.4)
(20.7)
297.4
1,868.9
1,870.2
1,537.9
1,537.1
501.6
238.4
421.2
190.1
4,146.8
4,018.6
OPERATING PROFIT 3
SIGNIFICANT ITEMS
BEFORE TAX 4
UNDERLYING PROFIT 4
2010
US$M
2009
US$M
2010
US$M
2009
US$M
2010
US$M
2009
US$M
235.2
324.9
77.8
637.9
123.1
(36.5)
724.5
3.9
728.4
229.0
286.5
57.9
573.4
95.9
48.9
718.2
15.2
733.4
(1.9)
(4.6)
(0.6)
(7.1)
(1.5)
(0.3)
(8.9)
3.9
(5.0)
(205.4)
(41.0)
(3.2)
(249.6)
(8.4)
75.6
(182.4)
15.2
(167.2)
237.1
329.5
78.4
645.0
124.6
(36.2)
733.4
434.4
327.5
61.1
823.0
104.3
(26.7)
900.6
66
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BRAM021 Annual Report 2010 FINS v7 FA.indd 66
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By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
Recall
Brambles HQ
Total
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
Recall
Brambles HQ
Total segment assets and liabilities
Cash and borrowings
Current tax balances
Deferred tax balances
Equity-accounted investments
Total assets and liabilities
Non-current assets by geographic origin5
Americas
Europe
Australia
Other
Total
CAPITAL EXPENDITURE
(INCLUDING ACQUISITIONS)
DEPRECIATION
AND AMORTISATION
2010
US$M
2009
US$M
2010
US$M
2009
US$M
214.2
174.8
67.2
456.2
73.7
2.1
312.6
223.6
93.0
629.2
59.0
5.4
171.9
167.8
52.1
391.8
47.9
4.3
173.3
168.5
36.5
378.3
46.0
0.3
532.0
693.6
444.0
424.6
SEGMENT ASSETS
SEGMENT LIABILITIES
2010
US$M
2009
US$M
2010
US$M
2009
US$M
1,702.6
1,739.5
1,499.4
1,752.1
451.6
430.4
3,653.6
3,922.0
1,038.2
1,020.1
32.9
11.0
204.9
339.3
91.0
635.2
182.5
78.5
4,724.7
4,953.1
896.2
241.6
360.3
72.3
674.2
167.7
79.3
921.2
135.5
16.3
19.8
14.0
90.1
34.5
7.0
13.8
1,894.8
2,233.5
78.5
408.2
–
64.6
449.9
–
4,910.3
5,098.5
3,277.7
3,669.2
1,936.8
1,952.9
1,270.4
1,532.3
487.9
315.2
488.1
266.1
4,010.3
4,239.4
1 Cash flow from operations is cash flow generated after net capital expenditure but excluding Significant items that are outside the ordinary course of business.
2 BVA represents the value generated over and above the cost of the capital used to generate that value. It is calculated using fixed June 2009 exchange rates as:
– Underlying profit; plus
– Significant items that are part of the ordinary activities of the business; less
– Average Capital Invested, adjusted for accumulated pre-tax Significant items that are part of the ordinary activities of the business, multiplied by 12%.
3 Operating profit is segment revenue less segment expense and excludes net finance costs.
4 Underlying profit is profit from continuing operations before finance costs, tax and Significant items. Refer Note 6.
5 Non-current assets exclude financial instruments and deferred tax assets.
BRAM021 Annual Report 2010 FINS v7 FA.indd 67
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BRAMBLES LIMITED ANNUAL REPORT 2010
67
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 5. PROFIT FROM ORDINARY ACTIVITIES – CONTINUING OPERATIONS
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
Impairment of pooling equipment (refer Note 6)
Irrecoverable pooling equipment provision expense
Amortisation:
– software
– acquired intangible assets (other than software)
– deferred expenditure
Other1
c) Net foreign exchange gains and losses – continuing operations
Net (losses)/gains included in operating profit1
Net gains included in net finance costs
1 2009 includes a US$77.3 million foreign exchange gain on capital repatriation from an overseas subsidiary. Refer Note 6 for further details.
2010
US$M
2009
US$M
4,146.8
4,018.6
26.4
70.6
97.0
11.9
84.8
96.7
4,243.8
4,115.3
779.5
778.2
730.7
376.3
458.0
193.5
262.3
405.5
–
111.2
24.2
6.7
7.6
169.6
758.5
353.4
434.1
181.1
254.3
391.3
33.6
97.8
22.8
6.6
3.9
86.5
3,525.1
3,402.1
(1.0)
2.3
1.3
75.5
0.1
75.6
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NOTE 6. SIGNIFICANT ITEMS – CONTINUING OPERATIONS
Significant items are items of income or expense which are, either individually or in aggregate, material to Brambles or to the relevant business
segment and:
–
outside the ordinary course of business (eg gains or losses on the sale or termination of operations, the cost of significant reorganisations or
restructuring); or
part of the ordinary activities of the business but unusual due to their size and nature.
–
Significant items are disclosed to assist users of the financial statements to understand Brambles’ business results.
Items outside the ordinary course of business:
– restructuring costsa
Significant items from continuing operations
Items outside the ordinary course of business:
– restructuring costsa
– reset of tax cost bases on Unificationb
– foreign exchange gain on capital repatriationc
Items within ordinary activities, but unusual due to size and nature:
– Walmart transition impactd
– USA pallet quality program costse
Significant items from continuing operations
2010
BEFORE TAX
US$M
TAX
US$M
AFTER TAX
US$M
(8.9)
(8.9)
2.6
2.6
(6.3)
(6.3)
2009
BEFORE TAX
US$M
TAX
US$M
AFTER TAX
US$M
(153.3)
–
77.3
(29.0)
(77.4)
(182.4)
47.0
(6.5)
–
11.3
30.3
82.1
(106.3)
(6.5)
77.3
(17.7)
(47.1)
(100.3)
a In February 2009, Brambles announced a restructure of its operations, estimated to cost US$159– US$169 million before tax, as a response to the effects of the global
economic crisis on its businesses. An impairment charge of US$33.6 million, a US$61.6 million charge for storage and scrapping costs and US$3.8 million depreciation
expense were booked in 2009 against surplus pallets within the CHEP USA pool. Redundancy and plant closure expenses of US$63.2 million have been incurred in various
countries, of which US$8.9 million was booked in 2010 (2009: US$54.3 million).
b During 2009, a net adjustment of US$(6.5) million was made to tax cost bases and other Unification tax matters.
c During 2009, capital of €460 million was repatriated to Australia from an overseas subsidiary. As required by AASB 121: The Effects of Changes in Foreign Exchange
Rates, a portion of the accumulated foreign currency translation reserve previously held in relation to the overseas subsidiary was recognised in the income statement,
resulting in a US$77.3 million foreign exchange gain.
d During 2009, non-recurring transition costs of US$29.0 million due to loss of white wood revenue and net additional operational costs were incurred within CHEP USA as
a result of Walmart’s decision to modify management of pallet flows within its network in the USA.
e Costs of US$77.4 million were incurred within CHEP USA on the pallet quality program and reported as Significant items in 2009. In October 2009, CHEP USA launched
its Better Everyday customer service and quality program. In 2010, spending under the Better Everyday program, together with the final US$37 million spending under
the USA pallet quality program announced in February 2008, have been presented within Underlying profit.
BRAM021 Annual Report 2010 FINS v7 FA.indd 69
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BRAMBLES LIMITED ANNUAL REPORT 2010
69
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 7. EMPLOYMENT COSTS – CONTINUING OPERATIONS
Wages and salaries
Social security costs
Share-based payment expense
Pension costs:
– defined contribution plans
– defined benefit plans
Other post-employment benefits
The average monthly number of employees in continuing operations was:
CHEP
Recall
Brambles HQ
NOTE 8. NET FINANCE COSTS
Finance revenue
Bank accounts and short term deposits
Other
Finance costs
Interest expense on bank loans and borrowings
Other
Net finance costs
2010
US$M
2009
US$M
653.2
648.2
71.5
11.1
19.9
5.4
18.4
72.2
14.2
19.7
4.9
19.0
779.5
778.2
2010
2009
7,617
5,004
93
7,911
4,784
90
12,714
12,785
2010
US$M
2009
US$M
2.2
0.6
2.8
5.3
1.8
7.1
(101.9)
(110.9)
(10.5)
(17.1)
(112.4)
(128.0)
(109.6)
(120.9)
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NOTE 9. INCOME TAX
a) Components of tax expense
Amounts recognised in the income statement
Current income tax – continuing operations:
– income tax charge
– prior year adjustments
Deferred tax – continuing operations:
– origination and reversal of temporary differences
– previously unrecognised tax losses
– prior year adjustments
Tax expense – continuing operations
Tax benefit – discontinued operations (Note 12)
Tax expense recognised in the income statement
Amounts recognised in the statement of comprehensive income
– on actuarial losses on defined benefit pension plans
– on losses on revaluation of cash flow hedges
Tax benefit recognised directly in the statement of comprehensive income
b) Reconciliation between tax expense and accounting profit before tax
Profit before tax – continuing operations
Tax at standard Australian rate of 30% (2009: 30%)
Effect of tax rates in other jurisdictions
Prior year adjustments
Current year tax losses not recognised
Foreign withholding tax – unrecoverable
Change in tax rates
Non-deductible expenses
Prior year tax losses recouped/recognised
Other
Tax expense – continuing operations
Tax benefit – discontinued operations (Note 12)
Total income tax expense
2010
US$M
2009
US$M
201.8
13.8
215.6
(6.6)
(15.7)
(22.3)
(44.6)
171.0
(1.0)
170.0
(1.3)
0.5
(0.8)
614.9
184.5
(9.9)
(8.5)
6.1
5.5
0.2
7.5
(15.7)
1.3
171.0
(1.0)
170.0
147.3
(18.1)
129.2
29.1
(9.4)
14.4
34.1
163.3
(3.4)
159.9
0.2
(4.9)
(4.7)
597.3
179.2
(3.6)
(3.7)
14.6
9.4
(1.1)
6.1
(9.4)
(28.2)
163.3
(3.4)
159.9
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BRAMBLES LIMITED ANNUAL REPORT 2010
71
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 9. INCOME TAX – CONTINUED
c) Components of and changes in deferred tax assets
Deferred tax assets shown in the balance sheet are represented by cumulative temporary differences attributable to:
Items recognised through the income statement
Employee benefits
Provisions
Losses available against future taxable income
Other
Items recognised directly in equity
Actuarial losses on defined benefit pension plans
Cash flow hedges
Share-based payments
Set-off of deferred tax liabilities
Net deferred tax assets
Changes in deferred tax assets were as follows:
At 1 July
Credited to the income statement
Credited directly to equity
Offset against deferred tax liabilities
Currency variations
At 30 June
2010
US$M
2009
US$M
10.5
37.6
143.5
48.9
240.5
3.3
4.9
0.3
8.5
7.5
52.0
116.8
46.9
223.2
2.3
5.3
0.3
7.9
(229.2)
(224.1)
19.8
7.0
7.0
7.5
0.6
5.1
(0.4)
19.8
8.8
51.1
4.6
(52.5)
(5.0)
7.0
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$569.0 million (2009: US$493.1 million) available for offset against
future profits. A deferred tax asset has been recognised in respect of US$395.0 million (2009: US$324.8 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$174.0 million (2009: US$168.3 million) due to
the unpredictability of future profit streams in the relevant jurisdictions. Other than China losses of US$31.5 million which will expire between
2011 and 2015, all other losses may be carried forward indefinitely.
