Brambles Limited
ABN 89 118 896 021
Level 40 Gateway 1 Macquarie Place
Sydney NSW 2000 Australia
GPO Box 4173 Sydney NSW 2001
Tel +61 2 9256 5222 Fax +61 2 9256 5299
www.brambles.com
9 September 2011
The Manager-Listings
Australian Securities Exchange Limited
Exchange Centre
20 Bridge Street
SYDNEY NSW 2000
Via electronic lodgement
Dear Sir
Brambles 2011 Annual Report
Attached is the Brambles Limited Annual Report to shareholders for the year ended
30 June 2011. This document will be sent to shareholders by 22 September 2011.
The attached document is being treated as having been lodged with the Australian Securities &
Investments Commission.
Yours faithfully
Brambles Limited
Robert Gerrard
Company Secretary
{CW 00074191}
Annual Report 2011
www.brambles.com
This year we have launched our
investor micro-site which offers
detailed information on our business
operations.You can view the site at:
www.brambles.com/2011review
View the strategy scorecard
in detail and access content
explaining our growth
initiatives in depth.
Read case studies highlighting
our successes with customers
and other important initiatives
around the world.
Read information, analysis
and case studies about our
performance, strategy and
targets for sustainability.
CONTENTS
Letter from the Chairman & the CEO
Growth Strategy Scorecard 2011
Operational & Financial Review
Treasury & Risk Review
Sustainability Review
Board & Executive Leadership Team
Corporate Governance Statement
Directors’ Report – Remuneration Report
Directors’ Report – Other Information
Shareholder Information
Financial Report
Auditors’ Independence Declaration
Five Year Financial Performance Summary
Glossary
Brambles Limited
ABN 89 118 896 021
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132
Forward-looking statements
The release, publication or distribution of this presentation in certain
jurisdictions may be restricted by law and therefore persons in such
jurisdictions into which this presentation is released, published or
distributed should inform themselves about and observe such restrictions.
This presentation does not constitute, or form part of, an offer to sell
or the solicitation of an offer to subscribe for or buy any securities,
nor the solicitation of any vote or approval in any jurisdiction, nor shall
there be any sale, issue or transfer of the securities referred to in this
presentation in any jurisdiction in contravention of applicable law.
Persons needing advice should consult their stockbroker, bank manager,
solicitor, accountant or other independent financial advisor. Certain
statements made in this presentation are forward-looking statements.
These forward-looking statements are not historical facts but rather are
based on Brambles’ current expectations, estimates and projections about
the industry in which Brambles operates, and beliefs and assumptions.
Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,”
“seeks,” “estimates,” and similar expressions are intended to identify
forward-looking statements. These statements are not guarantees
of future performance and are subject to known and unknown risks,
uncertainties and other factors, some of which are beyond the control of
Brambles, are difficult to predict and could cause actual results to differ
materially from those expressed or forecasted in the forward-looking
statements. Brambles cautions shareholders and prospective shareholders
not to place undue reliance on these forward-looking s statements, which
reflect the view of Brambles only as of the date of this presentation.
The forward-looking statements made in this presentation relate only to
events as of the date on which the statements are made. Brambles will
not undertake any obligation to release publicly any revisions or updates
to these forward-looking statements to reflect events, circumstances or
unanticipated events occurring after the date of this presentation except
as required by law or by any appropriate regulatory authority.
LETTER FROM THE CHAIRMAN & THE CEO
Brambles’ Chairman Graham Kraehe AO and CEO Tom Gorman
9 September 2011
In the 2011 financial year Brambles focused
on three key areas: delivering our near-term
objectives, making ongoing investments
in our future and implementing our long-
term strategic plan. We are pleased to say
that we made solid progress against each of
these targets.
We delivered a strong increase in sales revenue and profit. All our
business units reported increased sales as they continued to win new
customers, despite challenging economic conditions in our major
countries of operation. Our quality and service improvement program
in CHEP USA, Better Everyday, continued to deliver for our customers.
We invested substantially in our future. We invested in business
development and innovation opportunities throughout the company,
and we made a series of acquisitions to complement our organic
growth strategy, including IFCO.
We finalised and began to implement an exciting long-term growth
strategy. In line with this strategy, we will focus on building our
global equipment pooling solutions business by expanding into more
customer segments, diversifying our range of products and services
and growing geographically, including in emerging markets.
The IFCO acquisition has positioned Brambles as the leading global
provider of reusable plastic crates (RPCs) to the fresh produce sector,
complementing our position as the global leader in pallet pooling.
We are particularly well placed to expand the RPC business in the
USA, Europe and emerging markets.
We have developed sufficient growth opportunities in the pooling
business to support a single focus for Brambles, so we intend to
divest our information management business, Recall, as and when
financial market conditions support an appropriate outcome for
shareholders. When we receive proceeds from the Recall sale,
it will enable us to fund additional growth in pooling, in which we
are confident the organic growth opportunities present a long-term
return profile in line with our existing pallet pooling business. We
will also use those proceeds to reduce debt in line with our net debt
to EBITDA target and our commitment to maintaining our BBB+/
Baa1 credit ratings. We will consider capital management initiatives
should there be funds surplus to our growth needs.
To assist with the delivery of our strategy, we announced a new
management and reporting structure effective 1 October 2011.
This is based on our three product categories: Pallets, RPCs, and
other Containers, such as those used in the automotive, aviation,
bulk goods and chemicals sectors.
We have identified incremental organic capital investments of
US$550 million to expand our RPCs, Containers and emerging markets
Pallets businesses further over the 2012 and 2013 financial years.
Since our 2010 annual report, we have announced three small
acquisitions in the containers sector, acquiring Unitpool and JMI
Aerospace — to establish a global presence in aviation container
pooling — and Container and Pooling Solutions (CAPS), a provider of
intermediate bulk containers to the food, automotive and general
industrial sectors in the USA.
The new reporting structure will facilitate greater efficiencies in the
global Pallets business as we apply best practice standards worldwide.
We have identified US$60 million of annual cost efficiencies in the
global Pallets business that we can deliver by the end of the 2015
financial year. These savings will be in addition to US$40 million of
annual synergies we expect to achieve by the 2014 financial year
from the integration of IFCO.
Brambles Annual Report 2011 page 1 LETTER FROm ThE ChAiRmAN & ThE CEO — CONTiNuEd
STRATEGY SCORECARd & ShAREhOLdER miCRO-SiTE
To help explain our strategy and provide shareholders with additional
information about our direction, we have developed the Strategy
Scorecard on page 3 as well as an extensive shareholder micro-site
to enhance our investor communications.
SuSTAiNABiLiTY
Our commitment to sustainability continues to progress, and our
acquisition of IFCO has further enhanced our credentials in the
reusable equipment sector, which benefits the environment by
removing non-reusable packaging from the supply chain.
We encourage shareholders to visit the Brambles website at
www.brambles.com to review this content in detail, including case
studies and other information highlighting the progress we are making
in pursuing our growth strategy across the group.
FiNANCiAL YEAR 2011 RESuLT
Brambles’ result in the 2011 financial year was pleasing, and in line
with our expectations. Sales revenue was up 13%, including a three-
month contribution from IFCO and a strong rate of new business
growth. Operating profit was up 12%, including Significant items, most
of which were associated with the acquisition and integration of IFCO.
Underlying profit, which excludes these Significant items, was up 17%.
In constant currency terms, after adjusting for the positive translation
impact on our non-US dollar earnings during the period, Underlying
profit was up 12%.
diVidENd
The Board has declared a final dividend of 13.0 Australian cents,
up 0.5 cents on the 2010 final dividend, 20% franked and payable on
13 October. This took total dividends for the 2011 financial year to
26.0 Australian cents, up 1.0 Australian cent on the prior year.
We have suspended the Dividend Reinvestment Plan.
BOARd & CORPORATE GOVERNANCE
The Board reviews best practice in corporate governance on an
ongoing basis. More details are available in the Corporate Governance
Statement on pages 27 to 39.
Brambles is currently undertaking an international search for a
new Non-executive Director with substantial international business
experience and/or knowledge of the transport and logistics industry
to join the Board.
This follows the retirement in 2010 of David Gosnell and the
resignation in February 2011 of John Mullen, who accepted an
executive position at another company. John joined the Brambles
board in November 2009 and made a valuable contribution.
During the 2011 financial year the Board adopted a diversity policy,
which deals with diversity across a range of issues including gender.
Pursuant to that policy, the Board adopted a measurable objective for
women to represent 30% of its Board and senior management team by
30 June 2015. Full details are set out in sections 3.2 and 3.3 of
the Corporate Governance Statement on page 31.
During the 2011 financial year, we reviewed our sustainability
strategy, introducing a focus on the customer, alongside our
pre-existing themes of people, environment and community.
We have reintegrated our Sustainability Report into our Annual Report
for 2011, and developed the Key Sustainability Topics matrix to assist
us in reporting against our strategy. Please refer to pages 14 to 23
for full details.
SAFETY
During the 2011 financial year, we continued to roll out our three-year
strategy for further improving our overall safety performance. This
strategy is focused on the following three areas: the development of
leadership and general employee safety capability; the evaluation and
improvement of plant, equipment and facilities; and the development
of appropriate systems and solutions for managing the risk of our
operations and those of our third-party business partners.
Brambles’ safety performance exceeded our 15% improvement target
during the year. The 12-month rolling Brambles Injury Frequency
Rate (a combined measure of lost-time injuries, modified duties
and medical treatments) was 15.0 events per million man hours at
30 June 2011, compared with 21.9 events per million man hours at
30 June 2010. There were no employee or contractor fatalities during
the period. Brambles remains committed to its goal of Zero Harm.
OuTLOOK
In the 2012 financial year, subject to unforeseen circumstances and no
further deterioration in global economic conditions, Brambles expects
to deliver Underlying profit — prior to Significant items — of between
US$1,040 million and US$1,100 million, at 30 June 2011 foreign
exchange rates. This guidance includes a full 12-month contribution
from both IFCO and Recall.
Brambles is in a strong position to deliver its strategy of creating a
global pallet and container pooling business across a wider range of
customer segments as we diversify our range of products and services
and expand into emerging markets.
Graham Kraehe AO
Chairman
Tom Gorman
CEO
Brambles Annual Report 2011 page 2 GROWTH STRATEGY SCORECARD 2011
In the 2011 financial year, Brambles launched a growth
strategy focused on strengthening its global equipment
pooling business by diversifying into new customer sectors
through product diversification and geographic expansion.
Product Diversification
KEY TASK
FINANCIAL YEAR 2011 HIGHLIGHTS
FINANCIAL YEAR 2012 TARGETS
Pallets
Continuous improvement
of product and
service offering
RPCs
Continuous improvement
of product and
service offering
Containers
Grow domestic
and intercontinental
revenue streams in
specialist container sectors
Geographic Expansion
– Continued investment
in quality and service
– Acquisition of IFCO’s US pallet
recycling business
– Strong net new business wins
– Better Everyday program delivers
further quality improvements and
efficiencies
– Enhanced US business offering
through integration of IFCO
pallet business
– Delivery of global pallets structure
– Efficiencies and IFCO
integration synergies
- Continued Better
Everyday efficiencies
– Acquisition of leading
RPC business, IFCO
– Creation of global RPC business unit
– Continued product innovation
– Strong customer growth
– Continued strong growth
and investment in RPCs
worldwide
– Synergies and growth from
IFCO/CHEP integration
– Launch of automotive
business in USA
– Growth of USA and global
automotive businesses
– Investment in intermediate bulk
– Identification of further growth
container business
– Acquisition of aviation
container pooling business
opportunities in IBCs
– Strong growth and holistic
service offering in aviation
KEY TASK
FINANCIAL YEAR 2011 HIGHLIGHTS
FINANCIAL YEAR 2012 TARGETS
Participate in supply chain
modernisation in Asia
– Increased palletisation of Chinese and
– Continued penetration of
Indian grocery sectors
CHEP solutions in all markets
– Strong growth in automotive
– Increased investment in the pallets
business in Asia
and automotive businesses
– CHEP South-East Asia continued growth
Roll out
pooling
solutions
in EMEA
emerging
regions
Expand
our offering
into
Latin
America
– Continued penetration of
pallets business in Central
and Eastern Europe
– Strong growth and product
diversification in South Africa
– Continued expansion in
Middle East business
– Establishment of RPC business
in Central and Eastern Europe
– Further pallets business expansion
into new countries
– Continued support of
customers’ expansion
– Strong growth in pallets in Brazil,
Argentina and Chile
– Ongoing expansion into new countries
– Identification of further opportunities
– Establishment of South American RPC
in automotive, IBC and RPC
presence through IFCO
– IBC presence in Mexico through CAPS
– Continued support of
customers’ expansion
Brambles Annual Report 2011 page 3 OPERATIONAL & FINANCIAL REVIEW
SALES & OPERATING PROFIT SUMMARY
Year ended 30 June, US$m
2011
2010
Change (actual FX)
Change (constant FX)
Sales revenue
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
IFCO
Recall
Total sales revenue
Operating profit
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
IFCO
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
1,617.2
1,533.6
1,545.9
1,482.6
463.7
390.9
3,626.8
3,407.1
230.1
815.3
-
739.7
4,672.2
4,146.8
278.1
310.3
96.6
235.2
324.9
77.8
685.0
637.9
30.3
145.8
(51.9)
-
123.1
(36.5)
809.2
724.5
(127.5)
(109.6)
681.7
614.9
(209.9)
(171.0)
471.8
443.9
3.6
4.9
475.4
448.8
Weighted average number of shares (millions)
1,445.6
1,411.3
Basic EPS (US cents)
Basic EPS (Australian cents)
32.9
32.8
31.8
36.1
5%
4%
19%
6%
-
10%
13%
18%
(4)%
24%
7%
-
18%
(42)%
12%
(16)%
11%
(23)%
6%
(27)%
6%
3%
(9)%
4%
3%
6%
4%
-
5%
9%
15%
(5)%
8%
4%
-
10%
(30)%
8%
(13)%
7%
(16)%
3%
(37)%
3%
0%
0%
Brambles Annual Report 2011 page 4
UNDERLYING PROFIT
Year ended 30 June, US$m
2011
2010
Change
(actual FX)
Change
(constant FX)
Underlying profit
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
IFCO
Recall
Brambles HQ
Underlying profit
Net finance costs
Underlying profit before tax
Tax expense
Underlying profit after finance costs and tax
Underlying EPS (US cents)
Return on capital invested
Brambles Value Added (fixed June 2010 FX rates)
278.1
337.4
97.9
237.1
329.5
78.4
713.4
645.0
33.2
145.3
(34.7)
857.2
-
124.6
(36.2)
733.4
(127.5)
(109.6)
729.7
623.8
(206.1)
(173.6)
523.6
450.2
36.2
17%
248.3
31.9
17%
208.7
17%
2%
25%
11%
-
17%
4%
17%
(16)%
17%
(19)%
16%
13%
-
14%
1%
8%
7%
-
9%
17%
12%
(13)%
12%
(13)%
12%
9%
-
19%
RECONCILIATION OF UNDERLYING PROFIT TO OPERATING PROFIT
US$m
Underlying profit
Significant items:
Acquisition costs
IFCO integration costs
Restructuring costs
Total Significant items
Operating profit
2011
857.2
(19.1)
(25.5)
(3.4)
(48.0)
809.2
2010
733.4
-
-
(8.9)
(8.9)
724.5
Brambles Annual Report 2011 page 5
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
GROUP REVIEW
SALES
Brambles’ sales revenue in the financial year ended 30 June 2011
was US$4,672.2 million, up 13% (9% at constant currency), as both
CHEP and Recall contributed sales growth and newly-acquired IFCO
contributed for three months.
CHEP’s total sales revenue was US$3,626.8 million, up 6% (4% at
constant currency). All three CHEP regions delivered increased
sales, primarily from generating new business by converting
customers to CHEP's equipment pooling system.
Recall’s sales revenue was US$815.3 million, up 10% (5% at constant
currency), as demand for both physical and digital information
storage continued to grow.
IFCO1, which Brambles acquired effective 31 March 2011,
contributed US$230.1 million of sales revenue. Excluding IFCO, sales
revenue was US$4,442.1 million, up 7% (4% at constant currency).
BUSINESS WINS
The impact during the period of net new business wins, excluding
the contribution of acquisitions during the year, was US$110 million,
predominantly reflecting CHEP’s expansion in emerging markets and
increased penetration against non-pooled pallets in the Americas
and Europe. There was strong demand for Recall’s services.
The net annualised value of new business won during the year
was US$239 million, including IFCO’s net wins for the full 12 months.
This reflected increased penetration for CHEP and Recall in
developed economies, growth in emerging markets, the expansion
of the reusable plastic crates (RPCs) and other containers
businesses and CHEP USA winning back customers from pallet
pooling competitors.
PROFIT
Brambles’ operating profit was US$809.2 million, up 12% (8% at
constant currency), including the impact of US$48.0 million of
Significant items, which comprised US$25.5 million of IFCO
integration costs, US$19.1 million of acquisition costs and
US$3.4 million of facilities and operations rationalisation costs.
Brambles’ Underlying profit was US$857.2 million, up 17% (12% at
constant currency), reflecting sales growth, as well as margin
improvement in CHEP Americas.
CHEP’s Underlying profit was US$713.4 million, up 11% (7% at
constant currency). Recall’s Underlying profit was US$145.3 million,
up 17% (9% at constant currency). IFCO’s contribution to Brambles
Underlying profit was US$33.2 million.
At 30 June 2010 exchange rates, Brambles’ operating profit prior to
the contribution from IFCO or the impact of Significant items was
US$760.8 million, in line with management’s August 2010 guidance
range of US$740 million to US$780 million.
INTEREST
Net finance costs were US$127.5 million, up 16%, primarily
reflecting funding costs associated with the acquisition of IFCO. The
increased expense included interest on €500 million of Euro Medium
Term Notes issued in April 2011 and borrowings that Brambles
assumed on the acquisition of IFCO.
1 At date of publication, Brambles owned 99.5% of IFCO and had proceeded
with the compulsory buy-out of all remaining shareholders.
TAX
Tax expense was US$209.9 million, up 23% (16% at constant
currency). Brambles’ effective tax rate for operating profit was
30.8%, compared with 27.8% for the prior year. The increase in the
effective tax rate was principally because of the IFCO acquisition
and integration costs for which no tax relief is available. The
effective tax rate on Underlying profit was 28.2%, broadly in line
with 27.8% in the prior financial year.
PROFIT AFTER TAX
Brambles’ profit after tax was US$471.8 million, up 6% (3% at
constant currency). Basic earnings per share was 32.9 US cents,
up 3% (flat at constant currency). The lower growth rate for
earnings per share than for profit after tax reflected an increased
number of shares on issue in the period resulting from the August
2010 Dividend Reinvestment Plan, the December 2010 Share
Purchase Plan and the February 2011 underwritten Dividend
Reinvestment Plan.
CASH FLOW AND RETURN ON CAPITAL
Cash flow from continuing operations, prior to Significant items, was
US$725.1 million, down US$157.2 million. This reflected a
US$323.1 million (accruals basis) increase in capital expenditure
compared with the unusually low levels of capital expenditure in the
prior year. The increase in capital expenditure was predominantly
to support growth in line with Brambles’ strategy of expanding
pooling operations in emerging markets and diversifying its range of
pooling products, as well as to support Recall’s growth.
Brambles’ return on capital invested was 17%, in line with the
prior year.
DIVIDEND
Amount
(Aust.
cents per
share)
Interim
Final
Total
13.0
13.0
26.0
Franking
Ex date
Record
date
Payment
date
20%
20%
07/03/11
11/03/11 14/04/11
15/09/11
21/09/11 13/10/11
The Board has declared a final dividend of 13.0 Australian cents per
share, 20% franked, up 0.5 Australian cents compared with the
previous final dividend and taking total dividends for
the 2011 financial year to 26.0 Australian cents per share, up
1.0 Australian cent.
The unfranked component of the final dividend is conduit foreign
income. Consequently, shareholders not resident in Australia
will not pay Australian dividend withholding tax on the final
dividend. Brambles has suspended its Dividend Reinvestment Plan.
Brambles Annual Report 2011 page 6
Business wins
The net annualised value of new business CHEP Americas secured
during the year was US$75 million, including the impact of
customers such as ConAgra, Dole Fresh Fruit and Naturipe Berries
transferring volumes back to CHEP USA.
Other customer wins included Nice Pak Products in the USA and
Ultima Foods in Canada. There was lane expansion with Coca-Cola
Refreshments, Niagara Bottling and Bay Valley Foods in the USA,
Lassonde in Canada and Bunge in Brazil.
CAPS is growing volumes with existing and new customers. In
July 2011, CAPS signed a large contract with pizza supplier
Great Kitchens.
Separately, CHEP Americas extended contracts in the period with
existing key customers including Nestlé USA, Nestlé Waters USA,
Procter & Gamble in the USA, Unilever Brazil and Unilever
North America.
Since 1 July 2011, CHEP USA has begun servicing two new contracts
in the automotive sector, including with compact industrial vehicle
producer Bobcat.
Total contract wins with small-to-medium enterprises in CHEP USA,
defined as contracts with annual pallet issues of less than 100,000,
were 1,387, up 34%. This reflected Brambles’ growth strategy and
retailer Costco’s mandate for suppliers to use higher quality block
pallets, such as those CHEP supplies.
Profit
CHEP Americas’ operating profit was US$278.1 million, up 18%
(15% at constant currency), reflecting sales growth and, in CHEP
USA, lower storage costs and reduced expenditure, in line with plan,
on the Better Everyday program. The operating profit margin
improved to 17%, up 2 percentage points.
Total costs from Better Everyday were US$84 million, US$11 million
below forecast, while CHEP USA had storage savings of US$9 million,
reflecting the storage of a larger number of idle pallets in the prior
corresponding period.
These improvements more than offset cost increases including from:
transportation and conditioning in Canada related to customer
transition from stringer to block pallets to meet a mandate from
Costco; and business development from growing the automotive, IBC
and LeanLogistics businesses.
Cash flow and return on capital
Business growth throughout CHEP Americas and the utilisation of
idle pallets in CHEP USA led to increased capital expenditure on
pallets and a subsequent reduction in cash flow from operations to
US$270.1 million, down US$15.6 million.
Return on capital invested improved to 16%, up 2 percentage points,
reflecting the improved profit performance.
BUSINESS UNIT REVIEW
CHEP AMERICAS
Year ended 30 June, US$m
Change
2011
2010
Actual FX Constant FX
Sales revenue
1,617.2 1,533.6
Operating profit
278.1
235.2
5%
18%
4%
15%
Margin
17%
15%
2pp
2pp
Significant items:
Restructuring costs
Accelerated pallet
scrapping
-
-
-
4.4
(2.5)
1.9
Underlying profit
278.1
237.1
17%
Margin
Cash flow from
operations
Return on capital
invested
17%
15%
270.1
285.7
2pp
(5)%
14%
2pp
(8)%
16%
14%
2pp
1pp
Sales
Sales revenue in CHEP Americas was US$1,617.2 million,
up 5% (4% at constant currency), primarily driven by growth from
new business in all regions. The impact during the year of net new
business wins was US$37 million, contributing 2 percentage points of
CHEP Americas’ constant currency sales revenue growth, while
organic sales revenue growth contributed 1 percentage point.
Aggregate pricing across CHEP Americas was flat as the positive
impact of increased penetration with small-to-medium-sized
enterprises in CHEP USA and robust economic conditions in Latin
America offset subdued conditions in the USA.
In CHEP USA, sales revenue was US$1,113.2 million, up 1%. New
business growth since the introduction of the Better Everyday
program, announced in October 2009 to drive quality and service
improvements, offset the impact of customer losses from prior
periods. CHEP USA continues to roll out its Total Account
Management program to major customers, further improving the
level of service to customers and assisting with asset control.
In CHEP Canada, sales revenue was US$227.0 million, up 12% (5% at
constant currency), reflecting net new business wins and organic
sales growth with existing customers.
CHEP Latin America’s sales revenue was US$216.4 million,
up 21% (14% at constant currency), as the business continued to
drive increased pallet pooling in Mexico, Brazil, Argentina and Chile
and to expand in Central America.
Sales revenue in transport management software business
LeanLogistics was up 16%, to US$16.7 million, from new business
wins in part due to expansion into Canada, Europe and Australia.
Sales revenue was down 3% (6% at constant currency) in the
Catalyst & Chemical Containers business to US$38.2 million on lower
customer activity. CAPS, the intermediate bulk container (IBC)
business Brambles acquired in January 2011, contributed
US$5.7 million to sales revenue.
Brambles Annual Report 2011 page 7
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
Business wins
The net annualised value of new business CHEP EMEA signed during
the period was US$32 million. Key wins included: pallet contracts
with Procter & Gamble and Danone Waters in Turkey; Spain’s
Industria de Diseno Textil (owner of the Zara fashion retail chain)
and South African Coke bottler Amalgamated Beverage Industries
joining the CHEP system; and an RPC contract with Carrefour
subsidiary DIA in Spain. In addition, there was lane expansion with
Arla Foods in the UK.
CHEP EMEA renewed a pallet contract with Coca-Cola Enterprises -
the world's third largest independent Coca Cola bottler - in France,
the UK and Belgium as well as new business with the bottler in the
Netherlands.
Separately, CHEP extended pallets business with Anglo Beef
Producers in the UK, Nestlé UK, Leche Pascual in Spain and
Cumbrian Seafoods in the UK, and extended an RPC contract with
UK retailer Morrison’s and an automotive contract with General
Motors. CHEP signed its first RPC contract in Turkey, with Carrefour,
in July 2011.
Since Brambles acquired Unitpool, it has established contracts with
carriers including Bahrain’s Gulf Air, the USA’s National Air Cargo,
France’s Corsair, Scandinavia’s SAS and Portugal-based charter
operator Hi Fly. It has also extended contracts with Canada’s
Air Transat.
Profit
CHEP EMEA’s operating profit was US$310.3 million, down 4% (5% at
constant currency), reflecting Significant items of US$27.1 million,
primarily associated with the rationalisation of CHEP’s RPC
operations after the IFCO acquisition.
Underlying profit was US$337.4 million, up 2% (1% at constant
currency) as higher expenditure on pallet maintenance, emerging
market business development costs and the impact of the lost
Carrefour RPC contract in France and Spain reduced the positive
impact of sales growth.
Total spending on quality initiatives, excluding efficiencies,
increased US$22 million, partially reflecting the increase in the
average age of pallets in developed markets as the growth of the
pool slowed since 2008.
Efficiency improvements in plant operations and logistics were
sufficient to offset other inflationary pressures, in particular higher
lumber and fuel costs.
The operating profit margin was down 2 percentage points
to 20% because of Significant items. The Underlying profit margin
was unchanged at 22%.
Cash flow and return on capital
Cash flow from operations was US$299.2 million, down
US$112.5 million, reflecting low capital expenditure in the previous
financial year, higher pallet purchases and investment in growth in
developing regions. Return on capital invested was stable at 23%.
CHEP EMEA
Year ended 30 June, US$m
Change
2011
2010
Actual FX Constant FX
Sales revenue
1,545.9
1,482.6
4%
Operating profit
310.3
324.9
(4)%
3%
(5)%
Margin
20%
22%
(2)pp
(2)pp
Significant items:
Restructuring –
facilities and
operations
2.6
4.6
IFCO integration 24.5
27.1
-
4.6
Underlying profit
337.4
329.5
Margin
22%
22%
2%
-
1%
-
Cash flow from
operations
Return on capital
invested
299.2
411.7
(27)%
(32)%
23%
23%
-
-
Sales
Sales revenue in CHEP Europe, Middle East & Africa (EMEA)
was US$1,545.9 million, up 4% (3% at constant currency) as growth
in most regions, including developing markets, offset challenging
conditions in Iberia and France.
The impact during the period of net new business wins was
US$21 million, contributing 1 percentage point of CHEP EMEA’s
constant currency sales revenue growth. Pricing and organic sales
revenue growth each also contributed 1 percentage point.
In CHEP UK & Ireland, sales revenue was up 3% (2% at constant
currency) to US$390.9 million.
In CHEP Iberia, sales revenue was down 6% (5% at constant currency)
to US$313.9 million, because of weak economic conditions and the
loss of the Carrefour RPC contract to IFCO in August 2010.
CHEP France’s sales revenue was down 7% (6% at constant currency)
to US$198.2 million, predominantly because of the loss of the
Carrefour contract.
Sales revenue elsewhere in CHEP’s Western European operations
was up 7% (7% at constant currency) to US$415.3 million. CHEP
benefitted from a recovery in activity in the automotive sector and
increased sales volumes in Germany, Italy and the Benelux region.
CHEP Central & Eastern Europe’s sales revenue was US$45.8 million,
up 28% (27% at constant currency). Poland and Turkey contributed
strongly as the penetration of CHEP’s pallet pooling services
continued to increase in the region in line with supply-
chain modernisation.
In CHEP Middle East & Africa, sales revenue was US$169.4 million,
up 27% (17% at constant currency), reflecting volume and price gains
in South Africa and continued expansion in the Gulf States.
Unitpool, the aviation container pooling business Brambles acquired
in August 2010, contributed US$12.3 million of sales revenue,
experiencing strong growth from existing and new customers.
Brambles Annual Report 2011 page 8
CHEP ASIA-PACIFIC
Year ended 30 June, US$m
Change
2011
2010 Actual FX Constant FX
Sales revenue
463.7
390.9
Operating profit
Margin
96.6
21%
77.8
20%
19%
24%
1pp
Significant items:
Restructuring – facilities
and operations
1.3
0.6
Profit
CHEP Asia-Pacific’s operating profit was US$96.6 million, up 24%
(8% at constant currency), reflecting sales growth and reduced
losses in China. Underlying profit was US$97.9 million, up 25% (8% at
constant currency), after US$1.3 million of Significant items from
facilities and operations restructuring. Insurance recoveries
following the December 2010 and January 2011 flooding in
Queensland made a positive contribution to profit in CHEP Australia.
Margin was up 1 percentage point to 21% for both operating and
Underlying profit.
Cash flow and return on capital
CHEP Asia-Pacific’s cash flow from operations was US$80.8 million,
down US$13.3 million as capital expenditure increased to fund
development of the business in Asia and growth in Australia and
New Zealand.
Return on capital invested was 23%, up 2 percentage points,
reflecting the improved profit performance.
6%
8%
-
8%
-
Underlying profit
Margin
Cash flow from
operations
Return on capital
invested
78.4
25%
20%
1pp
97.9
21%
80.8
94.1
(14)%
(31)%
23%
21%
2pp
1pp
IFCO
US$m
Sales
Sales revenue in CHEP Asia-Pacific was US$463.7 million, up 19%
(6% at constant currency), on growth in emerging Asia, where CHEP
continues to drive palletisation of supply-chain logistics, and
increased RPC volumes in Australia and New Zealand.
The impact during the period of net new business wins was
US$11 million, contributing 3 percentage points to constant
currency sales revenue growth. Organic sales revenue and pricing
contributed 2 percentage points and 1 percentage points to
growth respectively.
In CHEP Australia, sales revenue was US$379.8 million, up 16% (2% at
constant currency), as growth in RPC volumes offset relatively flat
volumes in pallets and slower automotive activity. CHEP New
Zealand’s sales revenue was US$45.3 million, up 14% (5% at constant
currency), as sales volumes increased.
CHEP China’s sales revenue was US$22.7 million, up 71% (65% at
constant currency), as CHEP continued to support major retail and
manufacturing customers in palletising their supply chains. Growth
in automotive volumes slowed after March 2011 because of
disruption to the supply chain from the March 2011 earthquake and
tsunami in Japan.
In CHEP India, sales revenue was US$5.1 million, up 200% (188% at
constant currency) from continued strong growth in pallets and
automotive containers, reflecting CHEP’s increasing penetration
across national supply chains. CHEP South-East Asia’s sales revenue
was US$10.0 million, up 25% (14% at constant currency).
Business wins
The net annualised value of new business CHEP Asia-Pacific secured
during the period was US$18 million. Key wins in Australia included
lane expansion in the RPC business with fresh produce company
Moraitis plus new business in pallets with Sanitarium and Primo
Smallgoods and, in New Zealand, in RPCs with fresh produce
company JS Ewers.
USA-based retailer Costco selected CHEP as its preferred pallet
supplier for new stores in Canberra and Sydney, as well as its
existing store in Melbourne. Wins in China included retailers CRV
and Tesco. In India, wins included retailers Walmart and Tesco,
brewer Carlsberg, fast-moving consumer goods company Heinz and
automotive components makers Autoliv, Bosch and Continental.
Separately, CHEP Asia-Pacific extended contracts with Coca-Cola
Amatil in Australia and Danone Dumex and SCA Hygiene in Malaysia.
Actual
(3 mths to
30 June)
Pro forma (12 mths to 30 June)2
2011
2011
2010
Change
(actual FX)
Sales revenue
230.1
Operating profit
Margin
30.3
13%
838.3
108.8
13%
764.8
82.3
11%
10%
32%
2pp
Significant items:
Integration costs
2.9
-
-
-
Underlying profit
Margin
33.2
14%
123.4
100.8
22%
15%
13%
2pp
Sales
Brambles acquired IFCO effective 31 March 2011. Its sales revenue
contribution for the three months of the financial year under
Brambles’ ownership was US$230.1 million. This comprised
US$140.4 million from the RPC business and US$89.7 million from
the USA Pallet Management Services business.
On a pro forma basis – reflecting IFCO’s results for the full 2011
financial year – IFCO’s sales revenue was US$838.3 million, up 10%.
This reflected strong business growth in RPCs in all regions and a
flat outcome in Pallet Management Services. Net new business wins
were US$63 million.
In RPCs, pro forma sales revenue was US$503.3 million, up 17%,
comprising US$385.0 million from Europe and South America, up
18%, and US$118.3 million from the USA, up 14%.
Key contributors to RPC sales revenue growth included new business
wins worldwide and organic growth with existing customers in
Europe. Expanded use of RPCs continues in the USA and South
America, driving higher sales revenue for IFCO.
In Pallet Management Services, pro forma sales revenue was
US$335.0 million, which was flat compared with the prior
corresponding period, reflecting low-growth conditions in the US
economy.
2 Pro forma data as per IFCO financial statements, excludes amortisation of
intangible assets.
Brambles Annual Report 2011 page 9
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
Business wins
The net annualised value of new business IFCO won during the
12 months to 30 June 2011 was US$76 million. Customer wins for
IFCO’s RPC business during the financial year included Carrefour in
Europe and Food Lion, Safeway and Whole Foods in the USA.
Profit
IFCO’s operating profit contribution for the three months under
Brambles’ ownership was US$30.3 million. Underlying profit was
US$33.2 million. This reflected US$2.9 million of Significant items
associated with integration and US$6.1 million of amortisation of
identified intangibles assets associated with Brambles’ acquisition of
the business. The operating profit margin was 13% and the
Underlying profit margin was 14%.
On a pro forma basis, prior to the impact of amortisation of
identified intangible assets, IFCO’s full-year Underlying profit was
US$123.4 million, up 22%, reflecting sales revenue growth and
pricing and efficiency gains. The pro forma Underlying profit margin
was 15%.
RECALL
Year ended 30 June, US$m
Change
Both the operating and Underlying profit margins improved
1 percentage point to 18%, as cost efficiencies offset expenditure on
expanding Recall’s sales force and improving its information
technology systems.
