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Brambles Annual Report 2013 - Page 1 Brambles Limited is a supply-chain logistics company operating
in more than 50 countries, primarily through the CHEP and IFCO
brands. Brambles is listed on the Australian Securities Exchange
(ASX) and has its headquarters in Sydney, Australia. The Group
specialises in the provision of Pooling Solutions and associated
services, focussing on the outsourced management of returnable
pallets, crates and containers. It has three Pooling Solutions
segments: Pallets, Reusable Plastic Crates (RPCs) and Containers.
In addition, Brambles owns the information management
solutions business, Recall.
CONTENTS
Letter from the Chairman & the CEO
Operational & Financial Review
Strategy Scorecard
Board & Executive Leadership Team
Corporate Governance Statement
Directors’ Report – Remuneration Report
Directors’ Report – Other Information
1
2
14
16
19
32
50
Brambles Limited
ABN 89 118 896 021
Shareholder Information
Financial Report
Auditors’ Independence Declaration
Five-Year Financial Performance Summary
Glossary
Contact Information
54
57
123
124
125
128
Brambles Annual Report 2013 - Page 2 LETTER FROM THE CHAIRMAN & THE CEO
BRAMBLES’ CEO TOM GORMAN (L) AND CHAIRMAN GRAHAM KRAEHE AO (R)
9 September 2013
The 2013 financial year was significant in the 138-
year history of Brambles. Not only did we deliver
another solid set of financial results while
continuing to invest substantially for the long term,
we also took a series of important steps toward
becoming a more focused organisation.
Central to the concept of focus is the first of our shared values: “All
things begin with the customer”. We are proud of the progress we
are making in getting closer to our customers. We will continue to
strive to make Brambles the most customer-centric organisation in
our industry. We have set out more detail about how our shared
values drive our strategy and detailed commentary on our financial
results in the Operational & Financial Review.
We are committed to creating value for all of our stakeholders,
continuing to enhance our position as the world’s leading supply
chain equipment Pooling Solutions company and delivering our
strategy to grow profitably and deliver superior returns for
shareholders over the long term. In the five years ended 30 June
2013, Brambles’ total shareholder return1 was 47%, compared with
21% for Australia’s benchmark S&P/ASX200 Index.
We are also committed to delivering results year on year. In the year
ended 30 June 2013, Brambles’ total shareholder return was 57%,
compared with 46% for the S&P/ASX200. In FY13, in constant
currency terms compared with FY12, sales revenue was up 6% and
operating profit was up 10%, and we declared dividends of
27.0 Australian cents per share, up 1.0 Australian cent per share.
(Full dividend details are on page 54).
We believe our decision to demerge our information management
business, Recall, as a separate company on the Australian Securities
Exchange, will enhance our ability to focus on our core business
activities. While Recall had a challenging year in FY13, the
demerger, expected to be completed in December pending
shareholder and relevant court and regulatory approvals, will free
Recall to concentrate on its business, and enable Brambles to
concentrate on its Pooling Solutions strategy. More detail about
Recall’s strategy and outlook will be provided in the demerger
scheme book, which we expect to send to shareholders in late
October 2013.
STRATEGY
As we have communicated previously, we use four key themes to
govern the implementation of our strategy: Diversification, Cost
Leadership, Go To Market and People & Leadership.The Strategy
Scorecard on pages 14 and 15 highlights our progress against all
these areas during FY13, and sets out our focus areas as we look to
the future. While we are proud of the achievements of recent years,
we are committed to driving stronger returns for shareholders, by
allocating capital to high-value growth opportunities, by delivering
operational and asset efficiencies and by leveraging our global scale
and network capacity.
One highlight of this progress is our continued expansion of the
global Intermediate Bulk Containers (IBCs) business following the
acquisition in December 2012 of Pallecon, an IBC pooling services
provider with more than 30 years’ operating experience. We have
now merged Pallecon’s operations in Europe and the Asia-Pacific
with the IBC operations of CHEP and the CAPS business in North
America to form CHEP Pallecon Solutions.
Elsewhere, we continued to diversify our earnings base through the
strong expansion of our Reusable Plastic Crates (RPCs) operations,
through growing our Pallets operations with new customers and in
under-penetrated and emerging markets, and through the growth of
the CHEP Aerospace Solutions operations.
We continue to innovate alongside our customers, developing and
launching new and improved products and services, in particular
pallets for use in promotional in-store display.
In the area of cost control, we are continuing to deliver synergies
from integrating IFCO and to deliver operational efficiencies under
the global Pallets structure introduced in 2011. Each of our three
Pooling Solutions segments – Pallets, RPCs and Containers – now has
a single leadership focus.
SAFETY & SUSTAINABILITY
Although we continue to pursue our goal of Zero Harm, tragically,
two fatalities impacted Brambles during the Year. One involved a
contractor who passed away as a result of a traffic incident in the
IFCO Pallet Management Services operations and another involving a
third-party service provider who passed away after an accident at a
CHEP South Africa timber plantation.
More detail on our efforts to eliminate such tragic events, as well as
broader commentary about our progress against our Zero Harm
charter and broader Sustainability strategy are included in the
Operational & Financial Review on pages 5 and 6.
OUTLOOK
We have entered FY14 in a strong position to continue to deliver
profitable growth to our shareholders and invest in and develop our
business over the long term. When we announced our FY13 results,
we provided guidance for FY14 for Underlying Profit2, excluding any
contribution from Recall and subject to unforeseen circumstances,
of US$930 million to US$965 million at 30 June 2013 foreign
exchange rates, reflecting anticipated growth of 4% to 8% at those
rates.
As we look to deliver another year of growth for shareholders, we
wish to express our gratitude to our 18,000 employees worldwide,
the company’s management and our fellow Directors for their
ongoing commitment and support.
Graham Kraehe AO
Tom Gorman
Chairman
CEO
1Total shareholder return reflects share price movements and reinvestment of dividends
over a specified performance period. Bloomberg data are used for the purposes of
comparison.
2Brambles defines Underlying Profit as profit from continuing operations before finance
costs, tax and Significant Items.
Brambles Annual Report 2013 - Page 3
OPERATIONAL & FINANCIAL REVIEW
ABOUT BRAMBLES
OVERVIEW OF OPERATIONS
Brambles Limited is a supply-chain logistics company operating in
more than 50 countries, primarily through the CHEP and IFCO
brands. Brambles is listed on the Australian Securities Exchange
(ASX) and has its headquarters in Sydney, Australia.
The Group specialises in the provision of Pooling Solutions and
associated services, focussing on the outsourced management
of returnable pallets, crates and containers. It has three
Pooling Solutions segments: Pallets, Reusable Plastic Crates (RPCs)
and Containers.
Brambles’ businesses predominantly serve the consumer goods, dry
grocery, fresh food, retail and general manufacturing industries.
The Group has specialist businesses serving the automotive
manufacturing, aerospace and refining sectors. At 30 June 2013, the
Pooling Solutions operations employed more than 13,500 people and
owned approximately 450 million pallets, crates and containers
through a network of more than 850 service centres.
In addition, Brambles operates an information management
solutions business, Recall, which provides secure management and
destruction services for documents and digital media to customers
in 23 countries. Recall employs more than 4,500 people and
operates a network of more than 300 information centres.
On 2 July 2013, Brambles announced it intended to demerge Recall
as an independent company listed on the ASX. Brambles expects to
complete the demerger by the end of the 2013 calendar year.
SHARED VALUES
Brambles’ shared values are a core component of the Group’s
culture and are as follows:
- All things begin with the customer;
- We have a passion for success;
- We are committed to safety, diversity, people and teamwork;
- We believe in a culture of innovation; and
- We always act with integrity and respect for the communities in
which we operate and the environment.
OPERATING MODEL
Through its Pooling Solutions business, Brambles enhances supply
chain performance for customers by helping them transport goods
through their supply chains more efficiently, sustainably and safely.
Brambles provides standardised reusable pallets, crates and
containers to customers from its service centres, as and when
customers require. Customers use the equipment to transport goods
through their supply chains, then either arrange for its return to
Brambles or transfer it to another participant in the network for
that participant to reuse. Brambles retains ownership of its
equipment at all times, inspecting and repairing it as required to
maintain consistent levels of quality.
By participating in Brambles’ pooling system, customers eliminate
the need to purchase and manage their own pallets, crates and/or
containers and benefit from the superior scale of Brambles’ network
and systems, its asset management knowledge and experience and
its continuous development of new and innovative solutions.
Brambles’ Pooling Solutions operations predominantly generate sales
revenue from the rental and other service fees that customers pay
based on their usage of the Group’s equipment.
SHAREHOLDER VALUE
The service and value Brambles provides through its Pooling
Solutions business, the quality of the Group’s customer relationships
and the scale of its networks and invested capital base create the
foundation of its value proposition for investors.
As a result of this value proposition, Brambles has been able to
demonstrate superior rates of sales growth and delivered
consistently high levels of return on capital relative to the
benchmark Australian share index.1
BUSINESS STRATEGIES & FUTURE PROSPECTS
Brambles’ strategic focus is to create superior and sustainable value
for its customers, shareholders and employees.
The Group implements its strategy under four key themes:
- Diversification – expanding into more customer segments,
broadening the range of products and services and growing
geographically;
- Cost leadership – delivering a low-cost business model that
leverages its global scale to create sustainable competitive
advantage;
- Go to market – strengthening its brand position and enhancing the
customer experience through continuously improving the quality
of its products and services; and
- People and leadership – attracting, developing and retaining the
right individuals and teams that can enhance its culture and bring
the required capability for sustainable success.
The Group has access to a broad range of opportunities to continue
to invest in value-adding products and services for customers and
expand its Pooling Solutions business at the same as delivering
attractive returns to shareholders.
The principal factors that define growth opportunities in the Pooling
Solutions business within which the Group can create value for
customers while supporting its investment proposition for
shareholders are:
- Multiple parties use a common asset (i.e. a pallet, crate or
container) to transport goods throughout the supply chain;
- Assets flow freely and at high velocity throughout the supply
chain, creating complexity that Brambles can manage more
effectively through a pooled environment than customers could
alone;
- Ownership of assets is not a source of competitive differentiation
to the asset user; and
- Pooling of assets can create a benefit in which all supply-chain
participants can share.
The Strategy Scorecard on pages 14 and 15 sets out the Group’s
progress in relation to delivering its strategy. This scorecard
includes the identification of focus areas for future prospects as
well as execution risks and associated mitigating actions.
Further details of strategy and execution risk in the context of
Brambles’ risk management framework are provided in the
Significant Risk & Uncertainties section on page 7.
1Based on data published by Bloomberg for the five years ended
31 December 2012: Brambles’ compound average growth rate in sales
revenue was 9%, compared with negative 2% for the S&P/ASX200 Index;
Brambles’ five-year average post-tax return on capital was 14%, compared
with 4% for the ASX200.
Brambles Annual Report 2013 - Page 4
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
PERFORMANCE DRIVERS & METRICS
The Group monitors performance and value creation through non-
financial metrics (such as customer loyalty, safety performance and
employee engagement) and through financial metrics (such as those
covering sales revenue, profitability, return on capital and
shareholder returns).
Throughout Pooling Solutions, there are three key drivers of
Brambles’ sales revenue growth:
- General increases in sales volumes in line with economic or
industry trends (a relatively stable variable because the majority
of Brambles’ sales revenue comes from customers in the consumer
staples sector);
- The rate at which the group expands the penetration of its
operations (often described as “net new business wins2”); and
- Movements in pricing.
FINANCIAL POSITION
CAPITAL STRUCTURE
Brambles manages its capital structure to maintain a solid
investment grade credit rating. During the financial year
ended 30 June 2013, 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’ key focus in terms of measuring profitability is Underlying
Profit, the main drivers of which in Pooling Solutions are:
TREASURY POLICIES
- Transport, logistics and asset management costs (including
external factors such as fuel and freight prices, as well as labour
costs);
- Plant operations costs in relation to management of service centre
networks and the inspection and repair of assets (including labour
costs and raw materials costs);
- Other operational expenses (primarily overheads such as selling,
general and administrative expenses); and
- Depreciation, as well as provisioning for irrecoverable
pooling equipment.
Brambles calculates return on capital invested by dividing
Underlying Profit by Average Capital Invested3. The main driver of
Average Capital Invested in Pooling Solutions is capital expenditure
on pooling equipment. The main drivers of capital expenditure are
the rate of sales growth as well as asset efficiency factors: i.e. the
amount of pooling equipment not recoverable or repairable each
year (and therefore requiring replacement) and the frequency with
which customers return or exchange pooling equipment. Brambles’
main capital cost exposures are for raw materials, primarily lumber
and plastic resin.
The Group also monitors Brambles Value Added (BVA), which
measures value generated over and above the cost of capital used to
generate that value. BVA is calculated by subtracting from
Underlying Profit the product of Average Capital Invested multiplied
by 12% (a notional representation of pre-tax cost of capital).
2Net new business wins are the change in sales revenue in the reporting period
resulting from business won or lost in that period and the previous financial
year. The revenue impact of net new business wins 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.
3A 12-month average of capital invested, calculated as net assets before tax
balances, cash and borrowings but after adjustment for accumulated pre-tax
Significant Items, actuarial gains and losses and net equity adjustments for
equity-settled share-based payments.
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 financiers,
select and deal in approved financial derivatives for hedging
purposes, and generally execute Brambles’ financing strategy.
Brambles’ policies with respect to interest and exchange rate risks
and appropriate hedging instruments are described below. Further
information is contained in Note 30 on pages 99 to 108 of this
report, including a sensitivity analysis (pages 102 and 104) 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 only transacts derivatives
with relationship banks. Individual credit limits are assigned to
those relationship banks, thereby limiting exposure to credit-related
losses in the event of non-performance by any counterparty.
FUNDING & LIQUIDITY
Brambles funded its operations during the 2013 financial year
through equity issuance, retained cash flow and borrowings. The
Group generally sources debt funding from relationship banks and
debt capital market investors on a medium-to-long-term basis.
The only major equity issuance of the year occurred in July 2012,
when Brambles received A$115.3 million before costs representing
the retail portion of the fully underwritten 1-for-20 pro rata
accelerated renounceable entitlement offer made in June 2012.
Brambles received the institutional portion (A$332.8 million before
costs) of the entitlement offer in the prior year. The purpose of the
equity raising was to replace funds Brambles would have raised
through the underwritten dividend reinvestment plan for the 2011
final and 2012 interim dividends. These plans formed part of the
equity component of the original IFCO acquisition funding plan but
were cancelled in August 2011 in the expectation of a sale of Recall,
which subsequently did not proceed. The net proceeds of the offer
were used to retire bank borrowings drawn under various revolving
credit facilities. There were no new debt capital market issuances
during the Year.
Bank borrowing facilities were maintained and portions renewed
throughout the year. These facilities are generally structured on
multi-currency, revolving bases and currently have maturities
ranging to November 2017. Borrowings under the facilities are
floating-rate, unsecured obligations with covenants and
undertakings typical for these types of arrangements.
Brambles Annual Report 2013 - Page 5
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
Table 1 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.
leases for office and operational locations and certain plant and
equipment to achieve flexibility in the use of certain assets. The
rental periods vary according to business requirements.
Table 1: Maturity Profile of Committed Borrowing
Facilities & Outstanding Bonds
1.00
24%
22%
24%
B
$
S
U
0.50
15%
14%
1%
-
< 1 yr
1-2 yrs
2-3 yrs
3-4 yrs
4-5 yrs
> 5 yrs
Bonds/notes
Bank borrowings
Undrawn bank facilities
% = percentage of total committed credit facilities
Brambles’ liquidity policy requires, among other things, that no
more than 25% of total committed credit facilities mature in
any rolling 12-month period. At 30 June 2013, the Group was in
compliance with the policy.
Table 2: Net Debt & Key Ratios
US$M
June 2013 June 2012 Change
Current debt
156.9
86.4
70.5
Non-current debt
2,686.4
2,777.7
2,843.3
2,864.1
(91.3)
(20.8)
Gross debt
Less cash
Net debt
Key ratios
Net debt to EBITDA
1.68x
1.72x
EBITDA interest cover
14.6x
10.3x
-
4.3
Brambles’ financial policy is to target a net debt to EBITDA ratio of
less than 1.75 times. Key financial ratios continue to reflect the
Group’s strong balance sheet position and remain well within the
financial covenants included in Brambles’ major financing
agreements, with net debt to EBITDA at 1.68 times (2012: 1.72
times) and EBITDA interest cover at 14.6 times (2012: 10.3 times).
Net debt was US$2,714.4 million at 30 June 2013, up
US$24.5 million from 30 June 2012, reflecting the net funding
impact of the Pallecon acquisition and the retail rights proceeds
received in the period.
At 30 June 2013, Brambles had committed credit facilities including
bonds and notes totalling US$3,958.1 million. Undrawn committed
borrowing capacity totalled US$1,224.2 million. The average term
to maturity of Brambles’ committed credit facilities at 30 June 2013
was 3.6 years (2012: 3.7 years). Brambles enters into operating
DIVIDEND POLICY & PAYMENT
Brambles has a progressive dividend policy under which the Group
maintains at least the level of dividends per share it pays, in
Australian cents, subject to the Group’s financial performance and
cash requirements.
The Board has declared a final dividend for 2013 of 13.5 Australian
cents per share, up 0.5 Australian cents compared with the previous
final dividend and payable on 10 October 2013 to shareholders on
the Brambles register at 5pm on 13 September 2013. The final
dividend is 30% franked. The ex-dividend date is 9 September 2013.
Total dividends for the Year are 27.0 Australian cents per share, up
1.0 Australian cent. Brambles paid an interim dividend
of 13.5 Australian cents per share on 11 April 2013, franked at 30%.
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 this dividend. The
Dividend Reinvestment Plan remains suspended.
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, using
interest rate derivatives where appropriate. The 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; 10% to
50% for debt maturities of two to three years; and 0% to 50% for
debt maturities extending beyond three years.
At 30 June 2013, Brambles had 50% of its weighted average interest-
bearing debt over the next 12 months at fixed interest rates (2012:
51%). Beyond 12 months, the proportion of fixed rate debt in the
range of one to two years was 47% (2012: 47%), 48% for two to three
years (2012: 45%) and 46% for three to four years (2012: 39%) with a
decreasing proportion for each year thereafter. The weighted
average maturity period was 4.4 years (2012: 5.1 years). The fair
value of all interest rate swap instruments was US$19.0 million net
gain (2012: US$23.5 million net gain).
Brambles manages its foreign exchange exposures from the
perspective of reducing volatility in the value of foreign currency
cash flows and assets. Exposures generally arise in either:
- 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 the hedging of transaction exposures where
such exposures 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 generally mitigates
translation exposures by raising debt in currencies where there are
matching assets. During the Year, Brambles maintained net
investment hedge borrowings in euro of €350.5 million, broadly to
match its euro-denominated assets. At the end of the Year, the fair
value of foreign exchange instruments was US$8.3 million net loss
(2012: US$1.8 million net loss).
(128.9)
(174.2)
45.3
FOREIGN EXCHANGE RISK
2,714.4
2,689.9
24.5
Brambles Annual Report 2013 - Page 6
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
SAFETY & SUSTAINABILITY
ZERO HARM
During the Year, Brambles reviewed and launched an updated
version of its Zero Harm Charter (see Sustainability on pages 5 to 6).
The Charter states that everyone has the right to be safe at work
and be able to return home to their family and friends as healthy as
when they started the day. Each and every person is expected to
think first of Zero Harm. Brambles seeks to apply best practice in
occupational health, safety and environment for employees,
contractors, customers and the communities in which it operates.