72
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d) Components and changes in deferred tax liabilities
Deferred tax liabilities shown in the balance sheet are represented by cumulative temporary differences attributable to:
Items recognised through the income statement
Accelerated depreciation for tax purposes
Other
Set-off of deferred tax assets
Net deferred tax liabilities
Changes in deferred tax liabilities were as follows:
At 1 July
(Credited)/charged to the income statement
Credited to the statement of comprehensive income
Offset against deferred tax asset
Currency variations
At 30 June
2010
US$M
2009
US$M
538.1
99.3
637.4
565.7
108.3
674.0
(229.2)
(224.1)
408.2
449.9
449.9
(37.1)
–
5.1
(9.7)
408.2
443.5
85.2
(9.1)
(52.5)
(17.2)
449.9
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$1,865.6 million (2009: US$1,769.3 million).
No liability has been recognised in respect of these temporary differences because Brambles is in a position to control distributions from
subsidiaries and it is probable that such differences will not reverse in the foreseeable future. Unremitted earnings totalled US$2,093.3 million
(2009: US$2,134.7 million), of which US$170.9 million (2009: US$212.3 million) relates to earnings post Unification.
e) Tax consolidation
Brambles Limited and its Australian subsidiaries formed a tax consolidated group in 2006. Brambles Limited, as the head entity of the tax
consolidated group, and its Australian subsidiaries have entered into a tax sharing agreement in order to allocate income tax expense. The tax
sharing agreement uses a stand-alone basis of allocation. Consequently, Brambles Limited and its Australian subsidiaries account for their own
current and deferred tax amounts as if they each continue to be taxable entities in their own right. In addition, the agreement provides funding
rules setting out the basis upon which subsidiaries are to indemnify Brambles Limited in respect of tax liabilities and the methodology by which
subsidiaries in tax loss are to be compensated.
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BRAMBLES LIMITED ANNUAL REPORT 2010
73
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 10. EARNINGS PER SHARE
Earnings per share
– basic
– diluted
From continuing operations
– basic
– diluted
– basic, on Underlying profit after finance costs and tax
From discontinued operations
– basic
– diluted
2010
US CENTS
2009
US CENTS
31.8
31.7
31.5
31.4
31.9
0.3
0.3
32.6
32.5
31.3
31.2
38.5
1.3
1.3
Options, performance share rights and MyShare matching conditional rights granted under Brambles’ share 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 27.
a) Weighted average number of shares during the year
Used in the calculation of basic earnings per share
Adjustment for share options and rights
Used in the calculation of diluted earnings per share
b) Reconciliations of profits used in EPS calculations
Statutory profit
Profit from continuing operations
Profit from discontinued operations
Profit used in calculating basic and diluted EPS
Underlying profit after finance costs and tax
Underlying profit (Note 4)
Net finance costs (Note 8)
Underlying profit before tax
Tax expense on Underlying profit
Underlying profit after finance costs and tax
which reconciles to statutory profit:
Underlying profit after finance costs and tax
Significant items after tax (Note 6)
Profit from continuing operations
2010
MILLION
2009
MILLION
1,411.3
1,388.3
5.9
4.4
1,417.2
1,392.7
2010
US$M
2009
US$M
443.9
4.9
448.8
434.0
18.6
452.6
733.4
900.6
(109.6)
(120.9)
623.8
779.7
(173.6)
(245.4)
450.2
534.3
450.2
534.3
(6.3)
(100.3)
443.9
434.0
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NOTE 11. DIVIDENDS
a) Dividends declared and paid during the year
Dividend per share (in Australian cents)
Franked amount at 30% tax (in Australian cents)
Cost (in US$ million)
Payment date
b) Dividend declared after reporting date
Dividend per share (in Australian cents)
Franked amount at 30% tax (in Australian cents)
Cost (in US$ million)
Payment date
Dividend record date
As this dividend had not been declared at the reporting date, it is not reflected in the financial statements.
INTERIM
2010
12.5
2.5
164.2
FINAL
2009
12.5
2.5
160.5
8 April 2010
8 October 2009
FINAL
2010
12.5
2.5
158.6
14 October 2010
22 September 2010
2010
US$M
2009
US$M
c) Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
34.2
22.0
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 final 2010 dividend has been franked at 20%.
Brambles has lodged private ruling requests with the Australian Taxation Office as a result of amendments to the Australian tax consolidation
legislation that were enacted in June 2010. If these ruling requests are granted, Brambles will receive tax refunds relating to prior years and have
reduced Australian tax obligations in future years. Depending on the outcome and timing of each ruling, Brambles may be unable to frank its future
dividends in the short to medium term.
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BRAMBLES LIMITED ANNUAL REPORT 2010
75
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 12. DISCONTINUED OPERATIONS
Net favourable provision adjustments on divestments completed in 2007 and prior years have been recognised as Significant items outside the
ordinary course of business. The impact of these adjustments on profit and cash flow are summarised below:
Profit before tax
Tax benefit
Profit for the year from discontinued operations
Net cash outflow from operating activities
NOTE 13. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short term deposits
Short term deposits have initial maturities varying between 7 days and 3 months.
Refer to Note 29 for other financial instruments disclosures.
NOTE 14. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Provision for doubtful receivables (a)
Net trade receivables
Other debtors
Accrued and unbilled revenue
Non-current
Other receivables
2010
US$M
3.9
1.0
4.9
(1.2)
120.2
15.3
135.5
2009
US$M
15.2
3.4
18.6
(2.2)
55.0
35.1
90.1
507.8
(9.0)
498.8
93.4
39.4
631.6
461.8
(11.7)
450.1
119.6
83.9
653.6
6.2
8.1
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$2.9 million (2009: US$8.4 million)
has been recognised as an expense in the current year for specific trade and other receivables for which such evidence exists.
Movements in the provision for doubtful receivables were as follows:
At 1 July
Charge for the year
Amounts written off
Foreign exchange differences
At 30 June
11.7
2.9
(5.2)
(0.4)
9.0
7.6
8.4
(4.8)
0.5
11.7
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At 30 June, the ageing analysis of trade receivables by reference to due dates was as follows:
Not past due
Past due 0-30 days but not impaired
Past due 31-60 days but not impaired
Past due 61-90 days but not impaired
Past 90 days but not impaired
Impaired
2010
US$M
2009
US$M
410.0
70.7
12.9
5.2
–
9.0
271.8
115.7
27.5
18.5
16.6
11.7
507.8
461.8
At 30 June 2010, trade receivables of US$88.8 million (2009: US$178.3 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 2010, trade receivables of US$9.0 million (2009: US$11.7 million) were considered to be impaired. A provision of US$9.0 million
(2009: US$11.7 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 businesses and property, plant and equipment.
At 30 June 2010, other debtors of US$35.3 million (2009: US$35.0 million) were past due but not considered to be impaired. No specific
collection issues have been identified with these receivables. An ageing of these receivables was as follows:
Past due 0-30 days but not impaired
Past due 31-60 days but not impaired
Past due 61-90 days but not impaired
Past 90 days but not impaired
6.7
3.3
3.8
21.5
35.3
10.1
0.6
2.0
22.3
35.0
At 30 June 2010, there were no balances within other debtors that were considered to be impaired (2009: nil). No provision has been recognised
(2009: nil).
Refer to Note 29 for other financial instruments disclosures.
NOTE 15. INVENTORIES
Raw materials and consumables
Work in progress
26.0
7.5
33.5
27.8
7.3
35.1
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BRAMBLES LIMITED ANNUAL REPORT 2010
77
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swaps – cash flow hedges
Interest rate swaps – fair value hedges
Forward foreign exchange contracts – cash flow hedges
Forward foreign exchange contracts – held for trading
Interest rate swaps – cash flow hedges
Interest rate swaps – fair value hedges
Embedded derivatives
Refer to Note 29 for other financial instruments disclosures.
NOTE 17. OTHER ASSETS
Current
Prepayments
Current tax receivable
Non-current
Prepayments
2010
US$M
2009
US$M
2010
US$M
2009
US$M
CURRENT ASSETS
CURRENT LIABILITIES
–
8.4
–
6.1
14.5
–
–
–
1.1
1.1
8.1
–
0.2
3.9
12.3
–
0.5
0.1
12.2
12.9
NON-CURRENT ASSETS
NON-CURRENT LIABILITIES
0.1
11.5
0.4
12.0
–
–
–
–
7.1
3.0
–
10.1
5.8
–
–
5.8
2010
US$M
2009
US$M
36.8
16.3
53.1
37.7
34.5
72.2
0.7
0.6
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NOTE 18. INVESTMENTS
a) Joint ventures
Brambles has investments in the following unlisted jointly controlled entities, which are accounted for using the equity method.
NAME (AND NATURE OF BUSINESS)
PLACE OF INCORPORATION
CISCO – Total Information Management Pte. Limited (Information management)
Recall Becker GmbH & Co. KG (Document management services)
Singapore
Germany
b) Movement in carrying amount of investments in joint ventures
At 1 July
Share of results after income tax (Note 18c)
Dividends received/receivable
Foreign exchange differences
At 30 June
c) Share of results of joint ventures
Trading revenue
Expenses
Profit from ordinary activities before tax
Tax expense on ordinary activities
Profit for the year
d) Share of assets and liabilities of joint ventures
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets – continuing operations
e) Share of commitments and contingent liabilities of joint ventures
Contingent liabilities
Lease commitments
Total – continuing operations
% INTEREST HELD AT
REPORTING DATE
JUNE
2010
49%
50%
JUNE
2009
49%
50%
2010
US$M
2009
US$M
13.8
5.8
(5.9)
0.3
14.0
12.5
(5.6)
6.9
(1.1)
5.8
3.7
14.2
17.9
3.0
0.9
3.9
16.9
5.0
(7.1)
(1.0)
13.8
11.6
(5.6)
6.0
(1.0)
5.0
3.2
13.8
17.0
2.3
0.9
3.2
14.0
13.8
0.5
1.8
2.3
0.7
2.5
3.2
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BRAMBLES LIMITED ANNUAL REPORT 2010
79
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 19. PROPERTY, PLANT AND EQUIPMENT
At 1 July 2008
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2009
Opening net carrying amount
Additions
Disposals
Other transfers
Depreciation charge
Impairment of pooling equipment
Irrecoverable pooling equipment provision expense
Foreign exchange differences
Closing net carrying amount
At 30 June 2009
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2010
Opening net carrying amount
Additions
Disposals
Other transfers
Depreciation charge
Irrecoverable pooling equipment provision expense
Foreign exchange differences
Closing net carrying amount
At 30 June 2010
Cost
Accumulated depreciation
Net carrying amount
LAND AND
BUILDINGS
US$M
PLANT AND
EQUIPMENT
US$M
TOTAL
US$M
145.9
5,935.8
6,081.7
(55.8)
(2,327.0)
(2,382.8)
90.1
3,608.8
3,698.9
90.1
3,608.8
3,698.9
5.4
(3.4)
–
668.6
(88.6)
(7.6)
674.0
(92.0)
(7.6)
(7.0)
(384.3)
(391.3)
–
–
(33.6)
(97.8)
(33.6)
(97.8)
(10.4)
(298.6)
(309.0)
74.7
3,366.9
3,441.6
129.0
5,566.9
5,695.9
(54.3)
(2,200.0)
(2,254.3)
74.7
3,366.9
3,441.6
74.7
3,366.9
3,441.6
8.2
(2.2)
4.0
(6.8)
494.1
(58.1)
(30.4)
502.3
(60.3)
(26.4)
(398.7)
(405.5)
–
(111.2)
(111.2)
(4.3)
(112.4)
(116.7)
73.6
3,150.2
3,223.8
130.4
5,287.8
5,418.2
(56.8)
(2,137.6)
(2,194.4)
73.6
3,150.2
3,223.8
The net carrying amounts above include plant and equipment held under finance lease US$1.2 million (2009: US$1.9 million); leasehold
improvements US$6.4 million (2009: US$6.4 million); and capital work in progress US$17.6 million (2009: US$17.9 million).