Cash flow and return on capital
Recall’s cash flow from operations was US$92.6 million, down
US$29.1 million, as capital expenditure increased to support
increased storage capacity and investments in safety, security and
IT systems.
Return on capital invested was 14% up 1 percentage point, in line
with improved profitability.
ADDITIONAL FINANCIAL INFORMATION
CAPITAL EXPENDITURE ON PROPERTY, PLANT AND
EQUIPMENT (ACCRUALS BASIS)
Year ended 30 June, US$m
2011
2010
Change
CHEP Americas
CHEP EMEA
272.6
204.5
(68.1)
313.8
173.2
(140.6)
2011
2010 Actual FX Constant FX
CHEP Asia-Pacific
105.5
67.0
(38.5)
Total CHEP
691.9
444.7
(247.2)
IFCO
Recall
Brambles HQ
Total Brambles
48.1
81.8
0.1
-
(48.1)
53.8
(28.0)
0.3
0.2
821.9
498.8
(323.1)
Brambles’ capital expenditure (accruals basis) was US$821.9 million,
up US$323.1 million, primarily because of CHEP increasing
investment in new pallets to support new business wins and
expansion into emerging markets. Capital expenditure was lower in
the 2010 financial year because of low levels of pallet purchases
following the impact on growth of the global economic downturn.
CHEP’s capital expenditure was US$691.9 million, up
US$247.2 million, including US$591.1 million on pallets,
US$52.5 million on other pooling equipment and US$48.3 million of
other capital expenditure.
Capital expenditure in IFCO for the three months of the financial
year under Brambles ownership was US$48.1 million to support
strong growth in the RPC business in all regions.
Recall’s capital expenditure was US$81.8 million, up
US$28.0 million, to support increased storage capacity and
investments in safety, security and IT systems.
Sales revenue
815.3
739.7
Operating profit
145.8
123.1
10%
18%
5%
10%
Margin
18%
17%
1pp
1pp
Significant items:
Restructuring – facilities
and operations
(0.5)
1.5
Underlying profit
145.3
124.6
17%
Margin
18%
17%
1pp
9%
1pp
Cash flow from
operations
Return on capital
invested
92.6
121.7
(24)%
(35)%
14%
13%
1pp
0pp
Sales
Recall’s sales revenue was US$815.3 million, up 10% (5% at constant
currency), primarily reflecting ongoing growth in the storage of
physical and digital information.
Sales revenue in the Document Management Solutions service line
was US$581.0 million, up 12% (6% at constant currency), driven by
growth in cartons in storage of 5% due to the expansion of
operations in the Americas and Europe.
Sales revenue in Secure Destruction Services business was
US$154.2 million, up 6% (3% at constant currency), on higher
average paper prices through the year. In the Data Protection
Solutions service line, sales revenue was US$80.1 million, up 9%
(4% at constant currency).
Business wins
The impact during the period of net new business wins was
US$41 million, reflecting the strong contribution of two new
contracts won in the prior period. The net annualised value of new
business Recall won during financial year 2011 was US$38 million.
Profit
Recall’s operating profit was US$145.8 million, up 18% (10% at
constant currency), as sales revenue grew and productivity
improvements continued to drive increased margins. Underlying
profit was US$145.3 million, up 17% (9% at constant currency),
reflecting the impact of Significant items.
Brambles Annual Report 2011 page 10
CASH FLOW
NET DEBT & KEY RATIOS
Year ended 30 June, US$m
2011
2010
Change
As at 30 June, US$m
2011
2010
Change
Underlying profit
857.2
733.4
123.8
Current debt
325.6
276.0
49.6
Depreciation and amortisation
479.8
444.0
35.8
Non-current debt
2,811.7
1,618.8
1,192.9
EBITDA
1,337.0 1,177.4
159.6
Gross debt
3,137.3
1,894.8
1,242.5
Capital expenditure
(764.7)
(496.5)
(268.2)
Proceeds from disposals
Working capital movement
100.8
(14.8)
88.0
14.7
12.8
(29.5)
Less cash
Net debt
(138.5)
(135.5)
(3.0)
2,998.8
1,759.3
1,239.5
Irrecoverable pooling equipment
provision
104.9
111.2
(6.3)
Key ratios (times)
Net debt to EBITDA
EBITDA interest cover
2.2
10.5
1.5
10.7
0.7
(0.2)
Net debt was US$2,998.8 million at 30 June 2011, up
US$1,239.5 million from 30 June 2010, reflecting the funding of the
IFCO acquisition.
To diversify its funding sources further and lengthen debt
maturities, Brambles raised €500 million in April 2011 through the
issuance of guaranteed senior notes in the European capital
markets. The notes have a seven-year maturity. Brambles used the
proceeds to repay bank borrowings.
At 30 June 2011, Brambles had committed credit facilities including
bonds and notes totalling US$4,442.4 million. The average term to
maturity of total credit facilities was 4.1 years.
The ratio of net debt to EBITDA at 30 June 2011 was 2.2 times,
compared with 1.5 times at 30 June 2010, reflecting the funding of
the IFCO acquisition.
Brambles intends to use part of the proceeds from the Recall
divestment to retire debt in line with its financial policy to target
net debt to EBITDA of less than 1.75 times. The Company is
committed to maintaining its BBB+/Baa1 credit ratings.
Provisions/other
(38.1)
(12.5)
(25.6)
Cash flow from operations
725.1
882.3
(157.2)
Significant items outside ordinary
activities
Cash flow from operations
(incl. Significant items)
(35.1)
(52.1)
17.0
690.0
830.2
(140.2)
Financing costs and tax
(386.7)
(281.6)
(105.1)
Free cash flow
Dividends paid
303.3
548.6
(245.3)
(224.0)
(204.5)
(19.5)
Free cash flow after dividends
79.3
344.1
(264.8)
Free cash flow after dividends was US$79.3 million, down
US$264.8 million, reflecting the increase in capital expenditure and
a US$105.1 million increase in financing costs and tax to
US$386.7 million. The increase in financing costs included the
US$48.2 million impact of repaying IFCO’s high-yield debt.
BRAMBLES VALUE ADDED
Year ended 30 June, US$m,
fixed June 2010 FX
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
IFCO
Recall
Brambles HQ
Total BVA
2011
2010
Change
76.7
43.9
149.9
151.4
36.5
30.4
263.1
225.7
32.8
(1.5)
6.1
37.4
(11.3)
-
(11.3)
17.5
10.8
(21.0)
(27.8)
6.7
6.8
248.3
208.7
39.6
Brambles Value Added (BVA), the Company’s definition of economic
profit, was US$248.3 million, up US$39.6 million, reflecting the
increase in profitability in both CHEP and Recall and a particularly
strong improvement in CHEP Americas. The decline in BVA for CHEP
EMEA reflected the impact of the Unitpool acquisition.
Brambles Annual Report 2011 page 11
TREASURY & RISK REVIEW
CAPITAL STRUCTURE
Brambles manages its capital structure to maintain a solid
investment grade credit rating. During the financial year ended
30 June 2011, Brambles held investment grade credit ratings of
BBB+ from Standard & Poor’s and Baa1 from Moody’s Investors
Service.
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’ financial policy is to target a net debt to EBITDA ratio of
less than 1.75 times. The ratio at 30 June 2011 was 2.2 times,
outside the target, reflecting the funding of the IFCO acquisition.
Brambles expects the net debt to EBITDA ratio to revert within the
policy level during 2012 as the Company intends to use part of the
proceeds from any sale of Recall to retire debt. The Company is
committed to maintaining its BBB+/Baa1 credit ratings.
During the 2011 financial year, Brambles raised additional equity
through a number of sources. These sources included the
reinvestment of A$147.1 million in dividends under its Dividend
Reinvestment Plan for the 2010 final dividend and the 2011 interim
dividend; the A$104.1 million underwritten portion of the 2011
interim dividend; and A$110.0 million from an underwritten share
purchase plan in December 2010.
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 for
Treasury to arrange and implement lines of credit from its
financiers, select and deal in approved financial derivatives for
hedging purposes and generally execute 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 30 (pages 106 to 115)
including a sensitivity analysis (page 109 and page 111) with respect
to these financial instruments.
The Group uses standard financial derivatives to manage financial
exposures in the normal course of business. It does not use
derivatives for speculative purposes and transacts derivatives
predominantly with relationship banks with a reasonable
understanding of its 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 statistical and sensitivity analysis, details of
funding utilisation and capacity, and commentary on other
significant matters.
FUNDING AND LIQUIDITY
Brambles funded its operations during the 2011 financial year
through equity issuance, retained cash flow and new borrowings.
The Group generally sources debt funding from relationship banks
and debt capital market investors on a medium-to-long-term basis.
Brambles also enters into operating leases for office and operational
locations and certain plant and equipment.
Bank borrowing facilities are generally structured on a multi-
currency, revolving basis and currently have maturities ranging to
June 2016. Borrowings under the facilities are floating-rate,
unsecured obligations with covenants and undertakings typical for
these types of arrangements.
Net debt at 30 June 2011 was US$2,998.8 million, up
US$1,239.5 million from 30 June 2010, reflecting the funding of the
IFCO acquisition.
To diversify its funding sources further and to lengthen maturities,
Brambles raised €500 million in the European bond market in April
2011. The note issue comprised €500 million of 4.625% fixed rate
seven-year notes, the proceeds of which Brambles used to repay
bank borrowings.
Key financial ratios continue to reflect the Company’s strong
balance sheet position and remain well within the financial
covenants included in Brambles’ major financing agreements, with
net debt to EBITDA at 2.2 times (2010: 1.5 times) and EBITDA
interest cover at 10.4 times (2010: 10.7 times).
At 30 June 2011, Brambles had committed credit facilities including
bonds and notes totalling US$4,442.4 million. Undrawn committed
borrowing capacity totalled US$1,433.6 million. The average term to
maturity of committed credit facilities increased to 4.1 years at
30 June 2011 from 3.6 years at 30 June 2010.
The table below shows the maturity profile of the Group’s
committed borrowing facilities and outstanding bonds including the
percentage due in each 12-month maturity bucket.
MATURITY PROFILE OF COMMITTED BORROWING
FACILITIES AND OUTSTANDING BONDS
(US$ BILLIONS)
1.8
1.2
0.6
0.0
33%
30%
% = percentage of total credit
facilities
12%
11%
9%
5%
Undrawn Facilities
Bank Borrowings
Bonds / Notes
< 1 yr 1-2yrs 2-3yrs 3-4yrs 4-5yrs > 5yrs
During the 2011 financial year, Brambles adopted a liquidity policy
that requires, among other things, that no more than 25% of total
committed credit facilities due greater than 12 months mature in
any rolling 12-month period. At 30 June 2011, Brambles exceeded
its target level in the two-to-three-year maturity period. The Group
actively manages its maturity profile and expects to attain full
compliance with the policy over time as it refinances credit
facilities.
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.
Brambles Annual Report 2011 page 12
among other things, profitability, demand for Brambles’ services
and solvency of counterparties.
- Strategy and execution – Brambles is subject to the risk of not
having effective strategies in place to guide the Group’s
performance and to drive sales and profit growth, enable
innovation, safety improvements and improve customer and
employee satisfaction. Further, it is subject to the risk of not
being able to effectively execute against agreed strategies
resulting in loss of market and investor confidence and reduced
share performance.
- 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.
- Equipment losses – Brambles is subject to the risk of a lack of
control of CHEP equipment. This could impact financial
performance and lead to a reduction in customer satisfaction.
- 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.
- Market communication – Brambles is subject to risks relating to
not effectively communicating to the market, which may lead to a
loss of investor confidence in the business and its management
and reduced share performance.
- Mergers and acquisitions – Brambles is subject to the risk of failing
to successfully execute or integrate acquisitions. If the
integration of newly acquired businesses is not effective, this
could result in the failure to realise the anticipated benefits and
synergies.
- People capability – Brambles is subject to the risk of not
attracting, developing and retaining high-performing individuals.
Furthermore, succession planning may not be managed
effectively, so that talented individuals are able to be developed
and promoted within the Group, rather than sourced externally.
This could result in Brambles not having sufficient quality and
quantity of people to meet its growth and business objectives.
- Systems and technology – Brambles relies on the continuing
operation of its information technology and communications
systems, including those in CHEP’s global data centre.
Interruption, compromise or failure of these systems 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.
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 a range of 20% to 60% for debt
maturities of one to two years, a range of 10% to 50% for debt
maturities of two to three years and a range of 0% to 50% for debt
maturities extending beyond three years.
As at 30 June 2011, 58% of Brambles’ weighted average interest
bearing debt over the next 12 months was at fixed interest rates
(2010: 62%). The weighted average maturity period was 5.5 years
(2010: 4.9 years). The fair value of all interest rate swap
instruments was US$13.9 million net gain (2010: US$1.8 million net
gain).
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 the Group’s operations, these
exposures are not significant.
Brambles mitigates translation exposures generally by raising debt in
currencies where there are matching assets. During the 2011
financial year, Brambles increased its net investment hedge
borrowings in euro from €50.5 million to €350.5 million to match the
euro-denominated assets acquired with the IFCO acquisition. At the
end of the financial year, the fair value of foreign exchange
instruments was US$1.2 million net gain (2010: US$2.0 million
net gain).
SIGNIFICANT RISKS & 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 34 to 35.
- Business model - changing supply chain dynamics and customer
needs could render CHEP’s existing service offering and business
model out of date. Current market issues that, in combination or
separately, could support competitive service offerings include:
differing segmental needs, attributes of wood versus alternative
materials, use of track-and-trace technology, increasing fuel
costs, changes in retailer behaviour and the embedded cost of
asset losses in the current model. These issues could, over time,
have an impact on revenue, cost base, economies of scale and the
value of CHEP’s existing assets.
- 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 market structure, bargaining position and intensity of
competition. The above risks could have an impact on market
penetration, revenue, profitability, economies of scale and the
value of existing assets.
- 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,
Brambles Annual Report 2011 page 13
SUSTAINABILITY REVIEW
Brambles believes it makes a positive contribution to sustainable business practices. It aims to integrate sustainability into the way it does
business and the value proposition it offers to customers, employees and shareholders.
This Sustainability Review covers the year ended 30 June 2011 (Year).
The Sustainability Review covers: Brambles’ CHEP and Recall sites; the direct purchase of services or other materials over which Brambles
has operational control; and the purchase of all lumber. The Review does not include sites where Brambles does not have operational
control. Information on companies acquired by Brambles during the Year (Unitpool, Container and Pooling Solutions (CAPS), JMI Aerospace
and IFCO Systems) has not been included.
Details about the measurement techniques and methodologies used in this Review are either described in the Review or can be found on
Brambles’ website, www.brambles.com.
Brambles has not sought external assurance for the non-financial content and indicators in this Review, or supplementary information
published in the Sustainability section on www.brambles.com. In FY12, Brambles will be implementing an annual assurance process, which
will be conducted by an independent third party.
During the Year, Brambles restructured its Sustainability Committee, which is a management committee. The Sustainability Committee’s
Charter was reviewed and updated, in order to clarify the Sustainability Committee’s objectives, duties and responsibilities. Details of the
Sustainability Committee’s membership and its updated Charter are available on www.brambles.com.
Brambles also undertook the following sustainability governance activities:
• Reintegration of sustainability information into the Annual Report. This is aligned with Brambles’ intention to integrate sustainability into
Brambles’ business strategy. For the last two years, Brambles published a separate sustainability report online. The FY09 and FY10
sustainability reports are available on www.brambles.com;
• Development of a key sustainability topics matrix (see pages 15 to 16);
• Review of Brambles’ sustainability strategy;
• Update of the “Roadmap: Five Year Plan” (set out below) following a sustainability strategy review;
• Review of sustainability targets;
• Update of Brambles’ Environmental Policy; and
• Adoption of a new Diversity Policy.
BRAMBLES’ SUSTAINABILITY STRATEGY
In 2010, Brambles announced its sustainability strategy and outlined its strategic objectives and initiatives with a five year plan to
2015. During the Year, two amendments were made to these objectives and initiatives.
The first was to add “customer” as an area of focus. This now sits with the environment, people and community strategies. The
customer strategy is outlined below.
Customer — all things begin with the customer
Brambles’ first shared value is “all things begin with the customer”. Customers are showing a growing interest in understanding and
tracking the environmental and social impacts of their supply chain. Brambles has an excellent opportunity to improve and
demonstrate the environmental benefits of its business models, by using information acquired through its unique position in the
supply chain.
Brambles will:
• work closely with customers looking to improve the sustainability of their supply chains and develop innovative service offerings that
meet their needs;
• engage with relevant industry forums and customer advisory panels, to learn and contribute towards sustainability improvements in
supply chains; and
• commit to measure and continually improve the environmental benefits of Brambles product and service offerings to customers.
The second amendment was to the community strategy. As part of its commitment to the communities in which it operates, Brambles will be
“working in partnership with its suppliers to support and strengthen ethical and sustainable practices throughout the community”. This
commitment will be supported by the development and implementation of a Supplier Policy (see community targets on page 15).
The strategy can be viewed in full on www.brambles.com.
ROADMAP: FIVE YEAR PLAN
Below are the targets Brambles has set for the five year period to 2015 and commentary on progress during the Year.
Customer — all things begin with the customer
Measure
Customer loyalty
Target
Commentary
Introduce Net Promoter Score (NPS) methodology into
every country in which we operate
New target set in the Year. A description of NPS is
located on page 16.
Once baseline is established, achieve year-on-year
improvements in NPS
New target set in the Year. All baselines should be
in place by 2012.
Customer engagement
Active and increased participation in relevant industry
forums and customer advisory panels
New qualitative target set in the Year. Ongoing in
all countries.
Brambles Annual Report 2011 page 14
Environment — working towards Zero Harm by reducing Brambles’ environmental footprint
Target
Commentary
Measure
Lumber sourcing
Chain of custody certification for CHEP lumber pallets
by 2015
During the Year, CHEP Europe obtained
Programme for the Endorsement of Forest
Certification (PEFC) and Forest Stewardship
Council (FSC) accreditation for 100% of the lumber
used in repair activities and 96% of lumber in new
pallets (see page 17). Preliminary work is
underway in the other CHEP regions.
All participating countries are developing and
initiating greenhouse gas reduction strategies.
Brambles expects emission reductions to be
realised in line with its target.
All CHEP regions have processes in place and are
gathering data (see pages 19 to 20).
Greenhouse gas emissions
20% reduction on 2010 emission levels by 20151
Lumber waste
Zero CHEP lumber waste to landfill by 2015
Solid waste
Water management
Year-on-year improvements in service centre recycling
rates
Data collection processes are now in place (see
page 19).
Targets to be established once IFCO is integrated into
the Brambles Group
IFCO’s reusable plastic crate (RPC) operations are
the largest consumer of water in the Group. Data
collection processes are now in place in the other
business units.
People — engaging our people and making sure they are safe
Measure
Zero Harm
25% reduction in BIFR on 2010 levels by 2015
Target
Commentary
Brambles Employee Survey
(BES)
Participation rate at minimum of 90% in all businesses
by 2015
BES overall engagement score
Target to be set once IFCO is integrated into the Group
The Group’s performance in the Year improved by
31.5%, meeting its target. A new target will be set
in FY12, incorporating IFCO.
The Group’s participation rate was 90% for the
Year. A new target will be set in FY12,
incorporating IFCO.
IFCO employees comprise 22% of the Group. Target
to be set in FY12.
Education, Training and
Development (ETD)
25% increase in ETD days on 2011 participation levels by
2015
Baseline set. Brambles’ business units reported a
total of 11,454 training days in the Year.
Community — making a positive contribution to the communities we operate in
Measure
Supplier Policy
Target
Commentary
Develop and introduce a global policy by the end of
FY12
New target set during the Year.
Introduction of “volunteer”
time for employees
At least one volunteer hour per employee during
working hours across the Brambles Group by 2015
During the Year, Brambles recorded 0.35 volunteer
hours per employee.
Introduction of “give as you
earn” policies across the Group
All businesses where legislation allows it by 2015
Roll out of policy to commence in 2013.
KEY SUSTAINABILITY TOPICS IN THE YEAR
During the Year, Brambles conducted its first formal analysis of sustainability topics it considers important to its stakeholders so as to focus
its reporting. Brambles engaged a third party provider to conduct a desktop analysis, interview employees representing different business
units throughout the Group and review internal material. AccountAbility Principles Standards AA1000 was used as a guide and a detailed
report was produced, defining all sustainability topics relevant to the Group. These topics were reviewed, with 18 key topics identified and
grouped into areas of focus according to Brambles’ sustainability strategy and then ranked using methodologies consistent with Brambles’
risk and governance methodologies.
The key sustainability topics matrix is not intended to be a risk matrix (in which risks would be ranked by likelihood of occurrence and by
consequence to Brambles).
1 Based on existing businesses, new acquisitions not to be included, excluding emerging and developing economies (according to the IMF, this would include
Argentina, Botswana, Brazil, Chile, China, Guatemala, Hungary, India, Indonesia, Malaysia, Mexico, Namibia, Poland, Saudi Arabia, Swaziland, Thailand,
Turkey, United Arab Emirates, Zimbabwe). Target based on internally projected growth assumptions for the period.
Brambles Annual Report 2011 page 15
SUSTAINABILITY REVIEW - CONTINUED
Going forward, key sustainability topics will be reviewed on an
annual basis and, over time, more closely integrated into Brambles’
stakeholder engagement processes. The key topics will assist
Brambles in identifying and prioritising sustainability activities
through the representative eyes of its stakeholders.
For the Year, the key sustainability topics were:
CUSTOMER
CUSTOMER SATISFACTION
One of Brambles' shared values is that all things begin with the
customer. Brambles' business units are focused on improving levels
of customer satisfaction and making sure that their products and
services and the quality of relationships with their customers are a
source of competitive advantage.
Brambles is committed to continuously improving the customer
experience with its products, services and people. In order to meet
that commitment and best direct improvements, Brambles
introduced a significant change in its survey methodology in 2010.
Net Promoter is a multi dimensional program that includes Net
Promoter Score (NPS) measurement, leadership practices that
promote customer centricity, organisational strategies to ensure
program adoption, integration with core business processes and
operational systems geared to identify improvements in the
customer experience.
Detailed questionnaires generate data about customers' views on
processes and performance. This data is distilled into a single usable
indicator, known as the NPS. The NPS measures the relative weight
of people who use and recommend a company’s services or products
to others, compared to those who are unhappy. A target of year-on-
year improvements in NPS has been set in the Year.
The global roll-out of relationship surveys for CHEP began in
April 2011, and to date, feedback from 3,000 individual contacts
representing almost 500 companies has been collected.
The program is providing Brambles an excellent snapshot of
customers’ thoughts and the opportunity to respond quickly to
operational issues. For example, customers consider CHEP
employees knowledgeable and available when support is needed.
CHEP is seen to have systems that make it easy for customers to
interact with and its global presence is noted.
CHEP is looking at ways to satisfy its customers’ desire for CHEP to
expand existing relationships into long term partnerships that will
enable reductions in supply chain costs and value creation in their
businesses.
CHEP’s effort and investment in product quality is also being
acknowledged; more than 50% of respondents said pallet quality
improved in the Year.
CUSTOMER SOLUTIONS
By listening to customers and responding with innovative solutions,
Brambles' customers of today will be its customers of tomorrow.
Brambles believes that its business models make a positive
contribution to sustainable business practices and it aims to
integrate sustainability into the way it does business and the value
proposition it offers.
During the Year, the CHEP USA team developed a number of
customer focused activities in response to customer feedback from
its Net Promoter program. This included the total account
management service, where a dedicated CHEP manager is based on
a customer’s site to handle administration and asset control,
provide customised reporting and identify ways to reduce supply
chain costs. The program allows CHEP to understand customers’
needs and what is required to deliver improvements.
CHEP USA and CHEP EMEA have also created value solutions teams.
The teams present industry best practices and processes on issues
that matter most to a customer and then work in partnership with
the customer to develop solutions based on Lean and Six Sigma
methodologies, that deliver lower financial and environmental costs
across the supply chain.
CHEP's Innovation Centre in Orlando, Florida is a world-class product
testing and engineering facility. From packaging and unit load
design to simulated supply chain testing, CHEP collaborates with
customers around the globe, conducts packaging tests for customers
and tests new products and technologies at the Innovation Centre.
CHEP's engineers and other supply chain solutions specialists are
available to help customers improve the performance of their
packaging and palletised unit loads to minimise product damage.
This is one way that CHEP adds value and drives innovation and
savings for the customer. There is no charge for these services;
CHEP considers it part of being a good supply chain partner.
In February 2011, CHEP launched the world’s first testing facility to
simulate the pallet life cycle. What used to take over a year with
field trials can now be achieved with much more reliable data in
Brambles Annual Report 2011 page 16
just four to eight weeks. This test track facility will allow CHEP to
test innovations quickly and bring new platforms to the market
faster and at lower cost.
Recall continuously develops document management processes and
develops and improves software.
Further details about Brambles’ innovation, research and
development activities during the Year are set out in the Directors’
Report — Other Information on page 58.
PRODUCT & SERVICE QUALITY & SAFETY
Brambles is committed to achieving Zero Harm and considers the
health, safety and environment impacts in all its decisions: from the
development of projects to the launch of new products and
services. Brambles is committed to continuously improving the
quality of its products and services.
Safety management systems operate at every CHEP service centre
around the world. In addition, CHEP's Innovation Centre assesses
health and safety impacts of each product in development.
CHEP has a Global Quality Council that drives process control
standards across the regions to improve pallet quality standards
with the focus on improving customer satisfaction and internal
processes. This includes consistent audit procedures that encompass
all aspects of the inspection and repair process and the application
of Lean and Six Sigma methodologies. The Council also identifies
best practices and sees that they are shared across the Group so
that customers worldwide can benefit from improvements in
product quality. For example, for the Year, CHEP Europe reported
that product quality rejections improved 38% compared to FY10.
CHEP USA improved 29% compared to FY10.
Recall assists customers in the safe management of their document
storage requirements by clearly labelling its cartons with suggested
weight restrictions and correct handling techniques, specific to the
size of the carton (which varies from region to region) so that
neither customers nor employees put themselves at risk from strain
or injury of lifting heavy loads. Recall has stringent processes for
employees managing inbound cartons (for example, correct manual
handling techniques) to ensure adequate risk management.
Neither CHEP nor Recall is able to fully assess the safety risk of
customers using products on their own sites, due to the many
variables involved. However, CHEP and Recall actively engage with
customers and other organisations within the regions in which they
operate, promoting health and safety impacts and responsible
packaging solutions.
Total pallet management programs on customer premises are run to
CHEP Zero Harm standards.
CHEP's Innovation Centre is a certified testing laboratory of the
International Safe Transit Association (ISTA) and is capable of
performing test methods included in ISTA's rigorous global packaging
standards.
CUSTOMER PRIVACY
Recall establishes and adheres to stringent measures of physical and
operational security to protect customers' information. It is
committed to securely housing, retrieving and delivering customers
information when it is required.
Recall operates global standards in relation to the security, access
and protection of the information it manages for customers. These
standards are detailed on www.brambles.com. All Recall sites are
regularly measured and assessed for compliance with the standards.
An internal measurement system records any incident where
there is a possibility that a customer's information has gone outside
of Recall's control, known as security breach or security incident
reporting. Any report of this nature is provided to the region's
President within one day, who then passes it on to the Group
President and Chief Operating Officer of Recall. Breaches and
incidents are further reviewed at global leadership meetings so that
potential system errors can be rectified.
ENVIRONMENT
SUSTAINABLE LUMBER SOURCING
Brambles is committed to achieving Zero Harm and considers
environmental impacts in all decisions, including the sourcing of
lumber. CHEP has strict lumber sourcing policies and has a target of
achieving chain of custody certification for CHEP lumber pallets by
2015, which will provide further assurance of responsible and
sustainable practices.
Volume of lumber (m3) for the Year
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
2011
756,626
833,787
171,779
Total
1,762,192
Brambles' sustainability strategy specifically addresses responsible
management of forest resources for Brambles, its suppliers,
customers and the wider community (for example, the objective of
having products constructed from certified sustainable resources
and controlled by systems and practices approved by external
auditors). Brambles engages with its suppliers to assess whether
their practices are in line with Brambles' environmental principles
and acts accordingly (for example, to help them meet high
standards).
CHEP maintains strict lumber sourcing policies that support the
replenishment of natural resources by sourcing lumber in a
responsible and sustainable manner, with a preference for
plantations and state-managed forests with recognised forest
certifications. CHEP does not source from protected areas, parks, or
similar areas where harvesting operations are not complementary to
responsible forestry management.
In the Year, CHEP Europe achieved Programme for the Endorsement
of Forest Certification (PEFC) and Forest Stewardship Council (FSC)
chain of custody certification for 100% of its lumber used in pallet
repair activity and 96% of lumber used in new pallets, providing
assurance that the lumber used originates from sustainable sources.
CHEP Europe is also working to implement a traceability system for
100% of procured lumber during FY12, so every piece of lumber can
be traced to its origin of supply.
In FY10, CHEP achieved FSC accreditation for its wholly owned tree
plantations in South Africa.
During the Year, 91% of CHEP’s lumber was sourced from forests
that had obtained third party certification. This was down from 95%
on the previous year. Reasons for this include:
• CHEP South Africa reported that a number of third party growers
that did have formal certification have allowed this to lapse, due
to cost pressures (all lumber comes from government permitted
plantations); and
• Over the past couple of years, CHEP USA has increased its sourcing
of lumber from domestic suppliers. While sourcing this higher
quality lumber at favourable prices supports the local economy
and reduces the environmental footprint with regards to transport
costs and emissions, many smaller sawmills find the cost and
labour required to secure third party certification prohibitive.
CHEP USA continues to work with its domestic supplier base and
supports reputable smaller businesses which meet its strict
criteria for the responsible and sustainable management of forest
resources.
Brambles Annual Report 2011 page 17
SUSTAINABILITY REVIEW - CONTINUED
Lumber volume by forest source certification
and business unit (%)
Kilotonnes (kt) of CO2-e4
Terajoules (TJ) of energy
2011
2010
%
2011
2010
%
9
6
5
19
39
22
5
7
8
19
39
22
10
11
11
45
5
18
6
3
63
28
8
14
17
41
20
2
2
69
27
15
71
14
7
81
12
2011
2010
CHEP (Total)
2011
2010
CHEP Americas
2011
2010
CHEP EMEA
2011
2010
CHEP Asia-Pacific
FSC
PEFC
SFI
CERTFOR
Other
No formal certification
CHEP uses 58 species of tree in its lumber supply as per the
IUCN Red List2. None of these species are defined as “endangered”,
“critically endangered”, “extinct in the wild”, or “extinct”. Of the
58 species sourced, 55 are classified as “least concern”, two as
“near threatened” and one as “vulnerable”.
The possible inclusion of Longleaf Pine (classified as “vulnerable”)
in CHEP USA’s lumber supply was identified in 2009, and the
possible inclusion of Virginia Pine and Sand Pine (both classified as
“near threatened”) were identified in 2010. The exact sub-specie of
pine being supplied is not always disclosed by USA lumber suppliers.
No additional issues were identified in FY11.
CHEP USA is committed to working closely with its suppliers and
continues current supply chain auditing practices to better
understand and minimise the potential use of Longleaf Pine, Virginia
Pine and Sand Pine.
In Malaysia, CHEP is endeavouring to have its suppliers source 100%
of its lumber from permanent reserve forests that can be certified,
as the future of these forests is assured. When CHEP Asia-Pacific
implements chain of custody systems and processes it will seek a
Malaysian Timber Certification Council audit of those systems and
practices to provide further assurance regarding use of forest
resources.
EMISSIONS & ENERGY
Brambles is committed to achieving Zero Harm. It considers the
environment in all decisions concerning the development of
projects, the selection of commercial partners and suppliers and the
launch of new products and services. Brambles is committed to
using resources more efficiently and encouraging the sustainable use
of its products and services.
Brambles recorded a decline in Scope 1 and Scope 2 greenhouse gas
(GHG) emissions and energy use for the year.3
As reported last year, Brambles’ internal audit function reviewed
the 2010 GHG collection process and submitted a report, with
recommendations on how the process can be further improved, to
Brambles’ Audit Committee. A number of these recommendations
were implemented in during the Year and have resulted in more
accurate reporting, particularly in Recall.
2 The IUCN Red List of Threatened Species™ is compiled by the International
Union for Conservation Of Nature and Natural Resources.
3 Scope 1 emissions come from direct purchases of fuel, for company owned
transport or heating. Scope 2 emissions are indirect purchases of energy, like
electricity. Scope 3 emissions are generated by a third party, e.g. a
transport company carrying a company’s freight.
Brambles HQ
0.12
69.09
68.78
0.11
67.45
9.1
2.4
0.49
0.45
8.8
688.45
665.31
3.5
77.46
(11.2)
752.92
814.41
(7.6)
137.99
145.02
(4.8)
1,441.86 1,480.17
(2.6)
CHEP
Recall
Total
CHEP’s overall CO2-e emissions and energy consumption increased
slightly during the Year, which can be attributed to a general
increase in activity and the addition of new service centres.
CHEP and Recall continually work to optimise networks and
automate processes to improve plant capacity and make plants
more energy efficient.
For example, as part of CHEP EMEA’s reduction plan, CHEP Spain has
installed a biomass boiler in its Belpuig service centre, which is
expected to cut the site’s emissions by 36%. At CHEP Canada’s
Mississauga service centre, the replacement of sodium incandescent
lights is expected to reduce the site’s electricity consumption by
30% per annum. More examples of emission and energy saving
activities can be viewed in the sustainability section on
www.brambles.com.
CHEP USA is focused on analysing and reducing its corporate
environmental footprint through targeted energy saving projects.
CHEP USA is an ENERGY STAR® partner and has made the
commitment to track and reduce energy use in its buildings and
facilities. Additionally, CHEP USA and LeanLogistics are both
Environmental Protection Agency SmartWay partners in the USA.
CHEP Europe has joined the SmartWay Europe Initiative to
participate in the development of a standard recognised
methodology for transport emissions measurement and reduction in
Europe.
While Brambles has a relatively light GHG emissions footprint, with
the recent acquisition of IFCO and the growing interest among
customers to understand the costs of their supply chains, there is an
opportunity to develop better and more accurate ways to measure
emissions and energy (Scope 1, 2 and 3) that will demonstrate the
environmental benefits of its product and service offerings3.
Brambles greenhouse gas generation by source
in the Year (%)
6.40%
0.13%
3.66%
11.46%
21.87%
56.48%
Electricity
Diesel fuel
Natural Gas
LPG/Propane
Motor gasoline/Petrol
Other
4 Carbon dioxide equivalent (CO2-e) is the universal unit of measurement to
indicate the full global warming potential (GWP) of a particular greenhouse
gas emission. It takes into account the GWP of each of the six Kyoto
greenhouse gases, and expresses them in terms of the equivalent units of
carbon dioxide. It is used for measuring and reporting different emissions
sources on a common basis. At the corporate level, CO2-e is typically
reported in kilotonnes (kt).
Brambles Annual Report 2011 page 18
During the Year, Brambles reviewed its operations to determine the
main contributors to its Scope 3 emissions. These were determined
to be:
• supplier emissions — for leased and outsourced sites and
subcontracted transport carriers;
continuously improving its performance to meet customers' and
stakeholders' sustainability expectations.
During the Year, CHEP and Recall have established processes to
collect data on waste streams and have committed to improving
their recycling rates on an annual basis.