Brambles Injury Frequency Rate (BIFR) is the primary measure of
safety performance across the Group. BIFR is recorded at a rate per
million hours worked and provides a comprehensive view of
employee safety. It includes:
- Work-related fatalities;
- Loss of a full work shift due to injury;
- Modified duties for a full work shift following an injury; and
- Incidents that require external medical treatment.
The Year was transitional for Brambles’ reporting on safety. For the
first time, data for all businesses acquired in FY12 were
incorporated into BIFR. Acquisitions made in FY13 were not included
but will be incorporated in FY14. In addition, the Group introduced
a greater emphasis on reporting “near misses” (i.e. incidents in
which a reportable injury is narrowly avoided) as a positive indicator
to identify and eliminate risks before accidents occur. All businesses
increased their focus on improving segregation of pedestrians from
vehicles and machinery, helping drive a reduction in severity rates.
The FY13 BIFR result of 14.9, a 31% improvement on the previous
year, means the Group has achieved its objective of a 25% reduction
on FY12 levels. Brambles will continue to target year-on-year
improvements, after taking into account the impact of any
acquisitions.
Table 3: BIFR
FY13 FY12 Change
Reasons for change
Pallets -
Americas
38.9 54.7
29% Machine incident reductions and repair
process improvements
Pallets - EMEA
3.8
3.4
(12)%
Increased focus on safety management
and incident investigation in MEA
Pallets - Asia-
Pacific
10.0 18.5
46%
Improved ownership of safety at the site
level
Pallets4
20.5 29.0
29%
RPCs
11.0 11.1
1%
Containers5
17.7 18.4
4%
Focus on ergonomic improvements and
washing machine safety
Improvements in CHEP Aerospace
Solutions
Recall
5.7 10.6
46% Calibration of incident classification
throughout the world
Brambles
14.9 21.56
31%
4For the purposes of safety reporting the Pallets segment includes the CHEP
RPCs and Containers operations in Asia-Pacific and South Africa.
5For the purposes of safety reporting, the Containers segment includes the
CHEP Automotive & Industrial Solutions operations in Europe and the
Americas, CAPS, CHEP Aerospace Solutions and the CHEP Catalyst & Chemical
Containers business.
6Brambles has adjusted its FY12 BIFR to incorporate acquired operations and
establish a base rate for comparison. The previously published FY12 BIFR of
9.3 has been replaced with a new base rate of 21.5 that covers all businesses
except those acquired during FY13.
A detailed report on Brambles’ safety performance will be available
in the 2013 Sustainability Review, which will be published on
Brambles’ website during September 2013.
Brambles reports with great sadness that two fatalities occurred
during the Year in relation to its operations:
- A temporary contractor was fatally injured while working for the
IFCO PMS business in Kansas City, USA, in May 2013. The
contractor was driving a PMS vehicle and was involved in a single-
vehicle accident, which is under investigation by the Kansas State
Highway Patrol.
- A third-party service provider of tree-felling services at CHEP’s
Springfield timber farm in South Africa was fatally injured in
January 2013.
SUSTAINABILITY
Brambles defines Sustainability as the strategies and activities the
Group has adopted in relation to its employees, the environment,
ethics and the community. This approach is consistent with
Brambles’ strategy and shared values and is designed to enhance,
among other things:
- Efficiency and productivity in Brambles’ use of finite resources;
- The value Brambles creates for customers and shareholders;
- Employee engagement;
- Clarity of communication with customers and other
stakeholders; and
- Brambles’ ability to grow over the long term without causing harm
to the environment or the health and safety of its employees.
Brambles believes the fundamental principles on which its business
is built are inherently sustainable. The Group is committed to being
the global leader in responsible and sustainable pooling solutions in
the supply chains it serves. It is focused on building a long-term,
sustainable business that serves its customers, employees and
shareholders and the communities in which they live.
Brambles is applying best-practice standards throughout its
operations and logistics, and is continuously vigilant in reducing
asset losses, cycle times and damage to generate a more
sustainable use of physical and financial resources. Fundamental to
these efficiency efforts are the principles of recover, reuse,
reduce and recycle.
The repeated use of higher quality assets compared with alternative
disposable or limited-use platforms reduces material and energy
requirements. Brambles retains ownership of its assets at all times,
enabling the company to control end-of-life management and
improve continuously its recovery, reuse, reduction and
recycling efforts.
Strategy
Since 2009, Brambles’ Sustainability Committee has been
responsible for the strategies and activities adopted by Brambles
with regard to the environment, its employees, ethics and the
community, consistent with the Group’s Shared Values.
In 2010, Brambles launched its sustainability strategy and outlined
its strategic objectives and initiatives to 2015. Brambles set a
number of targets to measure efforts to improve continuously,
demonstrate the inherent sustainability value in the business model
for Brambles and its stakeholders and deliver more efficient, safer
and environmentally sustainable supply chains. The strategy and
targets are grouped into four areas of focus: Customer,
Environment, People and Community.
A table containing the targets and details on progress to date are
included in Table 4. A full update on the targets will be provided in
the Sustainability Review to be published on Brambles’ website in
September 2013.
Brambles Annual Report 2013 - Page 7
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
In support of its areas of focus, Brambles is aware that in its
approach it must have the right risk and governance foundations
and appropriate structures in place to manage its outputs and
outcomes responsibly. Brambles lists its commitments in this respect
under Governance in the Sustainability section of its website.
Key Topics
Brambles has established a process to determine key sustainability
topics that will impact the Group and are therefore of most
importance to measure, manage and communicate. Brambles
conducted its first formal analysis of sustainability topics it
considers important to its stakeholders in FY11. A third-party
provider conducted the analysis using AccountAbility Principles
Standards AA1000 five-part test as a guide.
For FY13, an online questionnaire was distributed to key
management personnel responsible for engagement with customers,
employees, shareholders and other stakeholders.
As a result of recent developments in regulatory reporting
frameworks, the acquisitions of new businesses and the planned
demerger of Recall, Brambles will conduct a new key sustainability
topic analysis process and a complete review of its Sustainability
targets in FY14. Brambles will communicate the outcomes of this
process in its 2014 Annual Report and Sustainability Review.
Key Activities during the Year
Brambles undertook the following key Sustainability activities during
the Year:
- Reviewed and updated the Zero Harm Charter, which included
adding human rights to the existing safety and environmental
commitments to recognise clearly everyone’s right to life, family
life, health and development;
- Enhanced the visibility of its lumber supply chains and updated its
lumber purchasing processes, including development of a global
sustainable sourcing standard to incorporate biodiversity and
human rights, in line with continuing efforts to improve the supply
chain;
- Incorporated its Social Media Policy in its Code of Conduct;
- Commenced the roll-out of the global Occupational Health, Safety
& Environment reporting system (iCARE). The safety module is
used by all businesses. iCARE’s energy waste and reporting module
is currently used by CHEP Pallets and the RPCs segment;
- IFCO RPCs operations reported energy and emissions data for the
first time;
Brambles is preparing the Sustainability Review with reference to
the Global Reporting Initiative (GRI) G3.1 principles for delivering
content and quality, and the 10 principles of the UN Global
Compact. Brambles has engaged KPMG to provide limited assurance
on the Group’s adherence to the GRI principles and on selected
metrics. Brambles will publish details of the scope of this
engagement and KPMG’s opinion with the full Sustainability Review.
Table 4: Progress against Sustainability Targets
Measure
Target
Progress
Customer
Customer
loyalty
Introduction of Net Promoter Score in every
country and year-on-year improvements
Customer
engagement
Increased participation in industry forums and
customer advocacy panels
Environment
Lumber
sourcing
Greenhouse
gas emissions
Chain of custody certification by 2015
20% reduction on 2010 levels by 2015
Lumber waste Zero lumber waste to landfill by 2015
Solid waste
Year-on-year recycling improvements
Water
management
People
Employee
diversity
Target to be set in 2014
30% female representation on Board and
Executive Leadership Team by 2015 and within all
management positions by 2018
Safety
25% reduction in BIFR on 2012 levels by 2017
Employee
engagement
survey
Employee
engagement
score
Education,
training and
development
Brambles Employee Survey participation at
minimum of 90% by 2015
Brambles Employee Survey target of 73% by 2015
25% increase in education, training and
development days on 2012 levels by 2015
- Signed the UN Global Compact, demonstrating Brambles’ support
Community
for responsible business practices;
Supplier policy Develop and introduce global policy by end of
- Became a Steering Committee member of the World Economic
2013
Forum’s food waste project; and
- Developed a global supplier policy to be rolled out to all
businesses in FY14.
Volunteer time
for employees
At least one volunteer hour per employee during
working hours by 2015
“Give as you
earn” policies
Introduced in all businesses where allowed by
legislation by 2015
Target achieved
● Progressing and on-track
●
●
●
●
●
●
●
●
✔
✔
●
●
●
●
●
Brambles Annual Report 2013 - Page 8
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
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.
- Zero Harm – Brambles is subject to inherent operational risks,
including industrial hazards, road traffic or transportation
accidents that could potentially result in serious injury or fatality
of employees, contractors or members of the public. There is also
a risk of prosecution of its Officers and Directors due to wilful or
negligent breaches of safety regulations.
SIGNIFICANT RISKS & UNCERTAINTIES
Brambles has adopted a risk management framework that sets out
the processes for the identification and management of risk
throughout the Group. Full details of the objectives of the
framework and the strategies and processes applied to manage
these risks are described in Section 7 of the Corporate Governance
Statement on pages 26 to 28.
The risk management framework provides for a biannual production
of a Group risk matrix, which sets out the top 10 “net” risks facing
the Group and the steps being taken to mitigate those risks. The top
10 “net” risks are rated on the basis of their potential impact on the
Group as a whole after taking into account current mitigating
actions.
Listed below are the top 10 net risks on the risk matrix for the Year.
Investors should be aware that there are other risks associated with
an investment in Brambles.
- Business model – changing supply chain dynamics and customer
needs could render Brambles’ existing service offerings and
business models 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 Brambles’ 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.
- 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 Pooling Solutions equipment. This could impact
financial performance and lead to a reduction in customer
satisfaction.
- Equipment quality – satisfaction of Brambles’ customers may
fluctuate with the customers’ perceived views of equipment
quality which, in turn, is influenced by the effectiveness of the
quality standards that Brambles employs in its equipment pools.
Brambles is subject to the risk that it may not optimise these
standards, thereby adversely affecting customer satisfaction with
its service offering and/or the operating and capital costs of the
equipment pools.
- Mergers and Acquisitions – Brambles is subject to the risk of failing
to successfully execute acquisitions and disposals, as well as the
risk of failing to successfully integrate acquisitions. If the
integration of newly acquired businesses is not effective, this
Brambles Annual Report 2013 - Page 9
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
FINANCIAL REVIEW – GROUP OVERVIEW
SALES REVENUE
US$M
Change
FY13
FY12
Actual
FX
Constant
FX
Pallets – Americas
2,205.8
2,041.3
Pallets – EMEA
1,346.8
1,326.8
Pallets - Asia-Pacific
391.8
375.8
Total Pallets
3,944.4
3,743.9
RPCs
Containers
Total Pooling
Solutions
812.8
325.7
759.5
276.6
5,082.9
4,780.0
8%
2%
4%
5%
7%
18%
6%
8%
5%
5%
7%
10%
20%
8%
Operating profit was US$1,011.2 million, up 8% (10% at constant
currency). Pooling Solutions contributed operating profit of
US$926.4 million, up 11% (13% at constant currency), reflecting sales
growth, operating efficiency improvements and reduced Significant
Items8, all of which more than offset the impact of an increase in
business development costs of US$26 million, and increases in direct
costs, primarily related to the cost of lumber purchased in Pallets
Americas.
In Recall, operating profit was down 20% (18% at constant currency),
reflecting a reduction in higher margin sales from project activities
in both the Document Management Solutions and Secure Destruction
Services business lines and an increase of US$10 million in costs,
primarily associated with business development.
PROFIT AFTER TAX
US$M
FY13
FY12
Change
Actual
FX
Constant
FX
1,011.2
939.2
8%
10%
Recall
807.0
845.0
(4)%
(3)%
Total Brambles
5,889.9
5,625.0
5%
6%
Operating profit
from continuing
operations
Brambles’ sales revenue in the 12 months ended 30 June 2013
was US$5,889.9 million, up 5% (6% at constant currency7) compared
with the prior corresponding period. Pooling Solutions (Pallets,
Reusable Plastic Crates (RPCs) and Containers) contributed sales
revenue of US$5,082.9 million, up 6% (8% at constant currency).
The main contributor was Pallets Americas, in which business
wins remained strong, combined with continued expansion of RPCs
and Containers and a resilient sales result from Pallets EMEA.
Recall contributed sales revenue of US$807.0 million, down 4% (3%
at constant currency), reflecting reduced levels of transactional
project activity.
OPERATING PROFIT
US$M
FY13
FY12
Change
Actual
FX
Constant
FX
20%
20%
-
2%
10%
27%
4%
3%
12%
30%
346.4
269.3
75.7
691.4
109.3
32.8
(15)%
(12%)
926.4
833.5
11%
13%
Pallets – Americas
Pallets – EMEA
414.6
268.2
Pallets – Asia-Pacific
77.2
Total Pallets
RPCs
Containers
Total Pooling
Solutions
760.0
138.4
28.0
Net finance costs
(110.9)
(152.0)
27%
26%
Tax expense
(260.4)
(212.3)
(23)%
(23)%
Profit from
discontinued
operations
0.7
1.4
(50)%
(57)%
Profit after tax
640.6
576.3
11%
14%
Weighted average
number of shares (M)
1,555.7
1,482.3
5%
5%
EPS (US cents)
41.2
38.9
6%
9%
Profit after tax was US$640.6 million, up 11% (14% at constant
currency), reflecting the higher operating profit, lower net finance
costs and a higher tax expense.
Net finance costs were US$110.9 million, down 27% (26% at constant
currency). The decreased costs were mainly attributable to the net
impact of lower average borrowings (reflecting the June 2012 equity
raising and higher free cash flow in FY13, which more than offset
the funding of the Pallecon acquisition) and lower average interest
rates on bank debt.
Tax expense was US$260.4 million. The effective tax rate on
operating profit (after net finance costs) was 29%, compared with
27% the prior year. The increase was primarily a result of higher
profits in the USA and higher non-deductible costs.
Basic earnings per share was 41.2 US cents, up 6% (9% at constant
currency), reflecting the increase in profit after tax, offset by an
increase in the weighted average number of shares on issue as a
result of the June 2012 equity raising.
Recall
128.2
160.1
(20)%
(18)%
Brambles HQ
(43.4)
(54.4)
20%
Total continuing
operations
1,011.2
939.2
8%
19%
10%
7Calculated by translating reported period results into US dollars at the actual
monthly exchange rates applicable in the prior corresponding period.
8Brambles defines Significant Items as items of income or expense that are
(either individually or in aggregate) material to Brambles or to the relevant
business segment and: either outside the ordinary course of business; or part
of the ordinary activities of the business but unusual in size and nature.
Brambles Annual Report 2013 - Page 10
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
UNDERLYING PROFIT9
US$M
Change
RETURN ON CAPITAL METRICS
Return on Capital Invested10
Pallets – Americas
Pallets – EMEA
419.1
282.4
Pallets – Asia-Pacific
78.8
Total Pallets
RPCs
Containers
Total Pooling
Solutions
780.3
138.7
28.4
FY13
FY12
Actual
FX
Constant
FX
Pallets – Americas
US$M
FY13
FY12
Change
363.6
274.8
76.6
715.0
125.5
15%
15%
Pallets – EMEA
3%
3%
9%
11%
7%
4%
11%
13%
Pallets - Asia-Pacific
Total Pallets
RPCs
Containers
19.2%
22.8%
18.8%
17.3%
1.9pp
21.5%
1.3pp
19.6%
(0.8)pp
20.4%
18.9%
1.5pp
9.5%
8.3%
9.1%
0.4pp
14.1%
(5.8)pp
32.8
(13)%
(10)%
Total Pooling Solutions
16.8%
16.2%
0.6pp
947.4
873.3
8%
11%
Recall
13.2%
15.8%
(2.6)pp
Total Brambles
15.9%
15.7%
0.2pp
Recall
144.2
174.2
(17)%
(16)%
Brambles HQ
(34.4)
(37.8)
Total Brambles
1,057.2
1,009.7
9%
5%
7%
7%
Underlying Profit, which excludes Significant Items, was
US$1,057.2 million, up 5% (7% at constant currency). In Pooling
Solutions, Underlying Profit was up 8% (11% at constant currency).
In Recall, Underlying Profit was US$144.2 million, down 17% (16% at
constant currency). These results reflected the same trends as for
operating profit.
Reconciliation of Underlying Profit to Operating Profit
US$M
Underlying Profit
Significant Items:
FY13
FY12
1,057.2
1,009.7
Improvements in Brambles’ key return on capital metrics primarily
reflected improvements in the Pallets segment, where there was
strong profit growth in the Americas region and reduced Average
Capital Invested in the EMEA region.
Return on capital invested across the Group was 15.9%, up
0.2 percentage points, while Brambles Value Added11 (BVA) was
US$269.9 million, up US$21.3 million. In Pooling Solutions, return on
capital invested was 16.8%, up 0.6 percentage points, while BVA
increased US$48.7 million to US$283.3 million.
Ongoing operating investment in developing the Containers segment
led to the decline in return on capital invested and BVA.
In Recall, return on capital invested remained in excess of the cost
of capital at 13.2% and BVA remained positive at US$13.3 million,
reflecting lower Underlying Profit.
Brambles Value Added
Acquisition-related costs
Restructuring & integration costs
Recall transaction costs
Impairment of software development costs
Pension costs
Foreign exchange gain on capital
repatriation
Total Significant Items
Operating profit
(4.6)
(22.0)
(4.1)
(15.3)
-
-
(2.8)
(53.2)
(21.2)
-
(5.8)
12.5
US$M, fixed June 2012 FX
FY13
FY12
Change
Pallets – Americas
Pallets - EMEA
Pallets - Asia-Pacific
170.7
132.2
28.8
126.4
114.6
27.6
44.3
17.6
1.2
Total Pallets
331.7
268.6
63.1
RPCs
(36.1)
(38.3)
2.2
(46.0)
(70.5)
Containers
(12.3)
4.3
(16.6)
1,011.2
939.2
Total Pooling Solutions
283.3
234.6
48.7
Significant Items were US$(46.0) million, down from
US$(70.5) million, primarily driven by a reduction in restructuring
and integration costs as well as transaction costs associated with the
cancelled Recall divestment process. The other major Significant
Item in the period was the impairment of software development
costs previously capitalised in Recall. Higher restructuring and
integration costs in the prior corresponding period were associated
with the integration of IFCO, the move of the CHEP head office in
North America and restructuring in Recall.
9Brambles defines Underlying Profit as profit from continuing operations
before finance costs, tax and Significant Items.
Recall
13.3
41.1
(27.8)
Brambles HQ
(26.7)
(27.1)
0.4
Total Brambles
269.9
248.6
21.3
10Return on capital invested is Underlying Profit divided by Average Capital
Invested (which Brambles defines as a 12-month average of capital invested,
calculated as net assets before tax balances, cash and borrowings but after
adjustment for accumulated pre-tax Significant Items, actuarial gains and
losses and net equity adjustments for equity-settled share-based payments).
11Brambles Value Added (BVA) is the value generated over and above the cost
of capital used to generate that value. It is calculated using fixed 30 June
2012 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 course of business, multiplied by 12%.