80
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NOTE 20. GOODWILL
a) Net carrying amounts and movements during the year
At 1 July
Carrying amount
Year ended 30 June
Opening net carrying amount
Disposal of subsidiaries
Other transfers
Foreign exchange differences
Closing net carrying amount
At 30 June
Gross carrying amount
Accumulated impairment
Net carrying amount
2010
US$M
2009
US$M
612.3
676.1
612.3
676.1
–
–
(5.3)
607.0
(0.6)
0.3
(63.5)
612.3
607.0
612.3
–
–
607.0
612.3
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 Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
Recall
Total goodwill
51.4
36.4
25.9
51.3
41.0
24.5
113.7
116.8
493.3
607.0
495.5
612.3
c) Recoverable amount testing - continuing operations
The recoverable amount of goodwill 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 carrying 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 8.3% and 26.5%.
SENSITIVITY
Any reasonable change to the above key assumptions would not cause the carrying value of the CGU to materially exceed its recoverable amount.
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BRAMBLES LIMITED ANNUAL REPORT 2010
81
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 21. INTANGIBLE ASSETS
At 1 July 2008
Gross carrying amount
Accumulated amortisation
Net carrying amount
Year ended 30 June 2009
Opening carrying amount
Additions
Disposals
Other transfers
Amortisation charge
Foreign exchange differences
Closing carrying amount
At 30 June 2009
Gross carrying amount
Accumulated amortisation
Net carrying amount
Year ended 30 June 2010
Opening carrying amount
Additions
Disposals
Amortisation charge
Foreign exchange differences
Closing carrying amount
At 30 June 2010
Gross carrying amount
Accumulated amortisation
Net carrying amount
1 Other intangible assets primarily comprise acquired customer lists and agreements.
SOFTWARE
US$M
OTHER 1
US$M
TOTAL
US$M
314.5
(230.9)
83.6
174.3
(71.0)
103.3
488.8
(301.9)
186.9
83.6
20.9
(0.1)
2.4
(22.8)
(6.8)
77.2
103.3
186.9
3.5
–
2.1
(10.5)
(12.6)
85.8
24.4
(0.1)
4.5
(33.3)
(19.4)
163.0
307.9
160.2
468.1
(230.7)
(74.4)
(305.1)
77.2
85.8
163.0
77.2
22.8
(0.1)
85.8
11.6
(0.1)
(24.2)
(14.3)
(1.7)
74.0
1.6
84.6
163.0
34.4
(0.2)
(38.5)
(0.1)
158.6
317.3
172.1
489.4
(243.3)
(87.5)
(330.8)
74.0
84.6
158.6
82
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NOTE 22. TRADE AND OTHER PAYABLES
Current
Trade payables
GST/VAT and other payables
Accruals and deferred income
Non-current
Other liabilities
Trade payables and other current payables are non-interest bearing and are generally settled on 30–90 day terms.
Refer to Note 29 for other financial instruments disclosures.
NOTE 23. BORROWINGS
Current
Unsecured:
– bank overdraft
– bank loans1
– accrued interest on loan notes2,3,4
– finance lease liabilities (Note 31)
Non-current
Unsecured:
– bank loans1
– loan notes2,3,4,5
– finance lease liabilities (Note 31)
Total borrowings
2010
US$M
2009
US$M
305.7
70.2
305.5
681.4
287.1
72.6
324.0
683.7
20.9
21.4
12.2
240.3
22.9
0.6
276.0
36.0
16.6
14.9
0.5
68.0
324.5
1,629.1
1,293.7
535.0
0.6
1.4
1,618.8
2,165.5
1,894.8
2,233.5
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 a
range of maturities out to December 2013; and (ii) various regional banking facilities providing local currency funding to certain subsidiaries. Included in bank loans is a
borrowing of US$61.5 million (2009: US$71.2 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 August 2004 in respect of US$425.0 million US private placement. 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.
3 Notes issued in May 2009 in respect of US$110.0 million US private placement. The terms of the note are (i) Series A US$35.0 million 7.29% Guaranteed Senior
Unsecured Notes due 7 May 2014; (ii) Series B US$55.0 million 7.83% Guaranteed Senior Unsecured Notes due 7 May 2016; and (iii) Series C US$20.0 million 8.23%
Guaranteed Senior Unsecured Notes due 7 May 2019.
4 Notes issued in March 2010 to qualified institutional buyers in accordance with Rule 144A and Regulation S of the United States Securities Act. The terms of the notes
are (i) US$250.0 million 3.95% Guaranteed Senior Notes due 1 April 2015; and (ii) US$500.0 million 5.35% Guaranteed Senior Notes due 1 April 2020.
5 US$450.0 million of loan notes have been hedged with interest rate swaps for fair value risk. In accordance with AASB139, the carrying value of the notes have been
adjusted by US$14.4 million in relation to changes in fair value attributable to the hedged risk.
Refer to Note 29 for other financial instruments disclosures.
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BRAMBLES LIMITED ANNUAL REPORT 2010
83
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 23. BORROWINGS – CONTINUED
a) Borrowing facilities and credit standby arrangements
Total facilities:
– committed borrowing facilities
– loan notes
– credit standby/uncommitted/overdraft arrangements
Facilities used at reporting date:1
– committed borrowing facilities
– loan notes
– credit standby/uncommitted/overdraft arrangements
Facilities available at reporting date:
– committed borrowing facilities
– credit standby/uncommitted/overdraft arrangements
2010
US$M
2009
US$M
2,481.0
2,845.3
1,285.0
151.2
535.0
129.6
3,917.2
3,509.9
534.4
1,647.5
1,285.0
43.8
535.0
43.5
1,863.2
2,226.0
1,946.6
1,197.8
107.4
86.1
2,054.0
1,283.9
Borrowing facilities are arranged by Brambles on behalf of its subsidiaries. Funding is generally sourced from relationship banks and debt capital
market investors on a medium to long term basis. The expiry dates of committed facilities range out to calendar year 2013 with loan notes
having maturities out to April 2020. The average term to maturity of the committed bank facilities and the loan notes is equivalent to 3.6 years
(2009: 3.3 years). These facilities are unsecured and are guaranteed as described in Note 37b.
b) Borrowing facilities maturity profile
MATURITY
TYPE
2010
Less than 1 year
1 – 2 years
2 – 3 years
3 – 4 years
4 – 5 years
Over 5 years
2009
Less than 1 year
1 – 2 years
2 – 3 years
3 – 4 years
4 – 5 years
Over 5 years
Bank loans/overdrafts
Bank loans/loan notes
Bank loans
Bank loans/loan notes
Loan notes
Loan notes
Bank loans/overdrafts
Bank loans
Bank loans/loan notes
Loan notes
Bank loans/loan notes
Loan notes
US$M
TOTAL
FACILITIES
FACILITIES
USED1
FACILITIES
AVAILABLE
460.8
763.9
677.4
936.1
407.5
671.5
249.0
271.5
117.8
145.9
407.5
671.5
211.8
492.4
559.6
790.2
–
–
3,917.2
1,863.2
2,054.0
134.7
685.8
795.6
583.0
981.8
329.0
45.2
332.8
557.3
380.6
581.1
329.0
89.5
353.0
238.3
202.4
400.7
–
3,509.9
2,226.0
1,283.9
1 Facilities used represents the principal value of loan notes and borrowings debited against the relevant facilities to reflect the correct amount of funding headroom.
This amount differs by US$31.6 million (2009: US$7.5 million) from loan notes and borrowings as shown in the balance sheet which are measured on the basis of
amortised cost as determined under the effective interest method and include accrued interest and fair value adjustments on certain hedging instruments.
84
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NOTE 24. PROVISIONS
At 1 July 2009
Current
Non-current
Charge to income statement:
– additional provisions
– unused amounts reversed
Utilisation of provision
Currency variations
At 30 June 2010
Current
Non-current
EMPLOYEE
ENTITLEMENTS
US$M
BUSINESS
DISPOSALS
US$M
OTHER
US$M
TOTAL
US$M
41.8
5.4
47.2
71.3
–
(60.8)
(0.3)
57.4
49.1
8.3
8.1
18.8
26.9
1.1
(6.6)
(0.6)
(2.1)
18.7
8.1
10.6
43.7
28.8
72.5
93.6
53.0
146.6
44.3
116.7
–
(6.6)
(71.3)
(132.7)
(0.4)
45.1
30.0
15.1
(2.8)
121.2
87.2
34.0
Employee entitlements provision comprises US$8.8 million (2009: US$9.0 million) for long service leave, US$1.6 million for phantom shares
(2009: US$1.3 million) and US$47.0 million (2009: US$36.9 million) for bonuses and 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$0.5 million (2009: US$3.6 million)
of the long service leave provision has been recognised as current as it is expected to be settled within one year from reporting date. The remaining
balance of long service leave of US$8.3 million (2009: US$5.4 million) is expected to settle within the next two to ten years and has been
discounted to present value.
Business disposals provision is in respect of divestments completed in 2007 and prior years.
Other provisions comprise US$4.6 million (2009: US$39.8 million) for restructuring costs, US$1.3 million (2009: US$1.3 million) for litigation
and customer disputes and US$39.2 million (2009: US$31.4 million) for other known exposures.
BRAM021 Annual Report 2010 FINS v7 FA.indd 85
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BRAMBLES LIMITED ANNUAL REPORT 2010
85
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 25. 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$19.9 million (2009: US$19.7 million) representing contributions paid and payable to these plans by Brambles at rates specified in the rules of
the plans relating to continuing operations has been recognised as an expense in the income statement.
b) Defined benefit plans
Brambles operates a number of defined benefit pension plans, which are closed to new entrants. The majority of the plans are self-administered
and the plans’ assets are held independently of Brambles’ finances. Under the plans, members are entitled to retirement benefits based upon a
percentage of final salary. No other post-retirement benefits are provided. The plans are funded plans.
The plan assets and the present value of the defined benefit obligation recognised in Brambles’ balance sheet are based upon the most recent
formal actuarial valuations which have been updated to 30 June 2010 by independent professionally qualified actuaries and take account of the
requirements of AASB 119. The present value of the defined benefit obligation, the related current service cost and past service cost were
measured using the projected unit credit method.
In addition to the principal defined benefit plans included in disclosures below, Brambles has a number of other arrangements in several countries
that are either defined benefit pension plans or have certain defined benefit characteristics. Each of these arrangements has been assessed as
immaterial separately and in aggregate and they have not been subjected to an independent AASB 119 valuation.
c) Balance sheet amounts
The amounts recognised in Brambles’ balance sheet in respect of defined benefit plans were as follows:
Present value of defined benefit obligations
Fair value of plan assets
Net liability recognised in the balance sheet
2010
US$M
2009
US$M
211.1
196.0
(160.7)
(145.2)
50.4
50.8
Brambles has no legal obligation to settle this liability with an immediate contribution or additional one-off contributions. Brambles intends to
continue to make contributions to the plans at the rates recommended by the funds’ actuaries. Refer Note 25(i).
d) Income statement amounts
The amounts recognised in Brambles’ income statement in respect of defined benefit plans were as follows:
Current service cost
Interest cost
Expected return on plan assets
Changes arising from curtailments and settlements
Net benefit expense included in employment cost (Note 7)
e) Statement of comprehensive income
Actuarial losses reported in the consolidated statement of comprehensive income
Cumulative actuarial losses recognised
3.5
12.2
3.6
12.8
(10.3)
(10.9)
–
5.4
(0.6)
4.9
(5.9)
(18.3)
(2.9)
(12.4)
86
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f) Defined benefit obligation
Changes in the present value of the defined benefit obligation were as follows:
At 1 July
Current service cost
Interest cost
Contributions from plan members
Actuarial gains and losses
Currency variations
Benefits paid
Curtailments
At 30 June
2010
US$M
2009
US$M
196.0
242.5
3.5
12.2
0.7
19.3
(13.8)
(6.8)
–
3.6
12.8
0.7
(23.4)
(33.9)
(5.7)
(0.6)
211.1
196.0
All Brambles’ 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.
g) Plan assets
Assets held in the plans fell within the following categories:
Equities
Bonds/gilts
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 sponsoring employers
Contributions from plan members
Benefits paid
At 30 June
The actual return on plan assets was US$23.7 million (2009: US$(15.4) million).