• purchased goods — harvesting of lumber purchased from suppliers
and other purchased goods and services, such as paper and
cardboard;
• capital goods — particularly CHEP pallets and containers;
• business travel — employee travel for business purposes; and
• employee commuting.
CHEP has an extensive network of service centres and outsources
many to third party providers. This provides CHEP with a great deal
of flexibility to adjust its network to meet changing customer needs
or to reduce or optimise transport costs.
During the Year, CHEP EMEA implemented a system to capture the
emissions from those third party activities undertaken by
subcontracted service centres and transporters contracted to move
CHEP equipment. This system allows CHEP to estimate a baseline,
from which it can measure the impact of its collaborative
transportation, route optimisation, network optimisation and total
pallet management initiatives (see Transport Impacts on page 20).
As there is a growing interest among customers to understand the
environmental benefits of using this network, all three CHEP regions
will be developing a consistent, coordinated approach to capturing
Scope 3 data.
Brambles is committed to developing a data collection system for its
businesses whereby information from third party operators and
other Scope 3 emission generators can be collected and assessed.
Compliance
In Australia, the National Greenhouse and Energy Reporting
System (NGER) threshold for 2011 is 50 kilotonnes of C02-e, or
200 terajoules of energy. This Year, Brambles’ CHEP and Recall
operations in Australia will be required to report their emissions.
In the UK, the Carbon Reduction Commitment (CRC) Energy
Efficiency Scheme legislation came into force in April 2010. CHEP
and Recall registered and submitted their footprint report to the UK
Environment Agency in July 2011. From April 2012, participants in
the scheme will be required to purchase allowances for the tonnes
of CO-2-e they generate. While the amount that Brambles’
businesses will pay will be relatively small, CHEP has invested in an
environmental management system and started implementing
strategies that will reduce energy consumption and emissions over
the coming years.
WASTE MANAGEMENT
Brambles is committed to using resources more efficiently and
minimising waste. CHEP's pallet pooling system operates on the
principles of reduce, reuse and recycle. Brambles is committed to
CHEP actively manages all waste streams related to pallet pooling
activities including lumber, corrugate, steel and plastic. CHEP
minimises the impact of its internal waste generation by ensuring
that scrap pallets, containers and crates are recycled. When pallets
are repaired, lumber that is in good condition is reused to repair
other pallets. The remaining lumber is recycled for other uses such
as fuel and mulch.
Lumber waste & recycling
Compared with disposable pallets, pallet pooling significantly
reduces the use of lumber resources and waste.
Unlike CHEP's pallet pooling system, many other types of lumber
pallets (without a clear system of ownership and accountability) end
up in landfill. CHEP avoids this problem by maintaining ownership of
its assets and enforcing a system of controls to ensure that its
pallets are recovered and the materials are reused or recycled for
other uses at the end of their useful lives.
CHEP USA and Europe have environmental calculators that enable
customers to determine by how much they can reduce solid waste,
GHG emissions and energy consumption by using the CHEP pallet
pooling system instead of alternative shipping platforms (such as
non-pooled lumber pallets and pooled plastic pallets).
CHEP reclaimed at least 74,000 cubic metres of lumber for use in
the repair and manufacture of pallets. An additional 97,000 cubic
metres was reused for a variety of purposes, including heating and
woodchips. The collection of this data was recently initiated and
relates to CHEP operated sites only, where available for the Year.
In line with its target of zero lumber waste to landfill by 2015, CHEP
is implementing a number of programs around the globe. For
example, in CHEP New Zealand, lumber reclaiming activities have
been extended to both the North and South Islands. CHEP New
Zealand also engaged a third party consultant to reduce waste,
including lumber going to landfill. In the first three months, its
waste going to landfill was reduced by 50%.
Other waste & recycling
Where possible, in office locations, segregation and recycling
programs are in place for recyclable items such as paper, bottles,
cans, newspapers, magazines and ink cartridges. CHEP complies
with local and federal regulations pertaining to waste handling,
recycling, storage and disposal.
General solid wastes (for example office/sanitation) are handled by
local solid waste management or recycling facilities. Universal
wastes and used oil (both generated in limited quantities) as well as
cardboard, plastic and metals are generally reused or recycled
where facilities are available.
Brambles’ global GHG emissions during the Year
Scope 1
Scope 2
Total
Brambles HQ
Recall
CHEP
Total
kt CO2-e
TJ
kt CO2-e
-
-
0.12
-
0.12
-
-
-
-
0.49
-
0.49
33.90
-
34.88
-
68.78
-
TJ
-
515.42
-
237.50
-
752.92
kt CO2-e
26.16
-
42.93
-
69.09
-
TJ
-
434.33
-
254.12
-
688.45
kt CO2-e
60.06
-
77.93
-
137.99
TJ
-
949.75
-
492.11
-
-
1,441.86
Brambles Annual Report 2011 page 19
SUSTAINABILITY REVIEW - CONTINUED
Waste paint is generally reused in the makeup of new paint. Where
that is not possible, it is treated to render it solid, but is then
directed to landfill as the better of current disposal options.
During the Year, Recall collected, shredded and sent for recycling
more than 180,000 tonnes of paper.
Recall assists its customers in managing their physical and digital
documents throughout their life cycle, from creation to secure
destruction. Recall believes that it benefits the environment by
assisting customers to reduce material usage by providing space-
and paper-efficient document archival and retrieval solutions.
All the material used in the production of Recall's cartons is
recyclable. Those cartons are supplied on CHEP pallets, as opposed
to one way whitewood pallets.
During the Year, Brambles began collecting data on solid waste
streams and has committed to improving its recycling rates on an
annual basis.
Brambles had no significant spills during the Year.
WATER
Brambles is committed to using resources more efficiently and
minimising waste. Brambles is committed to continuously improving
its performance to meet customers' and stakeholders' sustainability
expectations.
Brambles recognises that water is a precious resource and in many
areas of its operations water supply is crucial for the environment
and the community. Brambles believes it has a responsibility to use
water wisely. For this reason, during the Year, Brambles’ business
units established processes to collect data on water usage and
waste.
IFCO, which operates a pool of more than 120 million reusable
plastic crates (RPCs), is the largest user of water in the Group.
Brambles will set water targets in consultation with IFCO once it has
been integrated into the Group.
CHEP also uses water in operations with designated wash facilities
or service centres that condition RPCs. Many of these sites recycle
and reuse water. CHEP Europe uses washers with a facility to filter
and reuse water during the wash process. CHEP Australia uses water
recycling at several of its plants.
Water discharges from CHEP and Recall facilities are equivalent to
sanitary wastewater and are not considered material.
TRANSPORT IMPACTS
Brambles is working to reduce its environmental footprint by using
its logistics know-how to minimise the footprint of its customers and
the supply chain.
Network optimisation reduces transport distances and associated
emissions. CHEP’s total pallet management (TPM) program offered
to major manufacturers and retailers allows CHEP to manage all of a
customer’s pallet needs onsite and supply CHEP pallets without the
need for additional transport. Customers’ use of the TPM program
helps optimise the network and also reduces the energy
requirements associated with the pallet pool.
Network optimisation focuses on the number and location of service
centres based on sourcing requirements and locations, location of
manufacturers, transport costs and plant capacity. For instance,
CHEP Europe employs a central planning team to address these
issues across the whole of Europe.
In the USA, CHEP’s GreenLanes™ program helps customers increase
productivity and eliminate unnecessary empty return truck trips, by
working with third party transport companies to fill empty space on
a customer’s truck, or that of a transportation provider.
CHEP USA has collaborated with customers on more than 6,600
individual movements, resulting in the elimination of an estimated
1.29 million kilometres of transportation and production of
1.34 million kilograms of CO2-e emissions.
CHEP Europe continued the roll-out of its transportation
collaboration program and now has more than 20 customers
participating. The program allows participants to benefit from
logistics synergies by reducing empty miles, increasing shared
transportation or moving to using different transport solutions such
as rail and road. During the Year, savings of US$1.7 million were
reported, along with reductions in distances travelled and CO2-e
emissions.
In Australia, CHEP recently obtained accreditation to stack up to
20 pallets high on a truck, instead of 16 to 18, which is the industry
norm. This saves customers an estimated 7–12% on CO2-e emissions
per trip. This also reduces the number of vehicle trips and cuts
down on loading time and risk.
Recall is also optimising its transport operations to deliver the most
efficient, error-free solution to customers. This results in a reduced
number of vehicle trips and error correction which require further
energy expenditure. Additionally, Recall works to identify
opportunities to transmit data digitally to customer sites, for
example, the image of a single page rather than the entire carton
physically transported. This delivers the same net result to the
customer at a lower overall carbon expenditure.
PEOPLE
Employees by business unit5
Business unit
Employees
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
IFCO6
Recall
Brambles HQ
Total
2,182
4,175
1,625
3,806
5,238
108
17,134
EMPLOYEE ENGAGEMENT
Brambles recognises that people are its most important asset and is
committed to providing a safe, rewarding and challenging
environment for its employees. Ensuring its employees are engaged
means listening to employee feedback and treating employees with
integrity and respect.
Employee engagement is monitored through the Brambles Employee
Survey (BES). This is extended to all employees and is confidential.
It surveys employees’ perceptions of their workplace. The data is
used to track progress from previous surveys, to measure Brambles
against internal and external best practice and to identify key
actions for improvement.
Over the past couple of years Brambles employees have
demonstrated their willingness to provide feedback and suggest
where Brambles can improve. Participation rates in the BES surveys
are world class. For the latest survey the overall participation rate
increased to 90%, up from 89% on the previous survey.
Overall, employee engagement increased one percentage point from
63% to 64%7. Employees’ understanding of business direction and
confidence in leadership and the future of the Group have
strengthened.
5 Employee numbers are 12 month averages for the Year.
6 As indicated on page 14, this section does not include information on IFCO
personnel.
7 Engagement is a combination of perceptions that positively impact
behaviour. These perceptions include satisfaction, pride, loyalty and a
willingness to be an advocate for the organisation; engagement results are
an average of these four items and measure to what extent employees agree
or disagree with the statement. Those employees who agree or strongly
agree are the most engaged.
Brambles Annual Report 2011 page 20
As IFCO employees now comprise 22% of the Group, Brambles will
reset its targets for employee engagement in FY12 once IFCO is
integrated into the Group.
SAFETY & WELLBEING
Brambles' Zero Harm Charter states that everyone has the right to
be safe at work and to return home to their family and friends as
healthy as when they started the day. Each and every person is
expected to work safely and Brambles seeks to apply best
occupational health, safety and environment practice for
employees, contractors, customers and local communities.
Details on Brambles’ Health and Safety Policy and the Zero Harm
Charter are in the Directors’ Report — Other Information on page
58. In 2010, Brambles rolled out a new scorecard that replaced the
lost time injury frequency rate (LTIFR) and the lost time injury
severity rate (LTISR) measurements. The scorecard includes
Brambles Injury Frequency Rate (BIFR) and takes a much more
comprehensive view of safety. BIFR records fatalities and three
types of injury, each at a rate of injury per million hours worked:
• Loss of a full work shift due to injury;
• Modified duties following an injury; and
• Incidents that require medical treatment.
Brambles injury frequency rate
Introduced in 2007 within the CHEP businesses, BIFR is now the
primary measure of safety performance across the Group. While
Recall began to use BIFR as a measure during the Year, it has been
collecting BIFR data for a number of years.
Since 2009, the BIFR has been improving, reflecting Brambles efforts
to improve workplace safety and health. In FY10, the combined
performance of the three CHEP business units was a BIFR of
21.9 events per million hours worked.
In the Year, the Group (including Recall) achieved a BIFR of 15.0
events per million hours worked. All business units met or exceeded
their injury reduction targets. The reduction of 31.5% exceeded the
BIFR reduction target set at the beginning of the Year of 25% on
2010 levels by 2015. A new target will be set in FY12 once IFCO is
integrated into the Group.
Overall the level and severity of injury sustained across the business
units has reduced significantly. This is particularly true in Recall,
where rates of injury fell by 40%.
This performance can be attributed to the renewed Zero Harm
strategy developed in 2010. The strategy, internal structures and
performance measurement processes are aimed specifically at the
BIFR to create breakthrough performance by addressing the
underlying cause of injury.
During the Year, Brambles began a wellbeing program to help
employees and their families proactively seek out healthy activities
and lifestyles. More information on the program can be found on
www.brambles.com.
ATTRACTING & RETAINING TALENT: LEADERSHIP
Brambles is committed to providing a safe, rewarding and
challenging environment to help employees reach their potential.
Brambles operates a competency framework which allows
employees to understand the skills and competencies required to do
their job, and which ones need to be developed for career
progression.
This framework is at the core of Brambles’ performance appraisal
systems. Every employee has an annual appraisal with their
manager.
Career progression is an important part of Brambles’ employment
offering and executive development activities span the organisation.
Brambles recruits from many of the best business schools for high
potential executives and provides intensive development
opportunities to fast track these individuals.
Brambles holds a number of development centres each year to
identify junior and middle managers who have the potential to move
to higher levels of the organisation. In the Year, 50 executives went
through these centres with a number promoted since their
participation.
Brambles is a member of the CEDEP consortium. CEDEP is the
European centre for executive leadership development, based on
the campus of the prestigious INSEAD business school in
Fontainebleau, France.
Investment in leadership development is a priority for Brambles,
with 196 senior and high potential leaders attending various
programmes at CEDEP during the Year. Brambles has also
established partnerships with business schools in Shanghai (CEIBS)
and Singapore (INSEAD). This allows Brambles to widen its search for
management talent through its rotational MBA program, Brambles
Leadership Pathways.
The three year program is pitched to high achieving MBA/MSc
business school graduates. Participants in the program receive
ongoing career support and mentoring over a three year period.
They have at least two roles (rotations) in different functional areas
within the Brambles Group.
DIVERSITY & INCLUSION
Brambles is committed to selecting, recruiting, developing and
supporting people solely on the basis of their professional capability
and qualifications, irrespective of gender and other diversity
factors. Brambles selects, retains and develops the best people for
the job on the basis of merit and job related competencies —
without discrimination.
During the Year, the Board adopted a diversity policy that deals
with diversity across a range of measures. This policy is available on
www.brambles.com. Details of the policy are shown in section 3.2
of the Corporate Governance Statement on page 31.
Permanent employees by gender (total and management)
as at 30 June 2011 (%)
72.1 73.8
75.8 77.1
73.3 72.4
82.5 81.4
53.1
59.5
66.8 68.9
27.9
26.2
24.2 22.9
26.7 27.6
17.5 18.6
46.9
40.5
33.2 31.1
Total Mgmt
Total Mgmt
Total Mgmt
Total Mgmt
Total Mgmt
Total Mgmt
Group
CHEP
Americas
CHEP
EMEA
CHEP
Asia-Pacific
Recall
Brambles
HQ
Female
Male
The Group's Remuneration Policy is to pay at the median level of
remuneration for target capability and performance (further details
on the Remuneration Policy and structure can be found on pages 40
to 42). Brambles rewards performance on the basis of merit and job
related competencies without discrimination. As required by the
ASX Corporate Governance Council Corporate Governance Principles
and Recommendations (Principle 8), the Remuneration Committee
now has responsibility for reviewing and making recommendations
to the Board on remuneration by gender. Brambles expects that its
target of increasing the number of female employees in
management will reduce the disparity in male:female salary ratios
at the management level.
Brambles Annual Report 2011 page 21
SUSTAINABILITY REVIEW - CONTINUED
Male:female salary ratios
Training days for the Year
Group
Non-management
Management
Male
Female
1.09
0.95
1.16
1.00
1.00
1.00
Age distribution of employees as at 30 June 2011 (%)
0.5
7.1
21.0
36.2
0.5
6.9
18.9
0.1
5.0
19.0
0.5
9.0
18.0
34.2
38.2
32.8
27.8
33.9
34.3
35.7
0.8
6.8
19.7
28.8
33.1
1.0
10.7
31.0
30.1
26.2
7.4
Group
5.6
CHEP
Americas
3.4
CHEP
EMEA
4.0
CHEP
Asia-
Pacific
10.8
Recall
1.0
Brambles
HQ
<25
25-<35
35-<45
45-<55
55-<65
65<
Brambles is committed to supporting employees throughout their
working life and to tracking and reporting parental leave data8.
Group employees
taking parental leave
during the Year (%)
Group employees
returning to work after
parental leave during
the Year (%)
Group
Male
Female
1.95
0.96
4.50
1.70
1.11
3.22
For the Year, voluntary turnover of employees for the Group was
14.81%.
Voluntary turnover (%)
Group
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Recall
Brambles HQ
14.81
16.15
8.29
20.23
17.16
2.04
TRAINING & DEVELOPMENT
Brambles is committed to providing a safe, rewarding and
challenging environment for its employees. To meet ongoing and
future needs, Brambles is committed to developing the skills of its
people.
8 83.1% of Group employees as at 30 June 2011 were entitled to parental
leave.
Per
Per male
Per
Per
Per mgt
Number of
employee
employee
female
non-mgt
employee
e-learning
employee
employee
courses
completed
Group
0.86
0.78
1.04
0.77
1.30 5,573
CHEP
Americas
CHEP
EMEA
CHEP Asia-
Pacific
1.32
1.12
1.95
0.90
1.98 1,360
0.70
0.51
1.19
0.63
0.97
468
1.01
1.04
0.91
1.30
0.79 1,942
Recall
0.75
0.75
0.71
0.70
1.25 1,794
One of the areas of focus for Brambles’ sustainability strategy is its
people and the education, training and development opportunities
available to them. Brambles is committed to ensuring that all its
people are fully trained and equipped to do their job.
Brambles has set a target of a 25% increase on participation levels
for the Year in education, training and development days by 2015.
A large number of training courses are available to employees
through a proprietary web based system, which enables Brambles to
monitor the number of training days and their effectiveness.
COMMUNITY
SUPPLIER SUSTAINABILITY
Brambles expects its suppliers' practices to be in line with its
principles. Brambles is committed to driving efficiency and
environmental sustainability in the supply chains its businesses
serve.
Brambles has robust management systems for maintaining
relationships with suppliers. Responsibility for managing
relationships with suppliers resides with the Group Presidents of
each Brambles’ operating business. Brambles’ policy is incorporated
in the Code of Conduct and the business units’ expectations are
communicated clearly to suppliers. For example, CHEP Europe
purchasing contracts refer to the Code of Conduct and the Code of
Conduct is passed on to suppliers. The majority of CHEP Europe
purchases are under such contracts. Elements of the Code of
Conduct are also included in material purchasing contracts with
suppliers in CHEP Asia-Pacific. CHEP Americas’ contracts for service
providers in its plant network specify compliance with relevant local
requirements governing labour, health, safety and environment.
Brambles monitors relationships with suppliers. Brambles is
committed to assessing supplier environmental and social standards.
Major suppliers in sectors with a high environmental impact are
required to provide evidence of their systems for ensuring good
environmental performance.
Brambles recognises that its business units need to collaborate
closely with their third party operators and suppliers to meet
customers’ growing interest in understanding their environmental
impact and in turn to demonstrate the benefits of using Brambles’
products and services.
CHEP Americas and CHEP EMEA have joined the international
Supplier Ethical Data Exchange (Sedex). Sedex connects businesses
and their suppliers in the sharing of data to measure and improve
ethical and responsible business practices.
By working in partnership with suppliers, Brambles’ business units
will be able to gather credible and consistent quality data and
develop better, more sustainable and mutually beneficial outcomes.
In FY12 Brambles will develop a supplier policy that draws on best
practice across the business units.
Brambles Annual Report 2011 page 22
Brambles’ Zero Harm Council is evaluating appropriate actions to
assess whether providers are focusing on safety. During the Year,
the Zero Harm Council assessed the most appropriate methodology
to apply and how the information could be collected and evaluated.
An evaluation tool, broadly based on OSHAS 18000 methodology
which follows established safety management designs, has been re-
engineered following tests at sites in Europe and the USA. Testing
and evaluation will continue throughout FY12.
COMMUNITY INVESTMENT
One of Brambles' shared values is to always act with integrity and
respect for the community and the environment. Brambles' business
units are part of the communities in which they operate. The
business units recognise their responsibility in making a positive
contribution to these communities in the areas of environment
sustainability and education.
Brambles provides financial and other forms of support to a broad
range of charitable and community organisations around the world.
This support is provided in four ways:
•
•
•
contributions by Brambles’ businesses to a range of local and
national charities;
personal contributions by Brambles employees around the
world to a range of fundraising events and activities;
a volunteering policy that provides Brambles’ employees with
three days of paid volunteer leave per year; and
• monetary donations provided by Brambles’ business units to
support employee volunteer efforts.
During the Year, Brambles HQ provided almost A$500,000 in
donations and sponsorship. This includes donations to the Red Cross
disaster appeals for the Queensland floods in Australia (A$200,000)
and the Japanese earthquake and tsunami (A$50,000). Brambles also
donated A$100,000 to the Salvation Army’s Christchurch Earthquake
Appeal. In addition, Brambles’ business units donated more than
A$500,000 to local and regional charities and causes.
From time to time, CHEP provides pallets and containers free of
charge to transport emergency supplies for relief efforts in times of
disaster. During the Year, CHEP Australia provided pallets to
Foodbank Australia, for use in the distribution of food and grocery
industry donations to people affected by the devastating floods in
south-east Queensland, Australia, while CHEP New Zealand provided
pallets and intermediate bulk containers to the Christchurch
earthquake relief efforts. In Latin America, CHEP donates used
office furniture and equipment, computers and printers to various
charities.
Recall’s Secure Destruction Services sites hold “shredder days”,
where members of the local community can deposit sensitive
documents, such as bank statements, medical records or other
personal documents, knowing Recall will securely destroy them.
During the Year, shredding events were held in operations in the
United States and Australia.
Brambles recently implemented an employee volunteering policy,
which provides employees with three days of paid volunteer leave
per year during usual contracted hours to provide volunteer services
to community-based not-for-profit, educational, or environmental
organisations. In the Year, the policy was formally rolled out across
the Group and 533 employees volunteered a combined total of
4,618 hours.
To support the volunteering policy, CHEP Australia launched its
“Helping Hand” program in March 2011. Employees that have a
direct or ongoing active interest in an activity or cause that benefits
the broader community have the opportunity to apply for funding.
Each year, CHEP Australia will provide a total of A$50,000 through
the program.
GOVERNANCE
Brambles is conscious that it must have the right risk and
governance foundations and appropriate structures in place to
manage all impacts responsibly. Its sustainability strategy recognises
that sustainability must be embedded into its corporate risk
management framework. Brambles uses corporate governance
practices and processes to oversee its performance, including its
sustainability performance.
The Chief Executive Officer, who is also a member of the Board, has
operational responsibility for sustainability issues. The Board
receives updates on sustainability issues, including information on
operational activities, objectives and external feedback on
Brambles' performance.
Sustainability is overseen by the Sustainability Committee, which is
a management committee. Details of the Sustainability Committee
members and its Charter are available on www.brambles.com.
The Sustainability Committee meets at least three times a year.
Brambles’ Executive Leadership Team (ELT) has oversight of
sustainability policies and is responsible for implementing
sustainability policies across the organisation. Further details on the
Board and ELT are located on pages 24 to 26 and in section 1.1 of
the Corporate Governance Statement on page 27.
Brambles’ Code of Conduct provides an ethical and legal framework
for all employees in the conduct of Brambles' business. The Code of
Conduct defines how Brambles relates to its shareholders,
employees, customers, suppliers and the community. Brambles
implements its Code of Conduct through a variety of training and
induction programs. It is regularly reviewed by the Board and
updated as necessary. Further details on the Code of Conduct are in
section 3.1 of the Corporate Governance Statement on pages 30 to
31. A copy of the Code of Conduct is available on
www.brambles.com.
Senior managers are asked to either sign off on compliance with the
Code of Conduct every six months, or to identify any exceptions.
The sign-offs may be subject to audit testing by Internal Audit.
MERGERS AND ACQUISITIONS
Brambles' mission is to create superior shareholder value through its
people and their enterprising spirit. Brambles will work with the
businesses it acquires to identify and adopt the better practice.
Brambles will see that these practices are shared across the Group
and adopted in a considered and consistent manner.
Brambles has increased its emphasis on innovation and has a number
of areas of strategic focus to pursue opportunities that target
sustainable profitable growth for stakeholders. Details on Brambles’
growth strategy are on page 3.
When assessing potential acquisitions and mergers, Brambles
undertakes a due diligence process that includes the identification
of material risks, including risks related to sustainability.
In the Year, Brambles made a number of small acquisitions
(Unitpool, CAPS and JMI) and one large acquisition (IFCO).
Brambles acquired IFCO on 31 March 2011 and appointed an
integration team of Brambles and IFCO executives to identify
synergies that exist between the businesses and facilitate the
integration process. In the coming months, Brambles and IFCO
executives will review sustainability strategies and targets, systems,
process and the culture of each business.
Brambles Annual Report 2011 page 23
BOARD & EXECUTIVE LEADERSHIP TEAM
BOARD OF DIRECTORS
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 Billabong
International Limited and Coca-Cola Amatil Limited. Previously, he was a non-executive director of AXA Asia
Pacific Holdings Limited and 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 63.
TOM GORMAN CHIEF EXECUTIVE OFFICER
Chairman of the Executive Leadership Team
Joined Brambles as Group President, CHEP Europe, Middle East & 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 & International Relations from Tufts
University and an MBA with distinction from Harvard Business School. Age 51.
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 53.
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 the Chairman of Leighton
Holdings Limited and Spark Infrastructure Group and a non-executive director of the Westfield Group and
John Holland Group Pty 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 Australian Institute of Company Directors. Age 64.
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, Infrastructure New South Wales and The Sydney Institute and an External Board Member of Allens
Arthur Robinson. Carolyn has had over 25 years of experience in the finance sector and worked as an
executive in international finance at Morgan Stanley in London and Melbourne, JP Morgan in New York and
Melbourne and as a finance lawyer at 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 50.
Brambles Annual Report 2011 page 24
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 68.
LUKE MAYHEW NON-EXECUTIVE DIRECTOR (INDEPENDENT)
Chairman of the Remuneration Committee
Joined Brambles as a Non-executive Director in August 2005. Luke is a non-executive director of
InterContinental Hotels Group plc. He was a non-executive director of WH Smith plc until August 2010 and
retired as Chairman of Pets at Home Group Limited in March 2010, 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 business, 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 58.
BRIAN SCHWARTZ AM NON-EXECUTIVE DIRECTOR (INDEPENDENT)
Member of the Audit Committee
Joined Brambles as a Non-executive Director in March 2009. Currently Chairman and non-executive director of
Insurance Australia Group Limited and Deputy Chairman 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. 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 and a Fellow of the Australian Institute of Company Directors. He is a
Member of the Order of Australia. Age 58.
EXECUTIVE LEADERSHIP TEAM
TOM GORMAN CHIEF EXECUTIVE OFFICER
See biography under Board of Directors
GREG HAYES CHIEF FINANCIAL OFFICER
See biography under Board of Directors
JEAN HOLLEY CHIEF INFORMATION OFFICER
Appointed August 2011 and assumes her role in September 2011. Joined Brambles from telecommunications
services company Tellabs Inc, where she was Executive Vice President & Chief Information Officer. Previously,
she held roles including Vice President & Chief Information Officer at building materials group USG
Corporation and senior information technology and information systems roles at environmental services
company Waste Management Inc. Jean is also a member of the board of directors for VASCO Data Security
International, Inc. She has a Master of Science degree in Computer Science & Engineering from the Illinois
Institute of Technology and a Bachelor of Science degree in Computer Science & Electrical Engineering from
the Missouri University of Science & Technology. Age 52.
JASPER JUDD GROUP SENIOR VICE PRESIDENT & HEAD OF INNOVATION
Joined Brambles in 2002. Prior to his appointment as Group Senior Vice President & 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; Group Financial Controller; Interim Senior Vice President & 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 50.
Brambles Annual Report 2011 page 25
BOARD & EXECUTIVE LEADERSHIP TEAM - CONTINUED
PETER MACKIE GROUP PRESIDENT, CHEP ASIA-PACIFIC
Will become Group President, CHEP Americas, effective October 2011, having been Group President, CHEP
Asia-Pacific since May 2010 and Acting Group President, CHEP Europe, Middle East & Africa from November
2009 to April 2010. Previously, Peter held the positions of President, CHEP Europe; Senior Vice President,
Customer Service, CHEP Europe; Vice President, Strategy, CHEP Europe; and Managing Director, CHEP UK &
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 45.
KARL POHLER, CHIEF EXECUTIVE OFFICER, IFCO
Will become Group President, RPCs, effective October 2011, having been CEO, IFCO Systems, which Brambles
acquired in March 2011, since August 2005. Was an executive member and CEO of the board of directors of
IFCO from December 2000. Prior to joining IFCO, he was Chairman of the Board of Management of Computer
2000 AG, and, at the same time, European president of Computer 2000/Tech Data Corp. From 1997 to 1999,
he served as CEO of Sony Deutschland GmbH. From 1993 to 1996, he chaired the Board of Management of
Computer 2000 Deutschland GmbH. From 1980 to 1992, he was active in executive management functions for
Digital Equipment GmbH. Karl started his career in Germany as a licensed banker and undertook his
management education with a major German banking institution. Age 57.
ELTON POTTS GROUP PRESIDENT & 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 47.
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 50.
KEVIN SHUBA GROUP SENIOR VICE PRESIDENT & CUSTOMER DEVELOPMENT OFFICER
Will become Group Senior Vice President, Containers Americas effective October 2011. Served as President,
CHEP USA from November 2006 until his appointment as Group President, CHEP Americas in February 2008.
Appointed Group Senior Vice President & Customer Development Officer in January 2010. Previous roles at
CHEP since 1996 include Senior Vice President, New Business Development and Senior Vice President,
Sales & 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 52.
DOLPH WESTERBOS GROUP PRESIDENT, CHEP EMEA
Will become Group President, CHEP EMEA & Asia-Pacific effective October 2011. Joined Brambles in April
2010 as Group President, CHEP Europe, Middle East & Africa (EMEA). Prior to joining Brambles, held executive
positions at Dell, most recently as Vice President, Solutions & Services, EMEA, including responsibility for
Dell’s services, software and data centre business 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. He has a Masters degree in Management from
the Graduate School of Business at Stanford University. Age 47.
Brambles Annual Report 2011 page 26
CORPORATE GOVERNANCE STATEMENT
INTRODUCTION
Brambles is a global provider of pallet and container pooling and
supply chain services and information management services, and
operates in 54 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.
This Corporate Governance Statement outlines the key components
of Brambles’ governance framework in place during the year ended
30 June 2011 (Year), by reference to the Australian Securities
Exchange Corporate Governance Council Corporate Governance
Principles & Recommendations, Second Edition (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 & OVERSIGHT
1.1 ROLE OF THE BOARD & 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 Brambles’ Executive Leadership Team (ELT).
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.
The structure of the Board ensures that no individual or group
of individuals dominates the Board’s decision-making process.
The ELT, a management committee, assists in implementing
Brambles’ strategic direction, and ensuring its resources are well
managed. The ELT 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, development of strategy,
risk management, communications and post-investment project
reviews;
- leading initiatives which may from time to time vary, but include
Zero Harm and innovation; and
- leading the implementation of change processes.
Biographical details for the members of the ELT are shown on pages
25 and 26.
During the Year, Brambles established a US Advisory Board and an
Asian Advisory Board. Their functions are to assist management to
develop Brambles’ strategic direction in the USA and Asia
respectively, and to strengthen Brambles’ stakeholder relationships
in those regions. The Chief Executive Officer is a member of both
advisory boards. The remaining members comprise external persons
with relevant business and industry experience in, and senior
executives of Brambles with operating or functional responsibility
for, the applicable region. Meetings between the external members
of the advisory boards and Directors will be planned from time to
time.
1.1.2. Responsibilities of the Board
The Board is responsible for approving 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 approval
includes, among other matters:
- the Group’s overall strategic direction and strategic plans for the
major business units;
- acquisitions or disposals of assets which exceed the authority
limits delegated to the Chief Executive Officer and Chief Financial
Officer;
- budgets, financial objectives and policies, and significant capital
expenditure;
- Brambles’ financial statements and published reports;
- the Group’s systems of internal control and risk management
processes, and the annual review of their effectiveness;
- changes to the Group’s capital structure (other than changes
resulting from established employee share plans); and
- the appointment of key senior executives.
The schedule was amended during the Year to add responsibility for
Brambles’ Diversity Policy (see sections 3.2 and 3.3) and Board skills
matrix (see section 2.4.5.).
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.
Details of the Board committees are set out in sections 2.4, 4.1 and
8.1 and the committee charters can be found at
www.brambles.com. The Board is also supported by the ELT (see
section 1.1.1.).
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, amongst
other things, their term of office, rights, responsibilities and
entitlements on termination, and job descriptions setting out their
duties.
Brambles Annual Report 2011 page 27 CORPORATE GOVERNANCE STATEMENT - CONTINUED
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
ELT) all participate in this process, which is overseen by the
Remuneration Committee.
Performance evaluations for senior executives, including Executive
Directors and the ELT, 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 eight
members, with two Executive Directors (the Chief Executive Officer
and the Chief Financial Officer) and six Non-executive Directors.
The biographies for each of the current Directors, shown on pages
24 and 25, 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 years of their appointment and 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 2011 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 593,185 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
A G Froggatt
T J Gorman
G J Hayes
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
B M Schwartz AM
Year
appointed 1
Year last
elected
Executive or
Non-executive
Independent
Seeking election/
Retiring and seeking
re-election in 2011
Next due for
re-election
2006
2009
2009
2004
2006
2005 3
2005
2009
2008
2010
2010
2009
2009
2009
2010
2009
Non-executive
Executive
Executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Yes
No
No
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
No
No
2011
N/A 2
2013
2012
2012
2012
2013
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 Following an amendment to Brambles’ constitution which was approved by shareholders at the 2010 AGM, it is no longer necessary for the managing director of
Brambles to stand for re-election. Tom Gorman holds the role of managing director, but is referred to by the title of Chief Executive Officer.
3 Graham Kraehe also served as a Director from 2000 to 2004, then re-joined the Board in 2005.
Brambles Annual Report 2011 page 28
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 & 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.
During the Year, the Committee’s Charter was amended to
incorporate responsibility for periodically assessing and, if
necessary, recommending changes to the Board skills matrix (see
section 2.4.5.) and to incorporate that matrix into the Board
selection process contained in the Charter (see section 2.4.4.).
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 57.
2.4.4. Responsibilities
The Nominations Committee discharges its responsibilities by
meeting regularly throughout the year and, among other matters:
- assessing periodically the Board skills matrix to determine that it
includes the skills required to discharge competently the Board’s
duties, having regard to the strategic direction of the Group, and
making recommendations to the Board on any changes which
should be made to that matrix;
- having regard to the Board skills matrix, 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 mix
of skills, experience, expertise and diversity having regard to the
Board skills matrix) 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, capabilities and skills required
for any Board appointment (Role Specification), identifying
suitable candidates to fill Board vacancies, and nominating
candidates for the approval of the Board;
- in identifying suitable candidates for a Board appointment, if
necessary, causing:
> a search to be undertaken by an appropriately qualified
independent third party acting on a brief prepared by the
Nominations Committee, which includes the Role Specification;
> the search to be international, extending to those countries in
which candidates with the necessary skills would ordinarily
be expected to be found; and
> the pool of candidates to include qualified persons who would
fill an existing diversity gap having regard to the Board skills
matrix, Brambles’ Diversity Policy (see section 3.2) and the
diversity objectives adopted by the Board from time to time;
- 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 whether succession plans are in place
to maintain an appropriate mix of skills, experience, expertise
and diversity on the Board, and 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. As set out
in section 2.4.4., the Nominations Committee assists the Board in
the Board selection process, which involves the use of a Board skills
matrix.