Brambles Annual Report 2013 - Page 11
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
CAPITAL EXPENDITURE ON PROPERTY,
PLANT & EQUIPMENT (ACCRUALS BASIS)
US$M
FY13
FY12
Change
Pallets – Americas
Pallets – EMEA
Pallets - Asia-Pacific
Total Pallets
RPCs
Containers
330.1
233.7
72.5
282.9
233.5
47.2
0.2
84.9
(12.4)
636.3
601.3
35.0
Cash Flow from Operations12 increased to US$859.0 million, up
US$267.8 million. In addition to the increased profit and reduced
capital expenditure (on a cash basis), the main contributors to the
improved cash flow were a reduction in provisions and other items
of US$69.7 million (driven by the non-recurrence of FY12 litigation
and software spend, as well as lower bonus payments in FY13) and
improved working capital management. Free cash flow after
dividends was US$83.1 million, up US$301.3 million, reflecting the
higher operating cash flow and reduced interest costs.
196.0
227.2
(31.2)
FINANCIAL REVIEW – SEGMENTAL ANALYSIS
32.2
48.4
(16.2)
PALLETS
Total Pooling Solutions
864.5
876.9
(12.4)
Recall
Brambles HQ
62.0
1.2
42.8
1.4
19.2
(0.2)
Total Brambles
927.7
921.1
6.6
Capital expenditure on property, plant and equipment (accruals
basis) was US$927.7 million, up US$6.6 million. In Pooling Solutions,
the total was US$864.5 million, down US$12.4 million. This
primarily reflected continued disciplined investment in pallets,
crates and containers to support growth throughout Pooling
Solutions as well as the benefits of asset efficiency programs in the
Pallets segment. Maintenance capital expenditure in Pallets was
broadly in line with FY12.
Growth capital expenditure in RPCs, Containers and emerging
markets Pallets was US$190 million, taking total capital expenditure
in these areas for FY12 and FY13 to US$430 million. This was lower
than the US$550 million foreseen when the program was initially
announced in August 2011, primarily reflecting slower growth in
RPCs and lower expenditure in Containers as a result of the slower
than anticipated rate of customer conversion.
In Recall, capital expenditure was US$62.0 million, up
US$19.2 million, primarily reflecting increased investment to
support growth programs compared with levels in FY12 that were
lower than the historical average.
CASH FLOW
US$M
FY13
FY12
Change
Underlying Profit
1,057.2
1,009.7
47.5
Depreciation and amortisation
557.0
552.2
4.8
EBITDA
1,614.2 1,561.9
52.3
Capital expenditure
(905.1)
(949.4)
44.3
Proceeds from sale of PP&E
110.5
93.5
17.0
Working capital movement
(24.8)
(107.9)
83.1
Irrecoverable pooling equipment
provision
101.5
100.1
1.4
Provisions/other
(37.3)
(107.0)
69.7
Cash Flow from Operations
859.0
591.2
267.8
Significant Items/discontinued
operations
(43.6)
(38.2)
(5.4)
Financing costs and tax
(306.8)
(373.5)
66.7
Free cash flow
Dividends paid
508.6
179.5
329.1
(425.5)
(397.7)
(27.8)
Free cash flow after dividends
83.1
(218.2) 301.3
Sales
Sales revenue in the Pallets segment was US$3,944.4 million, up 5%
(7% at constant currency), driven primarily by strong growth in the
Americas. Net new business wins13 in the Pallets segment were
US$131 million, contributing constant currency sales revenue growth
of 4%.
Sales revenue from the emerging markets regions (Asia, Central &
Eastern Europe, Latin America and Middle East & Africa) of the
Pallets segment was US$523.7 million, up 13 % (19% at constant
currency), in line with the company’s forecast of at least 15%
constant currency growth.
Profit
Operating profit in the Pallets segment was US$760.0 million,
up 10% (12% at constant currency). The operating profit margin
was 19%, up 1 percentage point. During the year, the Pallets
segment delivered an additional US$11 million from IFCO integration
synergies and an additional US$10 million from the global Pallets
efficiencies program. These efficiency improvements, combined
with pricing and sales mix benefits, were more than sufficient to
offset other cost impacts throughout the Pallets segment.
Underlying Profit was US$780.3 million, up 9% (11% at
constant currency). The Underlying Profit margin was 20%,
up 1 percentage point.
12Brambles defines Cash Flow from Operations as cash flow generated after
net capital expenditure but excluding Significant Items that are outside the
ordinary course of business.
13Net new business wins are the change in sales revenue in the reporting
period resulting from business won or lost in that period and the previous
financial year. The revenue impact of net new business wins is included across
reporting periods for a total of 12 months from the date of the win or loss and
calculated on a constant currency basis.
Brambles Annual Report 2013 - Page 12
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
PALLETS – AMERICAS
US$M
PALLETS – EMEA
Change
US$M
Change
FY13
FY12
Actual
FX
Constant
FX
FY13
FY12
Actual
FX
Constant
FX
Sales revenue
2,205.8 2,041.3
Operating profit
414.6
346.4
8%
20%
8%
20%
Sales revenue
1,346.8 1,326.8
2%
Operating profit
268.2
269.3
Margin
19%
17%
2pp
Margin
20%
20%
Significant Items:
Restructuring
4.5
17.2
Underlying Profit
419.1
363.6
15%
15%
Significant Items:
Restructuring
14.2
(0.3)
Pension costs
-
5.8
Margin
19%
18%
1pp
Underlying Profit
282.4
274.8
5%
4%
-
-
7%
3%
-
Sales
Sales revenue in Pallets Americas was US$2,205.8 million, up 8%,
as a result of new business growth – led by strong growth in CHEP
USA. Net new business wins throughout Pallets Americas were
US$77 million, contributing 4% constant currency sales
revenue growth.
CHEP USA’s sales revenue was US$1,248.5 million, up 7%, reflecting
the rollover impact of new business won during FY12, further new
business wins in FY13, the benefits of targeted pricing initiatives
and modest increases in like-for-like sales volumes.
CHEP Canada’s sales revenue was US$278.2 million, up 8% (9% at
constant currency), reflecting a full year’s contribution from the
Paramount Pallet acquisition in November 2011, net new business
wins in the CHEP pooled pallets business and like-for-like sales
volume growth.
CHEP Latin America’s sales revenue was US$256.8 million, up 11%
(14% at constant currency), reflecting continued like-for-like sales
volume growth with key accounts throughout the region as well as
net new business wins, in particular in Mexico and Brazil, and
modest pricing increases.
IFCO Pallet Management Services’ (PMS) sales revenue was
US$400.7 million, up 9%, reflecting improvements in pricing like-for-
like sales volume growth.
LeanLogistics’ sales revenue was US$21.6 million, up 14%, primarily
reflecting new business growth in the USA and Europe.
Profit
Operating profit was US$414.6 million, up 20%. The operating profit
margin was up 2 percentage points at 19%. Margin improvement
reflected positive sales mix, incremental IFCO PMS integration
synergies, predominantly from plant network optimisation, and
gains from the global Pallets efficiencies program.
These factors more than offset increased direct costs (primarily
because of higher lumber costs and investment in asset recovery)
and increased business development costs.
Underlying Profit, which excludes Significant Items of US$4.5 million
on restructuring, was US$419.1 million, up 15%. The Underlying
Profit margin was 19%, up 1 percentage point.
Margin
21%
21%
Sales
Sales revenue in Pallets EMEA was US$1,346.8 million, up 2% (5% at
constant currency), as the benefits of net new business wins in FY12
and FY13 in Europe, modest pricing growth and continued expansion
in emerging countries and regions more than offset flat like-for-like
sales growth in Europe as a result of ongoing subdued economic
conditions. Net new business wins were US$47 million, contributing
constant currency sales revenue growth of 4%.
CHEP Western Europe sales revenue was US$1,131.5 million, down
1% (up 2% in constant currency). This reflected expansion in the
under-penetrated Mid Europe region, in particular Germany and
Italy, where retailer acceptance of the CHEP pallets solution is
increasing, and resilience in the UK & Ireland. This offset a flat
result in France and a further decline reflecting economic conditions
in Iberia. Within CHEP Western Europe:
- Mid Europe sales revenue was US$365.8 million, up 2% (5% at
constant currency);
- UK & Ireland sales revenue was US$359.7 million, up 3% (4% at
constant currency);
- Iberia sales revenue was US$242.1 million, down 6% (3% at
constant currency; and
- France sales revenue was US$163.9 million, down 3% (flat at
constant currency).
CHEP Central & Eastern Europe sales revenue was US$78.4 million,
up 44% (47% at constant currency), reflecting continued expansion in
the region, mostly in Turkey and Poland, and the entry in 2012 into
seven new countries within the region.
CHEP Middle East & Africa sales revenue was US$136.9 million,
up 1% (14% at constant currency), reflecting like-for-like sales
growth and pricing in South Africa and expansion in the Middle East.
Profit
Operating profit was broadly unchanged at US$268.2 million (up
4% at constant currency). The operating profit margin was flat at
20%. Price and sales mix improvements, as well as benefits from the
global Pallets efficiencies program, more than offset the impact of
continued investment in expanding the business in Central & Eastern
Europe and other costs.
Underlying Profit, which excludes US$14.2 million of Significant
Items on restructuring, was US$282.4 million, up 3% (7% at constant
currency). The Underlying Profit margin was maintained at 21%.
Brambles Annual Report 2013 - Page 13
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
PALLETS – ASIA-PACIFIC
US$M
Change
RPCs
US$M
Change
FY13
FY12
Actual
FX
Constant
FX
FY13
FY12
Actual
FX
Constant
FX
Sales revenue
Operating profit
Margin
391.8 375.8
77.2
75.7
20%
20%
Significant Items:
Restructuring
1.6
0.9
Underlying Profit
Margin
78.8
76.6
20%
20%
4%
2%
-
3%
-
5%
3%
4%
Sales
Sales revenue in Pallets Asia-Pacific was US$391.8 million, up 4%
(5% at constant currency), reflecting continued expansion in Asia
and subdued economic conditions in Australia. Net new business
wins were US$8 million, contributing constant currency sales
revenue growth of 2%.
Australia & New Zealand sales revenue was US$340.2 million,
up 2%, reflecting modest new business growth and pricing increases
in Australia.
Asia sales revenue was US$51.6 million, up 25%, primarily reflecting
new business wins in China and India and improved like-for-like sales
volumes with existing customers in Malaysia and Thailand.
Profit
Operating profit was US$77.2 million, up 2% (3% at constant
currency). The operating profit margin was flat at 20%. Sales growth
more than offset the impact of reduced compensations (reflecting a
reduction in the level of irrecoverable pallets), an increase in
repairs in Australia and business development costs in Asia.
Underlying Profit, which excludes Significant Items of US$1.6 million
on restructuring, was US$78.8 million, up 3% (4% at constant
currency). The Underlying Profit margin was flat at 20%.
Sales revenue
812.8
759.5
Operating profit
138.4
109.3
7%
27%
10%
30%
Margin
17%
14%
3pp
Significant Items:
IFCO integration
-
16.2
Restructuring
0.3
-
Underlying Profit
138.7
125.5
11%
13%
Margin
17%
17%
-
Sales
Sales revenue in RPCs was US$812.8 million, up 7% (10% at constant
currency), reflecting growth in all regions from continued
displacement of disposable cardboard boxes, expansion into
additional produce items with existing retailers, the addition of new
retailers to the network and the launch of new products.
The sales growth was below the target of 15% set in August 2012 as
a result of slower than anticipated conversions of new customers in
North America – although growth remained strong in this region.
- Europe sales revenue was US$510.9 million, up 4% (8% at constant
currency), primarily driven by expansion with existing retailers
throughout Western Europe;
- North America sales revenue was US$162.7 million, up 18%,
reflecting expansion in the USA and Canada, mostly with existing
retailers;
- South America sales revenue was US$21.9 million, down 9% (up 3%
at constant currency), reflecting growth in Argentina; and
- Australia, New Zealand and South Africa sales revenue was
US$117.3 million, up 9% (12% at constant currency), mostly
reflecting new business growth from expansion with new and
existing retailers in Australia.
Profit
Operating profit was US$138.4 million, up 27% (30% at constant
currency). The operating profit margin was 17%, up 3 percentage
points, reflecting integration costs in the prior year.
Underlying Profit, which excludes Significant Items of US$0.3 million
on restructuring, was U$138.7 million, up 11% (13% at constant
currency). The Underlying Profit margin was 17%, the same as the
prior year.
Brambles Annual Report 2013 - Page 14
OPERATIONAL & FINANCIAL REVIEW – CONTINUED
CONTAINERS
US$M
RECALL
Change
US$M
Change
FY13
FY12
Actual
FX
Constant
FX
FY13
FY12
Actual
FX
Constant
FX
Sales revenue
325.7 276.6
18%
20%
Sales revenue
807.0
845.0
(4)%
(3)%
Operating profit
28.0
32.8
(15)%
(12)%
Operating profit
128.2
160.1
(20)%
(18)%
Margin
9%
12%
(3)pp
Margin
16%
19%
(3)pp
Significant Items:
Significant Items:
Restructuring & integration
0.4
-
Restructuring
0.7
14.1
Underlying Profit
28.4
32.8
(13)%
(10)%
Margin
9%
12%
(3)pp
Impairment of software
development costs
15.3
-
Underlying Profit
144.2
174.2
(17)%
(16)%
Margin
18%
21%
(3)pp
Sales
Recall’s sales revenue was US$807.0 million, down 4% (3% at
constant currency). Growth in both carton volumes and retention
revenue in the document storage part of the business was
insufficient to offset lower transactional customer activity: i.e.
lower rates of document retrieval and other projects carried out on
behalf of customers in Document Management Solutions, as well as
lower levels of activity in Secure Destruction Services. There was
also a negative impact in the first half from lower selling prices for
destroyed paper.
Profit
Operating profit was US$128.2 million, down 20% (18% at constant
currency), reflecting the reduction in higher-margin transactional
activity, the normalisation of business development costs following
lower expenditure in FY12 and a US$15.3 million impairment of
software development costs. The operating profit margin was 16%, a
reduction of 3 percentage points.
Underlying Profit, which excludes US$16.0 million of Significant
Items on restructuring and the impairment of software development
costs, was US$144.2 million, down 17% (16% at constant currency).
The Underlying Profit margin was 18%, down 3 percentage points.
Sales
Sales revenue in the Containers segment was US$325.7 million,
up 18% (20% at constant currency), primarily reflecting the
US$34.1 million contribution of the Pallecon operations acquired in
December 2012 in addition to new business wins in pre-existing
businesses. Growth was partially offset by downward pressure in the
automotive sector, reflecting industry softness in Australia and, to a
lesser extent, Europe.
Sales revenue in the new Containers operations in the Automotive
and intermediate bulk containers (IBC) sectors in the USA and the
global Aerospace Solutions business was US$81.5 million, up 42%
(41% at constant currency), behind management forecasts that sales
revenue from these businesses would double. This primarily
reflected the slower than anticipated rate of conversion of new
customers in the automotive industry in the USA.
By business line, Containers’ sales revenue was as follows:
- Automotive sales revenue was US$150.2 million, down 3% (flat at
constant currency), as growth in Asia and North America and a
relatively resilient result in EMEA were offset by the impact of
severely deteriorating industry conditions in Australia;
- CHEP Pallecon Solutions, comprising the pre-existing CHEP IBC
business, the newly acquired Pallecon business and CAPS, had
sales revenue of US$78.3 million, up 82% (85% at constant
currency), reflecting the acquisition of Pallecon and continued
growth in CAPS;
- CHEP Aerospace Solutions sales revenue was US$59.3 million,
up 45% (44% at constant currency), reflecting new business growth
as well as a full-year contribution from the Driessen Services
business acquired in November 2011; and
- CHEP Catalyst & Chemical Containers (CCC) sales revenue was flat
(up 1% at constant currency) at US$37.9 million, reflecting
continued muted customer activity levels.
Profit
Operating profit was US$28.0 million, down 15% (12% at constant
currency). The operating margin was down 3 percentage points
at 9%, reflecting business development costs to support growth.
Underlying Profit was US$28.4 million, which excludes Significant
Items of US$0.4 million on integration and restructuring, down 13%
(10% at constant currency). The Underlying Profit margin was 9%,
down 3 percentage points.
Brambles Annual Report 2013 - Page 15
STRATEGY SCORECARD
TABLE 5: STRATEGY SCORECARD
DIVERSIFICATION
- Expanding into more customer
segments, broadening the range of
products and services and growing
geographically
FY13 TARGETS1
PALLETS
FY13 ACHIEVEMENTS
- Continued sales growth powered by
- Continued delivery of net new business wins in all three Pallets
new business wins
- Further constant currency sales
revenue growth of at least 15% in
emerging markets
- Continued assessment of and entry
into new countries
regions (Americas, EMEA and Asia-Pacific) despite subdued
economies
- Target comfortably achieved: constant currency growth of 19%
- Expansion into Balkan and Baltic states in Europe and Gulf States in
the Middle East; identification of opportunity to expand into Peru
and Colombia
RPCs
- Further constant currency sales
- Growth of 10% was below target as rollout in high-growth North
revenue growth of 15%
American region – while strong – somewhat slower than anticipated
- Lane expansion with existing retail
- Lane expansion with existing retail partners in all regions
partners
CONTAINERS
contributed to growth as expected
- Doubling of combined sales revenue in
- Target not achieved: conversion times for new contracts in US
US Automotive, US IBCs and CHEP
Aerospace Solutions
Automotive proved slow and capital redirected towards Pallecon
acquisition
- Continued assessment of potential
strategic acquisition opportunities
- €136 million acquisition of IBCs provider Pallecon in December 2012
and subsequent formation of CHEP Pallecon Solutions, combining
CHEP’s and Pallecon’s IBC operations in Europe and the Asia-
Pacific.
COST LEADERSHIP
- Delivering a low-cost business
- Delivery of further global operations
and logistics efficiencies in Pallets
model that leverages Brambles’
global scale to create sustainable
competitive advantage
- Improvement in operating margins in
Asia and Central & Eastern Europe
- Additional US$10 million of global Pallets operations and logistics
efficiencies and US$11 million of IFCO integration synergies
delivered as planned
- Profitable growth in Central & Eastern Europe with focus in Asia on
developing business as supply chains modernise
- Continued rollout of new RPC
- Additional launches of newer products including egg crates, banana
products and solutions
crates and meat crates throughout Europe and Americas
- Innovation for customers with half
size and display pallets
EUROPE
- Market tests on plastic half-size pallet in Spain, cardboard layering
pallet in France and wheeled merchandising unit in UK
- Advanced stage with customers and suppliers in developing next-
generation quarter pallet in Europe
AUSTRALIA & NEW ZEALAND
- Sales revenue from fractional/display pallets and beverage trays
growing strongly
- Next-generation display pallet and improved beverage trays under
development for launch in FY14 in conjunction with major retailers
NORTH AMERICA
- Continued work through customer forums to identify service and
product development opportunities
- Increased use of pooled half pallets in Canada and to explore
similar opportunities in the USA
- Development of global Containers
organisation under new Group
President
- Expansion of global Containers segment through Pallecon
acquisition and continued growth in CHEP Aerospace Solutions and
US IBCs
GO TO MARKET
- Strengthening brand position and
enhancing the customer
experience through continuously
improving the quality of its
products and services
PEOPLE & LEADERSHIP
- Attracting, developing and
retaining the right individuals and
teams that can enhance its
culture and bring the required
capability for sustainable success
1As disclosed in 2012 Annual Report.