2010
FAIR VALUE
2009
FAIR VALUE
US$M
%
US$M
%
68.6
53.0
3.9
20.3
14.9
42.7
33.0
2.4
12.6
9.3
66.3
47.3
4.9
16.2
10.5
45.7
32.6
3.4
11.1
7.2
160.7
100.0
145.2
100.0
2010
US$M
2009
US$M
145.2
10.3
13.4
(9.2)
7.1
0.7
(6.8)
179.1
10.9
(26.3)
(20.3)
6.8
0.7
(5.7)
160.7
145.2
BRAM021 Annual Report 2010 FINS v7 FA.indd 87
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BRAMBLES LIMITED ANNUAL REPORT 2010
87
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 25. RETIREMENT BENEFIT OBLIGATIONS – CONTINUED
h) Principal actuarial assumptions
Principal actuarial assumptions (expressed as weighted averages) used in determining Brambles’ defined benefit obligations were:
At 30 June 2010
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 2009
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Retail price inflation
Return on equities
Return on bonds
Return on cash
UK
EUROPE
OTHER
THAN UK
SOUTH
AFRICA
4.4%
3.4%
5.3%
3.4%
7.5%
5.3%
1.0%
4.4%
3.4%
6.2%
3.4%
8.3%
6.0%
1.0%
3.3%
2.8%
4.6%
2.0%
6.8%
3.6%
2.0%
3.7%
2.9%
6.2%
2.4%
7.8%
4.5%
2.4%
5.8%
5.8%
9.0%
5.8%
10.0%
9.0%
6.0%
8.0%
6.5%
9.0%
6.5%
12.6%
9.3%
7.6%
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 15% and 26% 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$3.1 million (2009: US$3.4 million) are being paid to remove the identified deficits over a period of 6 years.
Contributions paid to the plans during 2010 were US$7.1 million (2009: US$6.8 million), all of which related to continuing operations.
It is estimated that the amount of contributions to be paid to the plans during 2011 will be US$7.5 million.
j) Historical summary
The history of the defined benefit plan deficit at the end of each year is as follows:
– plan liabilities
– plan assets
Net liability recognised in the balance sheet
The history of favourable/(unfavourable) experience adjustments made in each year
is as follows:
2010
US$M
2009
US$M
2008
US$M
2007
US$M
2006
US$M
(211.1)
(196.0)
(242.5)
(216.8)
(602.1)
160.7
(50.4)
145.2
(50.8)
179.1
(63.4)
187.2
(29.6)
453.1
(149.0)
– on plan liabilities
– on plan assets
Net (unfavourable)/favourable adjustment
(19.3)
13.4
(5.9)
23.4
(26.3)
(2.9)
(13.9)
(20.7)
(34.6)
(17.2)
17.2
–
3.0
31.1
34.1
88
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NOTE 26. CONTRIBUTED EQUITY
Total ordinary shares, of no par value, issued and fully paid:
At 1 July 2008
Issued during the year
Issued during the year under the Dividend Reinvestment Plan
At 30 June 2009
At 1 July 2009
Issued during the year
Issued during the year under the Dividend Reinvestment Plan
At 30 June 2010
SHARES
US$M
1,383,550,886
13,778.6
1,630,312
16,687,841
7.1
61.9
1,401,869,039
13,847.6
1,401,869,039
2,048,065
18,312,603
13,847.6
11.8
120.2
1,422,229,707
13,979.6
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.
BRAM021 Annual Report 2010 FINS v7 FA.indd 89
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BRAMBLES LIMITED ANNUAL REPORT 2010
89
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 27. SHARE-BASED PAYMENTS
The Remuneration Report sets out details relating to the Brambles share plans (pages 43 to 44), together with details of options, performance
share rights and MyShare matching conditional rights issued to Executive Directors and other Key Management Personnel (pages 39 to 40).
Options and 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 rights granted under the plans.
a) Grants over Brambles Limited shares issued subsequent to Unification
GRANT DATE
EXPIRY DATE
BALANCE
AT 1 JULY
GRANTED
DURING
THE YEAR
EXERCISED
DURING
THE YEAR
FORFEITED/
LAPSED DURING
THE YEAR
BALANCE
AT 30 JUNE
2010
Performance share rights
19 Jan 2007
29 Aug 2007
26 Feb 2008
19 Mar 2008
28 Apr 2008
27 Aug 2008
1 Jun 2009
16 Nov 2009
25 Nov 2009
12 Apr 2010
31 Aug 2012
30 Aug 2013
2 Dec 2013
2 Mar 2014
29 Apr 2014
27 Aug 2014
1 Jun 2011
19 Oct 2010
25 Nov 2012
12 Apr 2013
MyShare matching conditional rights
1,900,630
1,982,795
28,406
36,365
125,250
3,844,813
85,830
–
–
–
–
–
–
–
–
–
–
60,092
(682,268)
(1,089,055)
129,307
(164,157)
(211,414)
1,607,224
–
–
–
(28,406)
–
–
–
36,365
125,250
(192,623)
(741,413)
2,910,777
(58,718)
–
–
–
27,112
60,092
3,582,251
(8,029)
(84,758)
3,489,464
22,902
–
–
22,902
2009 Plan Year
2010 Plan Year
Total rights
2009 (summarised)
Total rights
31 Mar 2011
31 Mar 2012
218,242
–
359,308
194,472
(18,786)
(33,230)
(874)
(1,665)
525,534
191,933
8,222,331
4,219,025
(1,125,455)
(2,189,941)
9,125,960
4,442,317
4,251,970
(185,022)
(286,934)
8,222,331
Of the above grants, 147,577 rights were exercisable at 30 June 2010.
Weighted average data:
– fair value at grant date of grants made during the year
– share price at exercise date of grants exercised during the year
– remaining contractual life at 30 June
2010
2009
A$
A$
years
5.16
7.08
3.0
5.61
6.57
4.3
90
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b) Grants over BIL or BIP shares pre-Unification, now over Brambles Limited shares
GRANT DATE
EXPIRY DATE
EXERCISE
PRICE
BALANCE
AT 1 JULY
GRANTED
DURING
THE YEAR
EXERCISED
DURING
THE YEAR
FORFEITED/
LAPSED DURING
THE YEAR
BALANCE
AT 30 JUNE
2010
Options
10 Sep 2003
10 Sep 2003
4 Mar 2004
4 Mar 2004
Total options
Performance share rights
10 Sep 2003
4 Mar 2004
24 Nov 2004
8 Sep 2004
8 Sep 2004
21 Oct 2005
21 Oct 2005
Total rights
Total
10 Sep 2009
10 Sep 2009
4 Mar 2010
4 Mar 2010
10 Sep 2009
4 Mar 2010
4 Mar 2010
8 Sep 2010
9 Sep 2010
21 Oct 2011
22 Oct 2011
Weighted average exercise price of options:
– previously over BIL shares
– previously over BIP shares
2009 (summarised)
Total options
Total rights
Total
Weighted average exercise price of options:
– previously over BIL shares
– previously over BIP shares
A$4.75
£1.72
A$5.31
£2.11
108,171
181,691
155,586
155,586
601,034
25,034
10,599
10,599
33,789
34,818
134,401
97,794
347,034
948,068
A$
£
5.08
1.90
2,687,502
3,397,673
6,085,175
A$
£
7.70
1.89
Of the above grants, 58,408 rights were exercisable at 30 June 2010.
Weighted average data:
– share price at exercise date of grants exercised during the year
– remaining contractual life at 30 June
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(108,171)
(181,691)
(155,586)
(155,586)
(601,034)
(25,034)
(10,599)
(10,599)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(6,500)
(15,289)
(22,818)
(107,491)
(82,076)
(265,117)
(866,151)
–
(4,110)
(4,110)
(23,509)
(23,509)
12,000
12,000
22,800
11,608
58,408
58,408
5.08
1.90
–
–
–
–
(275,257)
(1,811,211)
(1,279,246)
(1,771,393)
(1,554,503)
(3,582,604)
601,034
347,034
948,068
5.03
1.72
8.47
–
5.08
1.90
2010
2009
A$
£
7.33
3.95
7.40
3.53
years
0.7-0.9
0.9-1.1
There were 76,184 grants, 5,553 exercises and 934,350 forfeits in options, performance share rights and MyShare matching conditional
rights over Brambles Limited shares between the end of the financial year and 17 August 2010.
BRAM021 Annual Report 2010 FINS v7 FA.indd 91
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BRAMBLES LIMITED ANNUAL REPORT 2010
91
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 27. SHARE-BASED PAYMENTS – CONTINUED
c) Fair value calculations
The fair value of equity-settled options, performance share rights and MyShare matching conditional 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 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
2010
GRANTS
A$6.59
38%
2009
GRANTS
A$7.22
33%
3.0 years
1.0-3.0 years
4.86%
3.56-5.60%
3.75%
3.5-3.9%
The expected volatility was determined based on a two-year historic volatility of Brambles’ share prices.
d) Share-based payment expense – continuing operations
Brambles recognised a total expense of US$11.146 million (2009: US$14.213 million) relating to share-based payments, all within continuing
operations. Of this amount, US$0.472 million related to phantom share provisions (2009: US$0.240 million benefit).
92
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NOTE 28. RESERVES AND RETAINED EARNINGS
Reserves
Retained earnings
Non-controlling interests in reserves and retained earnings
a) Movements in reserves and retained earnings
2010
US$M
2009
US$M
(15,007.4)
(14,938.7)
2,660.1
2,520.1
(12,347.3)
(12,418.6)
0.3
0.3
RESERVES
HEDGING
US$M
SHARE-
BASED
PAYMENTS
US$M
FOREIGN
CURRENCY
TRANSLATION
US$M
UNIFICATION
US$M
OTHER
US$M
TOTAL
US$M
RETAINED
EARNINGS
US$M
(0.2)
65.8
481.4
(15,385.8)
167.3
(14,671.5)
2,436.1
–
–
–
–
(27.9)
9.7
13.7
(4.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
14.5
(6.3)
(2.9)
–
–
–
(77.3)
(0.6)
(185.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(77.3)
(0.6)
(185.3)
(27.9)
9.7
13.7
(4.8)
14.5
(6.3)
(2.9)
–
–
(3.1)
–
–
–
–
–
–
–
–
–
–
(365.5)
452.6
(9.5)
71.1
218.2
(15,385.8)
167.3
(14,938.7)
2,520.1
(9.5)
–
–
(10.6)
4.1
12.3
(0.3)
(4.6)
–
–
–
–
71.1
218.2
(15,385.8)
167.3
(14,938.7)
2,520.1
–
–
–
–
–
–
–
10.7
(9.1)
–
–
–
(71.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(71.2)
(10.6)
4.1
12.3
(0.3)
(4.6)
10.7
(9.1)
–
–
(4.6)
–
–
–
–
–
–
–
–
(304.2)
448.8
(8.6)
72.7
147.0
(15,385.8)
167.3
(15,007.4)
2,660.1
Year ended 30 June 2009
Opening balance
Actuarial loss on defined benefit plans
FCTR released to profits during the year
FCTR on entities disposed taken to profit
Foreign exchange differences
Cash flow hedges:
– fair value losses
– tax on fair value losses
– transfers to net profit
– tax on transfers to net profit
Share-based payments:
– expense recognised during the year
– shares issued
– equity component of related tax
Dividends declared
Net profit for the year
Closing balance
Year ended 30 June 2010
Opening balance
Actuarial loss on defined benefit plans
Foreign exchange differences
Cash flow hedges:
– fair value losses
– tax on fair value losses
– transfers to net profit
– transfers to property, plant and
equipment
– tax on transfers to net profit
Share-based payments:
– expense recognised during the year
– shares issued
Dividends declared
Net profit for the year
Closing balance
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BRAMBLES LIMITED ANNUAL REPORT 2010
93
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 28. RESERVES AND RETAINED EARNINGS – CONTINUED
b) 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 equity-settled options and share
rights issued but not yet exercised. Refer to Note 27 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
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 a merger reserve created in 2001 and a capital redemption reserve created in 2006.