During the Year, the Nominations Committee adopted a Board skills
matrix. The matrix incorporates the following elements: function
(finance, accounting, operations); international management
(Americas, Europe, Asia); industry (logistics, retail, fast moving
consumer goods); diversity (male/female, international residency,
Brambles Annual Report 2011 page 29
CORPORATE GOVERNANCE STATEMENT - CONTINUED
regional/cultural background); and customer perspectives. In
adopting the matrix, the Nominations Committee noted that it was
an iterative document and would be reviewed and revised from time
to time to meet Brambles’ ongoing needs.
Having regard to the Board skills matrix and the recent retirements
of David Gosnell and John Mullen due to their respective executive
roles, the Board recognised the need for a new non-executive
director with substantial international business experience
(particularly in Europe and the Americas) and/or knowledge of the
transport and logistics industries. The Board commenced a search,
using external consultants, to identify potential candidates meeting
these criteria and, in so doing, requested that they have regard to
Brambles’ diversity objectives (see section 3.3). The Board will
continue to seek to appoint new members in future years having
regard to the Board skills matrix 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 57.
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 & 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 external evaluation of
its performance as a whole and the performance of each of its
committees.
The external review was conducted by the Board Advisory Services
division of an independent firm of accountants. It involved the
completion of a detailed questionnaire by each of the Directors and
selected Brambles executives on matters relevant to the Board and
Committees’ performance, followed by in-depth interviews
conducted by the firm with each Director and executive.
The outcome of the questionnaire and interviews were reported to
the Board and each Committee. These were reviewed and discussed
by the Board and Committees, with input from the external
accountants, and key issues arising from the evaluations were
identified for further action.
An internal evaluation of the performance of Tony Froggatt, the
only Non-executive Director who is standing for re-election at the
2011 AGM, was also conducted. The Chairman reviewed the results
of Tony Froggatt’s performance evaluation with him. The Board also
reviewed the results of that evaluation, in his absence, and
unanimously resolved to recommend his re-election.
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, significant accounting
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 56.
PRINCIPLE 3: PROMOTE ETHICAL & 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’ Code of Conduct includes the following schedules:
- Corporate Social Responsibility Policy;
- Speaking Up Policy;
- Continuous Disclosure & Communications Policy;
- Group Guidelines for Serious Incident Reporting;
- Environmental Policy;
- Competition Compliance Policy;
- Health & Safety Policy;
- Diversity 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
available on www.brambles.com.
During the Year, the Continuous Disclosure & Communications Policy
and the Securities Trading Policy were reviewed and updated and
Brambles Annual Report 2011 page 30
the Diversity Policy was added to the Code of Conduct. Further
details of the Continuous Disclosure & Communications Policy are
set out in sections 5.1 and 6.1. The updated Securities Trading
Policy was released to the market, in accordance with ASX Listing
Rule 12.9. Further information about the Diversity Policy is set out
in section 3.2.
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 16 languages. This
means that the majority of Brambles’ employees can read the Code
in their first language. It can also 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 & Communications Policy.
3.2 ESTABLISH A DIVERSITY POLICY
During the Year, the Board adopted a Diversity Policy. (Previously,
many aspects of the Diversity Policy were covered under the
Group’s employment and equal opportunity policies.) When
considering the scope of the policy, the Board believed that it
should deal with diversity across a range of issues and not be solely
limited to gender.
Brambles’ vision statement for diversity, set out in the policy, is:
Brambles is committed to creating and maintaining a culture
which delivers outstanding performance and results.
Diversity is essential to Brambles’ long term success. Brambles
values and fosters diversity because it allows:
- customers’ needs, both today and in the future, to be
recognised and addressed;
- all employees to feel valued and able to perform to their best;
and
- Brambles to have access to the widest possible talent pool.
The Diversity Policy provides, amongst other things, that:
- Brambles is committed to selecting, recruiting, developing and
supporting people solely on the basis of their professional
capability and qualifications, irrespective of gender, ethnicity,
nationality, class, colour, age, sexual identity, disability, religion,
marital status or political opinion;
- Brambles selects, retains and develops the best people for the job
on the basis of merit and job related competencies – without
discrimination;
- where appropriate, Brambles will engage external agencies to
assist it in the identification, selection and assessment of
candidates;
- Brambles will continue to develop talent management programs
such as:
> development programs for senior executives;
> development programs for next generation leaders; and
> mentoring programs; and
- on an annual basis, the Board will review and report on the:
> relative proportion of women and men in the workforce at all
levels;
> statistics and trends in the age, nationality and professional
backgrounds of Brambles’ executive population;
> measurable objectives for achieving gender and nationality
diversity; and
> progress towards achieving those objectives.
3.3 GENDER DIVERSITY OBJECTIVES
During the Year, the schedule of matters reserved to the Board was
amended to add the following Board responsibilities:
- determining measurable objectives for achieving gender diversity
and annually assessing both the objectives and the progress
towards achieving them.
- annually review and report on the relative proportion of women
and men in the workforce at all levels of the Group.
Brambles had previously committed to establishing diversity targets
during 2011 in its 2010 Sustainability Report. In considering the
measurable objectives for achieving diversity, the Company
considered a number of areas that it believed were important to
both demonstrate and achieve a diverse workforce. These included:
- nationality – Brambles believes that it is essential that its
employees represent the communities in which they operate. The
Company already has a high representation of different
nationalities in its employee population. The general managers
and executive teams in each of the countries in which Brambles
operates are made up almost entirely of people of that
nationality. Brambles monitors this through its bi-annual talent
management process with a view to continuing the process and
expanding the access of differing nationalities to its global
operations.
- professional background - Brambles also believes that its
employees should be able to relate to the Company’s customers.
It therefore recruits extensively from the sectors in which it
operates, to ensure that the Company has the right blend of skills
and experience. This aspect of diversity is also monitored through
the bi-annual talent management process.
- gender – Brambles believes that its executive population should
reflect the overall balance of employees in its organisation. This
is the best measure for Brambles, as it has a large proportion of
employment activities in heavy manual duties, and therefore an
overall workforce that is predominantly male.
As at 30 June 2011, Brambles’ overall employee population was 73%
male and 27% female. 12.5% of its Board and approximately 26% of
its management (which is defined as manager, director, vice
president and senior vice president grades) are women. In
calculating these percentages, Brambles included each permanent
employee on the payroll, but excluded casual employees and
contractors.
Brambles has adopted a measurable objective for women to
represent 30% of its Board and across its Executive Leadership Team
and management positions by 30 June 2015.
3.4 GENDER DIVERSITY REPORTING
Each year, Brambles will publish the composition of its executive
population by grade against this target, showing progress year on
year.
Brambles Annual Report 2011 page 31
CORPORATE GOVERNANCE STATEMENT - CONTINUED
The position at 30 June 2011 is as follows:
2015
Objective
% Females at
30 June 2011
% Females at
30 June 2010
Board
Executive
Leadership Team
Senior Vice
President
Vice President
Director
Manager
30%
30%
30%
30%
30%
30%
12.5%
12.5%
0.0%1
0.0%
15.2%
18.2%
17.7%
21.3%
27.8%
11.8%
21.5%
27.1%
1 On 5 August 2011, Brambles announced the appointment of Jean Holley as
its new Chief Information Officer, bringing the percentage of females on the
Executive Leadership Team to 11%.
Further information on diversity is included in the Diversity &
Inclusion section of the Sustainability Review, on pages 21 and 22.
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;
- 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.
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:
- 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 the Chairman of
Leighton Holdings Limited and Spark Infrastructure Group and a
non-executive director of John Holland Group Pty Limited and the
Westfield 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 Australian
Institute of Company Directors.
- Carolyn Kay is a director of CBA, Infrastructure New South Wales
and an External Board Member of Allens Arthur Robinson. She has
had over 25 years of experience in the finance sector and worked
as an executive in international finance at Morgan Stanley in
London and Melbourne, JP Morgan in New York and Melbourne and
as a finance lawyer at 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 Chairman and a non-executive director of
Insurance Australia Group Limited and Deputy Chairman 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 and a Fellow of the Australian
Institute of Company Directors.
Stephen Johns, Carolyn Kay and Brian Schwartz were members of
the Audit Committee throughout the Year.
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
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.
4.3.2. Responsibilities
The Audit Committee discharges its responsibilities by meeting
regularly throughout the year and, among other matters:
- reviewing, and challenging where necessary, the actions and
judgment of management in relation to 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
Brambles Annual Report 2011 page 32
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 57. Audit Committee
papers are provided to all Directors and minutes of meetings are
included in the papers for subsequent Board meetings. There is also
an open invitation for all Directors to attend Audit Committee
meetings.
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 partners
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 & 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 grow, it must 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 & Communications
Policy to:
- reinforce Brambles’ commitment to the continuous disclosure
obligations imposed by law and to describe the processes
Brambles implements 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.
To achieve the above objectives and satisfy regulatory
requirements, the Board provides information to shareholders and
other market participants in several ways:
- Brambles releases significant announcements directly via the ASX
and immediately places copies 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. Brambles
posts all presentation materials on www.brambles.com; and
- www.brambles.com contains further information about Brambles
and its activities, including copies of recent interim and annual
reports and recordings of recent presentations to analysts.
During the Year, Brambles reviewed and updated the Continuous
Disclosure & Communications Policy. The Continuous Disclosure &
Communications Policy takes into account the matters listed in Box
5.1 of the CGPR. A copy can be found at www.brambles.com.
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. Brambles makes presentations of the full and half
year results to the investment community immediately after the
public release of those results. Brambles webcasts these
presentations live and posts copies of the associated presentation
materials on www.brambles.com.
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 page 46 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 regularly meet
investors and other market participants 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 provides information on
shareholder activity and trading to the Board, along with
shareholder feedback and copies of analysts’ reports.
6.1 ESTABLISH A COMMUNICATIONS POLICY
As disclosed in section 5.1, the Board has adopted a Continuous
Disclosure & 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.
Brambles Annual Report 2011 page 33
CORPORATE GOVERNANCE STATEMENT - CONTINUED
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
www.brambles.com.
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 encouraged to provide an email address to
Brambles’ share registry so that they can be sent an electronic
notification when a communication is available on
www.brambles.com, rather than a hard copy. 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. Shareholders
who do not specify a preferred method of communication are
posted 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.
A newsletter on the half year results and the acquisition of IFCO was
electronically distributed to shareholders who had provided an
email address in April 2011, and distributed in hard copy to other
shareholders with their interim dividend statements.
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
As noted in sections 6.1.1. and 6.1.3., Brambles communicates with
shareholders via electronic methods, including via
www.brambles.com. Brambles has also established a new
shareholder results micro-site, which contains the financial results
for the Year as well as more detailed information about Brambles’
business operations. The micro-site can be accessed directly at
www.brambles.com/2011review.
6.1.5. Briefings
Brambles follows a calendar of regular disclosure of its financial and
operational results. The calendar, which is posted on the website,
includes advance notice of the dates for the release of half year and
full year results, other financial information, shareholder meetings,
major analyst and investor briefings and Brambles’ involvement in
major investment conferences. Where possible, Brambles webcasts
these significant briefings.
When Brambles conducts analyst and investor briefings, a record of
the briefings is maintained for internal use. This record includes a
summary of the issues discussed, a record of those present (names
or numbers where appropriate) and the time and place of the
meeting.
PRINCIPLE 7: RECOGNISE & MANAGE RISK
7.1 ESTABLISH POLICIES FOR THE OVERSIGHT &
MANAGEMENT OF MATERIAL BUSINESS RISKS
7.1.1. Risk management policies
The Board is responsible for approving 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 Chief Executive Officer, the
Audit Committee (in relation to financial reporting risks) and the
Group’s internal audit function. To strengthen the relationship
between risk management and strategic and operational planning,
the Chief Executive Officer, through the ELT (see section 1.1.1.),
has principal responsibility for risk management. The Audit
Committee’s responsibilities are described in section 4.3.2. of this
Statement.
Following a comprehensive review of the risk management and
internal control system, a new risk management framework was
adopted, with effect from 1 July 2010. The objectives of the new
risk management framework are as follows:
- 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 audit 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.
Brambles Headquarters and each of the business units (other than
IFCO) have a risk and control committee (RCC) which reports to the
ELT. As part of the IFCO integration plan, IFCO will establish an RCC
during FY12. The Brambles Headquarters RCC is chaired by the
Chief Financial Officer and its members include key functional
heads. Each RCC conducts an in-depth review of the relevant
business unit’s risk profile on a regular basis. The relevant Group
President reviews the risk profile and accompanying mitigation plans
before they are consolidated into the Group-level risk profile. The
risk profiles and mitigation plans for Brambles Headquarters, the
business units and the Group as a whole are evaluated by the ELT,
with support from the Group Vice President, Risk. The ELT, through
the Chief Executive Officer, prepares a risk report to the Board
twice each year, which includes a review of the Group’s risk profile,
mitigation factors and emerging risks (see section 7.2). Legal
obligations and the reasonable expectations of stakeholders, such as
shareholders, customers, employees, subcontractors, suppliers and
the community in general are taken into account when preparing
and updating mitigation plans.
Brambles Annual Report 2011 page 34
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:
- identify, assess and manage risks in an effective and efficient
manner;
- enable decisions to be based on a comprehensive view of the
reward-to-risk balance;
- provide greater certainty of the delivery of objectives; and
- satisfy the Group’s corporate governance requirements.
These systems are designed to limit the risk of failure to achieve
business objectives. It must be recognised, however, that internal
control and risk management systems can provide only reasonable,
and not absolute, assurance against the risk of material loss.
Key elements of Brambles’ internal control systems include:
- a Code of Conduct that sets out an ethical and legal framework
for all employees in the conduct of Brambles’ business;
- financial systems to provide timely, relevant and reliable
information to management and to the Board;
- appropriate formalised delegations and limits of authority
consistent with Brambles’ objectives;
- 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;
- RCCs for each of Brambles Headquarters and the business units;
and
- other sources of independent assurance, such as environmental
audits, occupational health and safety audits and reports from
the external auditors.
The biannual management declarations are collected through a
web-based system, to enable the questionnaires to be completed
more easily and to facilitate rigorous tracking across periods.
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 ELT,
Brambles’ risk management team, the business unit Group
Presidents, RCCs 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
ELT and Brambles’ risk management team, risks and controls were
reassessed by the RCCs on a regular 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. In addition, a report on
the effectiveness of the management of business risks was provided
to the ELT and the Board. The effectiveness of specific business risk
controls and risk improvement programs was also periodically
reviewed by internal audit as part of the FY11 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;
- receiving twice-yearly reports from the ELT 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.
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. Risk Management Committee
The roles of the Board, ELT and the RCCs in Brambles’ risk
management framework are described in section 7.1.1.
7.3 CHIEF EXECUTIVE OFFICER & 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 received these
assurances in advance of approving both the annual and interim
financial statements for the Year.
PRINCIPLE 8: REMUNERATE FAIRLY & 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.
Brambles Annual Report 2011 page 35
CORPORATE GOVERNANCE STATEMENT - CONTINUED
8.2 STRUCTURE OF THE REMUNERATION COMMITTEE
The Remuneration Committee is comprised entirely of
Non-executive Directors, all of whom are independent. Luke
Mayhew (Committee Chairman), Tony Froggatt and Graham Kraehe
were members of the Remuneration Committee throughout the
Year; John Mullen, a former independent Non-executive Director of
Brambles, was a member of the Remuneration Committee during
the Year until his resignation on 7 February 2011. 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 57.
The Remuneration Committee may seek input from certain members
of executive management on remuneration, but no member of
executive management is directly involved in deciding their own
remuneration.
8.3 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 40, 41, 42 and 50.
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. During the Year,
the Charter was amended to provide that the Committee’s
responsibilities would include reviewing and making
recommendations to the Board on remuneration by gender. A copy
of the Remuneration Committee’s Charter, which is reviewed
annually, can be found at www.brambles.com.
8.1.3. 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,
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, reviewing and making
recommendations to the Board on remuneration by gender 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;
- 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; and
- review and make recommendations to the Board on remuneration
by gender.
8.1.4. Remuneration policy
Details of Brambles’ remuneration policy can be found in the
Directors’ Report – Remuneration Report on pages 40, 41, 42 and 50.
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,
following consultation with the Chairman of Brambles, 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 Remuneration Committee and the Board
monitored the progress of legislative changes to the Act concerning
director and executive remuneration, and, where not already in
place, made preparations to comply with the new rules on voting,
disclosure, engagement of remuneration consultants and hedging of
remuneration which take effect in FY12.
Brambles Annual Report 2011 page 36
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 & OVERSIGHT
Recommendation 1.1 Role of the board and management
Corporate Governance Statement: 1.1
Recommendation 1.2 Performance evaluation of senior executives
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”.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
Recommendation 2.1
Independent directors
Recommendation 2.2
Independent chairman
Corporate Governance Statement: 2.1
Corporate Governance Statement: 2.2
Recommendation 2.3 Roles of chairman and chief executive officer
Corporate Governance Statement: 2.3
Recommendation 2.4 Nomination committee
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
Corporate Governance Statement:
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
2 and Board & Executive Leadership
Team, pages 24 to 25.
- the names of the directors considered by the board to constitute independent
2.1.2.
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
2.1.2.
- a statement as to whether there is a procedure agreed by the board for directors
2.1.1.
to take independent professional advice at the expense of the company
- a statement as to the mix of skills and diversity for which the board of directors is
2.4.5.
looking to achieve in membership of the board
- the period of office held by each director in office at the date of the annual report 2.1.2.
- 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 57.
- whether a performance evaluation for the board, its committees and directors
2.5
has taken place in the reporting period and whether it was in accordance with the
process disclosed
- an explanation of any departures from Recommendations 2.1, 2.2, 2.3, 2.4, 2.5
Not applicable
or 2.6
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
www.brambles.com
See “Corporate Governance”, “Board
of Directors”, “Board Succession
Planning & Renewal”.
Brambles Annual Report 2011 page 37
CORPORATE GOVERNANCE STATEMENT - CONTINUED
Principle/Recommendation
- 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
PRINCIPLE 3: PROMOTE ETHICAL & RESPONSIBLE DECISION-MAKING
Recommendation 3.1 Establish a code of conduct
Recommendation 3.2 Establish a diversity policy
Recommendation 3.3 Gender diversity objectives
Recommendation 3.4 Gender diversity reporting
Reference
www.brambles.com
See “Corporate Governance”,
“Committees of the Board”,
“Nominations Committee”.
Corporate Governance Statement: 3.1
Corporate Governance Statement: 3.2
Corporate Governance Statement: 3.3
Corporate Governance Statement: 3.4
Recommendation 3.5 An explanation of any departures from Recommendations 3.1, 3.2. 3.3, 3.4 or 3.5
should be included in the corporate governance statement
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 diversity policy or a summary of its main provisions
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 Diversity 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
Corporate Governance Statement:
4.2.3 and Directors’ Report – Other
Information, page 57.
- the number of meetings of the audit committee
- 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:
- information on procedures for the selection and appointment of the external
auditor, and for the rotation of external audit engagement partners
- the audit committee charter
Corporate Governance Statement: 4.4
and www.brambles.com
See “Corporate Governance”,
“Committees of the Board”, “Audit
Committee”.
PRINCIPLE 5: MAKE TIMELY & BALANCED DISCLOSURE
Recommendation 5.1 Establish a continuous disclosure policy
Corporate Governance Statement: 5.1
Recommendation 5.2 An explanation of any departures from Recommendations 5.1 or 5.2 should be
Not applicable
included in the corporate governance statement
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 & 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 An explanation of any departures from Recommendations 6.1 or 6.2 should be
Not applicable
included in the corporate governance statement
Brambles Annual Report 2011 page 38
Principle/Recommendation
The company should describe how it will communicate with its shareholders publicly,
ideally by posting the information on the company’s website in a clearly marked
corporate governance section
Reference
www.brambles.com
See “Corporate Governance”,
“Other”, “Brambles Code of Conduct”
(which incorporates the Continuous
Disclosure & Communications Policy as
Schedule 3).
PRINCIPLE 7: RECOGNISE & 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
Corporate Governance Statement: 7.2
Recommendation 7.3 Chief Executive Officer and Chief Financial Officer declaration
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
Corporate Governance Statement: 7.2
Recommendation 7.2
- whether the board has received assurance from the chief executive officer (or
Corporate Governance Statement: 7.3
equivalent) and the chief financial officer (or equivalent) under Recommendation
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 & RESPONSIBLY
Recommendation 8.1 Establish a remuneration committee
Recommendation 8.2
Structure of the remuneration committee
Recommendation 8.3 Comparison of remuneration structures
Recommendation 8.4 Companies should provide the following information in the corporate governance
statement or a clear cross reference to the location of the material:
www.brambles.com
See “Corporate Governance”,
“Risk Management”.
Corporate Governance Statement: 8.1
Corporate Governance Statement: 8.2
Corporate Governance Statements: 8.3
and Directors’ Report – Remuneration
Report pages 40, 41, 42 and 50.
- 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: 8.2
and Directors’ Report – Other
Information, page 57.
- the existence and terms of any schemes for retirement benefits, other than
Not applicable
superannuation, for non-executive directors
- an explanation of any departures from Recommendations 8.1, 8.2, 8.3 or 8.4
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 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 9).
Brambles Annual Report 2011 page 39
DIRECTORS’ REPORT – REMUNERATION REPORT
Brambles has maintained a prudent approach to remuneration
during 2010/11, reflecting the continued focus on both cost
control and appropriate reward for good performance:
- salary increases across the company, including the Executive
Leadership Team, were relatively modest at an overall 3%;
- short term bonuses were around target level; and
- the element of the 2008 long term incentive award which is
based on Total Shareholder Return will partially vest in 2011.
During the year, Karl Pohler (Chief Executive Officer, IFCO)
joined the Brambles Executive Leadership Team as a result of
the IFCO acquisition. One senior executive, Jim Infinger, Chief
Information Officer, left the business. His departure was
managed under the provisions of his employment contract and
within the existing executive termination legislation.
Following last year’s restructuring into local currency, a market
rate increase of 4% was applied to Non-executive Directors’
fees, including the Chairman’s fees.
During the year we revisited Brambles’ remuneration strategy to
ensure that there continues to be a close alignment between
executive reward and the delivery of key business objectives,
and that effective incentives and rewards were in place for
executives for the delivery of strong sustainable returns to
shareholders.
The review confirmed that our current remuneration strategy is
strongly aligned with our business strategy. As a result we are not
putting forward any fundamental changes to our approach to
remuneration. However, Brambles will be seeking shareholder
approval for some changes to our executive and global employee
share plan rules. The proposed changes to our executive share plan
would bring it into line with market practice, with the addition of
the introduction of the discretion to “clawback” unvested shares in
exceptional circumstances. The proposed change to our global
employee share plan rules is designed to provide Brambles with
more flexibility to support increased employee share ownership
across our business. Details of the planned rule changes are
outlined in section 3.5 of this Report.
Finally we have continued to simplify the Remuneration Report
while ensuring that it still informs shareholders and includes all
formally required disclosures. We have introduced a table detailing
actual remuneration received by our Executive Leadership Team
during the financial year. This is to provide greater transparency
and understanding to shareholders.
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
7. Appendices
1. BACKGROUND
This Remuneration Report includes information on Brambles’
Executive Directors, Non-executive Directors, and other Group
executives whose remuneration 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 2011
(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.
Details of the Committee’s Charter, Advisers and the rules of
Brambles’ executive and employee share plans can be found on
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. The benchmarks used for setting fixed remuneration
in relation to the year ending 30 June 2011 were major listed
companies in the US, Australia and Europe, with market
capitalisation and revenue levels that were between 50% and 200%
of Brambles’ 12 month average market capitalisation and revenue as
of June 2010.
The structure of Brambles’ current incentive arrangements was
approved by shareholders at the 2008 Annual General Meeting
(AGM). There was a minor amendment to the Brambles Limited 2006
Performance Share Plan (2006 Share Plan) rules in 2009. This change
means that executives who leave the Company under certain
circumstances, such as retirement or redundancy, do not receive
accelerated vesting of their short term incentive (STI) share awards
and instead, need to wait until the completion of the performance
period to receive any awards.
Brambles Annual Report 2011 page 40
Remuneration is divided into those components which are not
directly linked to 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, has been 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.
Benefits may include pension contributions, motor vehicles, club
memberships 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.
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 will 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.
At Risk remuneration is provided to Brambles’ executives through
annual 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,
the key features of which are illustrated in the following diagram.
Definitions of the Brambles Value Added (BVA), Total Shareholder
Return (TSR) and Compound Annual Growth Rate (CAGR)
measurements and the methods by which they are calculated are
included in the Glossary on pages 132 to 133.
The manner in which the awards operate is summarised below.
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.
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 term of senior
executives' employment contracts that they are required to comply
with all Brambles policies (including the Securities Trading Policy).
Management declarations are obtained twice yearly and include a
statement that all policies have been complied with.
More detailed information on Brambles’ current incentive
arrangements is set out in section 4, and in the relevant plan rules,
which can be found on www.brambles.com.
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 STIs and LTIs. It represents approximately 65-70% of the
executive’s remuneration package (based on target performance for
STIs and using the fair market value for share awards).
The chart on the following page illustrates the mix of Fixed, and
potential STI and LTI remuneration for Disclosable Executives based
on target performance.
Brambles Annual Report 2011 page 41
DIRECTORS’ REPORT – REMUNERATION REPORT - CONTINUED
I
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1
3.4 ALL EMPLOYEE SHARE PLAN
At the 2008 AGM, shareholders gave approval to an all employee
share plan (MyShare), which was implemented in January 2009.
Since the initial launch, more than 25% 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 2011 was 1,719,780, excluding shares received under the
dividend share plan (Dividend Shares). At the end of March 2011,
Brambles issued 475,318 shares to employees, being a matching
number of shares (Matching Shares) to those purchased and held by
employees for the two year period.
In 2012 MyShare will be offered for the first time to employees in
Argentina, Austria, Chile, Finland, Greece, Hungary, Saudi Arabia,
Slovakia, United Arab Emirates and Zimbabwe.
Members of the ELT are eligible to participate in MyShare. The ELT’s
Acquired Shares, Dividend Shares and Matching Shares are included
in section 5.5. Matching share rights allocated, but not yet vested as
Matching Shares (Matching Awards), are shown in section 5.6.
3.5 CHANGES TO EXECUTIVE AND EMPLOYEE SHARE PLAN
RULES
Although the remuneration strategy review undertaken during the
Year indicated that Brambles’ executive and employee share plans
overall were fit for purpose, a few areas of improvement were
identified which will require minor amendments to the 2006 Share
Plan and MyShare rules. Specifically, Brambles will be seeking
shareholder approval to make the following four changes.
1. Under the current 2006 Share Plan rules, 50% of ELT members’
STI awards are deferred into STI share awards that vest after
three years. The level of deferral will remain at 50%. However,
it is proposed that the vesting period that commences after the
STI share award is granted will be reduced from three years to
two years, for STI share awards allocated in August 2011
onwards. The key reasons for these changes are as follows:
a. In Australia the most common practice is for an STI share
award vesting period of two years or less after the STI share
award is granted;
b. It will balance the longer term vesting practice of Europe
with the USA practice of immediate or short term vesting;
and
c. The current three year STI share award vesting period is
concurrent with Brambles’ LTI share award vesting period.
Having a staggered vesting between the two types of share
award provides for better executive motivation.
2. It is proposed that the “good leaver” provisions in the 2006
Share Plan rules be brought into line with market practice, so
that all employees can be treated as “good leavers”, other than
employees who voluntarily resign and employees who are
terminated for poor performance or misconduct. This will clarify
the rules. All STI and LTI share awards will continue to be
forfeited in the case of resignations or terminations for cause.
The rules relating to the allocation of Matching Shares under
MyShare will be similarly updated.
3. Brambles proposes that the Board be given discretion under the
rules of the 2006 Share Plan to “clawback” unvested share
awards, in the event of serious misconduct by management
which undermines materially the Group’s performance, financial
soundness and reputation. This could include misrepresentations
or material misstatements due to errors, omissions or
negligence.
4. In order to encourage higher levels of participation from
Brambles’ general employee population, the MyShare rules will
be amended to provide flexibility to occasionally increase the
ratio of Matching Shares to Acquired Shares from 1:1 to a
maximum of 2:1, for the first A$1,000 worth of Acquired Shares.
The Board believes these amendments would provide valuable
enhancements to the remuneration policy.
1 Karl Pohler’s remuneration mix and bonus calculations reflect his existing incentive arrangements from IFCO.
Brambles Annual Report 2011 page 42
4. PERFORMANCE OF BRAMBLES
Performance against financial KPIs in 2011
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;
KPIs
Brambles BVA
Brambles PAT
Level of performance achieved
during the Year2
Between Target and Maximum
Between Target and Maximum
- by selecting appropriate Key Performance Indicators (KPIs) for
annual STI cash awards and performance conditions for LTI share
awards; and
- by requiring those KPIs or performance 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. The tables in section 4.2.1 show the level
of vesting of awards triggered by performance over those periods.
4.1 STI KEY PERFORMANCE INDICATORS
As outlined in section 3.2, executives have the opportunity to
receive annual STI cash and share awards based on performance
against KPIs. An STI award currently vests three years after the
award is made. The ELT’s KPIs are comprised of 60-70% financial
KPIs and 30-40% of personal non-financial KPIs.
Financial KPIs
The STI financial KPIs chosen for the Year were BVA and Cash flow
from operations (Cash Flow), plus (for the Chief Executive Officer
and the Chief Financial Officer) Profit After Tax (PAT). For CHEP and
Recall Group Presidents, KPIs included Brambles BVA and their
respective business unit (CHEP or Recall) BVA and Cash Flow.
A focus on BVA helps ensure the efficient use of capital within
Brambles. PAT captures interest and tax charges which are not
directly incorporated in BVA. Cash Flow is used as a measure to
ensure a strong focus on the generation of cash for the Group.
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).
Karl Pohler, Chief Executive Officer, IFCO, had his incentive based
on his existing IFCO STI plan KPIs, being EBITDA and Free cash flow.
Definitions of the Cash flow from operations, EBITDA and Free cash
flow measurements and the methods by which they are calculated
are included in the Glossary on pages 132 to 133.
The actual levels of performance achieved for the Year against the
financial KPIs are summarised in the following table.
Brambles Cash Flow
Achieved Target
CHEP Americas BVA
Between Threshold and Target
CHEP Americas Cash Flow
Failed Target
CHEP EMEA BVA
Between Threshold and Target
CHEP EMEA Cash Flow
Achieved 50% of Target3
CHEP Asia-Pacific BVA
Between Target and Maximum
CHEP Asia-Pacific Cash Flow
Achieved Target
Recall BVA
Between Threshold and Target
Recall Cash Flow
Failed Target
IFCO EBITDA
IFCO Cash Flow
Non-financial KPIs
Achieved Target
Achieved Target
Non-financial KPIs include personal strategic objectives in areas
such as safety, business strategy, growth, customer satisfaction and
retention, and people and talent management.
- Brambles safety is measured by Brambles Injury Frequency Rate
(BIFR). A definition of BIFR is included in the Glossary on page 132
and reporting of the Group’s BIFR performance is included in the
Sustainability Review on page 21. Brambles regards the safety of
its people as a major priority and the ELT has Group-wide
oversight of the Zero Harm environment. This means that all ELT
members will lose any STI entitlement under their safety
objective if a fatality occurs anywhere in the Brambles Group.
- Business strategy and growth includes the implementation of
clearly specified strategic initiatives allocated to individual ELT
members, for example further new business acquisitions.
- Customer satisfaction and retention is mainly measured using the
Net Promoter Score (NPS) system. An explanation of the Group’s
use of NPS is included in the Sustainability Review on page 16.
- People and talent management metrics relate to the development
of future leaders in Brambles as well as succession planning for
critical roles.
Details of the STI cash award payable to Disclosable Executives and
the STI cash award forfeited, as a percentage of the maximum
potential STI cash award in respect to performance during the Year,
are shown for each ELT member in the following table.
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 11.
3 Achieved mid year at target but failed to meet full year target.
Brambles Annual Report 2011 page 43
DIRECTORS’ REPORT – REMUNERATION REPORT - CONTINUED
Actual STI cash payable and forfeited for year ended
30 June 2011
Name
% of maximum STI
cash payable for
year ended
30 June 2011
% of maximum STI
cash forfeited for
year ended
30 June 2011
EXECUTIVE DIRECTORS
T J Gorman
G J Hayes
78%
79%
CURRENT KEY MANAGEMENT PERSONNEL
J R A Judd
P S Mackie
K Pohler1
E E Potts
J D Ritchie
K J Shuba
N P Smith
R J Westerbos
69%
70%
48%
48%
50%
55%
73%
53%
22%
21%
31%
30%
52%
52%
50%
45%
27%
47%
FORMER KEY MANAGEMENT PERSONNEL
J L Infinger
0%
100%
4.2 LTI SHARE AWARD PERFORMANCE CONDITIONS
As outlined in section 3.3, Key Management Personnel 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 set out in section
4.2.2. Once awards vest, they are exercisable for up to six years
from the date of grant.
TSR measures the returns that a company has provided for its
shareholders, reflecting share price movements and reinvestment of
dividends over a specified period.
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 LTI share 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 TSR performance over various periods to 30 June 2010
and to 30 June 2011.
Equity awards only vest to the extent that performance conditions
are met. The awards are governed by plan rules, which have been
approved by shareholders. Any Board discretion, such as vesting in
the event of a change of control, is clearly prescribed under the
plan rules. Under the leaver provisions, there is no accelerated
vesting in the case of terminations and all unvested awards are
forfeited in the case of resignations or terminations for cause.
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 five financial years indicated, the performance against the applicable hurdle. The first table also contains data on
the level of vesting of “Enhanced STI share awards”, which were granted under the 2006 Share Plan prior to its amendment in November
2008 and apply to all Key Management Personnel.
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
Period to 30 June 2010 Period to 30 June 2011
Ranking (out of
100)/
Out-performance of
median company’s
TSR return (%)
Vesting
triggered
(% of original award)
Vesting
triggered
(% of original award)
20074
20084
20096
Relative TSR5
21 February 2007
Relative TSR5
1 July 2007
815
685
0% Enhanced STI awards
0% LTI awards
0% Enhanced STI awards
0% LTI awards
N/A
N/A
Relative TSR7
1 July 2008
6.307
N/A
57.8% LTI awards
4 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.
5 The average ranking of the Company’s TSR against the S&P/ASX100 Index.
6 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 CAGR and BVA
performance. The vesting matrix for this component of the award made in November 2010 is detailed at section 4.2.2.
7 Percentage out-performance of the median company’s TSR return against the S&P/ASX100 Index.
Brambles Annual Report 2011 page 44
The following table provides similar details for awards which have yet to be tested.