Brambles Annual Report 2013 - Page 16
STRATEGY SCORECARD
ONGOING FOCUS AREAS
EXECUTION RISKS
MITIGATING ACTIONS
- Expansion of product and services
offering within Pallets
- Relatively flat economic growth
outlook in developed markets
- Continued exploration of growth opportunities in new products,
services, segments and geographies
- Ongoing assessment and entry if
- High levels of penetration in some
- Extend service offerings in existing markets and expand into new
appropriate into emerging
geographies
regions of Pallets operations
segments and geographies
- Continued expansion of RPCs by
- Entrenchment of disposable solutions
- Emphasis on delivery of value to existing retail partners and
geography and product
in some markets
growers
- Continued targeted expansion of
- Lead time to develop opportunities in
- Ongoing exploration of organic and acquisitive growth opportunities
Containers portfolio
new pooling markets
- Analysis and assessment of asset
- Requirement for short-term
- Monitor raw material costs and mitigate as required; drive
management performance
- Focus on cost performance to
drive sustainable competitive
advantage
- Increased capability in shared
services delivery
investment to deliver long-term
capability
- Global rises in input costs, in
particular for lumber
efficiency in other cost areas
- Review and improve overhead structure
- Continued focus on innovation and
- Changes to consumer behaviour and
- Development of solutions to suit new retail formats and behaviour
product strategy
retailing formats
(e.g. promotional display pallets)
- Leveraging of CHEP global scale,
footprint, network and brand
- Ongoing activity from new and
- Build strength of global network and cost leadership position to
existing competitors
provide best solutions for customers
- Continued emphasis on enhancing
and developing talent throughout
the group
- Nurturing “one business” culture
- Availability of internal candidates for
- Inaugural Fast Track program for a select group of executives
senior roles
aimed at developing company leaders
Brambles Annual Report 2013 - Page 17
BOARD & EXECUTIVE LEADERSHIP TEAM
BOARD OF DIRECTORS
DOUG DUNCAN NON-EXECUTIVE DIRECTOR (INDEPENDENT)
Member of Audit Committee
Joined Brambles as a Non-executive Director in January 2012. He is a Non-executive Director and member of
the Audit Committee of JB Hunt Transport and Benchmark Electronics. Doug’s career in the transport and
logistics industry spans over 30 years. From 2001 until his retirement in 2010, he was President and Chief
Executive Officer of FedEx Freight. Prior to that, he spent more than 20 years with the company that
ultimately became Viking Freight, where he held senior executive roles including President & Chief Executive
Officer from 1998 to 2001, when FedEx acquired Viking. Doug holds a Bachelor of Science degree in Business
Administration from Christopher Newport University, Virginia. Age: 62.
TONY FROGGATT NON-EXECUTIVE DIRECTOR (INDEPENDENT)
Member of Remuneration Committee and Nominations Committee
Joined Brambles as a Non-executive Director in June 2006. He is a Non-executive Director of Billabong
International and Coca-Cola Amatil. Previously, Tony was a Non-executive Director of AXA Asia Pacific
Holdings and was Chief Executive Officer of Scottish & Newcastle PLC from May 2003 to October 2007. He
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 a Master of Business
Administration degree from Columbia Business School, New York. Age: 65.
TOM GORMAN CHIEF EXECUTIVE OFFICER
Chairman of Executive Leadership Team
Joined Brambles as Group President, CHEP EMEA 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,
Massachusetts and a Master of Business Administration degree with distinction from Harvard Business School,
Massachusetts. Age: 53.
DAVID GOSNELL NON-EXECUTIVE DIRECTOR (INDEPENDENT)
Member of Audit Committee
Re-joined Brambles as a Non-executive Director in December 2011. He is President of Global Supply &
Procurement for Diageo plc, leading a global team of 9,000 people across manufacturing, logistics and
technical operations as well as managing Diageo's multi-billion sterling procurement budget. David was a Non-
executive Director of Brambles from June 2006 until March 2010, when he retired due to his other
commitments at that time. Prior to joining Diageo, David spent 20 years at HJ Heinz, where he served on the
UK board and held various European operational positions. He holds a Bachelor of Science degree in Electrical
& Electronic Engineering from Middlesex University, England. Age: 56.
TAHIRA HASSAN NON-EXECUTIVE DIRECTOR (INDEPENDENT)
Member of Remuneration Committee
Joined Brambles as a Non-executive Director in December 2011. Tahira is based in Toronto, Canada and had a
long career with Nestlé. From 2003 to 2006, she was Senior Vice President & Head of Global Supply Chain.
Based in Switzerland, this was a new role created to lead the reshaping of Nestlé’s global approach to supply
chain management. Her other roles included Senior Vice President & Global Business Head for Nescafé Ready
To Drink from 2006 to 2009, and Vice President, Deputy Operations, Zone Americas from 2001 to 2003.
Previously, Tahira held various leadership positions in Nestlé Canada including President, Ice Cream and
Executive Vice President, Consumer Demand Chain and Information Services. Tahira is a Fellow of the
Chartered Institute of Management Accountants, UK and a Certified Member of the Society of Management
Accountants of Canada. Age: 60.
STEPHEN JOHNS NON-EXECUTIVE DIRECTOR (INDEPENDENT)
Chairman of Audit Committee and member of Nominations Committee
Joined Brambles as a Non-executive Director in August 2004. He is former Chairman and a Non-executive
Director of Leighton Holdings Limited and Spark Infrastructure Group, and a former Executive and Non-
executive Director of Westfield Group. 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: 66.
Brambles Annual Report 2013 - Page 16
Brambles Annual Report 2013 - Page 18
BOARD & EXECUTIVE LEADERSHIP TEAM – CONTINUED
CAROLYN KAY NON-EXECUTIVE DIRECTOR (INDEPENDENT)
Member of Audit Committee
Joined Brambles as a Non-executive Director in June 2006. She is a Non-executive Director of Commonwealth
Bank of Australia, Infrastructure NSW and The Sydney Institute and an External Board Member of Allens.
Carolyn has more than 25 years’ experience in the finance sector and worked as an executive in finance at
Morgan Stanley in London and Melbourne, JP Morgan in New York and Melbourne and Linklaters & Paines in
London. She holds Bachelor of Law and Arts degrees from the University of Melbourne and a Graduate
Diploma in Management from the Australian Graduate School of Management. Carolyn is a Fellow of the
Australian Institute of Company Directors, a member of Chief Executive Women and Women Corporate
Directors and has a Centenary Medal for services to Australian society in business leadership. Age: 52.
GRAHAM KRAEHE AO NON-EXECUTIVE CHAIRMAN (INDEPENDENT)
Chairman of Nominations Committee and member of Remuneration Committee
Re-joined the Board in December 2005, was appointed Deputy Chairman in October 2007 and Chairman in
February 2008. He is Chairman and a Non-executive Director 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 because of 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, a member
of the Board of the Reserve Bank of Australia 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: 70.
LUKE MAYHEW NON-EXECUTIVE DIRECTOR (INDEPENDENT)
Chairman of Remuneration Committee
Joined Brambles as a Non-executive Director in August 2005. Luke is a Non-executive Director and Chairman
of the Remuneration Committee of InterContinental Hotels Group. He was a Non-executive Director of
WH Smith until August 2010, Chairman of Pets at Home Group Limited until March 2010 and Chairman of the
British Retail Consortium between 2009 and 2011. Luke was a Director of John Lewis Partnership from 1992 to
2004. He previously held senior positions at Thomas Cook, British Airways and Shandwick. He has a Bachelor
of Arts (Honours) degree from Oxford University and a Master of Economics degree from the University of
London. He is a Trustee of BBC Children in Need. Age: 60.
BRIAN SCHWARTZ AM NON-EXECUTIVE DIRECTOR (INDEPENDENT)
Member of Remuneration Committee
Joined Brambles as a Non-executive Director in March 2009. He is Chairman and a Non-executive Director of
Insurance Australia Group Limited and Deputy Chairman and a Non-executive Director of Westfield Group and
Football Federation Australia. In March 2009, he retired as Chief Executive Officer of Investec Bank (Australia)
Limited. Having joined Ernst & Young in 1979, Brian became a partner in 1985. From 1998 to 2004 he was
Chief Executive Officer 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: 60.
EXECUTIVE LEADERSHIP TEAM (at 30 June 2013)
TOM GORMAN CHIEF EXECUTIVE OFFICER
Chairman of Executive Leadership Team
Joined Brambles as Group President, CHEP EMEA 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,
Massachusetts and a Master of Business Administration degree with distinction from Harvard Business School,
Massachusetts. Age: 53.
JEAN HOLLEY CHIEF INFORMATION OFFICER
Joined Brambles in September 2011 from telecommunications services company Tellabs, Inc, where she was
Executive Vice President & Chief Information Officer. Previously, Jean 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: 54.
Brambles Annual Report 2013 - Page 19
BOARD & EXECUTIVE LEADERSHIP TEAM – CONTINUED
PETER MACKIE GROUP PRESIDENT, PALLETS
Became Group President, Pallets in March 2013, having previously held the following Executive Leadership
Team positions: Group President, Pallets Americas and Group President, CHEP Asia-Pacific. Previously, Peter
held the positions of: Acting Group President, CHEP Europe, Middle East & Africa; 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 a Master of Business Administration degree from
London Business School. Age: 47.
DOUG PERTZ GROUP PRESIDENT, RECALL
Joined Brambles as Group President, Recall, in April 2013 from Bolder US Sanitation Group, where he was
Chairman and Chief Executive Officer. Prior to that, Doug served as Chief Executive Officer of a number of
companies, including: Clipper Windpower, a utility-scale wind turbine manufacturer; IMC Global (now Mosaic
Company), a leading miner and producer of concentrated phosphate, potash and salt for agricultural and
industrial applications; and Culligan Water Technologies. He was previously a group executive at Danaher and
held various international management roles with Cummins Engine Company and Caterpillar. Doug holds a
Bachelor of Mechanical Engineering degree from Purdue University, Indiana, USA. Age: 57.
KARL POHLER GROUP PRESIDENT, RPCs
Became Group President, RPCs in October 2011, having been Chief Executive Officer, IFCO Systems, which
Brambles acquired in March 2011, since August 2005. Karl was an executive member and Chief Executive
Officer 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 Chief Executive Officer 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 will retire on 30
September 2013. Age: 59.
JASON RABBINO GROUP PRESIDENT, CONTAINERS
Joined Brambles in May 2012 from diversified industrial company Tyco International, where he was Senior
Vice President of Enterprise Solutions. Previously, Jason held a number of senior executive roles in Tyco’s
ADT electronic security solutions business, managed services company Aramark Corporation and management
consultancy McKinsey & Company. Before entering the corporate world, he was an officer and aviator in the
United States Navy. He has a Master of Business Administration degree from the Wharton School of the
University of Pennsylvania. Age: 44.
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 a Master of Business Administration degree. Age: 52.
ZLATKO TODORCEVSKI CHIEF FINANCIAL OFFICER
Joined Brambles as Chief Financial Officer in October 2012. Previously, Zlatko was Chief Financial Officer of
oil and gas exploration and production company Oil Search Limited. Prior to that, he had a long international
career with BHP and BHP Billiton including as Chief Financial Officer, Energy. Zlatko is a Fellow of CPA
Australia and Fellow of Chartered Secretaries Australia. He holds a Master of Business Administration degree
and a Bachelor of Commerce degree from the University of Wollongong, Australia. Age: 45.
Brambles Annual Report 2013 - Page 20
CORPORATE GOVERNANCE STATEMENT
INTRODUCTION
Brambles is a global provider of Pooling Solutions and information
management services and operates in more than 50 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 2013 (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. The information provided in this
Corporate Governance Statement is current as at 31 July 2013.
A checklist summarising Brambles’ compliance with the CGPR is
included at the end of this Statement. Various documents referred
to in this Statement have been posted in the “Corporate
Governance” section of the Brambles website at
www.brambles.com. The checklist includes more detailed guidance
on the location of all the governance-related documents available at
www.brambles.com.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR
MANAGEMENT AND OVERSIGHT
1.1 ROLE OF THE BOARD AND EXECUTIVE MANAGEMENT
1.1.1. Role of the Board and executive management
The Board has overall responsibility for overseeing the effective
management and control of the Group on behalf of Brambles’
shareholders, and supervising executive management’s conduct of
the Group’s affairs within a control and authority framework which
is designed to enable risk to be prudently and effectively assessed
and monitored.
The Board has adopted a schedule of matters reserved to it for
decision, a copy of which can be found at www.brambles.com, and
further details of which are in section 1.1.2.
The roles of the Chairman and executive management, led by the
Chief Executive Officer, are separated and clearly defined:
- The Chairman, Graham Kraehe, is responsible for leadership of the
Board, setting the Board’s agenda, conducting Board meetings,
facilitating effective communication with shareholders and the
conduct of shareholder meetings; and
- Executive management, led by the Chief Executive Officer, Tom
Gorman, has been delegated responsibility for the management
of Brambles within the control and authority framework referred
to above. The levels of authority for management are periodically
reviewed by the Board and are documented. The Chief Executive
Officer is assisted by Brambles’ Executive Leadership Team (ELT)
and the USA and Asian Advisory Groups.
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
17 and 18.
The function of the USA and Asian Advisory Groups, which are
equivalent to management committees, 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 Groups. The other 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. The Advisory Groups meet four times a year.
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:
- The Group’s overall strategic direction and strategic plans for its
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);
- The appointment of key senior executives;
- The Group’s Diversity Policy; and
- The Board skills matrix.
The Board has delegated some of its functions to the Audit,
Nominations and Remuneration committees, although overall
responsibility for those functions remains with the Board. 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. From time to time, the Board establishes
special committees to consider and approve specific matters. 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.
Brambles Annual Report 2013 - Page 21
CORPORATE GOVERNANCE STATEMENT – CONTINUED
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.
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 the Chief
Executive Officer 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 ten
members, with one Executive Director (the Chief Executive Officer)
and nine Non-executive Directors. The former Chief Financial
Officer, Greg Hayes, retired as an Executive Director on 1 October
2012. The biographies for each of the current Directors, shown on
pages 16 and 17, 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,
where applicable, their most recent election by shareholders, their
status as Executive or Non-executive Directors, whether they will
retire and seek election or re-election at the 2013 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 they 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, at various times during the Year, was a substantial
shareholder of Brambles. The Board noted that, except for
2,446,655 shares (being 0.157% 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
D G Duncan
A G Froggatt
T J Gorman
D P Gosnell
T Hassan
S P Johns
S C H Kay
G J Kraehe AO
C L Mayhew
B M Schwartz AM
Year
appointed1
2012
2006
2009
20114
2011
2004
2006
20055
2005
2009
Year last
elected
2012
2011
2010
2012
2012
2012
2012
2012
2010
2012
Executive or
Non-executive
Non-executive
Non-executive
Executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Independent
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Seeking re-election in
20132
No
Next due for
re-election2
2014
Yes
No
Yes
No
No
No
No
Yes
No
2013
N/A3
2013
2014
2014
2015
2015
2013
2015
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 See section 2.4.5 for an explanation of the determination of the years when Non-executive Directors are due for re-election.
3 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.
4 David Gosnell also served as a Director from 2006 to 2010, and re-joined the Board in 2011.
5 Graham Kraehe also served as a Director from 2000 to 2004 and re-joined the Board in 2005.
Brambles Annual Report 2013 - Page 22
CORPORATE GOVERNANCE STATEMENT
2.1.3. Regular assessments
Directors are required to complete a declaration of interest form
prior to their appointment. This form is tabled at the Board meeting
to consider the appointment of the relevant Director. If their
circumstances change or they acquire any office, property or
interest which may conflict with their office as a Director of
Brambles or the interests of Brambles, Directors are required to
disclose its character and extent in writing at the next Board
meeting. The Board also makes an annual assessment of the
independence of each Non-executive Director. If the Board
concludes that a Director has lost their status as an independent
director, that conclusion will be advised to the market in a timely
manner.
Directors are generally not entitled to attend any part of a Board
meeting, or to vote on any matter, in which they have a material
personal interest unless the other Directors unanimously decide
otherwise. In appropriate cases, Directors may be required to
absent themselves from a meeting of the Board while such a matter
is being considered.
2.2 INDEPENDENT CHAIRMAN
The Board has concluded that the Chairman is independent and that
his other positions do not prevent him from devoting sufficient time
to perform the role effectively. As the Chairman is independent,
the Board does not consider it necessary to appoint a lead
independent Director.
The Chairman is responsible for facilitating the effective
contribution of Non-executive Directors, who are to receive
accurate, timely and clear information so that they may effectively
discharge their duties and responsibilities. The Chairman is also
responsible for fostering constructive relations between Executive
and Non-executive Directors.
2.3 ROLES OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The roles of Chairman and Chief Executive Officer are exercised by
two different individuals and are clearly documented, as discussed
in section 1.1.1 of this Statement. The Chairman does not have a
history of employment with Brambles.
2.4 NOMINATIONS COMMITTEE
2.4.1. Purpose of the Nominations Committee
The objective of the Nominations Committee is to support and
advise the Board in fulfilling its responsibilities to shareholders in
ensuring that the Board is comprised of individuals who are best
able to discharge the responsibilities of Directors.
2.4.2. Charter
A copy of the Nominations Committee’s Charter giving full details of
its duties and responsibilities can be found at www.brambles.com.
The Nominations Committee’s Charter also sets out its composition,
structure, membership requirements and the procedures for inviting
non-members to attend meetings. The Committee is authorised to
seek any information it requires from any Group employee or from
any other source, including obtaining outside legal or other
independent professional advice.
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, is set out in the Directors’
Report – Other Information on page 51.
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.
The Nominations Committee has 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,
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
Brambles Annual Report 2013 - Page 23
CORPORATE GOVERNANCE STATEMENT – CONTINUED
to time to meet Brambles’ ongoing needs. During the Year, the
Nominations Committee carried out a review of the Board skills
matrix and determined that no changes to it were required.
With the appointment of three new Directors (Doug Duncan, David
Gosnell and Tahira Hassan) to the Board during the 2012 Year, the
Board considers that, having regard to the Board skills matrix, the
current composition of the Board is an appropriate balance of skills
and experience. Notwithstanding this, the Nominations Committee
has determined it would be desirable to appoint, at an appropriate
time, an additional Non-executive Director with an international
retail background.
Each Non-executive Director receives a Non-executive Director’s
formal letter of appointment (see section 1.1.3.) which 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, including attendance at
those meetings by each of the Directors and committee members,
are set out in the Directors’ Report – Other Information on page 51.
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 (other than the Chief
Executive Officer) 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 and the Board’s skills matrix.
At the 2012 AGM, seven Non-executive Directors were elected or re-
elected to the Board. As a result, they would all be eligible to stand
for re-election at the 2015 AGM. To enable a more even number of
Non-executive Directors to be eligible to stand for re-election at the
next three AGMs, the Board decided that the year in which they
would be eligible to stand for re-election would be determined by
lot. The result of that lot, and the order in which Non-executive
Directors will be eligible to stand for re-election, are set out in the
table in Section 2.1.2 on page 20.
The Non-executive Directors’ formal letters of appointment confirm
that the Non-executive Directors have no right to compensation on
the termination of their appointment for any reason, other than for
unpaid fees and expenses for the period actually served.
2.5 PROCESS FOR EVALUATING THE PERFORMANCE OF THE
BOARD, ITS COMMITTEES AND DIRECTORS
The Board and its committees carry out both internal and external
evaluations, with the form of evaluation being determined each
year. For the Year, the Board undertook an internal evaluation of its
performance as a whole and the performance of each of its
committees.