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NOTE 29. 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 Treasury and Risk Review on pages 12 to 13.
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 and derivatives designated as hedging instruments, 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 13)
– short term deposits (Note 13)
– trade receivables (Note 14)
– interest rate swaps (Note 16)
– embedded derivatives (Note 16)
– forward foreign currency contracts (Note 16)
Financial liabilities
– trade payables (Note 22)
– bank overdrafts (Note 23)
– bank loans (Note 23)
– loan notes (Note 23)
– finance lease liabilities (Note 23)
– interest rate swaps (Note 16)
– forward foreign currency contracts (Note 16)
CARRYING AMOUNT
FAIR VALUE
2010
US$M
2009
US$M
2010
US$M
2009
US$M
120.2
15.3
498.8
20.0
0.4
6.1
55.0
35.1
450.1
–
–
1.1
120.2
15.3
498.8
20.0
0.4
6.1
55.0
35.1
450.1
–
–
1.1
305.7
12.2
287.1
36.0
305.7
12.2
287.1
36.0
564.8
1,645.7
564.8
1,645.7
1,316.6
549.9
1,360.0
515.6
1.2
18.2
4.1
1.9
18.1
0.6
1.2
18.2
4.1
1.9
18.1
0.6
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BRAMBLES LIMITED ANNUAL REPORT 2010
95
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 29. FINANCIAL RISK MANAGEMENT – CONTINUED
a) Fair values – continued
Brambles uses various methods in estimating the fair values of financial instruments. The methods comprise:
–
–
Level 1 – the fair value is calculated using quoted prices in active markets;
Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices); and
Level 3 – the fair value is estimated using inputs for the asset or liability that are not observable market data.
–
The table below sets out the fair values and methods used to estimate the fair value of derivatives designated as hedging instruments.
Derivative financial assets
– interest rate swaps
– embedded derivatives
– forward foreign currency contracts
Derivative financial liabilities
– interest rate swaps
– forward foreign currency contracts
2010
2009
LEVEL 1
US$M
LEVEL 2
US$M
LEVEL 3
US$M
TOTAL
US$M
LEVEL 1
US$M
LEVEL 2
US$M
LEVEL 3
US$M
TOTAL
US$M
–
–
–
–
–
20.0
0.4
6.1
18.2
4.1
–
–
–
–
–
20.0
0.4
6.1
18.2
4.1
–
–
–
–
–
–
–
1.1
18.1
0.6
–
–
–
–
–
–
–
1.1
18.1
0.6
The fair values of derivatives designated as hedging instruments are determined using valuation techniques that are based on observable market
data. For forward foreign currency contracts, the net fair value is taken to be the unrealised gain or loss at balance date calculated by reference to
the current forward rates for contracts with similar maturity dates. Fair value for other financial assets and liabilities has been calculated by
discounting future cash flows at prevailing interest rates for the relevant yield curve.
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b) Market risk
Brambles has the following risk policies in place with respect to market risk.
INTEREST RATE RISK
Brambles’ exposure to potential volatility in finance costs, predominantly US dollars, Australian dollars and euros, is managed by maintaining a mix
of fixed and floating-rate instruments within select target bands over defined periods. In most cases, interest rate derivatives are used to achieve
these targets synthetically.
The following table sets out the financial instruments exposed to interest rate risk at reporting date:
Financial assets (floating rate)
Cash at bank
Short term deposits
Weighted average effective interest rate
Financial liabilities (floating rate)
Bank overdrafts
Bank loans
Interest rate swaps (notional value) – cash flow hedges
Interest rate swaps (notional value) – fair value hedges
Net exposure to cash flow interest rate risk
Weighted average effective interest rate
Financial liabilities (fixed rate)
Loan notes
Finance lease liabilities
Interest rate swaps (notional value) – cash flow hedges
Interest rate swaps (notional value) – fair value hedges
Net exposure to fair value interest rate risk
Weighted average effective interest rate
2010
US$M
2009
US$M
120.2
15.3
135.5
1.3%
55.0
35.1
90.1
1.0%
12.2
36.0
564.8
1,645.7
(460.9)
(612.3)
450.0
–
566.1
1,069.4
3.0%
3.2%
1,316.6
549.9
1.2
1.9
460.9
612.3
(450.0)
–
1,328.7
1,164.1
5.4%
6.0%
Interest rate swaps – cash flow hedges
Brambles enters into various interest rate risk management transactions for the purpose of managing finance costs to achieve more stable and
predictable finance expense results. The instruments primarily used are interest rate swaps and caps.
During 2010, Brambles entered into or maintained interest rate swap transactions with various banks hedging variable rate borrowings in US
dollars and euros. The purpose of the interest rate swaps was to hedge variable interest expense under borrowings against rising interest rates.
Interest rate swaps achieve this by synthetically converting the variable interest rate payment into a fixed interest liability on the dates on which
interest is payable on the underlying debt. The fair value of these contracts at reporting date was US$(15.1) million (2009: US$(18.1) million).
The terms of the contracts have been negotiated to match the projected drawdowns and rollovers of variable rate bank debt.
Interest rate swaps – fair value hedges
During 2010, concurrent with the issue of US$750.0 million in fixed rate bonds, Brambles entered into interest rate swap transactions with various
banks swapping US$450.0 million fixed rate borrowings to variable rate borrowings. The fair value of these contracts at reporting date was
US$16.9 million (2009: nil).
The terms of the swaps match the terms of the fixed rate bond issue for the amounts and durations being hedged.
The gain or loss from re-measuring the interest rate swaps at fair value is recorded in the income statement together with any changes in the fair
value of the hedged asset or liability that is attributed to the hedged risk. For 2010, all interest rate swaps were effective hedging instruments.
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BRAMBLES LIMITED ANNUAL REPORT 2010
97
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 29. FINANCIAL RISK MANAGEMENT – CONTINUED
b) Market risk – continued
Sensitivity analysis
The following table sets out the sensitivity of Brambles’ financial assets and financial liabilities to interest rate risk applying the following
assumptions:
US dollar interest rates
Australian dollar interest rates
Sterling interest rates
Euro interest rates
Impact on profit after tax
Impact on equity
INTEREST RATE RISK
2010
2009
LOWER
RATES
HIGHER
RATES
LOWER
RATES
HIGHER
RATES
- 25 bps
+ 75 bps
- 25 bps
+ 50 bps
- 25 bps
+ 75 bps
- 50 bps
+ 50 bps
- 25 bps
+ 75 bps
- 25 bps
+ 50 bps
- 25 bps
+ 75 bps
- 25 bps
+ 50 bps
US$M
US$M
US$M
US$M
0.9
(0.2)
(3.0)
0.7
2.0
(0.3)
(5.4)
0.7
Based on financial instruments held at 30 June 2010, if interest rates were to parallel shift by the number of basis points in the different currencies
noted above with all other variables held constant, profit after tax for the year would have been US$0.9 million higher or US$3.0 million lower
(2009: US$2.0 million higher or US$5.4 million lower), mainly as a result of lower/higher interest expense on bank borrowings. The impact on equity
would have been US$0.2 million lower or US$0.7 million higher (2009: US$0.3 million lower or US$0.7 million higher) mainly as a result of the
incremental movement through the hedging reserve relating to the effective portion of cash flow hedges. Given its geographically diverse operations,
Brambles had interest rate exposure positions against a variety of currencies, but predominantly US dollars, Australian dollars and euros.
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FOREIGN EXCHANGE RISK
Exposure to foreign exchange risk generally arises in transactions affecting either the value of transactions translated back to the functional
currency of a subsidiary or affecting the value of assets and liabilities of overseas subsidiaries when translated back to the Group’s reporting
currency. Foreign exchange hedging is used when a transaction exposure exceeds certain thresholds and as soon as a defined exposure arises.
Currency profile
The following table sets out the currency mix profile of Brambles’ financial instruments at reporting date:
2010
Financial assets
– cash at bank and in hand
– short term deposits
– interest rate swaps
– embedded derivatives
– forward foreign currency contracts
Financial liabilities
– bank overdrafts
– bank loans
– loan notes
– finance lease liabilities
– interest rate swaps
– forward foreign currency contracts
– net investment hedge
2009
Financial assets
– cash at bank and in hand
– short term deposits
– forward foreign currency contracts
Financial liabilities
– bank overdrafts
– bank loans
– loan notes
– finance lease liabilities
– interest rate swaps
– forward foreign currency contracts
– net investment hedge
US
DOLLAR
US$M
AUST.
DOLLAR
US$M
STERLING
US$M
EURO
US$M
OTHER
US$M
TOTAL
US$M
23.9
0.2
20.0
–
215.3
259.4
–
–
–
–
2.6
–
–
–
127.6
127.6
134.4
137.0
–
0.3
399.4
1,316.6
0.4
17.4
–
–
–
–
115.4
155.7
–
–
1,849.2
156.0
2.8
–
3.4
6.2
–
894.3
549.9
0.7
16.6
101.0
–
2.3
12.2
129.2
143.7
–
161.0
–
–
1.5
1.9
–
–
–
–
–
–
–
–
–
–
–
48.8
48.8
8.2
–
–
–
–
3.1
–
27.8
0.4
–
–
110.5
138.7
7.3
62.9
–
0.7
0.8
65.9
14.7
–
0.4
60.2
141.2
4.6
41.0
–
0.1
–
120.2
15.3
20.0
0.4
648.0
803.9
12.2
503.3
1,316.6
1.2
18.2
269.5
105.4
646.0
61.5
402.7
–
61.5
151.1
2,559.0
8.6
2.8
7.2
18.6
22.8
397.3
–
1.0
–
48.3
71.2
41.3
20.1
1.3
62.7
55.0
35.1
189.9
280.0
5.0
36.0
121.9
1,574.5
–
0.2
–
35.1
–
549.9
1.9
18.1
189.4
71.2
1,562.5
164.4
11.3
540.6
162.2
2,441.0
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BRAMBLES LIMITED ANNUAL REPORT 2010
99
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 29. FINANCIAL RISK MANAGEMENT – CONTINUED
b) Market risk – continued
Forward foreign exchange contracts – cash flow hedges
Brambles enters into forward foreign exchange contracts to hedge currency exposures arising from normal commercial transactions such as the
purchase and sale of equipment and services, intercompany interest and royalties.
During 2010, Brambles 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 2010 and 2009, 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$(0.2) million (2009: US$(0.5) million).
Other forward foreign exchange contracts
Brambles enters into other 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 and are classified as held for trading.
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$2.2 million (2009: US$1.0 million).