Awards
made during
financial year
Performance
condition
Start of
Performance
Period
Period to 30 June 2011
Out-performance of
median company’s
TSR return (%)
Vesting if current performance
is maintained until earliest testing date
(% of original award)
20106
20116
Relative TSR7
1 July 2009
Relative TSR7
1 July 2010
1.057
4.777
41.9% LTI Awards
51.0% LTI Awards
LTI performance matrix for financial years 2011 to
2013
Vesting %6
Cumulative three year BVA
US$M at fixed June 2010 FX rates
900
–
30%
50%
70%
90%
100%
1,100
1,300
30%
50%
70%
90%
100%
100%
50%
70%
90%
100%
100%
100%
Sales revenue
CAGR*
4%
5%
6%
7%
8%
9%
*Three year CAGR over base year
4.2.2 LTI share 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 awards are measured by the following
relative TSR condition: 40% of LTI share awards will vest if the
Company's relative TSR performance over the Performance Period
equals the TSR of the median ranked ASX100 company; 100% will
vest for out-performance of the TSR of the median ranked
ASX100 company by 25% over the Performance Period; and if
Brambles’ TSR performance is between these two levels, vesting
will be on a pro-rata straight line basis.
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 CAGR 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 CAGR and BVA are measured in constant
currency.
The target matrix is set by the Remuneration Committee and
approved by the Board for each LTI share 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.
LTI share awards for the 2009 to 2011 performance period failed
to vest as both the sales revenue CAGR and BVA results were
below the target levels required for vesting, as published in the
2009 Remuneration Report. Based on performance to date, the
LTI share awards for the 2010 to 2012 years will not vest.
The following table provides the vesting framework for the
relevant awards made during the Year. If current performance is
maintained until the performance hurdles are assessed, the
awards will vest in 2013.
Brambles Annual Report 2011 page 45
DIRECTORS’ REPORT – REMUNERATION REPORT - CONTINUED
5. EXECUTIVE DIRECTORS AND DISCLOSABLE
EXECUTIVES
5.1 EXECUTIVE DIRECTOR CHANGES
During 2011 there were no changes to Brambles’ Executive
Directors.
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 provisions for Jim Ritchie, Kevin Shuba and Elton
Potts include payments in lieu of notice calculated by reference
to annual base salary and health insurance benefits. These
standard service contracts state that any termination payments
made would be reduced by any value to be received under any
new employment.
Other than Peter Mackie8, executives remunerated on a base
salary approach receive pension contributions of 15% of base
salary.
Jim Infinger ceased employment in accordance with the terms
and conditions of his contract.
Contract terms for executives
Name and role(s)
EXECUTIVE DIRECTORS
T J Gorman
Chief Executive Officer
G J Hayes
Chief Financial Officer
CURRENT KEY MANAGEMENT
PERSONNEL
J R A Judd
Group Senior Vice President
& Head of Innovation
P S Mackie8
Group President, CHEP Asia-Pacific
K Pohler
Chief Executive Officer, IFCO from
its acquisition by Brambles on
31 March 2011
E E Potts
Group President & Chief Operating
Officer, Recall
J D Ritchie
Group President, CHEP Americas
K J Shuba
Group Senior Vice President &
Customer Development Officer
N P Smith
Group Senior Vice President,
Human Resources
R J Westerbos
Group President CHEP Europe,
Middle East & Africa
FORMER KEY MANAGEMENT
PERSONNEL
J L Infinger
Group Senior Vice President
& Chief Information Officer until
2 November 2010
Salary/TFR as at
30 June 2011
unless indicated
TFR (including pension
contributions) of
A$1,926,000
Base salary of
A$1,400,000
Base salary of
A$515,000
Base salary of
A$567,000
Base salary of
€850,000
Base salary of
US$550,000
Base salary of
US$550,000
Base salary of
US$530,000
Base salary of
A$600,000
Base salary of
€410,000
Base salary of
US$425,000
8 Peter Mackie receives employer superannuation (pension) contributions
of 21% of base salary for income up to £153,700 and 15% of base salary
for any amount above £153,700.
Brambles Annual Report 2011 page 46
5.3 TOTAL REMUNERATION AND BENEFITS FOR THE YEAR
The table below provides a summary of the actual remuneration received by the Disclosable Executives for the Year, together with prior year
comparatives. The purpose of this table is to enable shareholders to better understand the actual remuneration received by Disclosable
Executives. The TFR amount shown for Tom Gorman is that to which he is entitled for the Year, and which he may elect to receive in a
combination of cash salary payments, pension contributions and motor vehicle benefits. Income derived from the vesting of shares during the
year has been included below as “Actual share income”. The value shown is the market value at the time the income became available to
the executive. These awards were granted in prior financial years. The values shown relate to STI and LTI share awards made in 2008.
Theoretical accounting values for unvested share awards are shown in section 7.4; those values are a statutory disclosure requirement.
Unvested share awards may result in “Actual share income” in future years and, if so, the income will be reported in the table below in the
Annual Report for the relevant year.9 10 11 12
Short term employee benefits
Post
employment
benefits
Name
Year
TFR/fees
Cash/
salary/
Cash
bonus
EXECUTIVE DIRECTORS
T J Gorman10 11
G J Hayes10 11
Totals
US$'000
US$'000
2011
2010
2011
2010
2011
2010
1,730
1,408
1,339
709
3,069
2,117
1,000
692
993
349
1,993
1,041
CURRENT KEY MANAGEMENT PERSONNEL
J R A Judd11
2011
603
P S Mackie10 11
E E Potts
K Pohler
J D Ritchie10
K J Shuba
N P Smith11
R J Westerbos10
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
592
749
443
566
513
292
-
566
509
562
563
624
544
575
146
FORMER KEY MANAGEMENT PERSONNEL
J L Infinger
Totals
2011
2010
2011
2010
167
301
4,704
3,611
266
252
394
276
249
278
254
-
248
164
255
184
326
296
268
65
-
99
2,260
1,614
Non-
monetary
benefits9
US$'000
Super-
annuation
US$'000
238
191
5
1
243
192
6
4
142
136
-
-
10
-
6
56
141
8
2
1
87
3
-
375
394
583
-
27
204
95
204
122
76
66
114
69
77
67
2
-
80
66
73
75
89
76
81
16
-
37
592
472
Actual
share
income
Total
before
equity
Other
US$'000
US$'000
STI / LTI
awards
US$'000
Total
US$'000
Other
Termination/
sign-on
payments/
retirement
benefits
US$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
217
-
-
-
-
400
445
276
-
676
662
19
48
-
-
19
48
-
-
10
17
18
18
1
-
17
13
18
19
-
-
-
1
3
10
67
78
2,987
2,366
2,541
1,154
5,528
3,520
951
914
1,409
941
910
876
559
-
917
1,025
1,049
849
1,041
917
1,411
676
446
822
8,693
7,020
260
-
-
-
260
-
88
95
54
40
59
66
-
-
208
291
78
7012
6
-
-
N/A
-
-
493
562
3,247
2,366
2,541
1,154
5,788
3,520
1,039
1,009
1,463
981
969
942
559
-
1,125
1,316
1,127
919
1,047
917
1,411
676
446
822
9,186
7,582
9 Non-monetary benefits include car parking, personal/spouse travel, club membership, motor vehicles, relocation and storage costs and fringe benefits tax.
10 These executives were appointed to their current role during the year ending 30 June 2010, as such the 2010 comparator represents part year only.
11 The year-on-year comparison of remuneration is affected by the movement of exchange rates from A$1=US$0.8813 for 2010 to A$1=US$0.9973 for 2011.
12 In addition Kevin Shuba received income from exercising awards which vested in previous years.
Brambles Annual Report 2011 page 47
DIRECTORS’ REPORT – REMUNERATION REPORT - CONTINUED
5.4 EQUITY-BASED AWARDS
5.5 SHAREHOLDINGS
The following table shows details of equity-based awards made to
the Disclosable Executives during the Year. STI and LTI share awards
were made under the 2006 Share Plan, the terms and conditions of
which are available in sections 7.2 and 7.3 (see plan numbers
15-17). Matching Awards were made under MyShare, the terms and
conditions of which are available in sections 7.2 and 7.3 (plan
numbers 34-45).13
Name
Type of award
Number
Value at grant
US$'00013
EXECUTIVE DIRECTORS
T J Gorman
STI
LTI
116,569
762
328,902
2,150
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.
Under recently updated guidelines, members of Brambles’ ELT are
encouraged, over the five year period commencing from the date
they joined the ELT, to achieve and maintain a shareholding equal
to 100% of salary before tax. In circumstances where executives
wish to sell shares, they will require the approval of the Chairman
(in the case of the Chief Executive Officer) or the Chief Executive
Officer (in the case of all other ELT members).14 15 16 17
Balance at the
start of the
Year
Changes
during the
Year
Balance at the
end of the
Year14
MyShare Matching
753 5
Ordinary shares
G J Hayes
Total
STI
LTI
Total
446,224
2,917
58,879
385
270,262
1,767
EXECUTIVE DIRECTORS
T J Gorman
329,141
2,152
G J Hayes
930
-
40,037
-
40,96715
-
CURRENT KEY MANAGEMENT PERSONNEL
65,399
14,037
79,43615
CURRENT KEY MANAGEMENT PERSONNEL
J R A Judd
STI
LTI
42,470
276
76,476
500
MyShare Matching
753 5
P S Mackie
Total
STI
LTI
119,699
781
46,554
304
109,456
715
MyShare Matching
676 5
J R A Judd
P S Mackie
K Pohler
E E Potts
K Pohler
E E Potts
Total
STI
LTI
Total
STI
LTI
156,686
1,024
251,637
1,811
J D Ritchie
39,941
20,383
-
-
K J Shuba
46,452
11,314
251,637
1,811
42,456
278
N P Smith
1,046
1,584
109,390
715
R J Westerbos
-
101,495
101,495
MyShare Matching
692
5
FORMER KEY MANAGEMENT PERSONNEL
J D Ritchie
Total
STI
LTI
152,538
998
25,091
164
109,390
715
K J Shuba
N P Smith
MyShare Matching
687
5
Total
STI
LTI
135,168
884
28,151
184
105,412
689
MyShare Matching
692
5
Total
STI
LTI
134,255
878
49,895
326
89,098
582
MyShare Matching
753 5
R J Westerbos
Total
STI
LTI
Total
139,746
913
9,570
63
106,864
698
116,434
761
FORMER KEY MANAGEMENT PERSONNEL
J L Infinger
MyShare Matching
Total
194
194
1
1
13 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.
J L Infinger
135
194
32917
14 On 29 July 2011 the following Key Management Personnel acquired ordinary
shares under MyShare, which are held by Computershare Nominees CI
Limited: Tom Gorman (60), Jasper Judd (60), Peter Mackie (60), Elton Potts
(51), Jim Ritchie (50), Kevin Shuba (51) and Nick Smith (60).
15 Of which Computershare Nominees CI Limited holds 39,522 shares for Tom
Gorman, 15,126 for Jasper Judd, 9,413 for Elton Potts and 12,246 for Kevin
Shuba
16 Held by Computershare Nominees CI Limited.
17 Balance at the end of the Year is at cessation of employment for Jim
Infinger, who ceased employment on 2 November 2010.
854
-
107
-
58,126
8,481
96116
-
66,60715
60,32416
57,76615
2,63016
Brambles Annual Report 2011 page 48
5.6 INTERESTS IN SHARE RIGHTS18
The table below shows details of rights over Brambles Limited ordinary shares in which the Disclosable Executives held relevant interests:
- 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 conditional rights awarded during the Year under MyShare.19 20 21 22
Balance at
the start of
the Year
Granted
during
the Year
Exercised
during
the Year19
Lapsed
during
the Year
Name
Number
Number21
Value at grant
Number
US$'000
Value at
exercise
US$'000
Number
Value at
lapse
US$'00022
Balance at
the end of
the Year20
Vested and
exerciseable at
the end of the
Year
Number
Number
EXECUTIVE DIRECTORS
T J Gorman
546,682
446,224
2,917
37,024
G J Hayes
405,870
329,141
2,151
-
CURRENT KEY MANAGEMENT PERSONNEL
J R A Judd
219,192
119,699
782
13,284
P S Mackie
139,763
156,686
K Pohler
-
251,637
E E Potts
276,704
152,538
J D Ritchie
92,602
135,168
K J Shuba
283,396
134,255
N P Smith
195,389
139,746
R J Westerbos
-
116,434
FORMER KEY MANAGEMENT PERSONNEL
J L Infinger
128,717
-
1,024
1,811
997
884
878
912
761
-
260
-
88
54
-
59
28,691
17,584
-
71,361
6,628
-
11,393
27,112
208
-
14,312
775
-
-
73
6
-
-
24,245
-
-
-
-
-
-
-
955,882
735,011
136
296,916
83
-
339
-
115
-
-
-
272,237
251,637
346,488
200,658
379,094
334,360
116,434
128,717
-
-
-
-
-
-
-
-
-
-
-
18 Of the awards detailed in section 7.3 the following plan numbers are relevant to Disclosable Executives: Tom Gorman (5, 7-9 and 12-46); Greg Hayes (12-14
and 16-17); (2-4, 7-9 and 12-46) for Jasper Judd, Peter Mackie and Elton Potts; Jim Ritchie (10-17 and 30-46); Kevin Shuba (2-4, 7-9, 13-17 and 18-46); Nick
Smith (7-9 and 12-46); and Jim Infinger (12-14 and 30-38). Lapses occurred for Jasper Judd, Peter Mackie, Elton Potts and Kevin Shuba (3 and 4). Exercises
occurred for Jasper Judd, Peter Mackie, Elton Potts and Kevin Shuba (2 and 18-29); Tom Gorman (5 and 18-29); Jim Ritchie (11 and 18-29); and Nick Smith
(18-29).
19 Of the options/rights exercised during the Year, no monies were paid or payable on exercise. The shares issued on exercise of share rights are fully paid up.
All of the share rights exercised during the Year vested during the Year.
20 On 29 July 2011, the following Disclosable Executives received Matching Awards under MyShare: Tom Gorman (60), Jasper Judd (60), Peter Mackie (60), Elton
Potts (51), Jim Ritchie (50), Kevin Shuba (51) and Nick Smith (60).
21 During the Year 4,429,520 performance share rights were granted under the 2006 Share Plan, of which 445,471 were granted to Tom Gorman and 329,141
were granted to Greg Hayes. 475,318 Matching Awards were granted under MyShare during the Year, of which 659 were granted to Tom Gorman. Approval for
these issues of securities was obtained under ASX Listing Rule 10.14 at the AGM held on 25 November 2010.
22 “Lapse” in this context means that the award was forfeited due to either the service or performance conditions not being met.
Brambles Annual Report 2011 page 49
DIRECTORS’ REPORT – REMUNERATION REPORT - CONTINUED
6. NON-EXECUTIVE DIRECTORS’ DISCLOSURES
6.2 NON-EXECUTIVE DIRECTORS’ APPOINTMENT LETTERS
6.1 NON-EXECUTIVE DIRECTORS’ REMUNERATION POLICY
The Chairman’s fees are determined by the Remuneration
Committee and the other Non-executive Directors’ fees are
determined by the Chairman and Executive Directors. 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.
A review of Non-executive Director and Board Chairman fees was
undertaken in 2011 to ensure the fees remained in line with market
practice, resulting in an increase of 4%.
The review established the following fee structure:
Directors are appointed for an unspecified term but are subject to
election by shareholders at the first AGM after their initial
appointment by the Board. The Corporate Governance Statement
contains details of the process for appointing and re-electing
Non-executive Directors and of the years in which the Non-executive
Directors are next due for re-election by shareholders.
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 and do not receive any benefits in kind.
Chairman
A$565,000
6.3 NON-EXECUTIVE DIRECTORS’ REMUNERATION FOR THE
Australia based Non-executive Directors
A$180,000
YEAR
UK based Non-executive Directors23
£83,200
Fee supplement for Audit Committee Chairman24
A$36,000
Fee supplement for Remuneration Committee
Chairman23 24
£22,000
Travel allowance for overseas based Director
£10,000
The next fee review will be undertaken during January 2012.
The fees and other benefits provided to Non-executive Directors
during the Year and during the prior year are set out in the table
below in US$. 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. Non-executive Directors do
not receive any share-based payment.
Any contributions to personal superannuation or pension funds on
behalf of the Non-executive Directors are deducted from their
overall fee entitlements.
23 Luke Mayhew, the Remuneration Committee Chairman, is currently the
only UK based Non-executive Director.
24 The fee supplement is only payable to a Committee Chairman who is not
also the Board Chairman.
Brambles Annual Report 2011 page 50
Table 6.3 Non-executive Directors’ remuneration for the Year 25 26 27
Short term employee benefits
Post employment benefits
Name
Year
CURRENT NON-EXECUTIVE DIRECTORS
A G Froggatt27
2011
S P Johns27
S C H Kay27
G J Kraehe AO27
C L Mayhew
B M Schwartz AM27
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
FORMER NON-EXECUTIVE DIRECTOR
J P Mullen27
2011
Totals
2010
2011
2010
Directors’ fees
US$'000
Superannuation
US$'000
Other25
US$'000
Total
US$'00026
164
125
211
155
161
122
533
448
167
138
161
122
95
84
1,492
1,194
12
8
16
8
15
11
14
40
6
5
15
11
9
8
87
91
-
-
1
-
-
-
20
4
3
1
-
-
-
-
24
5
176
133
228
163
176
133
567
492
176
144
176
133
104
92
1,603
1,290
6.4 NON-EXECUTIVE DIRECTORS’ SHAREHOLDINGS
As a guideline, 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 ordinary 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.28 29 30 31 32 33 34
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 Froggatt
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
B M Schwartz AM
14,890
47,500
13,400
61,561
16,500
10,354
10,000
-
1,477
2,215
-
2,675
24,89028
47,50029
14,87730
63,77631
16,50032
13,02933
FORMER NON-EXECUTIVE DIRECTOR
J P Mullen
-
-
-34
25 “Other” includes personal/spouse travel and fringe benefits tax.
26 None of the Non-executive Directors received rights/awards over Brambles Limited shares during the Year, so there are no relevant share-based payment
amounts for disclosure.
27 The year-on-year comparison of remuneration is affected by the movement of exchange rates from A$1=US$0.8813 for 2010 to A$1=US$0.9973 for 2011.
28 Of which 7,000 shares were held by Christine Joanne Froggatt and 10,000 shares were held by Equity Trustees Limited as nominee for Jessie Elizabeth
Froggatt (under power of attorney).
29 Of which 27,500 shares were held by Canzak Pty Limited and 20,000 were held by Caran Pty Limited.
30 Of which 9,977 shares were held by the Carolyn 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 trustee for the Schwartz Superannuation Fund.
34 Balance at the end of the Year is at 7 February 2011 for John Mullen, being his date of resignation.
Brambles Annual Report 2011 page 51
DIRECTORS’ REPORT – REMUNERATION REPORT - CONTINUED
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 28, page 103 of the financial accounts.
7.2 SUMMARY OF 2006 PLANS
The table below contains details of the 2006 Share Plan and MyShare Plan under which former or current Disclosable Executives have
unvested and/or unexercised awards which could affect remuneration in this or future reporting periods.
Plan
2006 Share Plan
(STI)
2006 Share Plan
(Enhanced STI)
Nature of
award
Share rights
Share rights
Size of award
Vesting condition
Vesting schedule
Performance/
vesting period
Life of award
Up to 100% of size
of STI cash award
Time only.
100% vesting based on
continuous employment.
Three years.
Maximum of six years.
Up to 50% of size
of STI Share
Award
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.
Three years.
Maximum of six years.
2006 Share Plan
(TSR LTI)
Share rights
% of salary/TFR
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.
Three years.
Maximum of six years.
2006 Share Plan
(TSR LTI)
Share rights
% of salary/TFR
Time and relative TSR
hurdle.
2006 Share Plan
(FY09-FY11
BVA LTI)
Share rights
% of salary/TFR
Time and sales revenue
CAGR and BVA
performance.
2006 Share Plan
(FY10-FY12
BVA LTI)
Share rights
% of salary/TFR
Time and sales revenue
CAGR and BVA
performance.
2006 Share Plan
(FY11-FY13
BVA LTI)
Share rights
% of salary/TFR
Time and sales revenue
CAGR and BVA
performance.
Three years.
Maximum of six years.
Three years.
Maximum of six years.
Three years.
Maximum of six years.
Three years.
Maximum of six years.
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$2,000M over three
year period. 100% vesting
occurs if CAGR is 11% and
BVA is US$2,200M over
three year period.
30% vesting occurs if
CAGR is 3% and BVA is
US$1,000M over three
year period. 100% vesting
occurs if CAGR is 6% and
BVA is US$1,200M over
three year period.
30% vesting occurs if
CAGR is 4% and BVA is
US$1,100M over three
year period. 100% vesting
occurs if CAGR is 7% and
BVA is US$1,300M over
three year period.
MyShare
Matching
Awards
1:1 Matching
Awards 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.
Brambles Annual Report 2011 page 52
7.3 SHARE RIGHTS
The terms and conditions of each grant of share rights affecting remuneration in this or future reporting periods are outlined in the table
below. Share rights granted under the plans carry no dividend or voting rights:
Plan
Plan
number
Grant date
Expiry date
Exercise
price
Value at grant
Status/vesting date
2006 Share Plans
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
19 January 200735 36 31 August 2012
29 August 200735
30 August 201337
29 August 200738
30 August 201337
29 August 200739
30 August 201337
19 March 200840
2 March 201437
28 April 200835
29 April 201437
27 August 200835
27 August 201437
27 August 200839
27 August 201437
27 August 200841
27 August 201437
1 June 2009
1 July 2010
1 June 2009
1 July 2011
25 November 200935 25 November 201537
25 November 200939 25 November 201537
25 November 200941 25 November 201537
24 November 201035 24 November 201637
24 November 201039 24 November 201637
24 November 201041 24 November 201637
–
–
–
–
–
–
–
–
–
–
–
–
–
–
-
-
-
A$12.60
100% vested and exercisable from
19 January 2010
A$12.64
29 August 2010
A$6.75
A$8.11
A$8.84
A$8.01
A$6.53
A$5.99
A$4.67
A$5.75
A$5.55
A$5.85
A$5.85
A$3.84
A$6.01
A$6.01
A$3.78
29 August 2010
29 August 2010
1 March 2011
28 April 2011
27 August 2011
27 August 2011
27 August 2011
100% vested at 1 June 2010
100% vested at 1 June 2011
25 November 2012
25 November 2012
25 November 2012
25 November 2013
25 November 2013
25 November 2013
35 STI awards vest on the third anniversary of their grant date, subject to continued employment.
36 Awards granted on 19 January 2007 were, for pricing and vesting purposes, taken to have been granted on 30 August 2006.
37 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.
38 Enhanced STI awards vest on the third anniversary of their grant date, subject to continued employment and meeting a TSR performance condition.
39 These LTI awards vest on the third anniversary of their grant date, subject to continued employment and meeting a TSR performance condition.
40 Awards granted on 19 March 2008 were, for pricing and vesting purposes, taken to have been granted on 1 March 2008.
41 These LTI awards vest on the third anniversary of their grant date, subject to continuing employment and meeting a sales revenue CAGR and BVA performance
condition.
Brambles Annual Report 2011 page 53
DIRECTORS’ REPORT – REMUNERATION REPORT - CONTINUED
Plan
MyShare
Plan
number
Grant date
Expiry date
Exercise
price
Value at grant
Status/vesting date
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
31 March 200942
1 April 2011
30 April 200942
1 April 2011
29 May 200942
1 April 2011
30 June 200942
1 April 2011
31 July 200942
1 April 2011
31 August 200942
1 April 2011
30 September 200942 1 April 2011
30 October 200942
1 April 2011
30 November 200942 1 April 2011
31 December 200942 1 April 2011
29 January 201042
1 April 2011
26 February 201042
1 April 2011
31 March 201043
1 April 2012
30 April 201043
1 April 2012
31 May 201043
1 April 2012
30 June 201043
1 April 2012
30 July 201043
1 April 2012
31 August 201043
1 April 2012
30 September 201043 1 April 2012
29 October 201043
1 April 2012
30 November 201043 1 April 2012
31 December 201043 1 April 2012
31 January 201143
1 April 2012
28 February 201143
1 April 2012
31 March 201144
1 April 2013
29 April 201144
1 April 2013
31 May 201144
1 April 2013
30 June 201144
1 April 2013
29 July 201144
1 April 2013
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
A$5.09
A$5.97
A$5.91
A$5.91
A$5.67
A$6.99
A$7.79
A$6.76
A$6.30
A$6.46
A$6.23
A$6.59
A$7.00
A$6.92
A$6.31
A$5.13
A$5.18
A$5.60
A$5.91
A$6.00
A$6.47
A$6.74
A$6.80
A$6.68
A$6.73
A$6.48
A$6.94
A$6.76
A$6.58
100% vested on 31 March 2011
100% vested on 31 March 2011
100% vested on 31 March 2011
100% vested on 31 March 2011
100% vested on 31 March 2011
100% vested on 31 March 2011
100% vested on 31 March 2011
100% vested on 31 March 2011
100% vested on 31 March 2011
100% vested on 31 March 2011
100% vested on 31 March 2011
100% vested on 31 March 2011
31 March 2012
31 March 2012
31 March 2012
31 March 2012
31 March 2012
31 March 2012
31 March 2012
31 March 2012
31 March 2012
31 March 2012
31 March 2012
31 March 2012
31 March 2013
31 March 2013
31 March 2013
31 March 2013
31 March 2013
42 These Matching Awards granted under MyShare vested on 31 March 2011, subject to continued employment and the retention of the associated Acquired
Shares. On vesting they were automatically exercised.
43 These Matching Awards granted under MyShare vest on 31 March 2012, subject to continuing employment and the retention of the associated Acquired Shares.
On vesting they are automatically exercised.
44 These Matching Awards granted under MyShare vest on 31 March 2013, subject to continuing employment and the retention of the associated Acquired Shares.
On vesting they are automatically exercised.
Brambles Annual Report 2011 page 54
7.4 SHARE BASED PAYMENTS – FUTURE POTENTIAL
The table below provides annual accounting values for shares granted during calendar years 2008-2010 which have been amortised over
three years. These share awards are subject to conditions set out in section 7.2. Remuneration will normally not be received as a result of
the underlying share awards vesting until the conditions have been met.
Share based payment
Name
EXECUTIVE DIRECTORS
T J Gorman
G J Hayes
Totals
Year
2011
2010
2011
2010
2011
2010
CURRENT KEY MANAGEMENT PERSONNEL
J R A Judd
P S Mackie
K Pohler
E E Potts
J D Ritchie
K J Shuba
N P Smith
R J Westerbos
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
FORMER KEY MANAGEMENT PERSONNEL
J L Infinger
Totals
2011
2010
2011
2010
Total
before
equity
US$'000
2,987
2,366
2,541
1,154
5,528
3,520
951
914
1,409
941
559
-
910
876
917
1,025
1,049
849
1,041
917
1,411
676
446
822
8,693
7,020
Awards
US$'000
823
438
500
288
1,323
726
269
242
217
122
109
-
300
320
394
375
304
243
279
120
80
-
83
291
2,035
1,713
as %
of 2011
total remuneration
22%
16%
16%
20%
-
-
22%
21%
13%
11%
16%
-
25%
27%
30%
27%
22%
22%
21%
12%
5%
0%
16%
26%
-
-
Total
US$'000
3,810
2,804
3,041
1,442
6,851
4,246
1,220
1,156
1,626
1,063
668
-
1,210
1,196
1,311
1,400
1,353
1,092
1,320
1,037
1,491
676
529
1,113
10,728
8,733
Luke Mayhew
Non-executive Director and Chairman of the Remuneration Committee
17 August 2011
Brambles Annual Report 2011 page 55
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 2011 (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.
At the beginning of the Year, the Group’s principal operations
comprised two main businesses, CHEP and Recall. CHEP owns a pool
of pallets and containers, which it issues, collects and reissues
through a network of service centres in multiple countries.
Manufacturers, producers, distributors and retailers use these
pallets and containers to transport their products safely and
efficiently through the supply chain. 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.
On 31 March 2011, Brambles acquired IFCO. This business operates a
pool of reusable plastic containers globally, which are used
primarily to transport fresh produce from producers to grocery
retailers. It also provides a national network of pallet management
services, to sort, repair and reissue pallets in the USA.
During the Year, Brambles also acquired three small businesses:
Container and Pooling Solutions (a USA-based provider of
intermediate bulk containers and automotive containers); Unitpool
(an airline container pooling business); and JMI (a non-flight critical
aviation equipment maintenance and repair business).
Other than as described above, there were no significant changes in
the nature of the Group’s principal activities during the Year.
REVIEW OF OPERATIONS & RESULTS
A review of the Group’s operations and a review of the results of
those operations are given in the Letter from the Chairman & the
CEO on pages 1 to 2, the Operational & Financial Review on pages 4
to 11 and in the Treasury & Risk Review on pages 12 to 13.
Information about the financial position of the Group is included in
the Operational & Financial Review on pages 4 to 11 and in the Five-
Year Financial Performance Summary on page 131.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
The only significant change in the state of affairs of Brambles during
the Year was the acquisition of IFCO for an enterprise value of
€923 million.
MATTERS SINCE THE END OF THE FINANCIAL YEAR
On 17 August 2011, Brambles announced that following the
completion of a strategic planning process, it had decided to focus
on building its global pooling solutions business and to divest Recall.
Brambles will commence an international sale process for Recall and
will complete the divestment as and when financial market
conditions support an appropriate outcome for shareholders.
To deliver the strategy of focussing on its global pooling solutions
business and to optimise on efficiencies, on 17 August 2011
Brambles also announced a new management and organisation
structure, effective 1 October 2011, details of which are in the
Letter from the Chairman & the CEO on page 1.
Other than this, the Directors are not aware of any matter or
circumstance that has arisen since 30 June 2011 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.
BUSINESS STRATEGIES & 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 & the CEO on pages 1 and 2 and in the Operational &
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.
DIVIDENDS
The Directors have declared a final dividend for the Year of 13.0
Australian cents per share, which will be 20% franked. The dividend
will be paid on Thursday, 13 October 2011 to shareholders on the
register on Wednesday, 21 September 2011. On 14 April 2011, an
interim dividend for the Year was paid, which was 13.0 Australian
cents per share and 20% franked. On 14 October 2010, a final
dividend for the year ended 30 June 2010 was paid, which was 12.5
Australian cents per share and 20% franked. The unfranked
component of each dividend paid during the Year was conduit
foreign income. This means that no Australian dividend withholding
tax was payable on the dividends that Brambles paid to non-resident
shareholders.
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 during the Year, is set out below.
The qualifications, experience and special responsibilities for
Directors are set out on pages 24 to 25.
Anthony Grant Froggatt
1 July 2010 to date
Thomas Joseph Gorman
1 July 2010 to date
Gregory John Hayes
1 July 2010 to date
Stephen Paul Johns
1 July 2010 to date
Sarah Carolyn Hailes Kay
1 July 2010 to date
Graham John Kraehe AO
1 July 2010 to date
Christopher Luke Mayhew
1 July 2010 to date
John Patrick Mullen
1 July 2010 to 7 February 2011
Brian Martin Schwartz AM
1 July 2010 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.
INDEMNITIES
Indemnities provided to Directors and officers in accordance with
the constitution of Brambles Limited are detailed in Note 36 on
page 125. 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.
Brambles Annual Report 2011 page 56
DIRECTORS’ MEETINGS
Details of the Board committee memberships are given in the Corporate Governance Statement on pages 29, 32 and 36. 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
G J Hayes
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
12
13
13
12
13
13
13
B M Schwartz AM 13
FORMER DIRECTOR
13
13
13
13
13
13
13
13
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
J P Mullen(c)
7
8
2
2
-
3
3
3
-
3
-
-
-
-
3
3
3
-
3
-
-
-
-
-
-
6
6
-
-
6
-
-
-
-
6
6
-
-
6
-
5
-
-
-
-
5
5
-
2
5
-
-
-
-
5
5
-
3
3
-
-
3
-
3
-
-
-
3
-
-
3
-
3
-
-
-
(a) 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) 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) John Mullen resigned as a Director on 7 February 2011.
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 2008.
Director
Listed company
A G Froggatt
AXA Asia Pacific Holdings Limited
Billabong International Limited
Coca-Cola Amatil Limited
T J Gorman
IFCO Systems N.V.
G J Hayes
None
S P Johns
Leighton Holdings Limited
Spark Infrastructure Group
Westfield Group:
Westfield Holdings Limited
Period directorship held
2008 to 2011
2008 to current
2010 to current
2011 to current
-
2009 to current
2005 to current
1985 to current
Westfield America Trust (director of responsible entity, Westfield America Management Limited) 1996 to current
Westfield Trust and Carindale Property Trust (director of responsible entity, Westfield
Management Limited)
S C H Kay
Commonwealth Bank of Australia
G J Kraehe AO
Bluescope Steel Limited
Djerriwarrh Investments Limited
C L Mayhew(a) WH Smith plc
B M Schwartz AM Insurance Australia Group Limited
IAG Finance (New Zealand) Limited
Westfield Group:
Westfield Holdings Limited
1985 to current
2003 to current
2002 to current
2002 to current
2006 to 2010
2005 to current
2008 to current
2009 to current
Westfield America Trust (director of responsible entity, Westfield America Management Limited) 2009 to current
Westfield Trust and Carindale Property Trust (director of responsible entity, Westfield
Management Limited)
2009 to current
(a) Luke Mayhew was appointed a director of InterContinental Hotels Group plc on 1 July 2011
Brambles Annual Report 2011 page 57
DIRECTORS’ REPORT – OTHER INFORMATION - CONTINUED
ENVIRONMENT
Brambles’ Environmental Policy is set by the Board. It applies in all
countries where Brambles operates and will be rolled out to IFCO in
FY12 as part of the plan for integrating IFCO into the Group. The
Environmental Policy provides that Brambles will act with integrity
and respect for the community and the environment and be
committed to sound environmental practice in its daily operations.
It is a minimum requirement that all Brambles operations
comply with all relevant environmental laws and regulations.
Additionally, employees are expected to care for the environment
by adopting a specified set of environmental principles. Every
business unit must ensure that those principles are adhered to,
including in countries that may not yet have enacted laws for the
protection of the environment.
Brambles has set environmental performance targets. Reporting of
performance against those targets is shown on pages 17 to 20 of the
Sustainability Review. A copy of the complete Environmental Policy
is set out in Brambles’ Code of Conduct, which is available at
www.brambles.com.
OCCUPATIONAL HEALTH & SAFETY
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 Charter and policy will be rolled out to
IFCO in FY12 as part of the plan for integrating IFCO into the Group.
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.
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. Reporting on health and safety performance is shown
in the Safety & Wellbeing section of the Sustainability Review on
page 21.
EMPLOYEES
Pages 20 to 22 of the Sustainability Review contain details of
Brambles’ performance as an employer - see the Employee
Engagement, Attracting & Retaining Talent: Leadership, Diversity &
Inclusion and Training & Development sections.
INNOVATION, RESEARCH & DEVELOPMENT
Innovation, whether of an incremental or step-change nature, is
integral to Brambles’ growth strategy.
Brambles is focusing on three key areas: innovating to address
customers’ current and future needs; accelerating tomorrow’s
growth opportunities; and fostering and driving a culture of
innovation.
During the Year, Brambles launched an Innovation Fund, which has
already reviewed and funded a significant number of early-stage
new business ideas.