The review involved the completion of a detailed questionnaire by
each of the Directors and selected Brambles executives and Board
advisors on matters relevant to the Board and Committees’
performance.
The outcomes of the questionnaires were collated and the results
were reported to the Board and each Committee by
PricewaterhouseCoopers. These findings were reviewed and
discussed by the Board and Committees, and key issues arising from
the evaluations were identified for further action.
An internal evaluation of the performance of each Non-executive
Director, including those standing for re-election at the 2013 AGM,
was also conducted. The Chairman reviewed the results of the
performance evaluations with each Director, and reported on the
results of those evaluations. The Board unanimously resolved to
recommend each Non-executive Director’s re-election. The
Chairman of the Audit Committee reviewed the results of the
Chairman’s performance evaluation with him and the Board
Details of those Directors standing for re-election, are set out in the
table in section 2.1.2 on page 20.
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 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 local staff and
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 51.
PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE
DECISION-MAKING
3.1 ESTABLISH A CODE OF CONDUCT
Brambles has a Code of Conduct, which provides an ethical and legal
framework for all employees in the conduct of Brambles’ business.
Brambles’ 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;
- Guidelines for Document Management; and
- Social Media Policy.
Brambles Annual Report 2013 - Page 24
CORPORATE GOVERNANCE STATEMENT – CONTINUED
A Supplier Policy was developed during the Year and formally
adopted subsequent to the end of the Year and will be added to the
Code of Conduct during FY14.
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. At each meeting, the Audit Committee receives
a report on investigations into any matters raised under that policy
relating to financial control issues. A report on all matters raised
under the Speaking Up Policy is provided to the Board at each of its
meetings. A copy of the Code of Conduct is available on
www.brambles.com.
3.1.1. Purpose of the Code of Conduct
The Code of Conduct defines how Brambles relates to its
shareholders, employees, customers, suppliers and the communities
in which it operates. 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 20 languages. This
means that all Brambles’ employees can read the Code in their first
language. The Code of Conduct 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
The Board has adopted a Diversity Policy which forms part of
Brambles Code of Conduct. (Previously, many aspects of the
Diversity Policy were covered under the Group’s employment and
equal opportunity policies.) When adopting 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
The schedule of matters reserved to the Board was amended in 2011
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 31 July 2013, women comprise 20% of its Board and 25% of its
management (which is defined as the manager, director, vice
president and senior vice president grades). In calculating these
percentages, Brambles included each permanent employee on the
payroll, but excluded casual employees and contractors.
During 2011, Brambles adopted a measurable objective for women
to represent 30% of its Board and across the ELT and management
Brambles Annual Report 2013 - Page 25
CORPORATE GOVERNANCE STATEMENT – CONTINUED
positions by 30 June 2015. At the time these targets were set, the
integration into the Group of the recently acquired IFCO, Paramount
Pallets and the CHEP Aerospace businesses was taking place and a
complete analysis of the gender diversity within those businesses
had not yet occurred. It has since become apparent that Brambles
will need additional time to meet the targets set in 2011. As a
result, during the 2012 Year the measurable objective of having
women represent 30% of its management positions has been revised
to 30 June 2018. The objective of having women represent 30% of
Board and ELT positions by 30 June 2015 remains unchanged.
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. The position at 31 July 2013 is as follows:
2018
Objective6
% Females at
31 July 20137
% Females at
30 June 20127
Board
Executive
Leadership Team
Senior Vice
President
Vice President
Director
Manager
30%
30%
30%
30%
30%
30%
20.0%
12.5%
15.6%
11.7%
21.3%
26.8%
18.2%
11.1%
21.8%
10.7%
21.8%
28.3%
Further information on diversity is included in the Diversity & Inclusion section
of the Sustainability Review, which will be available at www.brambles.com
from the end September 2013.
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
6 The objective of having women represent 30% of Board and ELT positions by
30 June 2015 remains unchanged.
7 The percentages for senior vice president, vice president, director and
manager exclude the employees of IFCO RPCs and Paramount Pallets which,
as recent acquisitions, have not yet completed the banding classification
process into senior vice president, vice president, director and manager
categories.
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 four 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 Brambles.
The members of the Audit Committee as at 31 July 2013, 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 the former Chairman of Leighton
Holdings Limited and Spark Infrastructure Group and a former
Executive and Non-executive Director of the Westfield Group. 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.
- Doug Duncan is a Non-executive Director and a member of the
Audit Committee of JB Hunt Transport and Benchmark Electronics.
From 2001 until his retirement in 2010, Doug was President and
CEO of FedEx Freight and prior to that he spent more than 20
years with the company that ultimately became Viking Freight,
where he held senior executive roles including President & CEO
from 1998 to 2001, when FedEx acquired Viking. Doug holds a
Bachelor of Science degree in Business Administration from
Christopher Newport University, Virginia.
- David Gosnell is President of Global Supply & Procurement for
Diageo plc, leading a global team of 9,000 people across
manufacturing, logistics and technical operations as well as
managing Diageo's multi-billion sterling procurement budget.
David was a Non-executive Director of Brambles from June 2006
until March 2010, when he retired due to his other commitments
at that time. Prior to joining Diageo, David spent 20 years at
HJ Heinz where he served on the UK board and held various
European operational positions. He holds a Bachelor of Science
degree in Electrical and Electronic Engineering from Middlesex
University, England.
- Carolyn Kay is a Non-executive Director and a member of the
Audit Committee of Commonwealth Bank of Australia,
Infrastructure NSW and an External Board Member of Allens. She
has more than 25 years’ experience in the finance sector and
worked as an executive in 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 Australian
Graduate School of Management. She is a Fellow of the Australian
Institute of Company Directors.
Stephen Johns, Doug Duncan, David Gosnell, Tony Froggatt and
Carolyn Kay, independent Non-executive Directors, were members
of the Audit Committee throughout the Year. Tony Froggatt retired
as a member of the Audit Committee with effect from 1 July 2013
Brambles Annual Report 2013 - Page 24
Brambles Annual Report 2013 - Page 26
CORPORATE GOVERNANCE STATEMENT – CONTINUED
due to his appointment to the Remuneration Committee on the
same date.
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
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 51. 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. Directors who are not members of the Audit Committee
regularly attend its meetings. From the 2012 financial year, all
Directors are required to attend the Audit Committee meetings at
which the half and full-year financial statements are considered.
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
rotate every five years. Paul Bendall was appointed as lead audit
engagement partner in the 2012 financial year.
The Audit Committee is responsible for making recommendations to
the Board on the selection, appointment, evaluation and removal of
external auditors, setting fees and ensuring that the external
auditors’ engagement partners are rotated at appropriate intervals.
PRINCIPLE 5: MAKE TIMELY AND BALANCED
DISCLOSURE
5.1 ESTABLISH A CONTINUOUS DISCLOSURE POLICY
Brambles is committed to the promotion of investor confidence by
taking all 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
- Brambles’ website contains further information about Brambles
and its activities, including copies of recent interim and annual
reports and recordings and slides of recent presentations
to analysts.
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.
Brambles Annual Report 2013 - Page 27
CORPORATE GOVERNANCE STATEMENT – CONTINUED
A review of operations and activities for the Year is included on
pages 2 to 13. Brambles makes presentations, which are reviewed
and approved by the Board in accordance with the Company’s
continuous disclosure procedures, 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 pages 39 and 40 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 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.
6.1.1. Electronic communication
Brambles takes all of the measures outlined in Box 6.1 of the CGPR
to make effective use of electronic communication with
stakeholders.
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.
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.
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 www.brambles.com.
Brambles website contains the financial results for the Year as well
as more detailed information about Brambles’ business operations.
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 AND MANAGE RISK
7.1 ESTABLISH POLICIES FOR THE OVERSIGHT AND
MANAGEMENT OF MATERIAL BUSINESS RISKS
7.1.1. Risk management policies
The Board is responsible for 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.
The Board has adopted a risk management framework, the
objectives of which are as follows:
- To incorporate effective risk management as part of Brambles’
strategic planning process;
Brambles Annual Report 2013 - Page 28
CORPORATE GOVERNANCE STATEMENT – CONTINUED
- 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 its business units have a risk and
control committee (RCC). 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 or corporate, as the case maybe, risk profile
on a regular basis. The Group Presidents review the risk profile and
accompanying mitigation plans of their respective business units
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, Taxation & Risk. The
ELT, through the Chief Executive Officer, prepares a risk report to
the Board twice yearly, 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.
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;
- A risk management function;
- RCCs for each of Brambles Headquarters and Brambles’ 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 risk management system and 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, Taxation & 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 FY13 internal
audit program, and the results reported to the Audit Committee
(see section 7.2.2).
The Board reviews the effectiveness of the internal control and risk
management systems 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; 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.
Brambles Annual Report 2013 - Page 29
CORPORATE GOVERNANCE STATEMENT – CONTINUED
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 AND CHIEF FINANCIAL
OFFICER DECLARATION
The Board receives written assurances from the Chief Executive
Officer and Chief Financial Officer that the declaration provided
under section 295A of the Corporations Act 2001 (Cth)(Act) is
founded on a sound system of risk management and internal control
and that the system is operating effectively in all material respects
in relation to financial reporting risks. The Board received these
assurances in advance of approving both the annual and interim
financial statements for the Year.
PRINCIPLE 8: REMUNERATE FAIRLY AND
RESPONSIBLY
8.1 ESTABLISH A REMUNERATION COMMITTEE
8.1.1. Purpose of the Remuneration Committee
The objective and purpose of the Remuneration Committee is to
assist the Board in establishing remuneration policies and practices
which:
- Enable Brambles to attract and retain executives and Directors
who will create value for shareholders;
- Fairly and responsibly reward executives having regard to the
performance of Brambles, the performance of the executive and
the general remuneration environment; and
- Comply with the provisions of the ASX Listing Rules and the Act.
8.1.2. Charter
The Remuneration Committee has a Charter which includes its
duties and responsibilities, composition, structure, membership
requirements, authority, access rights and sets out a procedure
for inviting non-members to attend its meetings. A copy of the
Remuneration Committee’s Charter, which is reviewed annually, can
be found at www.brambles.com.
8.1.3. 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 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 or
Brambles in respect of the remuneration of the Executive
Directors and other key management personnel as outlined in the
Remuneration Report; and
- Monitoring the Group’s policy of equal remuneration for equal
work value, regardless of gender, by receiving an annual report on
remuneration by gender across the Group, and otherwise
reviewing and making 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 33 to 35 and 44.
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.
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), Tahira Hassan, Graham Kraehe and
Brian Schwartz were members of the Remuneration Committee
throughout the Year. Tony Froggatt retired from the Committee on
1 August 2012 due to his appointment to the Audit Committee
earlier in the Year. Luke Mayhew has decided to retire as Chairman
of the Remuneration Committee with effect from the end of the
2013 AGM. Tony Froggatt will replace Luke Mayhew as Chairman
and, for that reason, was re-appointed to the Remuneration
Committee with effect from 1 July 2013. 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 51.
The Remuneration Committee may seek input from certain members
of executive management on remuneration, but no members of
executive management are 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 33 to 35 and 44.
Brambles Annual Report 2013 - Page 30
CORPORATE GOVERNANCE STATEMENT – CONTINUED
The following checklist summarises Brambles’ compliance with the CGPR and contains cross references to the sections of this Statement and
to the exact location of information disclosed at www.brambles.com.
Principle/Recommendation
Reference
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Recommendation 1.1 Role of the board and management
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”,
“Charters & Related Documents”
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 and Executive Leadership
Team, pages 16 to 18.
- 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
2.1.2.
of why the board considers a director to be independent, notwithstanding the
existence of those relationships
- a statement as to whether there is a procedure agreed by the board for directors
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 51.
- 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
- the charter of the nomination committee or a summary of the role, rights,
responsibilities and membership requirements for that committee
- the board’s policy for the nomination and appointment of directors
www.brambles.com
See “Corporate Governance”,
“Charters & Related Documents”.
www.brambles.com
See “Corporate Governance”,
“Charters & Related Documents”.
Brambles Annual Report 2013 - Page 31
CORPORATE GOVERNANCE STATEMENT – CONTINUED
Principle/Recommendation
Reference
PRINCIPLE 3: PROMOTE ETHICAL AND 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
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”,
“Charters & Related Documents”.
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 51.
- 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”,
“Charters & Related Documents”.
PRINCIPLE 5: MAKE TIMELY AND 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”,
“Charters & Related Documents”,
“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
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
www.brambles.com
See “Corporate Governance”,
“Charters & Related Documents”,
“Brambles Code of Conduct” (which
incorporates the Continuous Disclosure
& Communications Policy as
Schedule 3).
Brambles Annual Report 2013 - Page 32
CORPORATE GOVERNANCE STATEMENT – CONTINUED
Principle/Recommendation
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
Reference
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 AND 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 33 to 35 and 44.
- 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 51.
- 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”,
“Charters & Related Documents”.
www.brambles.com
See “Corporate Governance”,
“Charters & Related Documents”,
“Brambles Code of Conduct”
(which incorporates the Securities
Trading Policy as Schedule 9).
Brambles Annual Report 2013 - Page 33
DIRECTORS’ REPORT – REMUNERATION REPORT
Remuneration for senior executives in FY13 reflects another year
of strong Brambles results, as shown in the table below:
Financial measure
FY13 result
(US$M)
Change from FY12
(constant currency)
Sales revenue
Operating Profit
Profit after tax
TSR (3 years to
30 June 2013)
5,889.9
1,012.6
640.6
6%
10%
14%
48.1%
N/A
Annual Short-Term Incentive (STI) cash awards for continuing
senior executives ranged from 20% to 58% of base salary. These STI
outcomes were driven by Brambles’ financial performance and the
achievement by executives of their specific personal objectives.
65% of Long Term Incentive (LTI) awards granted in FY11 vested,
triggered by Brambles’ performance over the past three years to
FY13.
Where roles remained unchanged, salary increases in the Year for
the Brambles Executive Leadership Team (ELT) were between 0%
and 3%.
During the Year, there were changes to the ELT stemming from
the retirement of CFO, Greg Hayes, the restructuring of the
Pallets operating segment and the strategic review of Recall. The
remuneration arrangements implemented as a result of these
changes followed Brambles’ policy and standard practice, except
in the case of the recruitment of a new Group President for
Recall, Doug Pertz.
Mr Pertz, an external candidate, was appointed following an
extensive global recruitment exercise. Some elements of his
contract are not standard as the Board was, at the time,
considering a range of strategic options for Recall, including a
potential demerger or an initial public offering. He was also
required to forgo a substantial financial opportunity at the
business he was running at the time of his recruitment by
Brambles. To compensate him for this loss, his Brambles
remuneration package contains a one-off share award in Recall
Holdings, the company which will be listed on the ASX as a result
of the proposed demerger announced on 2 July 2013, if that
demerger is completed.
CONTENTS
1. Background
2. Remuneration Committee
3. Remuneration Policy & Structure
4. Performance of Brambles & At Risk Remuneration
5. Employee Share Plan
6. Executive Directors & Disclosable Executives
7. Non-Executive Directors’ Disclosures
8. Remuneration Advisors
9. Appendices
1. BACKGROUND
The Remuneration Report provides information on Brambles’
remuneration policy, the link between that policy and the
performance of Brambles, and remuneration information about
Brambles’ Key Management Personnel.
Brambles’ Key Management Personnel are:
(a)
(b)
its Non-executive Directors;
its Executive Directors; and
These shares would vest in stages over the next three years, contain
a performance-related element, and cannot be sold by Mr Pertz until
April 2017. The relevant parts of Mr Pertz’s remuneration
arrangements will be subject to shareholder approval as part of the
demerger process.
Following a review earlier in FY13, the Board determined to
nominate all Non-executive Director fees in Australian dollars.
Consequently, fees for overseas-based Non-executive Directors were
reset from their respective local currencies (as used previously) to
Australian dollars. This change aligns Brambles with Australian
market practice. Separately, the Chairman’s fee and other Non-
executive Director base fees increased by 3%, as a result of the
annual fee review. Brambles has introduced Committee fees for the
Audit and Remuneration Committees as well as a travel allowance,
again in line with Australian market practice.
We continue to try to make the Remuneration Report as easy to read
as possible and still compatible with the required regulatory
disclosures. This year we have included more detail on the range of
issues considered by the Remuneration Committee over the year.
These included the annual review of pay by gender in the major
CHEP countries of operations and IFCO’s operations in Europe; this,
as in the previous year, indicated remuneration equity across
genders. Brambles will extend the review across all its business
units.
The Remuneration Committee carried out its annual review of the
Brambles’ remuneration policy and share-based incentive plans. This
included reviewing the continued validity of Brambles Value Added
as a key performance measure for the Company’s incentive plans.
The Committee concluded that the current approach continues to
align the long-term interests of the Company and its shareholders
with those of its executives.
No changes to Brambles’ remuneration policy are proposed in the
coming year. Targets for FY14 are demanding and it will require a
strong performance to achieve similar or better levels of total
remuneration than in the prior year.
Luke Mayhew
Non-executive Director & Chairman of the Remuneration Committee
(c)
other Group executives who have authority and responsibility
for planning, directing and controlling the activities of the
Group. This has been defined as those who, for some or all of
the year ended 30 June 2013 (the Year), were members of the
Executive Leadership Team (ELT) of Brambles.
In this report, executives coming within paragraph 1(b) and 1(c)
above are called Disclosable Executives.
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 and the
Group.
2. REMUNERATION COMMITTEE
The Remuneration Committee (the 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 Disclosable
Executives and the Company Secretary; and
– Reviewing the remuneration policy and individual arrangements
for other executives.
Brambles Annual Report 2013 - Page 34
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
3.1 FIXED & AT RISK REMUNERATION
Remuneration is divided into those components not directly linked
to performance (Fixed remuneration) and those components which
are variable and directly linked to Brambles’ financial
performance and the delivery of personal strategic objectives
(At Risk remuneration). Fixed remuneration generally consists of
base salary and benefits and superannuation contributions. Fixed
remuneration for most Disclosable Executives increased by 0% to 3%
during the Year.
Brambles’ remuneration framework is underpinned by its banding
structure. This classifies roles into specific bands, each
incorporating roles which have broadly equivalent work value. Pay
ranges for each band are determined under the same framework
globally and are based on the local market rates for the roles falling
within each band. Where benchmarking was needed, the
comparative companies considered were major listed companies in
the USA, Australia, UK and Germany, with sales revenue and market
capitalisation between 50% and 200% of Brambles’ 12-month average
at 30 June 2013. This approach provides a sound basis for delivering
a non-discriminatory pay structure for all Group employees.
Given the global scope of its operations, Brambles operates an
international mobility policy, which can include the provision of
housing, payment of relocation costs and other location adjustment
expenses where appropriate.
A significant element of Disclosable Executives’ total potential
reward is required to be At Risk.
This means 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,
returns for all shareholders and strategic objectives. The proportion
of Disclosable Executives' remuneration packages At Risk is
illustrated in Section 3.3 of this Remuneration Report.
Brambles’ At Risk remuneration is provided by way of three types of
annual incentive awards: a Short Term Incentive (STI) cash award,
an STI share award and a Long Term Incentive (LTI) share award.
The market value at the date of grant of all STI and LTI share
awards made to any person in any financial year should not normally
exceed two times their base salary.
The remuneration structure and the key features of Fixed and At
Risk remuneration are summarised in the chart on the next page.
The application of the At Risk element of remuneration is further
described in in Section 4.