Hedge of net investment in foreign entity
Included in bank loans at 30 June 2010 is a borrowing of US$61.5 million (2009: US$71.2 million) denominated in euros. This loan has been
designated as a hedge of the net investment in Brambles’ European subsidiaries and is being used to partially hedge Brambles’ exposure to foreign
exchange risks on these investments. For 2010 and 2009, there was no ineffectiveness to be recorded from such partial hedges of net investments
in foreign entities.
Sensitivity analysis
The following table sets out the sensitivity of Brambles’ financial assets and financial liabilities to foreign exchange risk (transaction exposures only):
FOREIGN EXCHANGE RISK
2010
2009
LOWER
RATES
HIGHER
RATES
LOWER
RATES
HIGHER
RATES
Exchange rate movement
-10%
+10%
-10%
+10%
Impact on profit after tax
Impact on equity
US$M
US$M
US$M
US$M
0.3
(4.3)
(0.3)
4.3
3.2
(5.0)
(3.2)
5.0
Based on the financial instruments held at 30 June 2010, 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$0.3 million higher/lower (2009: US$3.2 million higher/lower). The impact on equity
would have been US$4.3 million lower/higher (2009: US$5.0 million lower/higher) as a result of the incremental movement through the foreign
currency translation reserve relating to the effective portion of a net investment hedge.
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c) Liquidity risk
Brambles’ objective is to maintain adequate liquidity to meet its financial obligations as and when they fall due. Brambles funds its operations
through existing equity, retained cash flow and borrowings. Funding is generally sourced from relationship banks and debt capital market investors
on a medium to long term basis. Bank credit facilities are generally structured on a committed multi-currency revolving basis and at balance date
had maturities ranging out to December 2013. Borrowings under the facilities are floating-rate, unsecured obligations with covenants and
undertakings typical for these types of arrangements.
Borrowings are raised from debt capital markets by the issue of unsecured fixed interest notes, with interest payable semi-annually.
Brambles also has access to further funding through overdrafts, uncommitted and standby lines of credit, principally to manage day-to-day liquidity.
To minimise foreign exchange risks, borrowings are arranged in the currency of the relevant operating asset to be funded.
Refer to Note 23a for borrowing facilities and credit standby arrangements disclosures.
Maturities of derivative financial assets and liabilities
The maturity of Brambles’ contractual cash flows on net and gross settled derivative financial instruments, based on the remaining period to
contractual maturity date, is presented below. Cash flows on interest rate swaps and forward foreign exchange contracts are valued based on
forward interest rates applicable at reporting date.
YEAR 1
US$M
YEAR 2
US$M
YEAR 3
US$M
YEAR 4
US$M
OVER 4 YEARS
US$M
TOTAL
CONTRACTUAL
CASH FLOWS
US$M
CARRYING
AMOUNT ASSETS/
(LIABILITIES)
US$M
2010
Net settled
Interest rate swaps
– cash flow hedges
– fair value hedges
Gross settled
Forward foreign exchange contracts
– inflow
– (outflow)
2009
Net settled
(8.2)
8.4
(5.1)
7.0
(1.9)
4.5
648.0
(646.0)
2.2
–
–
1.9
–
–
2.6
0.1
(0.4)
–
–
(0.3)
–
(2.6)
–
–
(2.6)
(15.1)
16.9
(15.1)
16.9
648.0
(646.0)
3.8
2.0
–
3.8
Interest rate swaps
(12.3)
(4.4)
(1.1)
(0.3)
–
(18.1)
(18.1)
Gross settled
Forward foreign exchange contracts
– inflow
– (outflow)
189.9
(189.4)
(11.8)
–
–
(4.4)
–
–
(1.1)
–
–
(0.3)
–
–
–
189.9
(189.4)
(17.6)
0.5
–
(17.6)
BRAM021 Annual Report 2010 FINS v7 FA.indd 101
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BRAMBLES LIMITED ANNUAL REPORT 2010
101
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 29. FINANCIAL RISK MANAGEMENT – CONTINUED
c) Liquidity risk – continued
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
which includes principal and interest, is presented below. Refer to Note 23b for borrowing facilities maturity profile.
YEAR 1
US$M
YEAR 2
US$M
YEAR 3
US$M
YEAR 4
US$M
OVER 4
YEARS
US$M
TOTAL
CONTRACTUAL
CASH FLOWS
US$M
CARRYING
AMOUNT
US$M
2010
Financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease liabilities
Financial guarantees1
2009
Financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease liabilities
Financial guarantees1
305.7
12.2
256.8
92.0
0.6
667.3
98.8
766.1
287.1
36.0
78.2
47.5
0.6
449.4
83.8
533.2
–
–
108.4
230.9
0.5
339.8
–
339.8
–
–
391.6
32.5
0.9
425.0
–
425.0
–
–
123.4
59.1
0.1
182.6
–
182.6
–
–
434.7
195.1
0.5
630.3
–
630.3
–
–
112.2
93.6
–
–
–
–
305.7
12.2
600.8
305.7
12.2
564.8
1,280.1
1,755.7
1,316.6
–
1.2
1.2
205.8
1,280.1
2,675.6
2,200.5
–
–
98.8
–
205.8
1,280.1
2,774.4
2,200.5
–
–
411.4
23.3
0.1
434.8
–
434.8
–
–
546.2
414.7
–
287.1
36.0
287.1
36.0
1,862.1
1,645.7
713.1
2.1
549.9
1.9
960.9
2,900.4
2,520.6
–
83.8
–
960.9
2,984.2
2,520.6
1 Refer to Note 32a for details on financial guarantees. The amounts disclosed above are the maximum amounts allocated to the earliest period in which the guarantee
could be called. Brambles does not expect these payments to eventuate.
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 29a. 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$26.1million (2009: US$1.1 million). Brambles transacts derivatives with prominent financial institutions and has credit limits in
place to limit exposure to any potential non-performance by its counterparties.
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e) Capital risk management
Brambles’ objective when managing capital is to ensure Brambles continues as a going concern as well as to provide a balance between financial
flexibility and balance sheet efficiency. In determining its capital structure, Brambles considers the robustness of future cash flows, potential
funding requirements for growth opportunities and acquisitions, the cost of capital and ease of access to funding sources.
Brambles manages its capital structure to be consistent with a solid investment grade credit. At 30 June 2010, Brambles held investment grade
credit ratings of BBB+ from Standard and Poor’s and Baa1 from Moody’s Investor Services.
Initiatives available to Brambles to achieve its desired capital structure include adjusting the amount of dividends paid to shareholders,
returning capital to shareholders, buying-back share capital, issuing new shares, selling assets to reduce debt and varying the maturity profile
of its borrowings.
Brambles considers its capital to comprise:
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total capital
2010
US$M
2009
US$M
1,894.8
2,233.5
135.5
90.1
1,759.3
2,143.4
1,632.6
1,429.3
3,391.9
3,572.7
Brambles has adopted a financial policy to target a net debt to EBITDA ratio of less than 1.75 to 1. Brambles is compliant with this financial policy
at 30 June 2010.
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.
Brambles has complied with these financial covenants for 2010 and prior years. At balance date, based on the definitions below, the ratios were:
Total borrowings
Less: fair value adjustments due to hedge accounting
Less: cash and cash equivalents
Net debt
EBITDA
Net finance costs
Net debt/EBITDA (times)
EBITDA/net finance cost (times)
1,894.8
2,233.5
14.4
135.5
–
90.1
1,744.9
2,143.4
1,171.6
1,207.6
109.6
120.9
1.5
10.7
1.8
10.0
The following definitions apply in the calculation of these financial covenants:
–
EBITDA means Brambles’ consolidated operating profit (excluding Significant items outside the ordinary course of business) 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.
–
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BRAMBLES LIMITED ANNUAL REPORT 2010
103
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 30. 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 13)
Short term deposits (Note 13)
Bank overdraft (Note 23)
b) 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
– impairment of pooling equipment
– foreign exchange gain on capital repatriation
– other valuation adjustments
– net gains on disposal of businesses and investments
– net gains after tax on completed disposals of discontinued operations
– joint ventures
– equity-settled share-based payments
– finance revenues and costs
Movements in operating assets and liabilities, net of acquisitions and disposals:
– (increase)/decrease in trade and other receivables
– (increase) in prepayments
– decrease in inventories
– (decrease)/increase in deferred tax
– increase/(decrease) in trade and other payables
– increase/(decrease) in tax payables
– (decrease)/increase in provisions
– other
Net cash inflow from operating activities
2010
US$M
2009
US$M
120.2
15.3
(12.2)
123.3
55.0
35.1
(36.0)
54.1
448.8
452.6
444.0
111.2
(26.4)
–
–
(1.1)
–
(7.5)
0.1
10.7
7.9
(19.3)
(0.8)
22.1
(45.1)
15.5
35.3
(4.1)
(1.0)
424.6
97.8
(11.9)
33.6
(77.3)
(1.9)
(0.6)
(17.0)
2.1
14.5
(3.0)
56.3
(6.0)
7.3
49.7
(31.9)
(19.0)
53.5
(0.4)
990.3
1,023.0
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c) Reconciliation of movement in net debt
Net debt at beginning of the year
Net cash inflow from operating activities
Net cash outflow from investing activities
Net (inflow)/outflow from hedge instruments
Proceeds from issue of ordinary shares
Dividends paid, net of Dividend Reinvestment Plan
Interest accruals, finance leases and other
Foreign exchange differences
Net debt at end of the year
Being:
Current borrowings
Non-current borrowings
Cash and cash equivalents
Net debt at end of the year
2010
US$M
2009
US$M
2,143.4
2,426.2
(990.3)
(1,023.0)
440.4
(35.8)
(2.7)
204.5
26.0
606.6
7.9
(0.8)
277.6
(7.5)
(26.2)
(143.6)
1,759.3
2,143.4
276.0
68.0
1,618.8
2,165.5
(135.5)
(90.1)
1,759.3
2,143.4
d) Non-cash financing or investing activities
Dividends of US$120.2 million were satisfied by issues of shares under the Dividend Reinvestment Plan. There were no other 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.
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BRAMBLES LIMITED ANNUAL REPORT 2010
105
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 31. COMMITMENTS
a) Capital expenditure commitments
At 30 June 2010, Brambles had commitments of US$41.1 million (2009: US$29.2 million) principally relating to property, plant and equipment.
Capital expenditure contracted for but not recognised as liabilities at reporting date were as follows:
Within one year
Between one and five years
2010
US$M
32.2
8.9
41.1
2009
US$M
29.2
–
29.2
b) Operating lease commitments
Brambles has taken out operating leases for offices, operational locations and plant and equipment. The leases have varying terms, escalation
clauses and renewal rights. Escalation clauses are rare and any impact is considered immaterial.
The future minimum lease payments under such non-cancellable operating leases are as follows:
Within one year
Between one and five years
After five years
Minimum lease payments
PLANT
OCCUPANCY
2010
US$M
23.6
28.4
–
52.0
2009
US$M
33.1
59.5
4.3
96.9
2010
US$M
2009
US$M
157.2
452.7
302.3
912.2
140.4
464.1
363.7
968.2
During the year, operating lease expense of US$205.2 million (2009: US$185.0 million) was recognised in the income statement.
c) Finance lease commitments
Finance leases of plant and equipment are not a material feature of Brambles’ funding arrangements. Finance lease commitments are payable
as follows:
Within one year
Between one and five years
Minimum lease payments recognised as a liability
PLANT
2010
US$M
2009
US$M
0.6
0.6
1.2
0.5
1.4
1.9
106
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NOTE 32. CONTINGENCIES
a) Subsidiaries of Brambles Limited have contingent unsecured liabilities in respect of guarantees given relating to performance under contracts
entered into totalling US$98.8 million (2009: US$83.8 million), of which US$92.7 million (2009: US$79.4 million) is also guaranteed by Brambles
Limited and is included in Note 37b.
b) 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$3.3 million (2009: US$5.4 million).
c) A subsidiary has guaranteed certain lease obligations of third parties totalling US$15.3 million (2009: US$21.7 million). A subsidiary of Brambles
Limited has provided guarantees to support lease facilities entered into by certain Brambles’ subsidiaries. Total facilities available amount to
US$11.7 million (2009: US$13.9 million), of which US$11.7 million (2009: US$13.9 million) has been drawn.
d) 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.
e) In the ordinary course of business, Brambles becomes involved in litigation. 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.
f) Brambles has given vendor warranties in relation to businesses sold in 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 2010.