Brambles carries out research and development activities in relation
to both its CHEP and Recall businesses. These activities comprise:
- continuously testing its pallets, containers and other platforms to
make them more durable, sustainable and safer for use in the
supply chain;
- enhancing existing, and developing new designs of pallets,
containers and other supply chain platforms, for both new and
existing markets;
- improving pallet and container repair processes and equipment;
- testing and developing unique identifier technologies, including
radio frequency identification; 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 48, 49 and 51 of the Directors’ Report - 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 & SHARE RIGHTS
Details of the changes in the issued share capital of Brambles
Limited and share rights and MyShare matching share rights
outstanding over Brambles Limited ordinary shares at the Year end
are given in Notes 27 and 28 on pages 101 to 103. 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 pages 53 to 54 of the Remuneration Report:
- 52,434 grants: 666 under the 2010 MyShare offer (plan numbers 30
to 41) and 51,768 under the 2011 MyShare offer (plan numbers 42
to 46);
- 43,313 exercises, resulting in the issue of fully paid ordinary
shares: 638 under the 2009 MyShare offer (plan numbers 18 to 29),
7,781 under the 2010 MyShare offer (plan numbers 30 to 41),
3,085 under the 2011 MyShare offer (plan numbers 42 to 46),
15,000 under plan 2 and 16,809 under plan 7; and
- 1,713,650 lapses: 11,630 under the 2010 MyShare offer (plan
numbers 30 to 41), 4,879 under the 2011 MyShare offer (plan
numbers 42 to 46), 458,318 under plan 8, 1,083,938 under plan 9,
10,593 under plan 12, 25,180 under plan 13, 25,180 under plan 14,
10,998 under plan 15, 41,467 under plan 16 and 41,467 under plan
17.
SHARE BUY-BACKS
No ordinary shares were bought-back and cancelled during the Year.
There is no current on-market buy-back in operation.
Brambles Annual Report 2011 page 58
RISK MANAGEMENT
AUDITORS’ INDEPENDENCE DECLARATION
A discussion of Brambles’ risk profile, management and mitigation of
risks can be found in the Treasury & Risk Review on pages 12 and 13
and the Corporate Governance Statement on pages 34 to 35.
TREASURY POLICIES
A discussion of the implementation of treasury policies and
mitigation of treasury risks can be found in the Treasury & Risk
Review on pages 12 and 13.
NON-AUDIT SERVICES
The amount of US$1,777,000 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 financial
due diligence for the acquisition of IFCO, compliance services,
regulatory reporting 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
5 August 2011, 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.
A copy of the auditors’ independence declaration as required under
section 307C of the Act is set out on page 130.
ANNUAL GENERAL MEETING
The AGM will be held at 2.00pm (AEDT) on 10 November 2011 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
17 August 2011
Brambles Annual Report 2011 page 59
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)
B M Schwartz AM
(Non-executive Director)
COMPANY SECRETARY
R N Gerrard
STOCK EXCHANGE LISTING
Brambles’ ordinary shares are listed on the Australian Securities
Exchange and are traded under the stock code “BXB”.
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 at the address set
out in Contact Information on the back cover of the Annual Report.
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.
DIVIDEND
Shareholders may elect to receive dividend payments in Australian
dollars or Pounds sterling, by contacting Link Market Services at the
address set out in Contact Information on the back cover of the
Annual Report.
ANNUAL GENERAL MEETING
The Brambles Limited 2011 AGM will be held at 2.00pm (AEDT)
on 10 November 2011 at The Wesley Theatre, Wesley Conference
Centre, 220 Pitt Street, Sydney NSW 2000.
FINANCIAL CALENDAR
Final dividend 2011
Ex dividend date – Thursday, 15 September 2011
Record date – Wednesday, 21 September 2011
Payment date – Thursday, 13 October 2011
2012 (Provisional)
Announcement of interim results – mid February
Interim dividend – mid April
Announcement of final results – mid August
Final dividend – mid October
AGM – October
Brambles Annual Report 2011 page 60
ANALYSIS OF HOLDERS OF EQUITY SECURITIES AS AT 12 AUGUST 2011
Substantial shareholders
Brambles has been notified of the following substantial shareholdings:
Holder
Baillie Gifford & Co
Commonwealth Bank of Australia and its subsidiaries
(1) Percentages are as disclosed in substantial holding notices given to Brambles Limited.
Number of ordinary shares on issue and distribution of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Number of ordinary
shares
% of issued ordinary
share capital(1)
86,308,065
91,384,538
6.07
6.42
Holders
29,184
28,958
5,371
3,169
178
Shares
14,861,911
69,246,978
38,393,786
66,856,807
1,290,051,285
66,860
1,479,410,767
The number of members holding less than a marketable parcel of 79 ordinary shares (based on a market price of A$6.40 on 12 August 2011) is
1,518 and they hold a total of 66,028 ordinary shares. The voting rights of ordinary shares are described on page 62.
Number of share 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 performance share rights and MyShare Matching Awards are described on page 62.
Holders
Share rights
1,860
172
17
88
26
555,305
312,269
115,210
3,800,578
5,614,676
2,163
10,398,038
Brambles Annual Report 2011 page 61
SHAREHOLDER INFORMATION - CONTINUED
Twenty largest ordinary shareholders
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Cogent Nominees Pty Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
AMP Life Limited
Australian Foundation Investment Company Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
Queensland Investment Corporation
Cogent Nominees Pty Limited
Australian Reward Investment Alliance
Argo Investments Limited
UBS Wealth Management Australia Nominees Pty Limited
Citicorp Nominees Pty Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
Djerriwarrh Investments Limited
Citicorp Nominees Pty Limited
Bond Street Custodians Limited
Number of ordinary
shares
% of share capital
395,593,356
316,124,378
285,401,550
95,407,997
35,495,667
22,879,992
13,857,745
13,734,755
8,475,028
5,533,676
5,495,353
5,130,343
4,875,424
4,334,610
3,328,353
2,923,832
2,768,345
2,586,018
2,279,274
2,038,758
26.74
21.37
19.29
6.45
2.40
1.55
0.94
0.93
0.57
0.37
0.37
0.35
0.33
0.29
0.22
0.20
0.19
0.17
0.15
0.14
Percentage of total holdings of 20 largest holders
1,228,264,454
83.02
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.
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 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.
Voting rights: share rights
Performance share rights over ordinary shares and MyShare Matching
Awards do not carry any voting rights.
Brambles Annual Report 2011 page 62
FINANCIAL REPORT
for the year ended 30 June 2011
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. Basis of preparation
2. Significant accounting policies
3. Critical accounting estimates and judgements
4. Segment information
5. Profit from ordinary activities - continuing operations
6. Significant items - continuing operations
7. Employment costs - continuing operations
8. Net finance costs
9. Income tax
10. Earnings per share
11. Dividends
12. Discontinued operations
13. Business combinations
14. Cash and cash equivalents
15. Trade and other receivables
16. Inventories
17. Derivative financial instruments
18. Other assets
19. Investments
20. Property, plant and equipment
21. Goodwill
22. Intangible assets
23. Trade and other payables
24. Borrowings
25. Provisions
26. Retirement benefit obligations
27. Contributed equity
28. Share-based payments
29. Reserves and retained earnings
30. Financial risk management
31. Cash flow statement - additional information
32. Commitments
33. Contingencies
34. Auditors' remuneration
35. Key management personnel
36. Related party information
37. Events after balance sheet date
38. Parent entity financial information
Directors' declaration
Independent auditors' report
64
65
66
67
68
69
69
75
76
78
79
80
80
81
84
85
86
86
88
88
89
90
90
91
92
93
94
95
95
97
98
101
102
104
106
116
118
119
120
120
123
125
126
127
128
Brambles Annual Report 2011 page 63
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2011
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
Profit attributable to:
- members of the parent entity
- non-controlling interest
Earnings per share (cents)
Total
- basic
- diluted
Continuing operations
- basic
- diluted
The consolidated income statement should be read in conjunction with the accompanying notes.
Note
5A
5A
5B
19C
8
9
12
10
2011
US$m
2010
US$m
4,672.2
4,146.8
135.0
97.0
(4,004.4)
(3,525.1)
6.4
809.2
17.2
(144.7)
(127.5)
681.7
(209.9)
471.8
3.6
475.4
475.3
0.1
32.9
32.7
32.6
32.5
5.8
724.5
7.6
(117.2)
(109.6)
614.9
(171.0)
443.9
4.9
448.8
448.8
-
31.8
31.7
31.5
31.4
Brambles Annual Report 2011 page 64 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2011
Profit for the year
Other comprehensive income:
Actuarial gains/(losses) on defined benefit pension plans
Exchange differences on translation of foreign operations
Cash flow hedges
Income tax on other comprehensive income
Other comprehensive income for the year
Total comprehensive income for the year
Total comprehensive income for the year attributable to:
- members of the parent entity
- non-controlling interest
Note
26E
29
29
9A
2011
US$m
475.4
13.9
279.0
6.1
(5.9)
293.1
768.5
768.4
0.1
2010
US$m
448.8
(5.9)
(71.2)
1.4
0.8
(74.9)
373.9
373.9
-
The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Brambles Annual Report 2011 page 65 CONSOLIDATED BALANCE SHEET
as at 30 June 2011
Note
2011
US$m
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
The consolidated balance sheet should be read in conjunction with the accompanying notes.
14
15
16
17
18
15
19
20
21
22
9
17
18
23
24
17
25
24
17
25
26
9
23
27
29
29
29
2010
US$m
135.5
631.6
33.5
14.5
53.1
868.2
6.2
14.0
3,223.8
607.0
158.6
19.8
12.0
0.7
4,042.1
4,910.3
681.4
276.0
12.2
78.5
87.2
138.5
1,050.3
56.5
11.3
56.9
1,313.5
9.6
16.8
4,279.0
1,694.3
403.7
36.3
14.1
0.7
6,454.5
7,768.0
1,264.3
325.6
6.1
102.9
189.3
1,888.2
1,135.3
2,811.7
1,618.8
3.2
20.0
37.4
529.1
27.0
3,428.4
5,316.6
2,451.4
10.1
34.0
50.4
408.2
20.9
2,142.4
3,277.7
1,632.6
14,370.2
13,979.6
(14,716.8)
(15,007.4)
2,797.6
2,451.0
0.4
2,660.1
1,632.3
0.3
2,451.4
1,632.6
Brambles Annual Report 2011 page 66 CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2011
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Dividends received from joint ventures
Interest received
Interest paid
Income taxes paid on operating activities
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for intangible assets
Proceeds from disposal of businesses
Costs incurred on disposal of businesses
Acquisition of subsidiaries, net of cash acquired
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Net (outflow)/inflow from hedge instruments
Proceeds from issues of ordinary shares
Dividends paid, net of Dividend Reinvestment Plan
Net cash inflow/(outflow) from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and deposits, net of overdrafts, at beginning of the year
Effect of exchange rate changes
Cash and deposits, net of overdrafts, at end of the year
31A
The consolidated cash flow statement should be read in conjunction with the accompanying notes.
Note
2011
US$m
2010
US$m
5,210.2
4,658.5
(3,815.6)
(3,392.5)
1,394.6
1,266.0
5.6
5.1
(169.6)
(222.2)
31B
1,013.5
(764.7)
100.8
(46.3)
-
(2.1)
(1,050.2)
(1,762.5)
5.9
2.9
(104.6)
(179.9)
990.3
(496.5)
88.0
(33.2)
1.3
-
-
(440.4)
3,184.3
2,222.9
(2,487.7)
(2,541.2)
(9.5)
231.1
(224.0)
694.2
(54.8)
123.3
11.9
80.4
35.8
2.7
(204.5)
(484.3)
65.6
54.1
3.6
123.3
Brambles Annual Report 2011 page 67 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2011
YEAR ENDED 30 JUNE 2010
Opening balance
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments:
- expense recognised
- shares issued
Note
Share
capital
US$m
Non-
Retained
controlling
Reserves1
US$m
earnings
US$m
interest
US$m
Total
US$m
13,847.6
(14,938.7)
2,520.1
0.3
1,429.3
-
-
-
-
-
-
448.8
(70.3)
(70.3)
10.7
(9.1)
-
-
-
(4.6)
444.2
-
-
(304.2)
-
-
-
-
-
-
-
-
-
-
448.8
(74.9)
373.9
10.7
(9.1)
(304.2)
11.8
120.2
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
29
27
27
-
11.8
120.2
Closing balance
13,979.6
(15,007.4)
2,660.1
0.3
1,632.6
YEAR ENDED 30 JUNE 2011
Opening balance
Profit for the year
Other comprehensive income
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
29
27
27
13,979.6
(15,007.4)
2,660.1
-
-
-
-
-
-
-
240.8
149.8
-
475.3
282.8
10.3
282.8
485.6
13.2
(9.2)
3.8
-
-
-
-
-
-
(348.1)
-
-
0.3
0.1
-
0.1
-
-
-
-
-
-
1,632.6
475.4
293.1
768.5
13.2
(9.2)
3.8
(348.1)
240.8
149.8
Closing balance
14,370.2
(14,716.8)
2,797.6
0.4
2,451.4
1 Refer Note 29 for further information on reserves.
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Brambles Annual Report 2011 page 68 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2011
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 2011.
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 2011 and 2010 are to the financial years ended
30 June 2011 and 30 June 2010 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.
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 (i.e. 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. 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.
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.
Brambles Annual Report 2011 page 69
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – CONTINUED
for the year ended 30 June 2011
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 2011 or 2010.
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.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
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:
US$:A$
US$:€
US$:£
Average
2011
0.9973
1.3746
1.5941
2010
0.8813
1.3782
1.5733
Year end
30 June 2011
1.0692
1.4464
1.6069
30 June 2010
0.8498
1.2185
1.5051
Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to Brambles and the revenue can be
reliably measured. Revenue is measured at the fair value of the
consideration received or receivable. Amounts disclosed as revenue
are net of duties and taxes paid (Goods and Services Tax and local
equivalents).
Revenue for services is recognised when invoicing the customer
following the provision of the service and/or under the terms of
agreed contracts in accordance with agreed contractual terms in the
period in which the service is provided.
Other income
Other income includes net gains on disposal of property, plant and
equipment in the ordinary course of business, which are recognised
when control of the property has passed to the buyer. Amounts
arising from compensation for irrecoverable pooling equipment are
recognised only when it is probable that they will be received.
Brambles Annual Report 2011 page 70
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
Executive and employee share-based compensation plans
Incentives in the form of share-based compensation benefits are
provided to executives and employees under performance share and
MyShare employee share plans approved by shareholders.
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 awards under the share-
based compensation 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 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
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
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.
Underlying profit is a non-statutory profit measure and represents
profit from continuing operations before finance costs, tax and
Significant items. It is presented within the segment information
note to assist users of the financial statements to better understand
Brambles’ business results.
ASSETS
Cash and cash equivalents
For purposes of the cash flow statement, cash includes deposits at
call with financial institutions and other highly liquid investments
which are readily convertible to cash on hand and are subject to an
insignificant risk of changes in value, net of outstanding bank
overdrafts. Bank overdrafts are presented within borrowings in the
balance sheet.
Receivables
Trade receivables due within one year do not carry any interest and
are recognised at amounts receivable less an allowance for any
uncollectible amounts. Trade receivables are recognised when
services are provided and settlement is expected within normal
credit terms.
Bad debts are written-off when identified. A provision for doubtful
receivables is established when there is a level of uncertainty as to
the full recoverability of the receivable, based on objective
evidence. Significant financial difficulties of the debtor, probability
that the debtor will enter liquidation, receivership or bankruptcy,
and default or significant delay in payment are considered
indicators that the trade receivable is doubtful.
The amount of the provision 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.
Brambles Annual Report 2011 page 71
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – CONTINUED
for the year ended 30 June 2011
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
The expected useful lives of PPE are generally:
- buildings 50 years
- pooling equipment 5–10 years
- other plant and equipment (owned and leased) 3–20 years
The cost of improvements to leasehold properties is amortised over
the unexpired portion of the lease, or the estimated useful life of
the improvement to Brambles, whichever is the shorter.
Provision is made for irrecoverable pooling equipment based on
experience in each market. The provision is presented within
accumulated depreciation.
The carrying values of PPE are reviewed for impairment when
circumstances indicate their carrying values may not be
recoverable. Assets are assessed within the cash generating unit to
which they belong. Any impairment losses are recognised in the
income statement.
The recoverable amount of PPE is the greater of its fair value less
costs to sell and its value in use. Value in use is determined as
estimated future cash flows discounted to their present value using
a pre-tax discount rate reflecting current market assessments of the
time value of money and the risk specific to the asset.
PPE is derecognised upon disposal or when no future economic
benefits are expected to arise from continued use of the asset. Any
net gain or loss arising on derecognition of the asset is included in
the income statement and presented 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.
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.
Brambles Annual Report 2011 page 72
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 (i.e. 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.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
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.
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.
Brambles Annual Report 2011 page 73
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – CONTINUED
for the year ended 30 June 2011
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
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.
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.
New accounting standards and interpretations issued but
not yet applied
At 30 June 2011, certain 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 2011.
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.
Revised IAS 1: Presentation of Financial Statements is applicable to
annual reporting periods beginning on or after 1 July 2012. The
revised standard requires entities to separate items presented in
other comprehensive income into two groups, based on whether the
items may be recycled to profit or loss in the future. Brambles will
assess the full impact of this standard after the AASB issues an
equivalent revised AASB 101 Presentation of Financial Statements.
Revised IAS 19: Employee Benefits is applicable to annual reporting
periods beginning on or after 1 January 2013. The revised standard
requires all remeasurements of defined benefit plan assets and
liabilities to be recognised immediately in other comprehensive
income. It further requires net interest expense on net defined
benefit liability to be calculated using a discount rate. The revised
requirements replace the expected return on plan assets that is
currently included in the profit or loss. Brambles will assess the full
impact of this standard after the AASB issues an equivalent revised
AASB 119 Employee benefits.
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.
Brambles Annual Report 2011 page 74
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.
Brambles’ pooling equipment operations around the world differ in
terms of business model, market dynamics, customer and
distribution channel profiles, contractual arrangements and
operational details. CHEP conducts audits continuously throughout
the year to confirm the existence and the condition of its pooling
equipment assets and to validate CHEP’s customer hire records.
During these audits, which take place at CHEP plants, customer sites
and other locations, pooling equipment is counted on a sample basis
and reconciled to the balances shown in CHEP’s customer hire
records. Brambles also monitors its pooling equipment operations
using detailed key performance indicators (KPIs).
The irrecoverable pooling equipment provision is determined by
reference to historical statistical data in each market, including the
outcome of audits and relevant KPIs, together with management
estimates of future equipment losses.
Impairment of goodwill
Brambles’ business units undertake an impairment review process
annually to ensure that goodwill balances are not carried at
amounts that are in excess of their recoverable amounts. The
recoverable amount of the goodwill in continuing operations is
determined based on value in use calculations undertaken at the
cash generating unit level. These calculations require the use of key
assumptions which are set out in Note 21.
Income taxes
Brambles is a global company and is subject to income taxes in
many jurisdictions around the world. Significant judgement is
required in determining the provision for income taxes on a
worldwide basis. There are many transactions and calculations
undertaken during the ordinary course of business for which the
ultimate tax determination is uncertain. Brambles recognises
liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome
of these matters is different from amounts provided, such
differences will impact the current and deferred tax provisions in
the period in which such outcome is obtained. Refer to Note 9 for
further details.
Brambles Annual Report 2011 page 75
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
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 six reportable segments, being CHEP Americas, CHEP EMEA, CHEP Asia-Pacific, IFCO (each 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. On 17 August 2011, Brambles announced that it
has decided to divest Recall. Refer Note 37.
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 below.
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 not allocated to
segments.
Sales
revenue
Cash flow from
operations1
Brambles
Value Added2
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
IFCO
Recall
Brambles HQ
Total
By geographic origin
Americas
Europe
Australia
Other
Total
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
IFCO
Recall
Brambles HQ
Continuing operations
Discontinued operations
Total
2010
US$m
285.7
411.7
94.1
791.5
-
121.7
(30.9)
882.3
2011
US$m
76.7
149.9
36.5
263.1
(11.3)
17.5
(21.0)
248.3
2010
US$m
43.9
151.4
30.4
225.7
-
10.8
(27.8)
208.7
2011
US$m
2010
US$m
2011
US$m
270.1
299.2
80.8
650.1
14.9
92.6
(32.5)
725.1
1,617.2
1,545.9
463.7
1,533.6
1,482.6
390.9
3,626.8
3,407.1
230.1
815.3
-
-
739.7
-
4,672.2
4,146.8
2,101.8
1,692.4
574.1
303.9
1,868.9
1,537.9
501.6
238.4
4,672.2
4,146.8
Operating
profit3
Significant items
before tax4
Underlying
profit4
2011
US$m
278.1
310.3
96.6
685.0
30.3
145.8
(51.9)
809.2
0.9
810.1
2010
US$m
235.2
324.9
77.8
637.9
-
123.1
(36.5)
724.5
3.9
728.4
2011
US$m
2010
US$m
2011
US$m
-
(27.1)
(1.3)
(28.4)
(2.9)
0.5
(17.2)
(48.0)
0.9
(47.1)
278.1
337.4
97.9
713.4
33.2
145.3
(34.7)
857.2
(1.9)
(4.6)
(0.6)
(7.1)
-
(1.5)
(0.3)
(8.9)
3.9
(5.0)
2010
US$m
237.1
329.5
78.4
645.0
-
124.6
(36.2)
733.4
Brambles Annual Report 2011 page 76 NOTE 4. SEGMENT INFORMATION - CONTINUED
Capital
expenditure
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
IFCO
Recall
Brambles HQ
Continuing operations
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Total CHEP
IFCO
Recall
Brambles HQ
Depreciation
and amortisation
2011
US$m
2010
US$m
176.9
173.5
59.2
409.6
18.1
51.3
0.8
171.9
167.8
52.1
391.8
-
47.9
4.3
2011
US$m
282.0
315.2
106.1
703.3
46.2
110.7
6.1
866.3
2010
US$m
214.2
174.8
67.2
456.2
-
73.7
2.1
532.0
479.8
444.0
Segment assets
Segment liabilities
2011
US$m
2010
US$m
2011
US$m
2010
US$m
1,817.0
1,851.8
600.8
1,702.6
1,499.4
451.6
4,269.6
3,653.6
2,009.7
-
1,248.5
1,038.2
32.5
32.9
250.3
420.4
131.3
802.0
456.5
230.0
58.8
204.9
339.3
91.0
635.2
-
182.5
78.5
896.2
Total segment assets and liabilities
7,560.3
4,724.7
1,547.3
Cash and borrowings
Current tax balances
Deferred tax balances
Equity-accounted investments
Total assets and liabilities
Non-current assets by geographic origin 5
Americas
Europe
Australia
Other
Total
138.5
135.5
3,137.3
1,894.8
16.1
36.3
16.8
16.3
19.8
14.0
102.9
529.1
-
78.5
408.2
-
7,768.0
4,910.3
5,316.6
3,277.7
2,627.5
2,744.8
604.6
427.2
1,936.8
1,270.4
487.9
315.2
6,404.1
4,010.3
1
2
3
4
Cash flow from operations is cash flow generated after net capital expenditure but excluding Significant items that are outside the
ordinary course of business.
BVA is a non-statutory profit measure and represents the value generated over and above the cost of the capital used to generate that
value. It is calculated using fixed June 2010 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%.
Operating profit is segment revenue less segment expense and excludes net finance costs.
Underlying profit is a non-statutory profit measure and represents 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 better understand Brambles' business results.
5 Non-current assets exclude financial instruments and deferred tax assets.
Brambles Annual Report 2011 page 77 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
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 property, plant and equipment (refer Note 6)
Irrecoverable pooling equipment provision expense
Amortisation:
- software
- acquired intangible assets (other than software)
- deferred expenditure
Other
C) NET FOREIGN EXCHANGE GAINS AND LOSSES - CONTINUING OPERATIONS
Net losses included in operating profit
Net (losses)/gains included in net finance costs
2011
US$m
2010
US$m
4,672.2
4,146.8
36.5
98.5
135.0
26.4
70.6
97.0
4,807.2
4,243.8
893.6
779.5
831.5
439.0
555.7
250.7
279.9
435.5
14.5
104.9
25.1
13.1
6.1
154.8
730.7
376.3
458.0
193.5
262.3
405.5
-
111.2
24.2
6.7
7.6
169.6
4,004.4
3,525.1
(2.1)
(1.4)
(3.5)
(1.0)
2.3
1.3
Brambles Annual Report 2011 page 78 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 (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.
Significant items are disclosed to assist users of the financial statements to better understand Brambles’ business results.
Items outside the ordinary course of business:
- acquisition-related costsa
- restructuring costsb
- IFCO integration costsc
Significant items from continuing operations
Items outside the ordinary course of business:
- restructuring costsb
Significant items from continuing operations
Before
tax
(19.1)
(3.4)
(25.5)
(48.0)
Before
tax
(8.9)
(8.9)
2011
US$m
Tax
2.5
0.9
(7.2)
(3.8)
2010
US$m
Tax
2.6
2.6
After
tax
(16.6)
(2.5)
(32.7)
(51.8)
After
tax
(6.3)
(6.3)
a Professional fees were incurred in 2011 in relation to the IFCO, Unitpool, CAPS and JMI business acquisitions described in Note 13.
b During 2011, redundancy and plant closure expenses of US$3.4 million have been incurred in various countries (2010: US$8.9 million).
c
Integration costs of US$25.5 million have been incurred by IFCO and CHEP EMEA following the acquisition of IFCO Systems NV. These include US$14.5 million
impairment of CHEP Europe's reusable plastic crates (RPC) assets and redundancies, offset by a US$1.9 million gain on repayment of an IFCO bond borrowing.
Tax expense of US$7.2 million includes US$8.4 million tax expense resulting from the acquisition and integration of IFCO.
Brambles Annual Report 2011 page 79 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 7. EMPLOYMENT COSTS - CONTINUING OPERATIONS
Wages and salaries
Social security costs
Share-based payment expense
Pension costs:
- defined contribution plans
- defined benefit plans
Other post-employment benefits
The average monthly number of employees in continuing operations was:
CHEP
IFCO
Recall
Brambles HQ
NOTE 8. NET FINANCE COSTS
Finance revenue
Bank accounts and short term deposits
Derivative financial instruments
Other
Finance costs
Interest expense on bank loans and borrowings
Derivative financial instruments
Other
Net finance costs
2011
US$m
753.6
81.4
13.6
22.9
6.4
15.7
893.6
2010
US$m
653.2
71.5
11.1
19.9
5.4
18.4
779.5
2011
2010
7,982
3,806
5,238
108
7,617
-
5,004
93
17,134
12,714
2011
US$m
3.1
12.1
2.0
17.2
(134.7)
(9.2)
(0.8)
(144.7)
(127.5)
2010
US$m
2.2
4.8
0.6
7.6
(101.9)
(14.8)
(0.5)
(117.2)
(109.6)
Brambles Annual Report 2011 page 80 NOTE 9. INCOME TAX
A) COMPONENTS OF TAX EXPENSE
Amounts recognised in the income statement
Current income tax - continuing operations:
- income tax charge
- prior year adjustments
Deferred tax - continuing operations:
- origination and reversal of temporary differences
- previously unrecognised tax losses
- prior year adjustments
Tax expense - continuing operations
Tax benefit - discontinued operations (Note 12)
Tax expense recognised in the income statement
Amounts recognised in the statement of comprehensive income
- on actuarial gains/(losses) on defined benefit pension plans
- on losses on revaluation of cash flow hedges
Tax expense/(benefit) recognised directly in the statement of comprehensive income
B) RECONCILIATION BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT BEFORE TAX
Profit before tax - continuing operations
Tax at standard Australian rate of 30% (2010: 30%)
Effect of tax rates in other jurisdictions
Prior year adjustments
Current year tax losses not recognised
Foreign withholding tax - unrecoverable
Change in tax rates
Non-deductible expenses
Other taxable items
Prior year tax losses recouped/recognised
Other
Tax expense - continuing operations
Tax benefit - discontinued operations (Note 12)
Total income tax expense
2011
US$m
2010
US$m
242.2
(11.2)
231.0
(3.8)
(2.5)
(14.8)
(21.1)
209.9
(2.7)
207.2
3.6
2.3
5.9
681.7
204.5
(22.7)
(26.2)
13.8
15.2
0.2
15.8
11.6
(2.5)
0.2
209.9
(2.7)
207.2
201.8
13.8
215.6
(6.6)
(15.7)
(22.3)
(44.6)
171.0
(1.0)
170.0
(1.3)
0.5
(0.8)
614.9
184.5
(9.9)
(8.5)
6.1
5.5
0.2
7.5
-
(15.7)
1.3
171.0
(1.0)
170.0
Brambles Annual Report 2011 page 81 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 9. INCOME TAX - CONTINUED
C) COMPONENTS OF AND CHANGES IN DEFERRED TAX ASSETS
Deferred tax assets shown in the balance sheet are represented by cumulative temporary differences attributable to:
2011
US$m
2010
US$m
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
Acquisition of subsidiary
Offset against deferred tax liabilities
Currency variations
At 30 June
9.5
48.9
283.3
83.1
424.8
4.4
-
3.8
8.2
10.5
37.6
143.5
48.9
240.5
3.3
4.9
0.3
8.5
(396.7)
(229.2)
36.3
19.8
19.8
67.7
0.3
-
(54.6)
3.1
36.3
7.0
7.5
0.6
-
5.1
(0.4)
19.8
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$1,382.8 million (2010: US$569.0 million)
available for offset against future profits. A deferred tax asset has been recognised in respect of US$855.8 million (2010:
US$395.0 million) of such losses.
The benefit for tax losses will only be obtained if:
-
Brambles derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the
losses to be realised;
-
Brambles continues to comply with the conditions for deductibility imposed by tax legislation; and
-
no changes in tax legislation adversely affect Brambles in realising the benefit from the deductions for the losses.
No deferred tax asset has been recognised in respect of the remaining unused tax losses of US$527.0 million (2010: US$174.0 million) due
to the unpredictability of future profit streams in the relevant jurisdictions. Tax losses of US$376.5 million will expire between 2012 and
2022. All other losses may be carried forward indefinitely.
Brambles Annual Report 2011 page 82 NOTE 9. INCOME TAX - CONTINUED
D) COMPONENTS AND CHANGES IN DEFERRED TAX LIABILITIES
Deferred tax liabilities shown in the balance sheet are represented by cumulative temporary differences attributable to:
2011
US$m
2010
US$m
Items recognised through the income statement
Accelerated depreciation for tax purposes
Other
Items recognised in the statement of comprehensive income
Cash flow hedges
Set-off of deferred tax assets
Net deferred tax liabilities
Changes in deferred tax liabilities were as follows:
At 1 July
Charged/(credited) to the income statement
Charged to the statement of comprehensive income
Acquisition of subsidiary
Offset against deferred tax asset
Currency variations
At 30 June
716.4
202.5
918.9
6.9
6.9
538.1
99.3
637.4
-
-
(396.7)
(229.2)
529.1
408.2
408.2
46.6
2.1
89.5
(54.6)
37.3
529.1
449.9
(37.1)
-
-
5.1
(9.7)
408.2
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$2,253.5 million (2010:
US$1,865.6 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$2,554.3 million (2010: US$2,093.3 million), of which US$631.9 million (2010: US$170.9 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.
Brambles Annual Report 2011 page 83
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
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
2011
US cents
2010
US cents
32.9
32.7
32.6
32.5
36.2
0.3
0.2
31.8
31.7
31.5
31.4
31.9
0.3
0.3
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 28.
A) WEIGHTED AVERAGE NUMBER OF SHARES DURING THE YEAR
Used in the calculation of basic earnings per share
Adjustment for share 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
2011
million
2010
million
1,445.6
1,411.3
6.3
5.9
1,451.9
1,417.2
2011
US$m
2010
US$m
471.8
3.6
475.4
857.2
(127.5)
729.7
(206.1)
523.6
523.6
(51.8)
471.8
443.9
4.9
448.8
733.4
(109.6)
623.8
(173.6)
450.2
450.2
(6.3)
443.9
Brambles Annual Report 2011 page 84 NOTE 11. DIVIDENDS
A) DIVIDENDS DECLARED AND PAID DURING THE YEAR
Dividend per share (in Australian cents)
Franked amount at 30% tax (in Australian cents)
Cost (in US$ 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
Interim
2011
13.0
2.6
200.3
Final
2010
12.5
2.5
174.0
14 April 2011
14 October 2010
Final
2011
13.0
2.6
197.9
13 October 2011
21 September 2011
As this dividend had not been declared at the reporting date, it is not reflected in these financial statements. On 17 August 2011,
Brambles suspended its Dividend Reinvestment Plan.
2011
US$m
2010
US$m
C) FRANKING CREDITS
Franking credits available for subsequent financial years based on a tax rate of 30%
49.7
34.2
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 2011 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.
Brambles Annual Report 2011 page 85 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 12. DISCONTINUED OPERATIONS
These results include amortisation expense of US$5.7 million and closure costs of businesses discontinued during the year, offset by net
favourable provision adjustments relating to divestments completed in 2007 and prior years. The impact of these adjustments on profit
and cash flow are summarised below:
Profit before tax
Tax benefit
Profit for the year from discontinued operations
Net cash outflow from operating activities
NOTE 13. BUSINESS COMBINATIONS
ACQUISITIONS
2011
US$m
0.9
2.7
3.6
(4.7)
2010
US$m
3.9
1.0
4.9
(1.2)
A) Unitpool AG
On 31 August 2010, Brambles acquired Unitpool AG, a leading independent provider of pooled containers and pallets used by airlines for
the storage of passenger baggage and cargo, for an enterprise value of US$35 million, resulting in a net cash outflow of US$21.1 million.
B) Container and Pooling Solutions
On 4 January 2011, Brambles acquired Container and Pooling Solutions (CAPS), a USA-based provider of intermediate bulk containers and
automotive containers for an enterprise value of US$16.4 million, resulting in a net cash outflow of US$15.2 million.
C) IFCO Systems NV
On 15 November 2010, Brambles announced its acquisition of IFCO Systems NV (IFCO) for an enterprise value of €923 million, subject to
regulatory clearance. IFCO is a leading provider of pooled reusable plastic crates to the food supply chain worldwide, and pallet services
in the USA.
Brambles took majority control of IFCO on 31 March 2011 following the completion of its sale and purchase agreements and the
acquisition of shares under the public tender offer, resulting in a net cash outflow of US$1,000.6 million. Brambles owns 99.5% of IFCO's
share capital and has commenced a mandatory buy-out of non-controlling shareholders so as to achieve 100% control. Brambles has
recognised the non-controlling interest in IFCO at its proportionate share of the acquired net identifiable assets.
US$17.6 million of professional fees related to this acquisition have been expensed in 2011 as a Significant item.
For the period from 1 April 2011 to 30 June 2011, IFCO contributed revenue of US$230.1 million and profit after tax of US$16.3 million.
These financial statements do not reflect revenue of US$607.5 million and profit after tax of US$33.1 million reported by IFCO for the
period from 1 July 2010 to 31 March 2011, being prior to the date at which Brambles obtained control.
The fair value of the IFCO assets acquired, liabilities assumed and goodwill were as follows, based on preliminary acquisition accounting
data which will be finalised by 31 March 2012:
Purchase consideration
Fair value of net identifiable assets acquired
Goodwill
2011
US$m
1,029.4
39.5
989.9
The goodwill acquired is attributable to the profitability of the acquired business and anticipated synergies with CHEP's existing
operations, as well as benefits derived from the acquired workforce and other intangible assets that cannot be separately recognised.