During the Year, the members of the Remuneration Committee1
were Luke Mayhew (Committee Chairman), Graham Kraehe, Tahira
Hassan and Brian Schwartz. Tony Froggatt re-joined the Committee
in July 2013 and will take over the Chairmanship of the Committee
after the 2013 AGM, when Mr Mayhew will retire as Committee
Chairman. Other individuals are invited to attend Committee
meetings as required by the Committee. This includes members of
Brambles’ management team including the CEO, Group Senior Vice
President of Human Resources, Group Company Secretary and Group
Vice President of Remuneration & Benefits as well as Brambles’
external advisor, Ernst & Young.
Details of the Committee’s Charter and the rules of Brambles’
executive and employee share plans can be found under Charters &
Related Documents in the Corporate Governance section of
Brambles’ website.
During the Year, the Committee held eight meetings. The most
significant topics of discussion were as follows:
– Executive performance assessment, salary review and FY12 short-
term incentive outcomes;
– Vesting of FY10-FY12 long-term incentive plan;
– Approval of FY13 short-term incentive targets;
– Approval of FY13-FY15 long-term incentive plan targets;
– Approval of final terms of employment for Group President,
Recall;
– Executive remuneration strategy review;
– Review of executive contracts;
– Review of Board Chairman’s fees;
– Review of gender based remuneration relativities;
– Review of Employee Share Plan performance;
– Design of short-term incentive plan;
– Consideration of remuneration issues related to the divestment of
Recall; and
– Annual review of the Committee’s performance.
3. REMUNERATION POLICY & STRUCTURE
The Board has adopted a remuneration policy for the Group which
requires remuneration to be consistent with Brambles’ strategic
business objectives, attract and retain high-calibre executives, align
executive rewards with the creation of shareholder value and
motivate executives to achieve challenging performance targets.
During FY13, the Committee reviewed the remuneration policy
against these objectives and concluded that it remained effective
and appropriate.
When setting and reviewing remuneration levels for Disclosable
Executives, the Committee considers the experience,
responsibilities and performance of the individual while also taking
into account market data relevant to the individual’s role and
location as well as Brambles’ size, geographic scale and complexity.
The Group’s remuneration policy is to set pay around the median
level of remuneration (of the peer group referred to in Section 3.1)
but with upper-quartile total potential rewards for outstanding
performance and proven capability.
1Each of the Committee members is an independent Non-executive Director
(see section 2.1.2 of the Corporate Governance Statement on page 20.
Brambles Annual Report 2013 - Page 33
Brambles Annual Report 2013 - Page 35
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
FIXED REMUNERATION
AT RISK REMUNERATION
LTI SHARE AWARD
Fixed remuneration consists of base
salary, superannuation and benefits.
Size of grant calculated as percentage of
salary and based on:
– TSR performance against the ASX100
median-ranked company. (Vesting starts at
median with full vesting for
outperformance of median by 25%); and
– Sales revenue compound annual growth
rate with BVA hurdle.
Awards subject to performance testing at
end of three years (see Section 4.2 for
details).
STI CASH AWARD
STI SHARE AWARD
Size determined by performance
against Key Performance Indicators
including BVA, cash flow and Strategic
Personal Objectives (see Section 4.1
for details).
Size derived from size of STI cash award.
Awards vest subject to continued
employment at second anniversary of
grant (see Section 4.1 for details).
3.2 REMUNERATION AND THE LINK TO BUSINESS STRATEGY
Brambles continues to adopt a growth strategy focussed on
strengthening its global equipment pooling businesses. This strategy
is underpinned by:
- Business performance being focused on profitable growth, the
efficient use of capital and the generation of cash;
- The recruitment and retention of high-calibre executives;
- The setting of goals to implement the growth strategy; and
- Achieving sustainable returns for Brambles shareholders.
The implementation of Brambles’ remuneration policy, which is
summarised in the chart above, is directly linked to the above
strategy and objectives in the following manner.
- Business performance – profitable growth is emphasized by both
the use of Brambles Value Added (BVA) as a key performance
condition in STI cash awards and the use of compound annual
growth rate (CAGR) sales targets with BVA hurdles as one of the
two key performance conditions which must be satisfied for LTI
share awards to vest. The generation of cash and the effective use
of capital are reinforced through the setting of cash flow targets
for STI cash awards.
- High-calibre executives – remuneration packages for executives
are designed to be competitive to assist Brambles in attracting
talented managers and to reward strong performance. The award
of a significant proportion of executives’ STI awards as shares
which do not vest for two years helps retain key executives.
- Strategic goals – each year, a part of an executive’s STI cash
award is subject to the achievement of specific personal
objectives. These include objectives focussed on the delivery of
Brambles’ strategy such as safety performance, development of
new markets, customer satisfaction, product and service
innovation, employee engagement, productivity improvements
and development of future potential senior executives.
- Sustainable shareholder returns – each of the above three
elements support the delivery of sustainable returns to
shareholders. In addition, there is a direct alignment of executive
rewards to the creation of shareholder value through the use of
relative total shareholder return (TSR) performance conditions, to
which the vesting of half of all LTI share awards granted since
FY10 are subject.
Full details of the link between senior executives’ remuneration and
Brambles’ performance in terms of financial outcome, creation of
shareholder value and the delivery of the Group’s strategy are set
out in Section 4.
Definitions of the BVA, TSR and CAGR measurements and the
methods by which they are calculated are included in the Glossary
on pages 125 and 126.
3.3 REMUNERATION MIX FOR DISCLOSABLE EXECUTIVES
Brambles’ executive remuneration mix is heavily tied to
performance. At Risk remuneration represents 71% to 76% of the
Disclosable Executives’ maximum potential remuneration.
The graph on page 35 illustrates the level of actual remuneration
received by Disclosable Executives compared with their maximum
potential remuneration. Maximum potential remuneration is the
Disclosable Executive’s base salary plus his or her STI cash award
and STI share award assuming maximum level of performance (see
Section 4.1) and full vesting of all LTI share awards.
The “Actual” column of that graph comprises:
- Base salary – this is fixed remuneration for FY13;
- STI cash – this represents the STI cash award received in respect
to FY13 performance (see Section 4.1);
- STI shares – this is the STI share award earned in respect to FY13
performance but the vesting of which is deferred until FY15 (see
Section 4.1); and
- LTI shares – this shows the proportion of the FY10 to FY13 LTI
share awards which will vest in FY14 (see Section 4.2).
The “Potential” column represents the maximum value of each
element of remuneration that could have been received in each
case by the individual Disclosable Executive for FY13. As a result of
the simplification of the Pallets operating segment, which took
effect on 1 March 2013, Mr Mackie was assessed against the previous
CHEP Americas business unit for the first eight months of the year
and the Pallets segment for the balance of the year.
Under the terms of his employment contract (see Section 6.3), Mr
Pertz was not entitled to participate in Brambles’ incentive
arrangements referred to in sections 3 and 4 in FY13.
Brambles Annual Report 2013 - Page 36
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arl Pohler, are
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Brambles Annual Report 2013 - Page 37
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
Doug Pertz did not participate in Brambles’ STI cash, STI share
award or LTI share award incentives for the Year.
The actual levels of performance achieved for the Year against the
financial KPIs are summarised in the following table.
PERFORMANCE AGAINST FINANCIAL KPIs IN 2013
KPIs3
Brambles BVA
Brambles PAT
Level of performance achieved
during the Year4
Between Target and Maximum
Between Target and Maximum
- Customer satisfaction and retention are mainly measured using
the Net Promoter Score (NPS)6 system. NPS targets are set for each
year and performance is measured against the achievement of
those targets.
- People and talent management metrics relate to the development
of future leaders in Brambles as well as succession planning for
critical roles.
The following table summarises the components and weighting of
KPIs for STI cash awards for Disclosable Executives other than Group
President of RPCs, Karl Pohler, and Group President of Recall, Doug
Pertz, from 1 April 2013.
Brambles Cash Flow
Achieved Target
Pallets BVA
Between Target and Maximum
Disclosable Financial KPIs
Executive
Non-
Financial
KPIs
Pallets Cash Flow
Achieved Target
Containers Sales
Between Threshold and Target
Containers Cash Flow
Achieved Target
CHEP Americas BVA
Between Threshold and Target
CHEP Americas Cash Flow
Achieved mid-year target but
below Threshold at Year-end
CHEP EMEA & Asia-Pacific BVA
Between Target and Maximum
CHEP EMEA & Asia-Pacific Cash
Flow
Achieved Target
Recall BVA
Recall Cash Flow
IFCO EBITDA
IFCO Cash Flow
Below Threshold
Achieved Target
Between Threshold and Target
Achieved mid-year target but
below Threshold at Year-end
NON-FINANCIAL KPIS
Non-financial KPIs are set to link Disclosable Executives’
performance to Brambles’ overall strategic objectives. These
include personal strategic objectives in areas such as safety,
business strategy, new markets, customer satisfaction and
retention, and people and talent management.
- Brambles safety is measured by Brambles Injury Frequency Rate
(BIFR)5. BIFR targets for each business unit and the Group as a
whole are set each Year and incorporated into Disclosable
Executives’ non-financial KPIs. Brambles regards the safety of its
people as a major priority and, as the leaders of the company, the
ELT has Group-wide oversight of the Zero Harm policy. If a fatality
occurs, then the CEO, Group Senior Vice President of Human
Resources and relevant Group President(s) will have any incentive
related to BIFR outcomes reduced to zero.
- Business strategy and growth objectives include the
implementation of clearly specified strategic initiatives allocated
to individual ELT members, for example new business acquisitions.
3Definitions of BVA, PAT, Cash flow from operations and EBITDA
measurements and the methods by which they are calculated are included in
the Glossary on pages 125 and 126.
4Financial 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.
5A definition of BIFR is included in the Glossary on page 125 and reporting of
the Group’s BIFR performance is included in the Zero Harm section of the
Operational & Financial Review on page 5.
Group
BVA
Business
Unit
BVA/Sales
Group
PAT
Group
Cash
Flow
Business
Unit
Cash
Flow
CEO, CFO
30%
-
20%
20%
-
30%
25%
25%
-
-
20%
30%
50%
-
-
20%
-
30%
Group
Presidents:
Pallets,
Containers,
Recall and
CHEP EMEA
& Asia-
Pacific
Other
Disclosable
Executives
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 Disclosable Executive in the following table.
ACTUAL STI CASH PAYABLE & FORFEITED FOR YEAR
ENDED 30 JUNE 2013
Name
% of maximum STI
% of maximum STI
cash payable
cash forfeited
DISCLOSABLE EXECUTIVES
T Gorman
Z Todorcevski
J Holley
P Mackie
D Pertz
K Pohler7
J Rabbino
N Smith
64%
49%
66%
58%
N/A
8%
56%
62%
36%
51%
34%
42%
N/A
92%
44%
38%
6An explanation of the Group’s use of NPS is included in the Sustainability
Review to be published on Brambles’ website by end September 2013.
7Karl Pohler’s remuneration mix and bonus calculations reflect his existing
incentive arrangements from IFCO.
Brambles Annual Report 2013 - Page 38
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
Each year, a sales revenue CAGR/BVA matrix is set by the
Committee and approved by the Board for each LTI share award.
The matrix is published in the subsequent Remuneration Report.
This allows the Board to set targets for each LTI share award which
reward strong performance in the light of the prevailing and
forecast economic and trading conditions.
The table below is the sales revenue CAGR/BVA matrix for LTI share
awards made during the Year. It should be noted that the LTI
Performance Matrix shown encompasses the entire Brambles Group,
including Recall. On 2 July 2013, Brambles announced its intention
to demerge Recall by listing a new holding company, Recall
Holdings, on the ASX. If the Recall demerger is approved by
shareholders, the matrix will be restated to exclude Recall from the
performance targets. The Company’s 2014 Remuneration Report will
explain the change to the matrix and how the final determination of
performance will be made.
As a policy principle, the Company takes into account major
acquisitions or divestments in determining the final outcome. Where
there are acquisitions or divestments that are not material to the
overall outcome, these are excluded from any performance
assessment.
LTI PERFORMANCE MATRIX FOR FY13 TO FY15
Vesting %
Cumulative three-year BVA
at fixed 30 June 2012 FX rates (US$M)
Sales revenue CAGR*
950
1,150
1,350
4%
5%
6%
7%
8%
9%
–
20%
40%
60%
80%
100%
20%
40%
60%
80%
100%
100%
40%
60%
80%
100%
100%
100%
*Three-year CAGR over base year
The sales revenue CAGR provides for half point vesting in between
the percentages shown if the sales revenue outcome is more than
half way between the vesting levels. For example, a sales revenue
CAGR of 6.7% and a BVA outcome of US$1,000 million would provide
vesting of 50%. There is no half point vesting scale in between the
respective BVA hurdles.
4.2.2 PERFORMANCE OF LTI SHARE AWARDS UNDER THE 2006
PERFORMANCE SHARE PLAN
The following tables detail actual performance against the
applicable performance condition for LTI share awards made during
the five financial years indicated.
Name
% of maximum STI
% of maximum STI
cash payable
cash forfeited
FORMER DISCLOSABLE EXECUTIVES
G Hayes
E Potts
R Westerbos
44%
32%
67%
56%
68%
33%
4.2 LTI SHARE AWARDS
As outlined in Section 3.1, Disclosable Executives 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
is subject to satisfaction of performance conditions (which are
explained in Section 4.2.1 below) over a three-year performance
period (Performance Period). If awards vest, they are exercisable
for up to six years from the date of grant.
The table in Section 4.2.2 illustrates the relationship between
Brambles’ remuneration policy and performance, showing the level
of vesting of LTI share awards during the Year and the previous four
financial years.
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 Sections 9.2 and 9.3. LTI share awards only vest to the
extent that performance conditions are met. The awards are
governed by the Brambles 2006 Performance Share Plan (2006 Share
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 2006 Share Plan rules. Under the “good
leaver” provisions, there is no accelerated vesting in the case of
terminations and all unvested LTI share awards are forfeited in the
case of resignations or terminations for cause.
4.2.1 LTI SHARE AWARD PERFORMANCE CONDITIONS
LTI performance conditions are set both to align executive
remuneration with the creation of shareholder value and to
support Brambles’ financial objective of creating and sustaining
profitable growth.
To allow a greater focus on profitable growth while retaining a
shareholder value metric, LTI share awards have two sets of
performance conditions, each with equal weighting.
Creation of Shareholder Value: 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.
TSR measures the returns that a company has provided for its
shareholders, reflecting share price movements and reinvestment of
dividends over a specific 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.
Profitable growth: Half of the LTI share award incentivises both
long-term sales revenue and BVA growth. Vesting is based on
achievement of sales revenue targets with three-year performance
targets 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.
Brambles Annual Report 2013 - Page 37
Brambles Annual Report 2013 - Page 39
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
As outlined in 4.2.1 LTI share awards have two sets of performance conditions, each with equal weighting. The tables below show the level
of performance and vesting for each of the two components, which each individually comprise half of the LTI Award.
Level of vesting of LTI share awards based on TSR performance
Period Prior to 30 June
2012
Period to 30 June 2013
Awards
made during
financial year8
Performance
condition
Start of
Performance
Period
Ranking (Out-
performance of median
company’s TSR return9
(%)
Vesting
triggered
(% of original award)
Vesting
triggered
(% of original award)
FY09
FY10
FY11
Relative TSR
1 July 2008
Relative TSR
1 July 2009
Relative TSR
1 July 2010
6.30
6.29
30.34
57.8% LTI awards
55.1% LTI TSR Award
N/A
N/A
N/A
100.0% LTI TSR Awards
The following table provides similar details for awards which have yet to be tested.
Awards made
during8
Performance condition
Start of Performance
Period
Out-performance of median
company’s TSR return9 (%)
FY12
FY13
Relative TSR
Relative TSR
1 July 2011
1 July 2012
19.08
11.15
Period to 30 June 2013
Vesting if current performance is
maintained until earliest testing
date (% of original award)
79.34% LTI TSR awards
61.59% LTI TSR awards
Level of vesting of LTI share awards based on sales revenue CAGR and BVA performance
The following table provides details for the actual performance of LTI share awards against the applicable sales revenue CAGR/BVA matrix
for those awards granted in 2010 and 2011 and which have been tested.
Awards made
during8
Performance condition
Start of Performance
Period
Prior Period and Period to 30
June 2012 vesting triggered (%
of original award)
Period to 30 June 2013 Vesting
triggered (% of original award)
FY09
FY10
FY11
Sales revenue CAGR/BVA 1 July 2008
0.00% LTI awards
Sales revenue CAGR/BVA 1 July 2009
30.00% LTI sales revenue
CAGR/BVA awards
N/A
N/A
Sales revenue CAGR/BVA 1 July 2010
N/A
30% of LTI sales revenue
CAGR/BVA awards
The following table provides similar details for LTI share awards the performance period of which has not yet expired.
Awards made
during8
Performance condition
Start of Performance
Period
Period to 30 June 2013 vesting if current performance is
maintained until earliest testing date (% of original award)
FY12
FY13
Sales revenue CAGR/BVA 1 July 2011
20% LTI sales revenue CAGR/BVA awards
Sales revenue CAGR/BVA 1 July 2012
40% LTI sales revenue CAGR/BVA awards
Total level of vesting of LTI share awards
The combined vesting of the two LTI components for 2012 and 2013 is shown below.
Awards made
during
Start of Performance
Period
End of Performance
Period
Total vesting (TSR and sales revenue CAGR/BVA combined)
FY09
FY10
FY11
1 July 2008
1 July 2009
1 July 2010
30 June 2011
30 June 2012
30 June 2013
28.90%
42.55%
65%
8These 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 three-year sales revenue CAGR and BVA
performance. The vesting matrix for this component of the award made during the 2013 financial year is detailed in Section 4.2.1.
9Percentage out-performance of the median company’s TSR return against the S&P/ASX 100 Index.
Brambles Annual Report 2013 - Page 40
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
5. 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 3,500 Brambles employees from
approximately 40 countries have elected to participate in MyShare.
MyShare employee participants as a group represent a group
approximately equivalent in size to our 25th largest registered
shareholder. The number of shares purchased by employees
(Acquired Shares) as at 30 June 2013 was 929,613, excluding shares
received under the MyShare Dividend Share Program (Dividend
Shares). At the end of March 2013, Brambles issued 500,941 shares
to employees, being a matching number of shares (Matching Shares)
to those purchased and held by employees for the two-year period.
During the Year, employees in Pallecon, acquired in January 2013,
were given their first opportunity to enrol in MyShare. This program
has been very well received by the Pallecon employees and their
participation rate was 46%.
In addition, during the Year, due to a relaxation of restrictions on
capital transfers out of China, CHEP China was able to convert its
MyShare plan from a phantom scheme to a standard share plan.
CHEP China employees MyShare participation increased significantly
to 57% in FY13 from 43% in FY12.
In August 2012, Argentina’s government enacted tighter foreign
exchange controls. Since then, Brambles’ Argentina-based
businesses have been unable to fund additional share purchases for
their MyShare plans.
Disclosable Executives are eligible to participate in MyShare.
Acquired Shares, Dividend Shares and vested Matching Shares
obtained by Disclosable Executives through MyShare are included in
Section 6.6. Matching Shares allocated, but not yet vested, are
shown in Sections 6.5 and 6.7.
6. EXECUTIVE DIRECTORS & DISCLOSABLE EXECUTIVES
6.1 EXECUTIVE DIRECTOR CHANGES
During the Year, Greg Hayes retired as CFO and as an Executive
Director. He retired from the Brambles Board effective 1 October
2012 but remained a Brambles employee until 1 March 2013.