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BRAMBLES LIMITED ANNUAL REPORT 2010
107
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 33. AUDITORS’ REMUNERATION
PricewaterhouseCoopers (PwC) earned the following remuneration from Brambles during the year:
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
– other
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
– other
Total remuneration of related practices of PwC (Australia)
Total auditors’ remuneration
2010
US$’000
2009
US$’000
1,338
1,252
256
31
1,594
1,283
33
–
33
37
22
59
1,627
1,342
2,531
3,209
53
6
2,584
3,215
43
108
151
51
–
51
2,735
3,266
4,362
4,608
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 Audit Committee has established a policy whereby its approval is required wherever management recommends that PwC undertake
non-audit work. Valuation services, actuarial services and internal audit services will not be performed by PwC.
In 2010 and 2009, non-audit assignments primarily related to implementation of a compliance tracking system and tax consulting advice.
NOTE 34. KEY MANAGEMENT PERSONNEL
a) Key management personnel compensation
Short term employee benefits
Post employment benefits
Other benefits
Termination/sign-on/retirement benefits
Share-based payments
12,269
7,722
594
126
5,172
2,012
397
64
631
4,895
20,173
13,709
108
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b) Equity instruments disclosure relating to key management personnel
The number of ordinary shares and options/share rights in Brambles held during the financial year by each key management personnel, including
their related parties, are set out below:
NAME AND HOLDINGS
2010
Executive Directors
T J Gorman
Ordinary shares
Share rights
G J Hayes
Ordinary shares
Share rights
Former Executive Directors
M F Ihlein
Ordinary shares
Share rights
M E Doherty
Ordinary shares
Share rights
Current Key Management Personnel
J L Infinger
Ordinary shares
Share rights
J R A Judd
Ordinary shares
Share rights
P S Mackie
Ordinary shares
Share rights
E E Potts
Ordinary shares
Share rights
J D Ritchie
Ordinary shares
Share rights
K J Shuba
Ordinary shares
Options/share rights
N P Smith
Ordinary shares
Share rights
R J Westerbos
Ordinary shares
Share rights
Former Senior Executive
C A van der Laan
Ordinary shares
Share rights
BALANCE
AT START OF
THE YEAR
GRANTED
DURING
THE YEAR
EXERCISED
DURING
THE YEAR
LAPSED
DURING
THE YEAR
CHANGES
DURING
THE YEAR
BALANCE
AT END OF
THE YEAR1
VESTED AND
EXERCISABLE
AT END OF
THE YEAR
245
–
219,688
326,994
–
–
–
405,870
783,524
809,734
10,151
246,453
–
483
–
440
–
–
–
128,717
50,590
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
110,038
–
–
–
–
–
685
–
930
546,682
–
–
–
405,870
489
–
441
–
784,013
700,179
10,592
246,893
135
–
135
128,717
14,809
65,399
177,446
84,345
13,931
28,668
–
219,192
245
–
–
–
110,041
53,701
6,278
17,701
609
–
854
139,763
50,689
–
–
–
7,437
58,126
210,106
103,662
9,955
27,109
–
276,704
–
–
–
–
39,941
123,368
65,490
58,718
37,538
–
39,941
92,602
28,033
–
–
–
18,419
46,452
334,421
111,645
134,534
28,136
–
283,396
292
–
97,463
97,926
–
–
15,000
442,662
–
–
–
–
–
–
–
–
–
–
–
–
–
754
–
–
–
1,046
195,389
–
–
–
34,779
49,779
34,779
49,507
–
358,376
–
–
–
–
–
68,713
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Closing balances are as the end of the year for ongoing employees and as at cessation of employment for those whose employment ended during the year.
BRAM021 Annual Report 2010 FINS v7 FA.indd 109
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BRAMBLES LIMITED ANNUAL REPORT 2010
109
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 34. KEY MANAGEMENT PERSONNEL – CONTINUED
b) Equity instruments disclosure relating to key management personnel
NAME AND HOLDINGS
2009
Executive Directors
M F Ihlein
Ordinary shares
Share rights
M E Doherty
Ordinary shares
Share rights
Current Key Management Personnel
T J Gorman
Ordinary shares
Share rights
J R A Judd
Ordinary shares
Share rights
E E Potts
Ordinary shares
Share rights
K J Shuba
Ordinary shares
Options/share rights
N P Smith
Ordinary shares
Share rights
C A van der Laan
Ordinary shares
Share rights
Former Senior Executive
C M Norin
Ordinary shares
Share rights
BALANCE
AT START OF
THE YEAR
GRANTED
DURING
THE YEAR
EXERCISED
DURING
THE YEAR
LAPSED
DURING
THE YEAR
CHANGES
DURING
THE YEAR
BALANCE
AT END OF
THE YEAR
VESTED AND
EXERCISABLE
AT END OF
THE YEAR
646,470
–
–
–
137,054
783,524
602,526
461,376
136,762
117,406
–
809,734
–
–
28,406
218,047
–
–
36,365
183,323
69,654
–
–
–
–
–
–
–
–
–
–
–
10,151
10,151
–
246,453
245
–
245
219,688
(19,064)
50,590
142,669
93,647
30,785
28,085
–
177,446
45,000
–
–
–
5,689
50,689
166,236
90,926
25,436
21,620
–
210,106
27,780
–
–
–
244,519
133,832
23,746
20,184
–
–
–
97,463
130,862
–
–
–
–
–
–
371,060
188,344
64,490
52,252
–
442,662
–
(115,862)
15,000
334,421
125,208
253
–
292
–
28,033
292
97,463
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
164,292
78,251
35,896
90,324
115
–
115
116,323
58,485
c) Other transactions with key management personnel
Other transactions with key management personnel are set out in Note 35d.
Further remuneration disclosures are set out in the Directors’ Report on pages 31 to 44 of the Annual Report.
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.
Brambles Limited charges Brambles’ borrowers a commercially-determined guarantee fee for the guarantees and cross-guarantees it has given in
relation to borrowing facilities, as described in Note 37b.
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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.
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
PLACE OF INCORPORATION
USA
Canada
UK
France
Germany
Spain
Mexico
The Netherlands
Italy
UK
CHEP South Africa (Proprietary) Limited
South Africa
CHEP Australia Limited
CHEP (Shanghai) Company Limited
CHEP Technology Pty Limited
CHEP India Pvt Limited
LeanLogistics Inc
Recall
Recall Limited
Recall France SA
Recall Corporation, Inc.
Recall do Brasil Ltda
AUSDOC Holdings Pty Limited
Recall Information Management Pty Limited
Recall Deutschland GmbH
Brambles HQ
Brambles Industries Limited
Brambles Holdings (UK) Limited
Australia
China
Australia
India
USA
UK
France
USA
Brazil
Australia
Australia
Germany
Australia
UK
Brambles International Finance BV
The Netherlands
Brambles USA Inc.
Brambles North America Incorporated
Brambles Finance plc
Brambles Finance Limited
USA
USA
UK
Australia
% INTEREST HELD AT
REPORTING DATE
2010
2009
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.
Investments in subsidiaries are primarily by means of ordinary or common shares. All subsidiaries prepare accounts with a 30 June balance date.
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BRAMBLES LIMITED ANNUAL REPORT 2010
111
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS – CONTINUED
FOR THE YEAR ENDED 30 JUNE 2010
NOTE 35. RELATED PARTY INFORMATION – CONTINUED
c) Joint ventures
Brambles’ share of the net results of joint ventures is disclosed in Note 18.
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 2010 of US$1.201 million (2009: US$1.099 million) to Brambles
Custodians Pty Limited, the trustee under Brambles’ employee loan scheme. This scheme enabled employees to acquire shares in BIL and has
been closed to new entrants since August 2002.
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; or
(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)
(ii)
(iii)
(iv)
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)(i) above;
in defending or resisting criminal proceedings in which the person is found guilty;
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
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.
As allowed by its constitution, Brambles Limited has provided indemnities from time to time to Directors, Secretaries or other Statutory Officers of
its subsidiaries (Beneficiaries) against all loss, cost and expenses (collectively Loss) caused by or arising from any act or omission by the relevant
person in performance of that person’s role as a Director, Secretary or Statutory Officer.
The indemnity given by the Company excludes the following matters:
(a) any Loss to the extent caused by or arising from an act or omission of the Beneficiary prior to the effective date of the indemnity;
(b) any Loss to the extent indemnity in respect of that Loss is prohibited under the Corporations Act (or any other law);
(c) any Loss to the extent it arises from private or personal acts or omissions of the Beneficiary;
(d) any Loss comprising the reimbursement of normal day-to-day expenses such as travelling expenses;
(e) any Loss to the extent the Beneficiary failed to act reasonably to mitigate the Loss;
(f) any Loss to the extent it is caused by or arises from acts or omissions of the Beneficiary after the date the indemnity is revoked by the
Company in accordance with the terms of the indemnity;
(g) any Loss to the extent it is caused by or arises from any breach by the Beneficiary of the terms of the indemnity.
Insurance policies are in place to cover Directors, Secretaries and other Statutory Officers of Brambles Limited and its subsidiaries, 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 2010 and up to the date
of this report that have had a material impact on Brambles’ financial performance or position.
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NOTE 37. PARENT ENTITY FINANCIAL INFORMATION
a) Summarised financial data of Brambles Limited
(Loss)/profit for the year1
Other comprehensive income/(loss) for the year
Total comprehensive income
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Share-based payment reserve
Foreign currency translation reserve
Retained earnings
Total equity
PARENT ENTITY
2010
US$M
2009
US$M
(8,573.3)
347.1
665.1
(2,718.0)
(7,908.2)
(2,370.9)
1.7
18.5
6,642.5
19,267.7
6,644.2
19,286.2
21.5
46.6
68.1
26.8
4,603.8
4,630.6
6,576.1
14,655.6
13,979.6
13,847.6
28.2
1,061.5
(8,493.2)
27.3
396.4
384.3
6,576.1
14,655.6
1 The parent entity’s loss for 2010 includes a charge of US$9.1 billion after tax against the parent entity’s investment in subsidiaries. The price of Brambles shares as
quoted on the Australian Securities Exchange at 30 June 2010 has been used to determine the new carrying value of these investments. This non-cash charge is
reversed on consolidation and does not impact the consolidated financial statements.
b) Guarantees and contingent liabilities
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$2,459.9 million (2009: US$2,826.6 million) of which US$527.4 million
(2009: US$1,640.9 million) has been drawn.
Brambles Limited and certain of its subsidiaries are parties to guarantees which support US Private Placement borrowings of US$535.0 million
(2009: US$535.0 million) by a subsidiary.
Brambles Limited and certain of its subsidiaries are parties to a guarantee which support notes of US$750.0 million (2009: nil) issued by a
subsidiary to qualified institutional buyers in accordance with Rule 144A and Regulation S of the United States Securities Act.
Brambles Limited has guaranteed repayment of certain facilities and financial accommodations made available to certain Brambles’ subsidiaries.
Total facilities available amount to US$327.2 million (2009: US$315.9 million), of which US$130.1 million (2009: US$98.8 million) has been drawn.