Brambles Annual Report 2011 page 86 NOTE 13. BUSINESS COMBINATIONS - CONTINUED
On acquisition of IFCO, assets acquired and liabilities assumed were:
Cash and cash equivalents
Receivables
Inventories
Property, plant and equipment
Intangible assets
Trade and other payables
Borrowings
Current and deferred tax liabilities
Provisions
Net assets
Cash outflow on acquisition of IFCO was as follows:
Purchase consideration
Less: cash and cash equivalents acquired
Less: deferred purchase consideration
Net cash outflow
Fair value
US$m
23.0
250.9
10.2
499.9
210.9
994.9
365.4
442.4
92.4
55.2
955.4
39.5
2011
US$m
1,029.4
(23.0)
(5.8)
1,000.6
D) JMI Aerospace Limited
On 9 June 2011, Brambles acquired JMI Aerospace Limited (JMI), a New Zealand-based provider of maintenance and repair services for
non-flight critical aviation equipment, for an enterprise value of US$14.1 million, resulting in a net cash outflow of US$10.6 million.
E) Other
In addition to the above acquisitions, there were other minor acquisitions in 2011 with immaterial impact.
Brambles Annual Report 2011 page 87 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 14. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short term deposits
2011
US$m
2010
US$m
112.1
120.2
26.4
15.3
138.5
135.5
Cash and cash equivalents include a balance of US$5.6 million (2010: US$0.7 million) used as security for various contingent liabilities and
is not readily accessible. Short term deposits have initial maturities varying between 7 days and 3 months.
Refer to Note 30 for other financial instruments disclosures.
NOTE 15. 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
856.5
507.8
(18.4)
(9.0)
838.1
498.8
149.5
62.7
93.4
39.4
1,050.3
631.6
9.6
6.2
A) PROVISION FOR DOUBTFUL RECEIVABLES
Trade receivables are non-interest bearing and are generally on 30–90 day terms. A provision for doubtful receivables is established when
there is a level of uncertainty as to the full recoverability of the receivable, based on objective evidence. A provision of US$7.9 million
(2010: US$2.9 million) has been recognised as an expense in the current year for specific trade and other receivables for which such
evidence exists.
Movements in the provision for doubtful receivables were as follows:
At 1 July
Charge for the year
Amounts written off
Acquisition of subsidiaries
Foreign exchange differences
At 30 June
9.0
7.9
(3.7)
4.9
0.3
18.4
11.7
2.9
(5.2)
-
(0.4)
9.0
Brambles Annual Report 2011 page 88 NOTE 15. TRADE AND OTHER RECEIVABLES - CONTINUED
At 30 June, the ageing analysis of trade receivables by reference to due dates was as follows:
Not past due
Past due 0-30 days but not impaired
Past due 31-60 days but not impaired
Past due 61-90 days but not impaired
Past 90 days but not impaired
Impaired
2011
US$m
2010
US$m
645.4
410.0
123.4
35.6
10.9
22.8
18.4
70.7
12.9
5.2
-
9.0
856.5
507.8
At 30 June 2011, trade receivables of US$192.7 million (2010: US$88.8 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 2011, trade receivables of US$18.4 million (2010: US$9.0 million) were considered to be impaired. A provision of
US$18.4 million (2010: US$9.0 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 2011, other debtors of US$55.8 million (2010: US$35.3 million) were past due but not considered to be impaired. No specific
collection issues have been identified with these receivables. An ageing of these receivables was as follows:
Past due 0-30 days but not impaired
Past due 31-60 days but not impaired
Past due 61-90 days but not impaired
Past 90 days but not impaired
6.1
0.9
1.0
47.8
55.8
6.7
3.3
3.8
21.5
35.3
At 30 June 2011, there were no balances within other debtors that were considered to be impaired (2010: nil). No provision has been
recognised (2010: nil).
Refer to Note 30 for other financial instruments disclosures.
NOTE 16. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods
2011
US$m
34.1
9.5
12.9
56.5
2010
US$m
26.0
7.5
-
33.5
Brambles Annual Report 2011 page 89
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 17. DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swaps - cash flow hedges
Interest rate swaps - fair value hedges
Forward foreign exchange contracts - cash flow hedges
Forward foreign exchange contracts - held for trading
Interest rate swaps - cash flow hedges
Interest rate swaps - fair value hedges
Embedded derivatives
Refer to Note 30 for other financial instruments disclosures.
NOTE 18. OTHER ASSETS
Current
Prepayments
Current tax receivable
Non-current
Prepayments
2011
US$m
2010
US$m
2011
US$m
2010
US$m
Current assets
Current liabilities
0.1
9.6
-
1.6
-
8.4
-
6.1
11.3
14.5
5.7
-
0.3
0.1
6.1
8.1
-
0.2
3.9
12.2
Non-current assets
Non-current liabilities
-
0.1
13.1
11.5
1.0
0.4
3.2
-
-
7.1
3.0
-
14.1
12.0
3.2
10.1
2011
US$m
2010
US$m
40.8
16.1
56.9
36.8
16.3
53.1
0.7
0.7
Brambles Annual Report 2011 page 90 NOTE 19. INVESTMENTS
A) JOINT VENTURES
Brambles has investments in the following unlisted jointly controlled entities, which are accounted for using the equity method.
Name (and nature of business)
CISCO - Total Information Management Pte. Limited (Information management)
Recall Becker GmbH & Co. KG (Document management services)
Place of
incorporation
Singapore
Germany
B) MOVEMENT IN CARRYING AMOUNT OF INVESTMENTS IN JOINT VENTURES
At 1 July
Share of results after income tax (Note 19C)
Dividends received/receivable
Foreign exchange differences
At 30 June
C) SHARE OF RESULTS OF JOINT VENTURES
Trading revenue
Expenses
Profit from ordinary activities before tax
Tax expense on ordinary activities
Profit for the year
D) SHARE OF ASSETS AND LIABILITIES OF JOINT VENTURES
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets - continuing operations
E) SHARE OF COMMITMENTS AND CONTINGENT LIABILITIES OF JOINT VENTURES
Contingent liabilities
Lease commitments
Total - continuing operations
% interest held
at reporting date
June
2011
49%
50%
June
2010
49%
50%
2011
US$m
2010
US$m
14.0
6.4
(5.6)
2.0
16.8
13.8
5.8
(5.9)
0.3
14.0
2011
US$m
2010
US$m
14.5
(6.8)
7.7
(1.3)
6.4
4.8
16.5
21.3
3.5
1.0
4.5
12.5
(5.6)
6.9
(1.1)
5.8
3.7
14.2
17.9
3.0
0.9
3.9
16.8
14.0
0.5
2.4
2.9
0.5
1.8
2.3
Brambles Annual Report 2011 page 91 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 20. PROPERTY, PLANT AND EQUIPMENT
At 1 July 2009
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2010
Opening net carrying amount
Additions
Disposals
Other transfers
Depreciation charge
Irrecoverable pooling equipment provision expense
Foreign exchange differences
Closing net carrying amount
At 30 June 2010
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2011
Opening net carrying amount
Additions
Acquisition of subsidiaries
Disposals
Other transfers
Depreciation charge
Irrecoverable pooling equipment provision expense
Impairment of property, plant and equipment
Foreign exchange differences
Closing net carrying amount
At 30 June 2011
Cost
Accumulated depreciation
Net carrying amount
Land and
Plant and
buildings
equipment
US$m
US$m
Total
US$m
129.0
(54.3)
74.7
5,566.9
5,695.9
(2,200.0)
(2,254.3)
3,366.9
3,441.6
74.7
8.2
(2.2)
4.0
(6.8)
-
(4.3)
73.6
130.4
(56.8)
73.6
73.6
29.2
4.0
(3.0)
(2.3)
(5.7)
-
-
11.0
106.8
182.5
(75.7)
106.8
3,366.9
3,441.6
494.1
(58.1)
(30.4)
(398.7)
(111.2)
(112.4)
502.3
(60.3)
(26.4)
(405.5)
(111.2)
(116.7)
3,150.2
3,223.8
5,287.8
5,418.2
(2,137.6)
(2,194.4)
3,150.2
3,223.8
3,150.2
3,223.8
792.7
515.9
(61.1)
(5.1)
(429.8)
(104.9)
(14.5)
328.8
821.9
519.9
(64.1)
(7.4)
(435.5)
(104.9)
(14.5)
339.8
4,172.2
4,279.0
6,986.2
7,168.7
(2,814.0)
(2,889.7)
4,172.2
4,279.0
The net carrying amounts above include plant and equipment held under finance lease US$67.6 million (2010: US$1.2 million); leasehold
improvements US$9.0 million (2010: US$6.4 million); and capital work in progress US$21.1 million (2010: US$17.6 million).
Brambles Annual Report 2011 page 92
NOTE 21. GOODWILL
A) NET CARRYING AMOUNTS AND MOVEMENTS DURING THE YEAR
At 1 July
Carrying amount
Year ended 30 June
Opening net carrying amount
Acquisition of subsidiaries
Foreign exchange differences
Closing net carrying amount
At 30 June
Gross carrying amount
Accumulated impairment
Net carrying amount
2011
US$m
2010
US$m
607.0
612.3
607.0
1,021.8
65.5
1,694.3
1,694.3
-
1,694.3
612.3
-
(5.3)
607.0
607.0
-
607.0
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
IFCO
Recall
Total goodwill
56.8
60.8
42.1
159.7
985.2
549.4
1,694.3
51.4
36.4
25.9
113.7
-
493.3
607.0
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 10.1% and 25.0%.
Sensitivity
Any reasonable change to the above key assumptions would not cause the carrying value of the CGU to materially exceed its recoverable
amount.
Brambles Annual Report 2011 page 93 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 22. INTANGIBLE ASSETS
At 1 July 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
Year ended 30 June 2011
Opening carrying amount
Additions
Acquisition of subsidiaries
Disposals
Amortisation charge
Foreign exchange differences
Closing carrying amount
At 30 June 2011
Gross carrying amount
Accumulated amortisation
Net carrying amount
Software
US$m
307.9
(230.7)
77.2
77.2
22.8
(0.1)
(24.2)
(1.7)
74.0
317.3
(243.3)
74.0
74.0
36.2
1.4
(0.1)
(30.0)
4.8
86.3
Other1
US$m
160.2
(74.4)
85.8
85.8
11.6
(0.1)
(14.3)
1.6
84.6
172.1
(87.5)
84.6
84.6
8.2
226.5
(0.4)
(20.0)
18.5
317.4
Total
US$m
468.1
(305.1)
163.0
163.0
34.4
(0.2)
(38.5)
(0.1)
158.6
489.4
(330.8)
158.6
158.6
44.4
227.9
(0.5)
(50.0)
23.3
403.7
371.5
(285.2)
86.3
434.0
(116.6)
317.4
805.5
(401.8)
403.7
1 Other intangible assets primarily comprise acquired customer relationships, customer lists and agreements.
Brambles Annual Report 2011 page 94 NOTE 23. TRADE AND OTHER PAYABLES
Current
Trade payables
GST/VAT, refundable deposits and other payables
Accruals and deferred income
Non-current
Other liabilities
2011
US$m
569.8
255.9
438.6
1,264.3
2010
US$m
305.7
70.2
305.5
681.4
27.0
20.9
Trade payables and other current payables are non-interest bearing and are generally settled on 30–90 day terms.
Refer to Note 30 for other financial instruments disclosures.
NOTE 24. BORROWINGS
Current
Unsecured:
- bank overdraft
- bank loans1
- loan notes2
- accrued interest on loan notes2,3,4,6
- finance lease liabilities (Note 32)
- other loans
Non-current
Unsecured:
- bank loans1
- loan notes2,3,4,5,6
- finance lease liabilities (Note 32)
- other loans
Total borrowings
58.1
34.0
169.3
29.5
26.2
8.5
12.2
240.3
-
22.9
0.6
-
325.6
276.0
920.6
1,847.4
41.4
2.3
2,811.7
3,137.3
324.5
1,293.7
0.6
-
1,618.8
1,894.8
1
2
3
4
5
6
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 June 2016; and (ii) various regional banking facilities providing local currency funding to certain subsidiaries.
Included in bank loans are borrowings of US$507.0 million (2010: US$61.5 million) which have been designated as a hedge of the net investment in Brambles'
European subsidiaries and are being used to partially hedge Brambles' exposure to foreign exchange risks on these investments.
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.
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.
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.
US$450.0 million of loan notes have been hedged with interest rate swaps for fair value risk. In accordance with AASB 139, the carrying value of the notes
have been adjusted by US$20.3 million (2010: US$14.4 million) in relation to changes in fair value attributable to the hedged risk.
Notes issued in April 2011 in the European bond market in respect of €500.0 million of 4.625% Guaranteed Senior Notes due 20 April 2018.
Refer to Note 30 for other financial instruments disclosures
Brambles Annual Report 2011 page 95
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 24. BORROWINGS - CONTINUED
A) BORROWING FACILITIES AND CREDIT STANDBY ARRANGEMENTS
Total facilities:
- committed borrowing facilities
- loan notes
- credit standby/uncommitted/overdraft arrangements
Facilities used at reporting date:1
- committed borrowing facilities
- loan notes
- credit standby/uncommitted/overdraft arrangements
Facilities available at reporting date:
- committed borrowing facilities
- credit standby/uncommitted/overdraft arrangements
2011
US$m
2010
US$m
2,434.2
2,008.2
271.5
4,713.9
1,000.6
2,008.2
86.3
2,481.0
1,285.0
151.2
3,917.2
534.4
1,285.0
43.8
3,095.1
1,863.2
1,433.6
185.2
1,618.8
1,946.6
107.4
2,054.0
Borrowing facilities are arranged by Brambles on behalf of its subsidiaries. Funding is generally sourced from relationship banks and
debt capital market investors on a medium to long term basis. The expiry dates of committed borrowing facilities range out to June
2016 with loan notes having maturities out to April 2020. The average term to maturity of the committed borrowing facilities and the
loan notes is equivalent to 4.1 years (2010: 3.6 years). These facilities are unsecured and are guaranteed as described in Note 38B.
B) BORROWING FACILITIES MATURITY PROFILE
Maturity
2011
Less than 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Type
Bank loans/loan notes/overdrafts/finance
leases/other loans
Bank loans/finance leases/other loans
Bank loans/loan notes/finance leases/other loans
Bank loans/loan notes/finance leases/other loans
Bank loans/loan notes/finance leases
Over 5 years
Loan notes
2010
Less than 1 year
Bank loans/overdrafts
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Over 5 years
Bank loans/loan notes
Bank loans
Bank loans/loan notes
Loan notes
Loan notes
Total
facilities
477.2
405.1
1,475.3
525.3
491.3
1,339.7
4,713.9
460.8
763.9
677.4
936.1
407.5
671.5
US$m
Facilities
used1
292.0
182.6
708.2
515.3
57.3
1,339.7
3,095.1
249.0
271.5
117.8
145.9
407.5
671.5
Facilities
available
185.2
222.5
767.1
10.0
434.0
-
1,618.8
211.8
492.4
559.6
790.2
-
-
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$42.2 million (2010: US$31.6 million) from loan notes and borrowings as shown in the balance sheet which are
measured on the basis of amortised cost as determined under the effective interest method and include accrued interest, transaction costs and fair value
adjustments on certain hedging instruments.
3,917.2
1,863.2
2,054.0
Brambles Annual Report 2011 page 96 NOTE 25. PROVISIONS
At 1 July 2010
Current
Non-current
Charge to income statement:
- additional provisions
- unused amounts reversed
Utilisation of provision
Acquisition of subsidiaries
Currency variations
At 30 June 2011
Current
Non-current
Employee
entitlements
US$m
Business
disposals
US$m
49.1
8.3
57.4
74.1
-
(61.9)
5.8
10.6
86.0
78.5
7.5
8.1
10.6
18.7
-
(10.9)
(2.1)
-
3.0
8.7
8.3
0.4
Other
US$m
30.0
15.1
45.1
60.7
-
(47.6)
50.8
5.6
114.6
102.5
12.1
Total
US$m
87.2
34.0
121.2
134.8
(10.9)
(111.6)
56.6
19.2
209.3
189.3
20.0
Employee entitlements provision comprises US$12.8 million (2010: US$8.8 million) for long service leave, US$2.1 million (2010:
US$1.6 million) for phantom shares and US$71.1 million (2010: US$47.0 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$5.3 million (2010: US$0.5 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$7.5 million (2010: US$8.3 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$25.0 million (2010: US$22.4 million) for restructuring and integration costs, US$26.4 million (2010:
US$1.3 million) for litigation and customer disputes and US$63.2 million (2010: US$21.4 million) for other known exposures.
Brambles Annual Report 2011 page 97
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 26. RETIREMENT BENEFIT OBLIGATIONS
A) DEFINED CONTRIBUTION PLANS
Brambles operates a number of defined contribution retirement benefit plans for qualifying employees. The assets of these plans are held
in separately administered trusts or insurance policies. In some countries, Brambles’ employees are members of state-managed
retirement benefit plans. Brambles is required to contribute a specified percentage of payroll costs to the retirement benefit plan to fund
benefits. The only obligation of Brambles with respect to defined contribution retirement benefit plans is to make the specified
contributions.
US$22.9 million (2010: US$19.9 million) representing contributions paid and payable to these plans by Brambles at rates specified in the
rules of the plans relating to continuing operations has been recognised as an expense in the income statement.
B) DEFINED BENEFIT PLANS
Brambles operates a number of defined benefit pension plans, which are closed to new entrants. The majority of the plans are self-
administered and the plans’ assets are held independently of Brambles' finances. Under the plans, members are entitled to retirement
benefits based upon a percentage of final salary. No other post-retirement benefits are provided. The plans are funded plans.
The plan assets and the present value of the defined benefit obligation recognised in Brambles' balance sheet are based upon the most
recent formal actuarial valuations which have been updated to 30 June 2011 by independent professionally qualified actuaries and take
account of the requirements of AASB 119. The present value of the defined benefit obligation, the related current service cost and past
service cost were measured using the projected unit credit method.
In addition to the principal defined benefit plans included in disclosures below, Brambles has a number of other arrangements in several
countries that are either defined benefit pension plans or have certain defined benefit characteristics. Each of these arrangements has
been assessed as immaterial separately and in aggregate and they have not been subjected to an independent AASB 119 valuation.
C) BALANCE SHEET AMOUNTS
The amounts recognised in Brambles' balance sheet in respect of defined benefit plans were as follows:
Present value of defined benefit obligations
Fair value of plan assets
Net liability recognised in the balance sheet
2011
US$m
239.6
(202.2)
37.4
2010
US$m
211.1
(160.7)
50.4
Brambles has no legal obligation to settle this liability with an immediate contribution or additional one-off contributions. Brambles
intends to continue to make contributions to the plans at the rates recommended by the funds' actuaries. Refer Note 26(I).
D) INCOME STATEMENT AMOUNTS
The amounts recognised in Brambles' income statement in respect of defined benefit plans were as follows:
Current service cost
Interest cost
Expected return on plan assets
Changes arising from curtailments and settlements
Net benefit expense included in employment cost (Note 7)
E) STATEMENT OF COMPREHENSIVE INCOME
Actuarial gains/(losses) reported in the consolidated statement of comprehensive income
Cumulative actuarial losses recognised
3.7
12.8
(10.8)
0.7
6.4
13.9
(4.4)
3.5
12.2
(10.3)
-
5.4
(5.9)
(18.3)
Brambles Annual Report 2011 page 98 NOTE 26. RETIREMENT BENEFIT OBLIGATIONS - CONTINUED
F) DEFINED BENEFIT OBLIGATION
Changes in the present value of the defined benefit obligation were as follows:
At 1 July
Current service cost
Interest cost
Contributions from plan members
Actuarial gains and losses
Currency variations
Benefits paid
Curtailments
At 30 June
2011
US$m
2010
US$m
211.1
196.0
3.7
12.8
0.7
(2.2)
20.1
(7.3)
0.7
239.6
3.5
12.2
0.7
19.3
(13.8)
(6.8)
-
211.1
All Brambles' defined benefit pension arrangements are closed to new entrants. Under the projected unit method, the current service cost
of these arrangements will increase as a percentage of payroll as the members of the plan approach retirement.
G) PLAN ASSETS
2011
Fair value
2010
Fair value
US$m
%
US$m
%
Assets held in the plans fell within the following categories:
Equities
Bonds/gilts
Insurance bonds
Cash
Other
96.5
51.0
5.0
19.6
30.1
202.2
47.7
25.2
2.5
9.7
14.9
100.0
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$22.7 million (2010: US$23.7 million).
68.6
53.0
3.9
20.3
14.9
42.7
33.0
2.4
12.6
9.3
160.7
100.0
2011
US$m
2010
US$m
160.7
145.2
10.9
11.7
15.1
10.4
0.7
(7.3)
202.2
10.3
13.4
(9.2)
7.1
0.7
(6.8)
160.7
Brambles Annual Report 2011 page 99 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 26. 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 2011
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 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
UK
4.7%
3.8%
5.5%
2.8%
8.0%
5.5%
1.0%
4.4%
3.4%
5.3%
3.4%
7.5%
5.3%
1.0%
other
than UK
South
Africa
3.3%
2.8%
5.1%
2.0%
6.8%
3.9%
2.0%
3.3%
2.8%
4.6%
2.0%
6.8%
3.6%
2.0%
5.8%
5.8%
8.5%
5.8%
5.0%
8.5%
7.0%
5.8%
5.8%
9.0%
5.8%
10.0%
9.0%
6.0%
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$3.5 million (2010: US$3.1 million) are being paid to remove the identified deficits
over a period of 6 years.
Contributions paid to the plans during 2011 were US$10.4 million (2010: US$7.1 million), all of which related to continuing operations. It is
estimated that the amount of contributions to be paid to the plans during 2012 will be US$8.9 million.
Brambles Annual Report 2011 page 100 NOTE 26. RETIREMENT BENEFIT OBLIGATIONS - CONTINUED
J) HISTORICAL SUMMARY
2011
US$m
2010
US$m
The history of the defined benefit plan deficit at the end of each year is as follows:
- plan liabilities
- plan assets
Net liability recognised in the balance sheet
(239.6)
202.2
(37.4)
(211.1)
160.7
(50.4)
2009
US$m
(196.0)
145.2
(50.8)
The history of favourable/(unfavourable) experience adjustments made in each year is as follows:
- on plan liabilities
- on plan assets
Net favourable/(unfavourable) adjustment
NOTE 27. CONTRIBUTED EQUITY
2.2
11.7
13.9
(19.3)
13.4
(5.9)
23.4
(26.3)
(2.9)
Total ordinary shares, of no par value, issued and fully paid:
At 1 July 2009
Issued during the year
Issued during the year under the Dividend Reinvestment Plan
At 30 June 2010
At 1 July 2010
Issued during the year
Issued during the year under the Dividend Reinvestment Plan
At 30 June 2011
2008
US$m
2007
US$m
(242.5)
179.1
(63.4)
(13.9)
(20.7)
(34.6)
(216.8)
187.2
(29.6)
(17.2)
17.2
-
Shares
US$m
1,401,869,039
13,847.6
2,048,065
18,312,603
11.8
120.2
1,422,229,707
13,979.6
1,422,229,707
13,979.6
32,770,055
24,367,692
240.8
149.8
1,479,367,454
14,370.2
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.
Brambles Annual Report 2011 page 101
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 28. SHARE-BASED PAYMENTS
The Remuneration Report sets out details relating to the Brambles share plans (pages 52 to 53), together with details of performance
share rights and MyShare matching conditional rights issued to Executive Directors and other Key Management Personnel (pages 48 to 49).
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 rights granted under the plans.
A) GRANTS OVER BRAMBLES LIMITED SHARES ISSUED SUBSEQUENT TO UNIFICATION
Grant date
Expiry date
2011
Performance share rights
19 Jan 2007
29 Aug 2007
19 Mar 2008
28 Apr 2008
27 Aug 2008
1 Jun 2009
16 Nov 2009
25 Nov 2009
12 Apr 2010
24 Nov 2010
21 Feb 2011
31 Mar 2011
31 Aug 2012
30 Aug 2013
2 Mar 2014
29 Apr 2014
27 Aug 2014
1 Jun 2011
19 Oct 2010
26 Nov 2015
12 Apr 2013
24 Nov 2016
21 Feb 2014
30 Jun 2014
Balance
at 1 July
Granted
during
the year
Exercised
during
the year
Forfeited/
lapsed during
the year
Balance
at 30 June
129,307
1,607,224
36,365
125,250
2,910,777
27,112
60,092
3,489,464
22,902
-
-
-
-
-
-
-
-
-
-
-
-
4,429,520
32,906
732,095
(39,140)
(500,798)
(36,365)
(116,500)
(48,228)
(27,112)
(60,092)
(8,029)
-
-
-
-
-
90,167
(909,567)
196,859
-
-
(4,000)
4,750
(84,710)
2,777,839
-
-
-
-
(212,373)
3,269,062
-
-
-
-
22,902
4,429,520
32,906
732,095
MyShare matching conditional rights
2009 Plan Year
31 Mar 2011
2010 Plan Year
31 Mar 2012
2011 Plan Year
31 Mar 2013
525,534
191,933
-
-
(490,354)
(35,180)
-
392,312
209,804
(12,028)
(268)
(45,740)
526,477
(3,298)
206,238
Total rights
9,125,960
5,796,637
(1,338,914)
(1,294,868)
12,288,815
2010 (summarised)
Total rights
8,222,331
4,219,025
(1,125,455)
(2,189,941)
9,125,960
Of the above grants, 291,776 rights were exercisable at 30 June 2011.
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
2011
2010
A$
A$
years
5.46
6.68
4.1
5.16
7.08
3.0
Brambles Annual Report 2011 page 102 NOTE 28. SHARE-BASED PAYMENTS - CONTINUED
B) GRANTS OVER BIL OR BIP SHARES PRE-UNIFICATION, NOW OVER BRAMBLES LIMITED SHARES
Balance
at 1 July
Granted
during
the year
Exercised
Forfeited/
during
lapsed during
Balance
the year
the year
at 30 June
Grant date
Expiry Date
2011
Performance share rights
8 Sep 2010
9 Sep 2010
21 Oct 2011
22 Oct 2011
8 Sep 2004
8 Sep 2004
21 Oct 2005
21 Oct 2005
Total rights
2010 (summarised)
Total options
Total rights
Total
12,000
12,000
22,800
11,608
58,408
601,034
347,034
948,068
Weighted average exercise price of options:
- previously over BIL shares
- previously over BIP shares
A$
£
5.08
1.90
Of the above grants, 17,541 rights were exercisable at 30 June 2011.
Weighted average data:
- share price at exercise date of grants exercised during the year
- remaining contractual life at 30 June
-
-
-
-
-
-
-
-
-
-
(12,000)
(12,000)
(12,450)
(4,417)
(40,867)
(601,034)
(265,117)
(866,151)
-
-
-
-
-
-
(23,509)
(23,509)
-
-
10,350
7,191
17,541
-
58,408
58,408
5.08
1.90
-
-
-
-
2011
2010
A$
£
years
6.43
3.86
0.3
7.33
3.95
0.7-0.9
There were 80,443 grants, 56,476 exercises and 1,731,920 forfeits in performance share rights and MyShare matching conditional rights
over Brambles Limited shares between the end of the financial year and 15 August 2011.
C) FAIR VALUE CALCULATIONS
The fair value of equity-settled 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 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
2011
Grants
A$6.76
31%
2010
Grants
A$6.59
38%
3.0 years
3.0 years
5.16%
3.70%
4.86%
3.75%
The expected volatility was determined based on a four-year historic volatility of Brambles' share prices.
D) SHARE-BASED PAYMENT EXPENSE - CONTINUING OPERATIONS
Brambles recognised a total expense of US$13.638 million (2010: US$11.146 million) relating to share-based payments, all within
continuing operations. Of this amount, US$0.432 million related to phantom share provisions (2010: US$0.472 million).
Brambles Annual Report 2011 page 103
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 29. RESERVES AND RETAINED EARNINGS
Reserves
Retained earnings
Non-controlling interests in reserves and retained earnings
A) MOVEMENTS IN RESERVES AND RETAINED EARNINGS
2011
US$m
2010
US$m
(14,716.8)
(15,007.4)
2,797.6
2,660.1
(11,919.2)
(12,347.3)
0.4
0.3
Share-
based
payment
US$m
Hedging
US$m
Reserves
Foreign
currency
translation Unification
US$m
US$m
Other
US$m
Total
US$m
Retained
earnings
US$m
(9.5)
71.1
218.2
(15,385.8)
167.3
(14,938.7)
2,520.1
-
-
(10.6)
4.1
12.3
(0.3)
(4.6)
-
-
-
-
-
-
-
-
-
-
-
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
(8.6)
72.7
147.0
(15,385.8)
167.3
(15,007.4)
2,660.1
-
-
(1.9)
0.6
7.7
0.3
(2.9)
-
-
-
-
-
-
-
-
-
-
-
-
13.2
(9.2)
3.8
-
-
-
279.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
279.0
10.3
-
(1.9)
0.6
7.7
0.3
(2.9)
13.2
(9.2)
3.8
-
-
-
-
-
-
-
-
-
-
(348.1)
475.3
(4.8)
80.5
426.0
(15,385.8)
167.3
(14,716.8)
2,797.6
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
Year ended 30 June 2011
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
- equity component of related tax
Dividends declared
Net profit for the year
Closing balance
Brambles Annual Report 2011 page 104 NOTE 29. 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 28 for further details.
Foreign currency translation reserve
This comprises cumulative exchange differences arising from the translation of the financial statements of foreign subsidiaries, net of
qualifying net investment hedges. The relevant accumulated balance is recognised in the income statement on disposal of a foreign
subsidiary.
Unification reserve
On Unification, Brambles Limited issued shares on a one-for-one basis to those Brambles Industries Limited (BIL) and Brambles Industries
plc (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.
Brambles Annual Report 2011 page 105 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 30. FINANCIAL RISK MANAGEMENT
Brambles is exposed to a variety of financial risks: market risk (including the effect of fluctuations in interest rates and exchange rates),
liquidity risk and credit risk.
Brambles' overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of Brambles.
Brambles uses standard derivative financial instruments to manage its risk exposure in the normal course of business. Brambles does not
trade in financial instruments for speculative purposes. Hedging activities are conducted through Brambles' Treasury department on a
centralised basis in accordance with Board policies and guidelines through standard operating procedures and delegated authorities.
Policies with respect to financial risk management and hedging activities are discussed below and should be read in conjunction with
detailed information contained in the Treasury & 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 financial assets are classified
as financial assets at fair value through profit or loss.
Financial assets
- cash at bank and in hand (Note 14)
- short term deposits (Note 14)
- trade receivables (Note 15)
- interest rate swaps (Note 17)
- embedded derivatives (Note 17)
- forward foreign currency contracts (Note 17)
Financial liabilities
- trade payables (Note 23)
- bank overdrafts (Note 24)
- bank loans (Note 24)
- loan notes (Note 24)
- finance lease liabilities (Note 24)
- other loans (Note 24)
- interest rate swaps (Note 17)
- forward foreign currency contracts (Note 17)
Carrying amount
Fair value
2011
US$m
112.1
26.4
838.1
22.8
1.0
1.6
569.8
58.1
954.6
2010
US$m
120.2
15.3
498.8
20.0
0.4
6.1
305.7
12.2
564.8
2011
US$m
2010
US$m
112.1
26.4
838.1
22.8
1.0
1.6
569.8
58.1
954.6
120.2
15.3
498.8
20.0
0.4
6.1
305.7
12.2
564.8
2,046.2
1,316.6
2,103.8
1,360.0
67.6
10.8
8.9
0.4
1.2
-
18.2
4.1
67.6
10.8
8.9
0.4
1.2
-
18.2
4.1
Brambles Annual Report 2011 page 106 NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
A) FAIR VALUES - CONTINUED
Brambles uses the following methods in estimating the fair values of financial instruments:
Level 1 - the fair value is calculated using quoted prices in active markets;
Level 2 - the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices); or
Level 3 - the fair value is estimated using inputs for the asset or liability that are not observable market data.
-
-
-
The table below sets out the fair values and methods used to estimate the fair value of derivatives designated as hedging
instruments.
Derivative financial assets
- interest rate swaps
- embedded derivatives
- forward foreign currency contracts
Derivative financial liabilities
- interest rate swaps
- forward foreign currency contracts
2011
2010
Level 1
Level 2
Level 3
US$m
US$m
US$m
-
-
-
-
-
22.8
1.0
1.6
8.9
0.4
-
-
-
-
-
Total
US$m
22.8
1.0
1.6
8.9
0.4
Level 1
Level 2
Level 3
US$m
US$m
US$m
Total
US$m
-
-
-
-
-
20.0
0.4
6.1
18.2
4.1
-
-
-
-
-
20.0
0.4
6.1
18.2
4.1
The fair values of derivatives designated as hedging instruments are determined using valuation techniques that are based on observable
market data. For forward foreign exchange contracts, the net fair value is taken to be the unrealised gain or loss at balance date
calculated by reference to the current forward rates for contracts with similar maturity dates. Fair value for other financial assets and
liabilities has been calculated by discounting future cash flows at prevailing interest rates for the relevant yield curve.
Brambles Annual Report 2011 page 107 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
B) MARKET RISK
Brambles has the following risk policies in place with respect to market risk.
Interest rate risk
Brambles' exposure to potential volatility in finance costs, predominantly US dollars and euros, is managed by maintaining a mix of fixed
and floating-rate instruments within select target bands over defined periods. In most cases, interest rate derivatives are used to achieve
these targets synthetically.
The following table sets out the financial instruments exposed to interest rate risk at reporting date:
Financial assets (floating rate)
Cash at bank
Short term deposits
Weighted average effective interest rate
Financial liabilities (floating rate)
Bank overdrafts
Bank loans
Interest rate swaps (notional value) - cash flow hedges
Interest rate swaps (notional value) - fair value hedges
Net exposure to cash flow interest rate risk
Weighted average effective interest rate
Financial liabilities (fixed rate)
Loan notes
Finance lease liabilities
Other loans
Interest rate swaps (notional value) - cash flow hedges
Interest rate swaps (notional value) - fair value hedges
Net exposure to fair value interest rate risk
Weighted average effective interest rate
2011
US$m
112.1
26.4
138.5
1.6%
58.1
954.6
(272.3)
450.0
1,190.4
3.7%
2010
US$m
120.2
15.3
135.5
1.3%
12.2
564.8
(460.9)
450.0
566.1
3.0%
2,046.2
1,316.6
67.6
10.8
272.3
(450.0)
1,946.9
5.1%
1.2
-
460.9
(450.0)
1,328.7
5.4%
Interest rate swaps - cash flow hedges
Brambles enters into various interest rate risk management transactions for the purpose of managing finance costs to achieve more stable
and predictable finance expense results. The instruments primarily used are interest rate swaps and caps.
During 2011, Brambles entered into or maintained interest rate swap transactions with various banks hedging variable rate borrowings in
US dollars and euros. The purpose of the interest rate swaps was to hedge variable interest expense under borrowings against rising
interest rates. Interest rate swaps achieve this by synthetically converting the variable interest rate payment into a fixed interest liability
on the dates on which interest is payable on the underlying debt. The fair value of these contracts at reporting date was US$(8.8) million
(2010: US$(15.1) million).
The terms of the contracts have been negotiated to match the projected drawdowns and rollovers of variable rate bank debt.