6.2 OTHER DISCLOSABLE EXECUTIVE CHANGES
Zlatko Todorcevski commenced as Chief Financial Officer on 8
October 2012. On 1 March 2013, Dolph Westerbos ceased
employment following the restructure of the Pallets operating
segment. Following the appointment of Doug Pertz as Group
President of Recall, Elton Potts ceased employment on 25 April
2013.
6.3 SERVICE CONTRACTS
Disclosable Executives 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 annual base salary. These
standard service contracts states that any termination payments
made would be reduced by any value to be received under any new
employment.
Other than Peter Mackie10, executives remunerated on a base salary
approach receive pension contributions of 15% of base salary.
All terminations during the Year were in accordance with the terms
and conditions of individual employees’ contracts.
Under his employment contract, Zlatko Todorcevski, who
commenced employment on 8 October 2013, received a sign on
grant of 214, 213 Brambles share rights. This was an amount equal
10Mr Mackie received 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.
in value to the share rights he forfeited on leaving his former
employer. These rights vest in five tranches between January 2013
and January 2015. During the Year, 77,906 of those rights vested
and are reflected in the table in Section 6.6. Vesting of these share
rights is subject to his continuing employment with Brambles.
On 28 March 2013, Brambles announced the appointment of Doug
Pertz as Group President of Recall and he commenced that role on
1 April 2013. His employment contract provides for him to be
remunerated on a base salary approach.
At the time of Mr Pertz’s recruitment, Brambles was carrying out a
strategic review of Recall, which included a number of different
divestment options including a possible demerger or IPO. Therefore,
in searching for a candidate for the role of Recall Group President,
priority was given to identifying individuals who had the skills and
experience to lead Recall as a standalone business headquartered in
the USA and, if Brambles so decided, to manage it through a
divestment or public listing. After a comprehensive search, Mr Pertz
was selected as the most suitable candidate.
Because Brambles was still conducting the Recall strategic review at
the time it was recruiting a new Group President, parts of Mr Pertz’s
service contract are not standard. It contains provisions relating to
his remuneration which are contingent on the occurrence and, if
applicable, the manner in which any Recall divestment would take
place. In addition, Mr Pertz’s contract includes a one-off grant of
share awards in Recall Holdings to the value of US$6 million if it
were to be demerged, to recognise the significant opportunity he
forfeited in leaving his previous employer to join Recall. The Board
considered that the one-off nature of these arrangements were
necessary and appropriate.
On 2 July 2013, Brambles announced it would divest Recall by way
of a demerger and listing on the ASX. The elements of Mr Pertz’s
remuneration which apply if the demerger takes place are as
follows:
– One–off Recall share award: Subject to Mr Pertz remaining
employed by Recall, he is entitled to a one-off share award
comprising a grant of share rights in Recall Holdings to the value
of US$6 million (Recall Award). The amount and nature of the
Recall Award was determined to compensate him for the value of
the equity in his then employer that he would forfeit by joining
Recall, to provide an incentive for him to remain at Recall through
and after a demerger and to align this part of his package with the
creation of shareholder value in Recall Holdings. Any shares issued
to Mr Pertz pursuant to the Recall Award will be held in escrow
and may not, except in the specific termination situations
described below, be sold or otherwise disposed of for a period of
48 months (i.e. 1 April 2017) from the date of commencement of
his employment with Recall.
The grant of the Recall Award is subject to any required
shareholder approval. Each share right the subject of the Recall
Award will, upon vesting, entitle Mr Pertz to one share in Recall
Holdings. The vesting schedule for the Recall Award is over a two-
year period, as follows:
– On completion of the demerger: 33.33%;
– 12 months after completion of the demerger if he remains
employed by Recall Holdings: 16.67%; and a further 16.67%
subject to the satisfaction of performance conditions to be
determined by the Board of Recall Holdings; and
– 24 months after completion of the demerger if he remains
employed by Recall Holdings: 16.67%; and a further 16.67%
subject to the satisfaction of performance conditions to be
determined by the Board of Recall Holdings.
The number of share rights the subject of the Recall Award will be
US$6 million divided by the volume-weighted average price of
shares in Recall Holdings for the five trading days after (and
excluding) the first day on which Recall Holdings’ shares are
quoted on the ASX.
Brambles Annual Report 2013 - Page 39
Brambles Annual Report 2013 - Page 41
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
CONTRACT TERMS FOR DISCLOSABLE EXECUTIVES
Name and role(s)
Disclosable Executives:
T Gorman
CEO
Z Todorcevski
CFO
From 8 October 2012
Base salary at 30 June 2013
unless indicated
A$2,060,000
A$1,050,000
J Holley
Group Chief Information Officer
US$435,000
P Mackie
Group President, Pallets
K Pohler
Group President, RPCs
D Pertz
Group President & Chief Operating
Officer, Recall
From 1 April 2013
J Rabbino
Group President, Containers
N Smith
Group Senior Vice President,
Human Resources
Former Disclosable Executives:
G Hayes11
CFO until 7 October 2012, ceased
employment on 1 March 2013
E Potts
Group President & Chief Operating
Officer, Recall until 25 April 2013
R Westerbos
Group President, Pallets, EMEA &
Asia-Pacific until 30 June 2013
£425,000
€850,000
US$900,000
US$535,000
A$635,000
A$1,550,000
US$583,000
€442,000
– Recall Holdings’ incentive schemes: subject to receiving any
necessary shareholder approvals, Mr Pertz will be eligible to
participate in any cash bonus scheme, share-based incentive plans
or other incentive arrangements that Recall Holdings may
implement after the demerger is completed.
Because of the uncertainty surrounding the future of Recall at the
time Mr Pertz commenced employment with Brambles, under his
employment contract he was not entitled to participate in
Brambles’ incentive arrangements referred to in Sections 3 and 4 in
FY13 and beyond. In lieu of this, Mr Pertz will be entitled to a cash
bonus of up to US$1 million relating to the period 1 April 2013 to
31 December 2013, subject to the achievement of the following
objectives:
– Financial targets:
– Recall EBITDA; and
– Recall Cash Flow;
– Personal and strategic objectives:
– Zero Harm for Recall; and
– Retaining key customers, and driving the achievement of a
successful separation of Recall.
This cash bonus will be payable no later than 15 March 2014.
The termination provisions of Mr Pertz’s employment contract are
more complex than usual because Brambles had not completed the
strategic review of Recall at the time he was recruited. The
following is a summary of his termination provisions:
– As with other Disclosable Executives, his contract may be
terminated by his employer for good cause or by Mr Pertz giving
six months’ notice. If his employment is terminated in these
circumstances, Mr Pertz will retain any vested portion of the
Recall Award, any unvested portion of the Recall Award will be
foregone and the 48 month escrow period referred to above will
continue to apply.
– As with other Disclosable Executives, his contract may be
terminated without cause by the employer giving 12 months’
notice. Mr Pertz may also terminate his employment contract for
“good reason”. The circumstances which comprise “good reason”
are either: a material reduction in his base salary; a material
diminution in his duties or reporting relationships; a requirement
that he relocates to a principal place of business outside the USA;
or, if applicable, his not being appointed (or, if required by law,
nominated periodically) to the Board of any Recall listed entity. If
Mr Pertz’s employment is terminated in either of these
circumstances, Mr Pertz will retain any vested portion of the
Recall Award, any unvested portion of the Recall Award will vest
and the 48 month escrow period referred to above will no longer
apply. He would also be entitled to a pro rata payment of the
US$1 million bonus relating to the period up to 31 December 2013
referred to above, subject to satisfaction of the performance
conditions to which that bonus is subject.
Mr Pertz’s employment contract provides that any termination
benefits described above are, where applicable, subject to receiving
any necessary shareholder approval under Part 2D.2 of the Act. This
approval will be sought at the Brambles general meeting to approve
the Brambles capital reduction by which the demerger will be
implemented and which is expected to be held in early December
2013.
11Mr Hayes retired from the Group on 1 March 2013. A summary of his
retirement entitlements was announced to the ASX on 4 June 2012 and is
included in Section 6.4.
Brambles Annual Report 2013 - Page 42
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
6.4 TOTAL REMUNERATION AND BENEFITS FOR THE YEAR
The table below provides a summary of the actual remuneration, before equity, received or receivable by the Disclosable Executives for the
Year, together with prior year comparatives. Income derived from the vesting of shares during the year has been included below as “Actual
share income”. The value shown is the market value at the time the income became available to the executive. These awards were granted
in prior financial years. The values shown relate to STI and LTI share awards made in 2009. (Theoretical accounting values for unvested share
awards are shown in Section 9.4; those values are a statutory disclosure requirement. Unvested share awards may result in “Actual share
income” in future years and, if so, the income will be reported in the table below in the Annual Report for the relevant year). The purpose
of this table is to enable shareholders to understand the actual remuneration received by Disclosable Executives.
(US$'000)
Name
Short-term employee benefits
Year
Cash/
salary/
fees
Cash
bonus
Non-
monetary
benefits12
Post-
employment
benefits
Super-
annuation
Other
Termination/
sign-on
payments/
retirement
benefits
Other
Total
before
equity
Actual
share
income
STI/LTI
awards
Total
EXECUTIVE DIRECTORS
T Gorman13
FY13
2,322
1,210
FY12
2,430
1,043
CURRENT DISCLOSABLE EXECUTIVES
Z Todorcevski13
FY13
955
J Holley14
P Mackie13
D Pertz47
K Pohler13
J Rabbino14
N Smith13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
-
454
408
761
749
253
-
FY13
1,100
FY12
1,133
FY13
FY12
FY13
FY12
563
64
778
691
FORMER DISCLOSABLE EXECUTIVES
G Hayes13
E Potts
R Westerbos13
Totals
FY13
1,146
FY12
1,691
FY13
FY12
FY13
FY12
493
613
589
582
503
-
216
158
349
370
333
-
219
-
268
-
303
260
633
746
320
148
346
248
FY13
9,414
FY12
8,361
4700
2,973
180
296
10
-
152
75
52
146
-
-
35
37
-
-
-
-
32
42
-
-
125
108
586
704
-
-
26
-
59
24
21
17
-
-
9
9
53
-
26
52
26
52
46
71
85
84
351
309
-
-
306
-
-
133
-
-
-
-
-
-
-
-
-
-
1
-
699
-
447
330
1,453
463
18
21
-
-
17
11
25
20
1
-
5
6
15
-
-
-
-
-
17
15
-
-
98
73
3,730
1,101
4,831
3,790
661
4,451
1,800
674
2,474
-
898
809
1,208
1,302
587
-
1,368
1,185
899
64
1,107
1,003
-
-
204
1,102
-
809
193
171
-
-
-
-
-
-
359
339
1,401
1,473
587
-
1,368
1,185
899
64
1,466
1,342
1,838
1,281
3,119
2,531
1,575
847
1,592
1,352
-
2,531
374
261
-
-
1,949
1,108
1,592
1,352
16,602
4,186
20,788
12,883
1,432
14,315
12Non-monetary benefits include car parking, personal/spouse travel, club membership, motor vehicles, relocation and storage costs and fringe benefits tax.
13The year-on-year comparison of remuneration is affected by the movement of exchange rates from A$1=US$1.0304 and EUR=US$1.3325 for 2012 to
A$1=US$1.0212, EUR=US$1.2939 and GBP=US$1.5667 respectively for 2013.
14These executives were appointed to their current role during the 2012 Year, as such the 2012 comparator represents part year only.
47 The US$333,000 cash bonus for Mr Pertz in the above table is the current estimate accrued for service performed during the period 1 April 2013 to 30 June
2013. The full details of Mr Pertz’s cash bonus entitlement, including the objectives to which it is subject, are referred to in section 6.3. This amount was not
actually paid to Mr Pertz in FY13 and will only become payable in FY14 subject to achievement of the objectives referred to in that section.
Brambles Annual Report 2013 - Page 43
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
6.5 EQUITY-BASED AWARDS
6.6 SHAREHOLDINGS
The following table shows details of equity-based awards made to
the Disclosable Executives during the Year. STI and LTI share awards
were made under the 2006 Share Plan, the terms and conditions of
which are set out in Sections 9.2 and 9.3 (see plan numbers
16 to 26). Matching Awards were made under MyShare, the terms
and conditions of which are also set out in Sections 9.2 and 9.3
(plan numbers 43 to 55).
Ty pe of aw ard
Name
DISCLOSABLE EX ECUTIV ES
T Gorman
STI
LTI
MyShare Matching
Total
J Holley
D Pertz
P Mackie
Z Todorcevski STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
Total
STI
LTI
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
J Rabbino
K Pohler
N Smith
FORMER DISCLOSABLE EX ECUTIV ES
G Hayes
E Potts
R Westerbos
STI
LTI
Total
STI
LTI
MyShare Matching
Total
STI
LTI
Total
Equity -based aw ards
V alue at grant
Number
US$'00017
150,039
385,412
641
536,092
214,213
191,900
185
406,298
22,560
60,652
661
83,873
52,835
118,366
642
171,843
-
-
-
-
-
-
-
97,400
19
97,419
37,359
91,608
641
129,608
1,059
2,719
5
3,783
1,562
1,399
1
2,962
159
428
5
592
373
835
5
1,213
-
-
-
-
-
-
-
687
-
687
264
646
5
915
-
-
-
111,075
105,008
552
216,635
34,217
105,822
140,039
-
-
-
710
741
4
1,455
241
747
988
The following table 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 their base salary before tax. In circumstances where
executives wish to sell shares, they will require the approval of the
Chairman (in the case of the CEO) or the CEO (in the case of all
other ELT members).151618 19 20 21
Balanc e at the
Changes
Balanc e at
Ordinary
shares
start of the
during the
the end of
Y ear
Y ear
the Y ear18
DISCLOSABLE EX ECUTIV ES
T Gorman19
128,782
Z Todorcevski15
J Holley20
P Mackie20
D Pertz
K Pohler
J Rabbino20
N Smith16 19
80,366
78,091
24,596
500
229
2,165
12,890
-
-
-
-
-
19
209,148
78,591
24,825
15,055
-
-
19
4,132
71,359
75,491
FORMER DISCLOSABLE EX ECUTIV ES
G Hayes21
E Potts20 21
-
-
-
93,059
(19,577)
73,482
R Westerbos
101,495
(101,495)
-
15Of which 500 shares were held by Zlatko Todorcevski and Robert
Todorcevski, 77,906 shares were held by Tentwentyfive Pty Ltd and 185 are
held by AET Structured Finance Services Pty Limited.
16Of which 70,000 held by Lisa Smith.
17The total value of the relevant equity award(s) is valued as at the date of
grant using the methodology set out in Section 9.1. 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.
18On 31 July 2013, the following Disclosable Executives acquired ordinary
shares under MyShare, which are held by AET Structured Finance Services Pty
Limited: Tom Gorman (45), Zlatko Todorcevski (45), Jean Holley (46), Peter
Mackie (47), Jason Rabbino (4) and Nick Smith (46).
19Of which AET Structured Finance Services Pty Limited holds 933 shares for
Tom Gorman, 230 shares for Zlatko Todorcevski and 5,537 shares for Nick
Smith.
20All of these shares are held by AET Structured Finance Services Pty Limited.
21Balance at the end of the Year is at cessation of employment for Greg
Hayes, who ceased employment on 1 March 2013; Elton Potts, who ceased
employment on 25 April 2013.
Brambles Annual Report 2013 - Page 44
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
6.7 INTERESTS IN SHARE RIGHTS222324
The following table shows details of rights over Brambles Limited ordinary shares in which the Disclosable Executives held relevant interests:
share rights, being awards made on 24 November 2010, 31 March, 2011, 6 September 2011, 16 July 2012, 25 September 2012 and 12 October
2012 under the 2006 Share Plan; and Matching Awards, being conditional rights awarded during the Year under MyShare. 25,26
Balanc e at
the start
of the
Y ear
Granted
during
the Y ear
Exerc ised
during
the Y ear23
Lapsed
during
the Y ear
V alue at
V alue at
V ested and
Balanc e at
exerc iseable
the end of
at the end of
the Y ear24
the Y ear
Name
Number
Number25
V alue at grant
Number
exerc ise
Number
lapse26
Number
Number
US$'000
US$'000
US$'000
DISCLOSABLE EX ECUTIV ES
T Gorman
1,316,336
536,092
Z Todorcevski
-
406,298
J Holley
125,859
83,873
P Mackie
375,446
171,843
D Pertz
-
K Pohler
251,637
-
-
J Rabbino
-
97,419
N Smith
376,931
129,608
FORMER DISCLOSABLE EX ECUTIV ES
3,783
2,962
592
1,213
-
-
687
915
148,310
1,101
178,735
1,129
1,525,383
77,906
32,305
25,888
-
-
-
674
204
193
-
-
-
-
-
-
-
328,392
177,427
27,918
176
493,483
-
-
-
-
-
-
-
251,637
97,419
46,822
359
49,649
314
410,068
G Hayes
1,159,820
-
-
172,739
1,281
384,861
2,802
602,220
E Potts
392,796
216,635
1,455
50,192
374
177,717
R Westerbos
264,092
140,039
988
-
-
106,648
755
737
381,522
297,483
-
-
-
-
-
-
-
-
-
-
-
22Of the awards detailed in Section 9.3, the following plan numbers are relevant to Disclosable Executives: Tom Gorman, Peter Mackie and Nick Smith (2 to 9, 13
to 15, 17 to 19 and 27 to 55); Zlatko Todorcevski (20 to 26 and 51 to 55); Jean Holley (11 to12, 14 to 16 and 17 to 19); Karl Pohler (10); Jason Rabbino (18 to 19
and 51 to 55); Greg Hayes (3 to 9, 13 and 15); Elton Potts (2 to 9, 13 to 18 and 27 to 55); Dolph Westerbos (7 to 9, 13 to 15 and 17 to 19). Lapses occurred for
Tom Gorman, Peter Mackie and Nick Smith (3 and 4); Greg Hayes (3 to 4 and 8 to 9); Elton Potts (3 to 4, 8 to 9 and 14 to 15) and Dolph Westerbos (14 to 15 and
18 to 19). Exercises occurred for Tom Gorman, Peter Mackie and Nick Smith (2 to 4 and 27 to 38); Zlatko Todorcevski (20 to 21); Jean Holley (11); Greg Hayes
(3 to 4); and Elton Potts (2 to 4 and 27 to 52).
23Of the 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.
24On 31 July 2013, the following Disclosable Executives received Matching Awards under MyShare: Tom Gorman (45), Zlatko Todorcevski (45), Jean Holley (46),
Peter Mackie (47), Nick Smith (46) and Jason Rabbino (4).
25During the Year, 3,468,198 performance share rights were granted under the 2006 Share Plan, of which 535,451 were granted to Tom Gorman and 406,113 were
granted to Zlatko Todorcevski. 763,015 Matching Awards were granted under MyShare during the Year, of which 641 were granted to Tom Gorman. Approval for
these issues of securities was obtained under ASX Listing Rule 10.14 at the AGM held on 10 November 2011.
26“Lapse” in this context means that the award was forfeited due to either the applicable service or performance conditions not being met.
Brambles Annual Report 2013 - Page 45
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
7. NON-EXECUTIVE DIRECTORS’ DISCLOSURES
7.2 NON-EXECUTIVE DIRECTORS’ APPOINTMENT LETTERS
Directors are appointed for an unspecified term but are subject to
election by shareholders at the first AGM after their initial
appointment by the Board. 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 (see pages 20
and 22).
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’ STI, LTI
or MyShare plans.
7.3 NON-EXECUTIVE DIRECTORS’ REMUNERATION FOR THE YEAR
The fees and other benefits provided to Non-executive Directors
during the Year and during the prior year are set out in the table
below in US dollars. 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.