Other than these guarantees, the parent entity did not have any contingent liabilities at 30 June 2010 or 30 June 2009.
c) Contractual commitments
Brambles Limited did not have any contractual commitments for the acquisition of property, plant and equipment at 30 June 2010 or 30 June 2009.
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BRAMBLES LIMITED ANNUAL REPORT 2010
113
DIRECTORS’
DECLARATION
In the opinion of the Directors of Brambles Limited:
(a)
the financial statements and notes set out on pages 53 to 113 are in accordance with the 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 as at 30 June 2010 and of its 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.
A statement of compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board
is included within Note 1 to the financial statements.
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
19 August 2010
T J GORMAN
Chief Executive Officer
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BRAMBLES LIMITED ANNUAL REPORT 2010
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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 2010,
and the income statement, the statement of comprehensive income, statement of changes in equity 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 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 the financial statements comply 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 auditor’s 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.
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.
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:
giving a true and fair view of Brambles’ financial position as at 30 June 2010 and of its performance for the year ended on that date; and
(i)
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001; and
(b)
the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1.
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BRAMBLES LIMITED ANNUAL REPORT 2010
115
INDEPENDENT AUDITORS’ REPORT – CONTINUED
TO THE MEMBERS OF BRAMBLES LIMITED
REPORT ON THE REMUNERATION REPORT
We have audited the Remuneration Report included in pages 31 to 44 of the Directors’ Report for the year ended 30 June 2010. 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 2010, complies with section 300A of the Corporations
Act 2001.
Matters relating to the electronic presentation of the audited financial report
This auditors’ report relates to the financial report and Remuneration Report of Brambles Limited for the year ended 30 June 2010 included on
Brambles’ web site. The Directors of the Company are responsible for the integrity of the Brambles’ web site. We have not been engaged to report
on the integrity of this web site. The auditors’ 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 the financial report 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 website.
PRICEWATERHOUSECOOPERS
M G JOHNSON
Partner
Sydney
19 August 2010
M DOW
Partner
116
BRAMBLES LIMITED ANNUAL REPORT 2010
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 2010, 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
19 August 2010
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BRAMBLES LIMITED ANNUAL REPORT 2010
117
FIVE YEAR FINANCIAL
PERFORMANCE SUMMARY
Continuing operations
Sales revenue
Operating profit
Net finance costs
Profit before tax
Tax expense
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Depreciation and amortisation
Continuing operations
Discontinued operations
Capex on property, plant & equipment
Continuing operations
Discontinued operations
Cash flow
Cash flow from operations
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
From continuing operations
On Underlying profit after finance costs and tax
Dividend declared per share (Australian cents)
Interim and final
Special
2010
US$M
2009
US$M
2008
US$M
2007
US$M
2006
US$M
4,146.8
4,018.6
4,358.6
3,868.8
3,522.1
724.5
718.2
1,030.6
796.0
701.1
(109.6)
(120.9)
(149.5)
(59.9)
(111.8)
614.9
597.3
881.1
736.1
589.3
(171.0)
(163.3)
(234.2)
(302.4)
(226.7)
443.9
434.0
646.9
433.7
362.6
4.9
18.6
1.8
857.6
1,101.8
448.8
452.6
648.7
1,291.3
1,464.4
444.0
424.6
458.6
404.3
–
–
–
–
412.0
80.7
498.8
672.4
849.2
–
–
–
695.7
24.7
581.7
182.8
882.3
548.6
204.5
344.1
722.4
419.5
277.6
141.9
810.0
412.6
444.8
838.3
490.2
604.0
(32.2)
(113.8)
762.6
559.7
296.7
263.0
3,391.5
3,572.7
3,969.7
3,419.6
4,643.1
1,759.3
2,143.4
2,426.2
1,996.9
1,690.1
1,632.2
1,429.3
1,543.5
1,422.7
2,953.0
12,714
12,785
12,305
12,327
12,249
–
–
–
1,841
14,043
31.8
31.5
31.9
25.0
–
32.6
31.3
38.5
30.0
–
46.0
45.9
45.4
34.5
–
83.4
28.0
37.3
17.0
–
86.7
21.5
25.3
25.0
34.5
118
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GLOSSARY
2001 Option Plans
2001 Share Plans
2004 Share Plans
2006 Share Plan
Act
Actual rates
AGM
ASX
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.
The Brambles Limited 2006 Performance Share Plan, as amended on 25 November 2008 and
18 November 2009.
The Corporations Act 2001 (Cth).
In the statutory financial statements, results are translated into US dollars at the applicable actual
monthly exchange rates ruling in each period.
Annual General Meeting.
Australian Securities Exchange.
Average Capital Invested
Average Capital Invested or ACI is a 12 month average of Capital Invested.
BIL
BIP
Board
Capital Invested is calculated as net assets before tax balances, cash and borrowings, but after
adjustment for accumulated pre-tax Significant items, actuarial gains or losses and net equity
adjustments for equity-settled share-based payments.
Brambles Industries Limited, which was one of the two listed entities in the previously dual-listed
companies structure.
Brambles Industries plc, which was one of the two listed entities in the previously dual-listed
companies structure.
The Board of Brambles Limited.
Brambles or Group
Brambles Limited and all of its related bodies corporate.
BVA
CAGR
Cash flow from operations
CGPR
Company
Constant currency
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 using fixed June 2009 exchange rates as:
–
–
–
Underlying profit; plus
Significant items that are part of the ordinary activities of the business; less
Average Capital Invested, adjusted for accumulated pre-tax Significant items that are part of the
ordinary activities of the business, multiplied by 12%.
Compound Annual Growth Rate. The CAGR of sales revenue is the annualised percentage at which
sales revenue would have grown over a period if it grew at a steady rate.
Cash flow generated after net capital expenditure but excluding Significant items that are outside
the ordinary course of business.
The Australian Securities Exchange Corporate Governance Council Corporate Governance Principles
and Recommendations.
Brambles Limited (ACN 118 896 021)
Constant currency results are presented by translating both current and comparable period results
into US dollars at the actual monthly exchange rates applicable in the comparable period, so as to
show relative performance between the two periods before the translation impact of currency
fluctuations.
Continuing operations
Continuing operations refers to CHEP, Recall and Brambles HQ.
Discontinued operations
Operations which have been divested or which are held for sale.
DLC
Dual-listed companies structure – the previous 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 residences and stock
exchange listings. BIL and BIP operated as a DLC from August 2001 to December 2006.
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BRAMBLES LIMITED ANNUAL REPORT 2010
119
GLOSSARY – CONTINUED
DMS
DPS
EBITDA
EPS
Free cash flow
fx
FY10 or Year
FY11
Document Management Solutions, a Recall service line.
Data Protection Services, a Recall service line.
Earnings before interest, tax, depreciation and amortisation. EBITDA is defined as Operating profit
from continuing operations after adding back depreciation and amortisation and Significant items
outside the ordinary course of business.
Earnings per share.
Cash flow generated after net capital expenditure, finance costs and tax, but excluding the net cost
of acquisitions and proceeds from business disposals.
Foreign exchange.
The 2010 financial year commencing 1 July 2009 and ending 30 June 2010.
The 2011 financial year commencing 1 July 2010 and ending 30 June 2011.
Group or Brambles
Brambles Limited and all of its related bodies corporate.
IBC
IFRS
IPEP
KPI(s)
LSE
LTI
LTIFR
LTISR
OHS&E
MyShare
Intermediate Bulk Container, for the transport and storage of bulk products.
International Financial Reporting Standards. Brambles reports its financial results under Australian
Accounting Standards, which are compliant with IFRS.
Irrecoverable pooling equipment provision.
Key Performance Indicator(s).
London Stock Exchange.
Long Term Incentive.
Lost Time Injury Frequency Rate.
Lost Time Injury Severity Rate.
Occupational Health Safety and Environment.
The Brambles Limited MyShare Plan, an all employee share plan, under which employees acquire
ordinary shares by means of deductions from their after-tax pay and must hold those shares for a
two year period. If they hold those shares and remain employed at the end of the two year period,
then 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 at no additional cost to the employee.
Net new business wins
The change in sales revenue in a period resulting from business won or lost in that period and the
previous 12 months. Net new business is calculated on a constant currency basis.
PAT
RFID
ROCI
RPC
SDS
Significant items
STI
TFR
TSR
Underlying profit
Unification
Profit After Tax.
Radio Frequency Identification.
Return on Capital Invested or ROCI is calculated as Underlying profit divided by Average Capital
Invested.
Reusable Plastic Container, generally used for shipment and display of produce items.
Secure Destruction Services, a Recall service line.
Significant items are items of income or expense which are, either individually or in aggregate,
material to Brambles or to the relevant business segment and:
–
outside the ordinary course of business (e.g. gains or losses on the sale or termination of
operations, the cost of significant reorganisations or restructuring); or
part of the ordinary activities of the business but unusual due to their size and nature.
–
Short Term Incentive.
Total Fixed Remuneration.
Total Shareholder Return. TSR measures the returns that a company has provided for its shareholders,
reflecting share price movements and reinvestment of dividends over a specified performance
period. Under the 2006 Share Plan, TSR is normally calculated on the average daily closing share
prices in the three months immediately preceding the start of a period and the end of a period.
Underlying profit is profit from continuing operations before finance costs, tax and Significant items.
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, which took place in December 2006.
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INVESTOR
INFORMATION
BRAMBLES LIMITED
Level 40, Gateway
1 Macquarie Place
Sydney NSW 2000
Australia
Telephone: 61 (0) 9256 5222
Facsimile: 61 (0) 9256 5299
Website: www.brambles.com
Brambles Limited has a primary listing on the
Australian Securities 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 AGM will be held at 2.00pm (AEDT)
on Thursday, 18 November 2010 at:
The Wesley Theatre
Wesley Conference Centre
220 Pitt Street
Sydney NSW 2000
A live webcast of the meeting will be
broadcast on www.brambles.com
DIVIDEND
The Directors have declared a final dividend
of 12.5 Australian cents per share, which will
be 20% franked. The dividend will be paid on
Thursday, 14 October 2010.
Shareholders may elect to receive dividend
payments in Australian dollars or Pounds
sterling, by contacting Brambles’ share
registry, Link Market Services Limited.
The relevant contact details are set out
in Shareholder Information on page 50.
BRAMBLES BUSINESS UNITS
CHEP Americas
8517 South Park Circle
Orlando FL 32819-9040
United States of America
Telephone: 1 407 370 2437
Facsimile: 1 407 363 5354
Email: chep_americas@chep.com
Website: www.chep.com
CHEP EMEA
Weybridge Business Park
Addlestone Road, Addlestone
Surrey KT15 2UP
United Kingdom
Telephone: 44 (0) 1932 850 085
Facsimile: 44 (0) 1932 850 144
Email: info.emea@chep.com
Website: www.chep.com
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
Email: ap.marketing@chep.com
Website: www.chep.com
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: recall.communications@recall.com
Website: www.recall.com
WE’RE
BUILDING A
STRONGER
FOUNDATION
CONTENTS
001 _ Letter from the Chairman and the CEO
002 _ Performance summary
004 _ Operational and financial review
012 _ Treasury and risk review
014 _ Board of Directors
016 _ Executive leadership team
018 _ Corporate governance statement
031 _ Directors’ report – remuneration report
045 _ Directors’ report – other information
050 _ Shareholder information
053 _ Financial report – financial statements
114 _ Financial report – Directors’ declaration
115 _ Financial report – independent auditors’ report
117 _ Auditors’ independence declaration
118 _ Five year financial performance summary
119 _ Glossary
IBC _ Investor information
Brambles Limited
ABN 89 118 896 021
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WWW.BRAMBLES.COM
ANNUAL REPORT 2010
WE’RE
BUILDING A
STRONGER
FOUNDATION
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.
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