Brambles Annual Report 2011 page 108 NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
B) MARKET RISK - CONTINUED
Interest rate swaps - fair value hedges
Brambles has entered into interest rate swap transactions with various banks swapping US$450.0 million of the US$750.0 million 144A
bonds to variable rate. The fair value of these contracts at reporting date was US$22.7 million (2010: US$16.9 million).
The terms of the swaps match the terms of the fixed rate bond issue for the amounts and durations being hedged.
The gain or loss from re-measuring the interest rate swaps at fair value is recorded in the income statement together with any changes in
the fair value of the hedged asset or liability that is attributed to the hedged risk. For 2011, all interest rate swaps were effective
hedging instruments.
Sensitivity analysis
The following table sets out the sensitivity of Brambles' financial assets and financial liabilities to interest rate risk applying the following
assumptions:
2011
2010
lower rates
higher rates
lower rates
higher rates
Interest rate risk
US dollar interest rates
Australian dollar interest rates
Sterling interest rates
Euro interest rates
Impact on profit after tax
Impact on equity
- 15 bps
- 25 bps
- 25 bps
- 25 bps
US$m
0.5
(0.5)
+ 75 bps
+ 75 bps
+ 75 bps
+ 75 bps
US$m
(4.8)
0.3
- 25 bps
- 25 bps
- 25 bps
- 25 bps
US$m
0.9
(0.2)
+ 75 bps
+ 75 bps
+ 75 bps
+ 75 bps
US$m
(3.0)
0.7
Based on financial instruments held at 30 June 2011, 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$0.5 million higher or
US$4.8 million lower (2010: US$0.9 million higher or US$3.0 million lower), mainly as a result of lower/higher interest expense on bank
borrowings. The impact on equity would have been US$0.5 million lower or US$0.3 million higher (2010: US$0.2 million lower or
US$0.7 million higher) mainly as a result of the incremental movement through the hedging reserve relating to the effective portion of
cash flow hedges. Given its geographically diverse operations, Brambles had interest rate exposure positions against a variety of
currencies, predominantly US dollars and euros.
Brambles Annual Report 2011 page 109 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
B) MARKET RISK - CONTINUED
Foreign exchange risk
Exposure to foreign exchange risk generally arises in transactions affecting either the value of transactions translated back to the
functional currency of a subsidiary or affecting the value of assets and liabilities of overseas subsidiaries when translated back to the
Group's reporting currency. Foreign exchange hedging is used when a transaction exposure exceeds certain thresholds and as soon as a
defined exposure arises.
Currency profile
The following table sets out the currency mix profile of Brambles' financial instruments at reporting date:
US
dollar
US$m
Aust.
dollar
US$m
Sterling
US$m
Euro
US$m
Other
US$m
Total
US$m
2011
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
- other loans
- interest rate swaps
- forward foreign currency contracts
- net investment hedge
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
7.5
-
22.7
-
7.6
8.7
-
-
-
125.6
37.8
134.3
-
-
-
-
-
-
7.4
-
2.7
201.6
38.7
1,322.3
0.2
-
8.9
105.8
-
-
-
-
-
3.8
-
-
-
-
-
-
35.6
0.4
0.1
-
17.9
54.0
37.1
73.7
723.9
67.4
8.9
-
60.3
26.0
-
1.0
112.1
26.4
22.8
1.0
136.2
287.3
223.5
449.6
10.9
58.1
133.6
447.6
-
-
1.9
-
2,046.2
67.6
10.8
8.9
23.8
128.0
24.7
286.1
-
507.0
-
507.0
1,646.2
42.5
26.5
1,546.0
171.1
3,432.3
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
-
-
-
-
-
-
-
-
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
120.2
15.3
20.0
0.4
648.0
803.9
12.2
503.3
-
1,316.6
0.1
-
1.2
18.2
269.5
105.4
646.0
61.5
-
61.5
402.7
151.1
2,559.0
Brambles Annual Report 2011 page 110 NOTE 30. 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 2011, Brambles entered into forward foreign exchange transactions with various banks in a variety of cross-currencies for terms
ranging up to 12 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 2011 and 2010, 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$(0.3) million (2010: US$(0.2) 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$1.5 million (2010: US$2.2 million).
Hedge of net investment in foreign entity
Included in bank loans at 30 June 2011 is a borrowing of US$507.0 million (2010: US$61.5 million) denominated in euros. This loan has
been designated as a hedge of the net investment in Brambles' European subsidiaries and is being used to partially hedge Brambles'
exposure to foreign exchange risks on these investments. For 2011 and 2010, there was no ineffectiveness to be recorded from such
partial hedges of net investments in foreign entities.
Sensitivity analysis
The following table sets out the sensitivity of Brambles' financial assets and financial liabilities to foreign exchange risk (transaction
exposures only):
Exchange rate movement
Impact on profit after tax
Impact on equity
Foreign exchange risk
2011
2010
lower rates
higher rates
lower rates
higher rates
-10%
US$m
0.1
(36.5)
+10%
US$m
(0.1)
36.5
-10%
US$m
0.3
(4.3)
+10%
US$m
(0.3)
4.3
Based on the financial instruments held at 30 June 2011, 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$0.1 million higher/lower (2010: US$0.3 million higher/lower). The impact
on equity would have been US$36.5 million lower/higher (2010: US$4.3 million lower/higher) as a result of the incremental movement
through the foreign currency translation reserve relating to the effective portion of a net investment hedge.
Brambles Annual Report 2011 page 111 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
C) LIQUIDITY RISK
Brambles' objective is to maintain adequate liquidity to meet its financial obligations as and when they fall due. Brambles funds its
operations through existing equity, retained cash flow and borrowings. Funding is generally sourced from relationship banks and debt
capital market investors on a medium to long term basis.
Bank credit facilities are generally structured on a committed multi-currency revolving basis and at balance date had maturities ranging
out to June 2016. Borrowings under the bank credit facilities are floating-rate, unsecured obligations with covenants and undertakings
typical for these types of arrangements.
Borrowings are raised from debt capital markets by the issue of unsecured fixed interest notes, with interest payable semi-annually or
annually.
Brambles also has access to further funding through overdrafts, uncommitted and standby lines of credit, principally to manage day-to-day
liquidity.
To minimise foreign exchange risks, borrowings are arranged in the currency of the relevant operating asset to be funded.
Refer to Note 24A for borrowing facilities and credit standby arrangements disclosures.
Maturities of derivative financial assets and liabilities
The maturity of Brambles' contractual cash flows on net and gross settled derivative financial instruments, based on the remaining period
to contractual maturity date, is presented below. Cash flows on interest rate swaps and forward foreign exchange contracts are valued
based on forward interest rates applicable at reporting date.
Year 1
US$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
2011
Net settled
Interest rate swaps
- cash flow hedges
- fair value hedges
Gross settled
Forward foreign exchange contracts
(5.6)
9.6
(3.0)
8.3
(0.2)
4.7
287.3
(286.1)
5.2
-
-
5.3
-
-
4.5
-
0.1
-
-
0.1
-
-
-
-
-
(8.8)
22.7
(8.8)
22.7
287.3
(286.1)
15.1
1.2
-
15.1
(8.2)
8.4
(5.1)
7.0
(1.9)
4.5
0.1
(0.4)
-
(2.6)
(15.1)
16.9
(15.1)
16.9
Forward foreign exchange contracts
- inflow
- (outflow)
648.0
(646.0)
2.2
-
-
1.9
-
-
2.6
-
-
-
-
(0.3)
(2.6)
648.0
(646.0)
3.8
2.0
-
3.8
- inflow
- (outflow)
2010
Net settled
Interest rate swaps
- cash flow hedges
- fair value hedges
Gross settled
Brambles Annual Report 2011 page 112 NOTE 30. 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, for principal and interest, is presented below. Refer to Note 24B for borrowing facilities maturity profile.
2011
Financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease liabilities
Other loans
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
569.8
58.1
71.5
292.9
29.6
8.7
-
-
196.3
91.7
20.6
0.2
-
-
681.2
126.2
12.9
2.1
-
-
104.4
-
-
.
569.8
58.1
1,053.4
569.8
58.1
954.6
486.0
1,648.0
2,644.8
2,046.2
8.0
0.1
2.5
-
73.6
11.1
67.6
10.8
1,030.6
308.8
822.4
598.5
1,650.5
4,410.8
3,707.1
Financial guarantees1
144.3
-
-
-
-
144.3
-
1,174.9
308.8
822.4
598.5
1,650.5
4,555.1
3,707.1
2010
Financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease liabilities
Financial guarantees 1
305.7
12.2
256.8
92.0
0.6
667.3
98.8
766.1
-
-
108.4
230.9
0.5
339.8
-
-
-
-
-
123.4
112.2
-
-
-
305.7
12.2
600.8
305.7
12.2
564.8
59.1
0.1
93.6
1,280.1
1,755.7
1,316.6
-
-
1.2
1.2
182.6
205.8
1,280.1
2,675.6
2,200.5
-
-
-
98.8
-
339.8
182.6
205.8
1,280.1
2,774.4
2,200.5
1
Refer to Note 33A 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.
Brambles Annual Report 2011 page 113 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
D) CREDIT RISK EXPOSURE
Brambles is exposed to credit risk on its financial assets, which comprise cash and cash equivalents, trade and other receivables and
derivative financial instruments. This exposure to credit risks arises from the potential failure of counterparties to meet their obligations.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial instruments as set out in Note 30A.
There is no significant concentration of credit risk.
Brambles trades only with recognised, creditworthy third parties. Collateral is generally not obtained from customers.
Customers are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past
experience and industry reputation. Credit limits are set for individual customers and approved by credit managers 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$24.2 million (2010: US$26.1 million). Brambles transacts derivatives with prominent financial institutions and
has credit limits in place to limit exposure to any potential non-performance by its counterparties.
E) CAPITAL RISK MANAGEMENT
Brambles’ objective when managing capital is to ensure Brambles continues as a going concern as well as to provide a balance between
financial flexibility and balance sheet efficiency. In determining its capital structure, Brambles considers the robustness of future cash
flows, potential funding requirements for growth opportunities and acquisitions, the cost of capital and ease of access to funding sources.
Brambles manages its capital structure to be consistent with a solid investment grade credit. At 30 June 2011, Brambles held investment
grade credit ratings of BBB+ from Standard and Poors and Baa1 from Moody's Investor Services.
Initiatives available to Brambles to achieve its desired capital structure include adjusting the amount of dividends paid to shareholders,
returning capital to shareholders, buying-back share capital, issuing new shares, selling assets to reduce debt and varying the maturity
profile of its borrowings.
Brambles considers its capital to comprise:
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total capital
2011
US$m
2010
US$m
3,137.3
1,894.8
(138.5)
(135.5)
2,998.8
1,759.3
2,451.4
1,632.6
5,450.2
3,391.9
Brambles has a financial policy to target a net debt to EBITDA ratio of less than 1.75 to 1. The ratio at 30 June 2011 was 2.2 to 1, outside
the target, because the IFCO acquisition was initially funded with debt. The net debt to EBITDA ratio is expected to revert within the
policy level during 2012.
Brambles Annual Report 2011 page 114 NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
E) CAPITAL RISK MANAGEMENT - CONTINUED
Under the terms of its major borrowing facilities, Brambles is required to comply with the following financial covenants:
-
-
the ratio of net debt to EBITDA is to be no more than 3.5 to 1; and
the ratio of EBITDA to net finance costs is to be no less than 3.5 to 1.
Brambles has complied with these financial covenants for 2011 and prior years. At balance date, based on the definitions below, the ratios
were:
Total borrowings
Less: fair value adjustments due to hedge accounting
Less: cash and cash equivalents
Net debt
EBITDA
Net finance costs
Net debt/EBITDA (times)
EBITDA/net finance cost (times)
2011
US$m
2010
US$m
3,137.3
1,894.8
(20.3)
(138.5)
(14.4)
(135.5)
2,978.5
1,744.9
1,330.6
1,171.6
127.5
109.6
2.2
10.4
1.5
10.7
The following definitions apply in the calculation of these financial covenants:
-
EBITDA means Brambles’ consolidated operating profit (excluding Significant items outside the ordinary course of business) before
depreciation, amortisation, impairment, profit of joint ventures and associates and certain fair value adjustments in respect of
financial derivatives; and
- net debt means Brambles' consolidated total borrowings, excluding the impact of fair value adjustments in relation to hedge
accounting, less cash and cash equivalents.
Brambles Annual Report 2011 page 115 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 31. CASH FLOW STATEMENT - ADDITIONAL INFORMATION
A) RECONCILIATION OF CASH
For the purpose of the cash flow statement, cash comprises:
Cash at bank and in hand (Note 14)
Short term deposits (Note 14)
Bank overdraft (Note 24)
B) RECONCILIATION OF PROFIT AFTER TAX TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Profit after tax
Adjustments for:
- depreciation and amortisation
- irrecoverable pooling equipment provision expense
- net gains on disposals of property, plant and equipment
- impairment of property, plant and equipment
- other valuation adjustments
- net gains on disposal of businesses and investments
- joint ventures
- equity-settled share-based payments
- finance revenues and costs
Movements in operating assets and liabilities, net of acquisitions and disposals:
- increase in trade and other receivables
- decrease/(increase) in prepayments
- (increase)/decrease in inventories
- (decrease) in deferred taxes
- increase in trade and other payables
- increase in tax payables
- increase/(decrease) in provisions
- other
2011
US$m
112.1
26.4
(58.1)
80.4
2010
US$m
120.2
15.3
(12.2)
123.3
475.4
448.8
485.5
104.9
(36.5)
14.5
(0.1)
(10.9)
(0.9)
13.2
(37.1)
(79.4)
1.1
(5.9)
(20.2)
70.1
5.3
37.6
(3.1)
444.0
111.2
(26.4)
-
(1.1)
(7.5)
0.1
10.7
7.9
(19.3)
(0.8)
22.1
(45.1)
15.5
35.3
(4.1)
(1.0)
Net cash inflow from operating activities
1,013.5
990.3
Brambles Annual Report 2011 page 116
NOTE 31. CASH FLOW STATEMENT - ADDITIONAL INFORMATION - CONTINUED
C) RECONCILIATION OF MOVEMENT IN NET DEBT
Net debt at beginning of the year
Net cash inflow from operating activities
Net cash outflow from investing activities
Net outflow/(inflow) from hedge instruments
Proceeds from issue of ordinary shares
Dividends paid, net of Dividend Reinvestment Plan
Increase on business acquisitions and disposals
Interest accruals, finance leases and other
Foreign exchange differences
Net debt at end of the year
Being:
Current borrowings
Non-current borrowings
Cash and cash equivalents
Net debt at end of the year
2011
US$m
1,759.3
(1,013.5)
1,762.5
9.5
(231.1)
224.0
453.5
(15.9)
50.5
2010
US$m
2,143.4
(990.3)
440.4
(35.8)
(2.7)
204.5
-
26.0
(26.2)
2,998.8
1,759.3
325.6
2,811.7
(138.5)
2,998.8
276.0
1,618.8
(135.5)
1,759.3
D) NON-CASH FINANCING OR INVESTING ACTIVITIES
Dividends of US$149.8 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.
Brambles Annual Report 2011 page 117 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 32. COMMITMENTS
A) CAPITAL EXPENDITURE COMMITMENTS
At 30 June 2011, Brambles had commitments of US$43.1 million (2010: US$41.1 million) principally relating to property, plant and
equipment.
Capital expenditure contracted for but not recognised as liabilities at reporting date were as follows:
Within one year
Between one and five years
2011
US$m
43.1
-
43.1
2010
US$m
32.2
8.9
41.1
B) OPERATING LEASE COMMITMENTS
Brambles has taken out operating leases for offices, operational locations and plant and equipment. The leases have varying terms,
escalation clauses and renewal rights. Escalation clauses are rare and any impact is considered immaterial.
The future minimum lease payments under such non-cancellable operating leases are as follows:
Within one year
Between one and five years
After five years
Minimum lease payments
Plant
Occupancy
2011
US$m
34.6
42.0
0.1
2010
US$m
23.6
28.4
-
2011
US$m
194.6
548.8
298.9
76.7
52.0
1,042.3
2010
US$m
157.2
452.7
302.3
912.2
During the year, operating lease expense of US$228.3 million (2010: US$205.2 million) was recognised in the income statement.
C) FINANCE LEASE COMMITMENTS
Finance leases of plant and equipment are not a material feature of Brambles' funding arrangements. Finance lease commitments are
payable as follows:
Minimum lease payments
Within one year
Between one and five years
Finance costs
Within one year
Between one and five years
Minimum lease payments recognised as a liability
Within one year
Between one and five years
Plant
2010
US$m
0.6
0.6
1.2
-
-
-
0.6
0.6
1.2
2011
US$m
29.6
44.0
73.6
(3.4)
(2.6)
(6.0)
26.2
41.4
67.6
Brambles Annual Report 2011 page 118 NOTE 33. CONTINGENCIES
a)
Subsidiaries have contingent unsecured liabilities in respect of guarantees given relating to performance under contracts entered into
totalling US$127.5 million (2010: US$98.8 million), of which US$120.1 million (2010: US$92.7 million) is also guaranteed by Brambles
Limited and is included in Note 38B.
b)
c)
d)
e)
f)
A subsidiary has provided guarantees on a several basis in relation to a reduction in the share premium account of another subsidiary in
favour of certain creditors which amounts to US$1.8 million (2010: US$3.3 million).
A subsidiary has guaranteed certain lease obligations of third parties totalling US$10.3 million (2010: US$15.3 million). A subsidiary has
provided guarantees to support lease facilities entered into by certain other subsidiaries. Total facilities available amount to
US$11.8 million (2010: US$11.7 million), of which US$11.8 million (2010: US$11.7 million) has been drawn.
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.
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.
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 2011.
Brambles Annual Report 2011 page 119 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 34. AUDITORS' REMUNERATION
Amounts received or due and receivable by PwC (Australia) for:
Audit services:
- audit and review of Brambles' financial reports
- other assurance services
Other services:
- acquisition due diligence
- tax advisory services
Total remuneration of PwC (Australia)
Amounts received or due and receivable by related practices of PwC (Australia) for:
Audit services:
- audit and review of Brambles' financial reports
- other assurance services
Other services:
- tax advisory services
- other
Total remuneration of related practices of PwC (Australia)
Total PwC remuneration
Amounts received or due and receivable by non-PwC audit firms for audit
of subsidiaries' financial reports
Total auditors' remuneration
2011
US$'000
2010
US$'000
1,567
168
1,735
1,473
38
1,511
3,246
2,835
24
2,859
234
32
266
3,125
6,371
1,294
7,665
1,338
256
1,594
-
33
33
1,627
2,531
53
2,584
43
108
151
2,735
4,362
-
4,362
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 2011 and 2010, non-audit assignments primarily related to acquisition due diligence, tax consulting advice and implementation of a
compliance tracking system.
NOTE 35. 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
12,663
12,269
796
86
676
3,358
17,579
594
126
5,172
2,012
20,173
Brambles Annual Report 2011 page 120
NOTE 35. KEY MANAGEMENT PERSONNEL - CONTINUED
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 key management personnel,
including their related parties, are set out below:
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
Current Key Management Personnel
Name and holdings
2011
Executive Directors
T J Gorman
Ordinary shares
Share rights
G J Hayes
Ordinary shares
Share rights
J R A Judd
Ordinary shares
Share rights
P S Mackie
Ordinary shares
Share rights
K Pohler
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
930
-
-
546,682
446,224
37,024
-
-
405,870
329,141
-
-
-
65,399
219,192
119,699
13,284
28,691
854
-
139,763
156,686
-
6,628
-
17,584
-
-
-
251,637
-
-
-
-
-
-
152,538
11,393
71,361
-
-
39,941
92,602
-
-
135,168
27,112
-
-
-
-
-
134,255
14,312
24,245
-
139,746
-
116,434
-
775
-
-
-
-
-
-
-
-
58,126
276,704
46,452
283,396
1,046
195,389
-
-
-
-
-
-
40,037
-
-
-
-
14,037
-
107
-
-
-
8,481
-
20,383
-
11,314
-
1,584
-
101,495
-
40,967
955,882
-
735,011
79,436
296,916
961
272,237
-
251,637
66,607
346,488
60,324
200,658
57,766
379,094
2,630
334,360
101,495
116,434
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Former Key Management Personnel
J L Infinger
Ordinary shares
135
-
Share rights
1
-
Closing balances are as at the end of the year for ongoing employees and as at cessation of employment for those whose employment
ended during the year.
128,717
128,717
-
-
-
-
194
329
Brambles Annual Report 2011 page 121 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 35. KEY MANAGEMENT PERSONNEL - CONTINUED
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
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
245
-
219,688
326,994
-
-
-
405,870
783,524
809,734
10,151
246,453
-
483
-
440
-
-
-
128,717
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
110,038
-
-
-
-
-
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
50,590
177,446
-
84,345
13,931
28,668
245
-
110,041
53,701
50,689
210,106
-
103,662
-
6,278
-
9,955
-
17,701
-
27,109
-
-
-
-
39,941
123,368
65,490
58,718
37,538
-
-
-
-
18,419
111,645
134,534
28,136
-
97,926
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34,779
34,779
49,507
-
28,033
334,421
292
97,463
-
-
Former Key Management Personnel
C A van der Laan
Ordinary shares
Share rights
15,000
442,662
C) OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Other transactions with key management personnel are set out in Note 36C.
Further remuneration disclosures are set out in the Directors' Report on pages 40 to 55 of the Annual Report.
685
-
-
-
489
-
441
-
135
-
14,809
-
609
-
7,437
-
-
754
-
-
-
930
546,682
-
405,870
784,013
700,179
10,592
246,893
135
128,717
65,399
219,192
854
139,763
58,126
276,704
39,941
92,602
46,452
283,396
1,046
195,389
-
-
49,779
358,376
-
-
-
-
-
68,713
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Brambles Annual Report 2011 page 122 NOTE 36. 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 38B.
Dividends are declared within the group only as required for funding or other commercial reasons.
Brambles 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) JOINT VENTURES
Brambles' share of the net results of joint ventures is disclosed in Note 19.
C) 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.
D) OTHER RELATED PARTIES
A subsidiary has a non-interest bearing advance outstanding as at 30 June 2011 of US$1,327,000 (2010: US$1,201,000) 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.
Brambles Annual Report 2011 page 123 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 36. RELATED PARTY INFORMATION - CONTINUED
E) MATERIAL SUBSIDIARIES
The principal subsidiaries of Brambles during the year were:
Place of incorporation
% interest held at
reporting date
2011
2010
CHEP Benelux Nederland BV
The Netherlands
CHEP Italia SRL
Brambles Enterprises Limited
Italy
UK
CHEP South Africa (Proprietary) Limited
South Africa
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 Australia Limited
CHEP (Shanghai) Company Limited
CHEP Technology Pty Limited
CHEP India Pvt Limited
LeanLogistics Inc
Unitpool AG
IFCO
IFCO Systems NV
Recall
Recall Limited
Recall France SA
Recall Corporation, Inc.
Recall do Brasil Ltda
Recall Information Management Pty Limited
Recall Deutschland GmbH
Brambles HQ
Brambles Industries Limited
Brambles Holdings (UK) Limited
USA
Canada
UK
France
Germany
Spain
Mexico
Australia
China
Australia
India
USA
Switzerland
UK
France
USA
Brazil
Australia
Germany
Australia
UK
The Netherlands
99.5
-
Brambles International Finance BV
The Netherlands
Brambles USA Inc.
Brambles North America Incorporated
Brambles Finance plc
Brambles Finance Limited
USA
USA
UK
Australia
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.
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
Brambles Annual Report 2011 page 124 NOTE 36. RELATED PARTY INFORMATION - CONTINUED
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:
(a) 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
(b) in respect of a liability for legal costs:
(i) in defending or resisting proceedings in which the person is found to have a liability for which they could not have
been indemnified under paragraph (a)(i) above;
(ii) in defending or resisting criminal proceedings in which the person is found guilty;
(iii) in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for
making the order are found by the Court to be established; or
(iv) in connection with proceedings for relief to any persons under the Act in which the Court denies the relief.
Paragraph (b)(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 37. EVENTS AFTER BALANCE SHEET DATE
On 17 August 2011, Brambles announced that following the completion of a strategic planning process, the Company has decided to focus
on building its global pooling solutions business and to divest Recall, its information management business. Brambles will commence an
international sale process for Recall and will complete the divestment as and when financial market conditions support an appropriate
outcome for shareholders.
Other than those outlined in the Directors' Report, there have been no other events that have occurred subsequent to 30 June 2011 and up
to the date of this report that have had a material impact on Brambles' financial performance or position.
Brambles Annual Report 2011 page 125 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2011
NOTE 38. PARENT ENTITY FINANCIAL INFORMATION
A) SUMMARISED FINANCIAL DATA OF BRAMBLES LIMITED
Profit/(loss) for the year1
Other comprehensive income for the year
Total comprehensive income/(loss)
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
2011
US$m
2010
US$m
23.4
(8,573.3)
1,662.6
1,686.0
11.1
8,443.1
8,454.2
23.8
112.4
136.2
665.1
(7,908.2)
1.7
6,642.5
6,644.2
21.5
46.6
68.1
8,318.0
6,576.1
14,370.2
13,979.6
41.6
28.2
2,724.1
1,061.5
(8,817.9)
(8,493.2)
8,318.0
6,576.1
1
The parent entity's loss for 2010 included 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 was used to determine the new carrying value
of these investments. This non-cash charge was reversed on consolidation and did 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 subsidiaries. Total facilities available amount to US$2,342.1 million (2010: US$2,459.9 million) of which US$914.6
million (2010: US$527.4 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 (2010: 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 (2010: US$750.0 million)
issued by a subsidiary to qualified institutional buyers in accordance with Rule 144A and Regulation S of the United States Securities Act.
Brambles Limited and certain of its subsidiaries are parties to guarantees which support notes of €500.0 million issued in April 2011 in the
European bond market.
Brambles Limited has guaranteed repayment of certain facilities and financial accommodations made available to certain subsidiaries. Total
facilities available amount to US$474.8 million (2010: US$327.2 million), of which US$180.2 million (2010: US$130.1 million) has been drawn.
Other than these guarantees, the parent entity did not have any contingent liabilities at 30 June 2011 or 30 June 2010.
C) CONTRACTUAL COMMITMENTS
Brambles Limited did not have any contractual commitments for the acquisition of property, plant and equipment at 30 June 2011 or
30 June 2010.
Brambles Annual Report 2011 page 126 DIRECTORS' DECLARATION
In the opinion of the Directors of Brambles Limited:
(a)
the financial statements and notes set out on pages 63 to 126 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 2011 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
T J Gorman
Chief Executive Officer
17 August 2011
Brambles Annual Report 2011 page 127 INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF BRAMBLES LIMITED
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 2011, 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 of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
Directors determine is necessary to enable the preparation of the financial report that is free from material
misstatement, whether due to fraud or error. 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.
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.
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
DX 77 Sydney, Australia
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Brambles Annual Report 2011 page 128
Auditors’ opinion
In our opinion:
(a)
the financial report of Brambles Limited is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of Brambles’ financial position as at 30 June 2011 and of their performance
for the year ended on that date; and
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.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 40 to 55 of the Directors’ Report for the year ended
30 June 2011. 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 2011, complies with section
300A of the Corporations Act 2001.
PricewaterhouseCoopers
M G Johnson
Partner
M Dow
Partner
Sydney
17 August 2011
Sydney
17 August 2011
Brambles Annual Report 2011 page 129
AUDITORS’ INDEPENDENCE DECLARATION
As lead auditor for the audit of Brambles Limited for the year ended 30 June 2011, 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
17 August 2011
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
DX 77 Sydney, Australia
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Brambles Annual Report 2011 page 130
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)
2011
US$m
2010
US$m
2009
US$m
2008
US$m
2007
US$m
4,672.2
4,146.8
4,018.6
4,358.6
3,868.8
809.2
(127.5)
681.7
(209.9)
471.8
3.6
475.4
479.8
5.7
724.5
718.2
1,030.6
796.0
(109.6)
(120.9)
(149.5)
614.9
597.3
881.1
(59.9)
736.1
(171.0)
(163.3)
(234.2)
(302.4)
443.9
434.0
646.9
4.9
18.6
1.8
433.7
857.6
448.8
452.6
648.7
1,291.3
444.0
424.6
458.6
404.3
–
–
–
–
695.7
24.7
838.3
490.2
604.0
821.9
498.8
672.4
849.2
-
–
–
–
725.1
303.3
224.0
79.3
882.3
548.6
204.5
344.1
722.4
419.5
277.6
141.9
810.0
412.6
444.8
(32.2)
(113.8)
5,450.2
2,998.8
2,451.4
3,391.5
3,572.7
3,969.7
3,419.6
1,759.3
2,143.4
2,426.2
1,996.9
1,632.2
1,429.3
1,543.5
1,422.7
17,134
12,714
12,785
12,305
12,327
-
–
–
–
1,841
32.9
32.6
36.2
26.0
31.8
31.5
31.9
32.6
31.3
38.5
46.0
45.9
45.4
83.4
28.0
37.3
25.0
30.0
34.5
17.0
Brambles Annual Report 2011 page 131
GLOSSARY
2004 Share Plans
The Brambles Industries Limited 2004 Performance Share Plan and the Brambles Industries plc 2004 Performance
Share Plan (as amended), incorporating Brambles Limited rollover amendments of 22 August 2006.
2006 Share Plan
The Brambles Limited 2006 Performance Share Plan (as amended).
Act
The Corporations Act 2001 (Cth).
Actual rates
In the statutory financial statements, results are translated into US dollars at the applicable actual monthly exchange
rates ruling in each period.
Acquired Shares
Brambles Limited shares purchased by Brambles employees under MyShare.
AGM
ASX
Average capital
invested
BIFR
BIL
BIP
Board
Annual General Meeting.
Australian Securities Exchange.
Average capital invested or ACI is a 12 month average of Capital invested.
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 Injuries Frequency Rate. This safety performance indicator measures the combined number of fatalities,
lost time injuries, modified duties and medical treatments per million hours worked.
Brambles Industries Limited, which was one of the two listed entities in the previous dual-listed companies structure.
Brambles Industries plc, which was one of the two listed entities in the previous dual-listed companies structure.
The Board of Brambles Limited.
Brambles or Group
Brambles Limited and all of its related bodies corporate.
BVA
Brambles Value Added or BVA represents the value generated over and above the cost of the capital used to generate
that value.
It is calculated using fixed June 2010 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%.
CAGR
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 from
operations
Cash flow generated after net capital expenditure but excluding Significant items that are outside the ordinary
course of business.
CGPR
The Australian Securities Exchange Corporate Governance Council Corporate Governance Principles &
Recommendations, Second Edition.
Company
Brambles Limited (ACN 118 896 021).
Constant currency
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
Disclosable
Executives
Discontinued
operations
DLC
EBITDA
ELT
EPS
Continuing operations refers to CHEP, IFCO, Recall and Brambles HQ.
Brambles Limited’s Executive Directors, Non-executive Directors and other Group executives whose remuneration
details are required to be disclosed in the Remuneration Report.
Operations which have been divested or which are held for sale.
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.
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.
Brambles’ Executive Leadership Team, details of which are on pages 25 to 26.
Earnings per share.
Free cash flow
Cash flow generated after net capital expenditure, finance costs and tax, but excluding the net cost of acquisitions
and proceeds from business disposals.
Brambles Annual Report 2011 page 132 FX
Foreign exchange.
FY11 or Year
The 2011 financial year commencing 1 July 2010 and ending 30 June 2011.
FY12
The 2012 financial year commencing 1 July 2011 and ending 30 June 2012.
Group or Brambles Brambles Limited and all of its related bodies corporate.
IBC
IFCO
IFRS
IPEP
Key Management
Personnel
KPI(s)
LTI
OHS&E
Intermediate bulk container, for the transport and storage of bulk products.
IFCO Systems N.V.
International Financial Reporting Standards. Brambles reports its financial results under Australian Accounting
Standards, which are compliant with IFRS.
Irrecoverable pooling equipment provision.
Members of the Board of Brambles Limited and Brambles’ Executive Leadership Team.
Key Performance Indicator(s).
Long Term Incentive.
Occupational Health Safety & Environment.
Matching Awards
Matching share rights over Brambles Limited shares allocated to employees when they purchase Acquired Shares
under MyShare. When an employee’s Matching Awards vest, Matching Shares are allocated to that employee.
Matching Shares
Shares allocated to employees who have held Acquired Shares under MyShare for two years, and who remain
employed at the end of that two year period. One Matching Share is allocated for every one Acquired Share held.
MyShare
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 reporting period resulting from business won or lost in that period and the previous
financial year. The revenue impact of net new business is included across reporting periods for a total of 12 months
from the date of the win or loss and calculated on a constant currency basis.
PAT
Profit after tax.
Performance
Period
A three year period over which the achievement of performance conditions is assessed to determine whether STI and
LTI share awards will vest.
RCC
ROCI
RPC
Risk & Control Committee.
Return on capital invested or ROCI is calculated as Underlying profit divided by Average capital invested.
Reusable plastic container/crate, or returnable/reusable produce crate, generally used for shipment and display of
produce items.
Significant items
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.
STI
TFR
TSR
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
Underlying profit is profit from continuing operations before finance costs, tax and Significant items.
Unification
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.
ULD
Unit-load device, pooled containers used in the aviation industry for transporting cargo and baggage on board airliners.
Brambles Annual Report 2011 page 133
CONTACT iNFORmATiON
REGiSTEREd OFFiCE
The global headquarters of Brambles is at its
registered office in Sydney, Australia:
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
Email:
info@brambles.com
Website: www.brambles.com
investor & Analyst Queries
Telephone: 61 (0) 2 9256 5238
Email:
investorrelations@brambles.com
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:
Website: www.chep.com
chep_americas@chep.com
CHEP Europe, Middle East & Africa
Weybridge Business Park
Addlestone Road, Addlestone
Surrey KT15 2UP
United Kingdom
Telephone: 44 (0) 1932 850 085
Facsimile: 44 (0) 1932 850 144
Email:
Website: www.chep.com
info.emea@chep.com
CHEP Asia-Pacific
Level 6, Building C
11 Talavera Road
North Ryde NSW 2113
Australia
Telephone: 61 (0) 2 9856 2437
Email:
Website: www.chep.com
ap.marketing@chep.com
IFCO Systems
Evert van de Beekstraat 310
1118 CX Schiphol Centrum
Netherlands
Telephone: 31 20 654 1854
31 20 654 1801
Fax:
Email:
ifco.communication@ifco.de
Website: www.ifco.com
designed and produced by walterwakefield.com.au
Recall
One Recall Center
180 Technology Parkway
Norcross, GA 30092
United States of America
Telephone: 1 770 776 1000
1 770 776 1001
Fax:
Email:
recall.communications@recall.com
Website: www.recall.com
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
SHARE RIGHTS REGISTRY
Employees or former employees of Brambles who have queries
about the following interests:
- performance share rights under the 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 one of the following registries:
until 6 November 2011:
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
From 7 November 2011 onwards:
Boardroom Pty Limited
Attention: Brambles Employee Share Plans
GPO Box 3993
Sydney NSW 2001
Australia
Telephone: 1300 737 760 (within Australia)
61 (0) 2 9290 9600 (from outside Australia)
Facsimile: 1300 653 459 (within Australia)
61 (0) 2 9279 0644 (from outside Australia)
bramblesesp@boardroomlimited.com.au
Email:
Website: www.boardroomlimited.com.au