7.1 NON-EXECUTIVE DIRECTORS’ REMUNERATION POLICY
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 advisors 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.
Over the past three years Brambles has set Non-executive Directors’
fees at the relevant market rate for the geography in which the
Non-executive Director resided. In 2013, this approach was reviewed
by Brambles’ external advisors and, following an extensive
benchmarking exercise, a decision was made to align Brambles
practice with that of the Australian market.
Fees for all Non-executive Directors’ are now paid in Australian
dollars. Brambles’ base fees for Non-executive Directors are set
with reference to the peer group referred to in Section 3.1, which is
consistent with Brambles’ policy on executive pay.
A review of Non-executive Director and Board Chairman fees was
undertaken in 2013 to ensure the fees remained in line with the
Australian market practice, resulting in an increase of 3%.
A key outcome of the review was a gap between Brambles’ practices
in relation to the payment of Committee membership fees. Market
practice in Australia showed that the majority of companies pay
Committee membership fees. Effective 1 January 2013, Brambles
commenced paying a A$10,000 Committee membership fee per
annum. This only applies to the Audit and Remuneration
Committees. These fees do not apply to the Board Chairman. To
reflect the increasing complexity and workload of the Chairman of
both the Audit and Remuneration Committees, the fees for the
Committee Chairs have been increased as follows:
– Audit Committee Chair from A$36,000 to A$50,000; and
– Remuneration Committee Chair from A$33,000 to A$40,000.
In addition, Brambles reviewed the travel allowances for Non-
executive Directors and introduced a flat fee of A$5,000 per long-
haul trip for all Non-executive Directors (including the Chairman).
In summary, the 2013 review established the following fee
structure:
– Chairman: A$605,000
– Non-executive Directors: A$193,000
– Supplement for Audit Committee Chairman: A$50,000
– Supplement for Remuneration Committee Chairman: A$40,000
– Supplement for Audit and Remuneration Committee
membership: A$10,000
– Travel allowance per long-haul flight: A$5,000
The next fee review will be undertaken during January 2014.
Brambles Annual Report 2013 - Page 46 DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
TABLE 7.3 NON-EXECUTIVE DIRECTORS’ REMUNERATION FOR THE YEAR
(US$'000)
Name
Short-term employee benefits
Post-employment benefits
Year
Directors’ fees
Superannuation
Other27
Total28
CURRENT NON-EXECUTIVE DIRECTORS
D Duncan
A Froggatt29
D Gosnell
T Hassan
S Johns29
C Kay29
G Kraehe AO29
L Mayhew29
B Schwartz AM29
Totals
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
207
88
190
176
181
81
209
109
238
214
190
173
611
579
212
178
190
173
2,228
1,771
9
4
17
13
8
3
9
5
8
12
17
16
26
22
10
6
17
16
7
17
16
8
2
3
5
8
28
12
17
6
35
53
4
9
33
56
223
109
223
197
191
87
223
122
274
238
224
195
672
654
226
193
240
245
121
97
147
172
2,496
2,040
7.4 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.
Ordinary shares
Balance at
start of Year
Changes
during Year
Balance at
end of Year
CURRENT NON-EXECUTIVE DIRECTORS
D Duncan
A Froggatt
D Gosnell
T Hassan
S Johns
C Kay
G Kraehe AO
L Mayhew
B Schwartz AM
-
24,890
14,450
8,000
47,500
14,877
63,776
16,500
13,029
-
(10,000)
8,460
-
-
-
3,189
-
8,652
-
14,89030
22,91031
8,00032
47,50033
14,87734
66,96535
16,50036
21,68137
27“Other” includes personal/spouse travel, meals and fringe benefits tax.
28None 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.
29The year-on-year comparison of remuneration is affected by the movement of exchange rates from A$1=US$1.0304 and GBP1=US$1.5834 for 2012 to
A$1=US$1.0212 and GBP1=US$1.5667 for 2013.
30Of which 7,000 shares were held by Christine Joanne Froggatt and 7,890 shares were held by Anthony Grant Froggatt.
31Held by Charles Stanley & Co Australia in the name of Susan Gosnell.
32Held by RBC Dexia Custodian on behalf of Tahira Hassan.
33Of which 27,500 shares were held by Canzak Pty Ltd, and 20,000 shares were held by Caran Pty Limited.
34Of which 9,977 held by the Carolyn Kay Superannuation Fund.
35Held by Invia Custodians as trustee for the Graham John Kraehe Self Managed Superannuation Fund.
36Held by HSBC Bank of Australia Limited on behalf of Luke Mayhew.
37Held by Brian Martin Schwartz & Arlene Schwartz as trustee for the Schwartz Superannuation Fund.
Brambles Annual Report 2013 - Page 47
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
8. REMUNERATION ADVISOR
The Committee have appointed Ernst & Young as Brambles’
remuneration advisor to assist the Company with Non-executive
Director and executive remuneration matters. In performing its role,
the Remuneration Committee directly request and receive
information and advice from Ernst & Young.
During the Year, no remuneration recommendations, as defined by
the Act (Recommendations), were provided by Ernst & Young. Ernst
& Young also provided taxation, internal audit, option valuation and
project-related services together with general employee advice
services to Brambles during the Year. These services did not include
a Recommendation.
During the Year, the Committee reviewed the arrangement relating
to the engagement of its independent, external advisor. As a result,
Brambles has made arrangements to ensure that the making of any
Recommendations would be free from undue influence by the
Disclosable Executives to whom a Recommendation may relate.
The engagement letter entered into by Brambles and Ernst & Young
contains an agreed set of engagement protocols which apply to the
provision of Recommendations to Brambles. These include:
- An agreed set of pre-approved services Ernst & Young may provide
- Representatives of Ernst & Young attend all Committee meetings;
- Except for CEO Tom Gorman and Group Senior Vice President of
Human Resources, Nick Smith, the Disclosable Executives do not
attend Committee meetings;
- Mr Gorman and Mr Smith do not attend those parts of any
Committee meeting when their remuneration is being reviewed or
discussed; and
- The Committee meets with Ernst & Young without management
being present, during which time any issues or questions relating
to Disclosable Executives’ remuneration which are not appropriate
to discuss with management present, may be discussed.
9. APPENDICES
9.1 BASIS OF VALUATION OF EQUITY-BASED AWARDS
Unless otherwise specified, the fair values of the options and share
rights included in the tables in this report have 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,
pages 95 and 96 of the financial statements.
Brambles management, which excluded Recommendations;
9.2 SUMMARY OF 2006 PLANS
– Any requests to Ernst & Young from Brambles management
which might constitute a Recommendation are to be
referred by Ernst & Young to the Committee for its
consideration and direction;
– Ernst & Young is not permitted to provide Recommendations to
Brambles’ management; and
– If Ernst & Young provides a Recommendation, it would include
with it a declaration that it has not been unduly influenced by
the Disclosable Executive subject to the Recommendation;
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. The plans in bold
relate to the Plans and targets which were relevant to vesting
during the Year.
Plan
Nature of
award
Size of award
2006 Share Plan
(STI)
Share
rights
2006 Share Plan
(TSR LTI)
Share
rights
Up to 100% of
size of STI cash
award
% of salary/TFR
2006 Share Plan
(FY11-FY13 BVA LTI)
Share
rights
% of salary/TFR
2006 Share Plan
(FY12-FY14 BVA LTI)
Share
rights
% of salary/TFR
2006 Share Plan
(FY13-FY15 BVA LTI)
Share
rights
% of salary/TFR
Vesting
condition
Time only
Vesting schedule
Performance/
vesting period
Life of award
100% vesting based on continuous
employment.
Two years
Maximum six years
Time and
relative TSR
hurdle
40% vesting if TSR is equal to the
median ranked company.
100% vesting if 25% above the
median ranked company.
Time and sales
revenue CAGR
and BVA
performance
Time and sales
revenue CAGR
and BVA
performance
Time and sales
revenue CAGR
and BVA
performance
30% vesting occurs if CAGR is 5%
and BVA is US$900M over three-year
period.
100% vesting occurs if CAGR is 7%
and BVA is US$1,300M over three-
year period.
20% vesting occurs if CAGR is 6%
and BVA is US$850M over three-year
period.
100% vesting occurs if CAGR is 8%
and BVA is US$1,250M over three
year period.
20% vesting occurs if CAGR is 5%
and BVA is US$950M over three-year
period.
100% vesting occurs if CAGR is 7%
and BVA is US$1,350M over three-
year period.
Three years
Maximum six years
Three years
Maximum six years
Three years
Maximum six years
Three years
Maximum six years
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 2013 - Page 46
Brambles Annual Report 2013 - Page 48
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
9.3 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 do not have an exercise price and carry no dividend or voting rights.
Plan
Plan
number
Grant date
Expiry date
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
18
19
20
21
22
23
24
25
26
29 August 200738
30 August 2013
A$12.64
100% vested at 29 August 2010
25 November 200938 25 November 201539 A$5.85
100% vested at 25 November 2012
25 November 200940 25 November 201539 A$3.84
25 November 200941 25 November 201539 A$5.85
12 April 201041
12 April 2016
12 April 201040
12 April 2016
A$6.48
A$4.26
24 November 201038 24 November 201639 A$6.01
24 November 201040 24 November 201639 A$3.78
24 November 201041 24 November 201639 A$6.01
31 March 2011
30 June 2017
6 September 2011
1 August 201239
6 September 2011
1 August 201339
A$6.35
A$6.17
A$5.92
6 September 201142 6 September 201739 A$5.92
6 September 201140 6 September 201739 A$3.46
6 September 201141 6 September 201739 A$5.68
16 July 2012
1 September 201439 A$6.09
25 September 201242 25 September 201839 A$6.31
25 September 201240 25 September 201839 A$3.41
25 September 201241 25 September 201839 A$6.07
55.1% exercisable from 25 November
2012, remainder lapsed
30% exercisable from 25 November
2012, remainder lapsed
25 November 2013
25 November 2013
25 November 2013
25 November 2013
25 November 2013
30 June 2014
100% vested at 1 July 2012
1 July 2013
6 September 2013
6 September 2014
6 September 2014
1 September 2013
25 September 2014
25 September 2015
25 September 2015
12 October 2012
12 October 2018
A$6.48
100% vested at 31 January 2013
12 October 2012
12 October 2018
A$6.48
100% vested at 31 May 2013
12 October 2012
12 October 2018
A$6.48
31 January 2014
12 October 2012
12 October 2018
A$6.48
31 May 2014
12 October 2012
12 October 2018
A$6.48
31 January 2015
12 October 201240
25 September 2018
A$3.50
12 October 201241
25 September 2018
A$6.23
25 September 2015
25 September 2015
38STI awards vest on the third anniversary of their grant date, subject to continued employment.
39Awards granted to Elton Potts, Jean Holley, Peter Mackie and Jason Rabbino expire three years earlier than the date shown, or immediately after vesting, if
earlier.
40These LTI awards vest on the third anniversary of their grant date, subject to continued employment and meeting a TSR performance condition.
41These 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.
42STI awards vest on the second anniversary of their grant date, subject to continued employment.
Brambles Annual Report 2013 - Page 49
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
Plan
MyShare
Plan
number
Grant date
Expiry date
Value at grant
Status/vesting date
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
31 March 201143
1 April 2013
29 April 201143
1 April 2013
A$6.73
A$6.48
100% vested on 31 March 2013
100% vested on 31 March 2013
31 May 201143
1 April 2013
A$6.94
100% vested on 31 March 2013
30 June 201143
1 April 2013
A$6.76
100% vested on 31 March 2013
29 July 201143
1 April 2013
A$6.58
100% vested on 31 March 2013
31 August 201143
1 April 2013
30 September 201143 1 April 2013
31 October 201143
1 April 2013
30 November 201143 1 April 2013
30 December 201143 1 April 2013
31 January 201243
1 April 2013
29 February 201243
1 April 2013
30 March 201244
1 April 2014
30 April 201244
1 April 2014
31 May 201244
1 April 2014
29 June 201244
1 April 2014
31 July 201244
1 April 2014
31 August 201244
1 April 2014
28 September 201244 1 April 2014
31 October 201244
1 April 2014
30 November 201244 1 April 2014
28 December 201244 1 April 2014
31 January 201344
1 April 2014
28 February 201344
1 April 2014
29 March 201345
1 April 2015
30 April 201345
1 April 2015
31 May 201345
1 April 2015
28 June 201345
1 April 2015
31 July 201345
1 April 2015
A$6.30
A$6.05
A$6.37
A$6.73
A$6.80
A$6.94
A$6.77
A$6.73
A$6.97
A$6.26
A$5.80
A$5.93
A$6.55
A$6.57
A$6.93
A$6.94
A$7.17
A$7.74
A$8.27
A$8.08
A$8.31
A$8.86
A$8.92
A$8.74
100% vested on 31 March 2013
100% vested on 31 March 2013
100% vested on 31 March 2013
100% vested on 31 March 2013
100% vested on 31 March 2013
100% vested on 31 March 2013
100% vested on 31 March 2013
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2014
31 March 2015
31 March 2015
31 March 2015
31 March 2015
31 March 2015
43These Matching Awards granted under MyShare vest on 31 March 2013, subject to continuing employment and the retention of the associated Acquired Shares.
On vesting they are automatically exercised.
44These Matching Awards granted under MyShare vest on 31 March 2014, subject to continuing employment and the retention of the associated Acquired Shares.
On vesting they are automatically exercised.
45These Matching Awards granted under MyShare vest on 31 March 2015, subject to continuing employment and the retention of the associated Acquired Shares.
On vesting they are automatically exercised.
Brambles Annual Report 2013 - Page 50
DIRECTORS’ REPORT – REMUNERATION REPORT – CONTINUED
9.4 SHARE BASED PAYMENTS – FUTURE POTENTIAL
The table below provides annual accounting values for shares granted during years 2010-2012 which have been amortised over three years.
These share awards are subject to conditions set out in section 9.2. Remuneration will normally not be received as a result of the underlying
share awards vesting until the conditions have been met.46
(US$'000)
Share based
pay ment
Aw ards
Share of FY 13
total remuneration
1,624
1,546
1,054
-
335
194
538
469
1,134
-
512
465
79
-
485
481
992
1,306
1,207
463
939
301
8,899
5,225
30%
29%
37%
-
27%
19%
31%
26%
66%
-
27%
28%
8%
-
30%
32%
35%
34%
43%
35%
37%
18%
-
-
Total
5,354
5,336
2,854
-
1,233
1,003
1,746
1,771
1,721
-
1,880
1,650
978
64
1,592
1,484
2,830
3,837
2,782
1,310
2,531
1,653
25,501
18,108
Name
EX ECUTIV E DIRECTORS
Y ear
T Gorman
2013
2012
CURRENT DISCLOSABLE EX ECUTIV ES
Z Todorcevski
J Holley
P Mackie
D Pertz 46
K Pohler
J Rabbino
N Smith
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
FORMER DISCLOSABLE EX ECUTIV ES
G Hayes
E Potts
R Westerbos
Totals
2013
2012
2013
2012
2013
2012
2013
2012
Total
before
equity
3,730
3,790
1,800
-
898
809
1,208
1,302
587
-
1,368
1,185
899
64
1,107
1,003
1,838
2,531
1,575
847
1,592
1,352
16,602
12,883
Luke Mayhew
Non-executive Director & Chairman of the Remuneration Committee
22 August 2013
46 This represents the Recall Award described in Section 6.3.
Brambles Annual Report 2013 - Page 51
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 2013 (Year).
PRINCIPAL ACTIVITIES
The principal activities of the Group during the Year were the
provision of pooling solutions services and information management
services. Brambles is a leading global provider of these services.
The Group’s pooling solutions services comprised three operating
business segments: Pallets, RPCs and Containers.
The Pallets business, carried out under the name CHEP, focusses on
the outsourced management of returnable pallets, 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, Pallets
provides supply chain optimisation and transport management
services and, in the USA provides a national network of pallet
management services, to sort, repair and reissue pallets.
The RPC business, carried out under the name IFCO in Europe, North
and South America and CHEP in Australia, New Zealand and South
Africa, focusses on the outsourced management of reusable plastic
containers globally, which are used primarily to transport fresh
produce from producers to grocery retailers.
The Containers business provides intermediate bulk, automotive and
chemical and catalyst containers to its customers. It also operates
an airline container pooling and repair business and a non-flight
critical aviation equipment maintenance and repair business called
CHEP Aerospace.
The information management services business, carried out under
the name of Recall, is a global business and comprises the
management of information, providing secure storage, digitisation,
retrieval and destruction of information in multiple media formats.
There were no significant changes in the nature of the Group’s
principal activities during the Year.
REVIEW OF OPERATIONS AND 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 page 1, the Operational & Financial Review on pages 2 to
13.
Information about the financial position of the Group is included in
the Operational & Financial Review on pages 2 to 13 and in the Five-
Year Financial Performance Summary on page 124.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
On 3 January 2013, Brambles announced the completed acquisition
of Pallecon, a leading provider of Intermediate Bulk Container (IBC)
solutions in Europe and the Asia-Pacific, for €135 million (US$177
million).
Pallecon operates mainly in Western Europe, Australia and New
Zealand, providing IBCs primarily for the transportation of liquids in
the food, cosmetic and chemical industries. It has been operating
for more than 30 years and operates a pool of approximately
180,000 IBCs.
Other than this, there were no significant changes to the state of
affairs of the Group for the Year.
MATTERS SINCE THE END OF THE FINANCIAL YEAR
On 2 July 2013, Brambles announced the intention to demerge its
information management business, Recall, by listing a new holding
company, Recall Holdings Limited, on the ASX. Through the
demerger, eligible Brambles shareholders will receive new shares in
Recall Holdings Limited proportionate to their existing Brambles
shareholding, while retaining their existing Brambles shares.
Brambles will not retain any shareholding in Recall Holdings
following the demerger.
Brambles expects to distribute a scheme book to shareholders in
October 2013 containing: a recommendation from the Brambles
Board in respect of the demerger; information about the mechanics
of the demerger; information about the operating and financial
profiles of both Recall Holdings Limited and the post-demerger
Brambles; an independent expert’s report; and additional
information for shareholders.
Brambles intends to convene a meeting in December 2013 for
shareholders to vote on the demerger proposal. Subject to the
outcome of this shareholder vote and the satisfaction of other
conditions (including receiving the relevant court and regulatory
approvals) the final separation of Recall from Brambles and the
listing of Recall Holdings Limited is expected to occur shortly
thereafter.
Other than this, the Directors are not aware of any matter or
circumstance that has arisen since 30 June 2013 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 AND PROSPECTS FOR FUTURE
FINANCIAL YEARS
The business strategies and prospects for future financial years,
together with likely developments in the operations of the Group in
future financial years and the expected results of those operations
known at the date of this Report, are set out in in the Letter from
the Chairman and CEO at page 1 and in the Operational & Financial
Review on pages 2 to 13. 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 13.5
Australian cents per share, which will be 30% franked. The dividend
will be paid on 10 October 2013 to shareholders on the register on
13 September 2013.
On 11 April 2013, an interim dividend for the Year was paid, which
was 13.5 Australian cents per share and 30% franked. On 11 October
2012, a final dividend for the year ended 30 June 2012 was paid,
which was 13.0 Australian cents per share and 30% 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.
Brambles Annual Report 2013 - Page 52
DIRECTORS’ REPORT – OTHER INFORMATION – CONTINUED
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 16 to 17.
Douglas Gordon Duncan
1 July 2012 to date
Anthony Grant Froggatt
1 July 2012 to date
Thomas Joseph Gorman
1 July 2012 to date
David Peter Gosnell
1 July 2012 to date
Tahira Hassan
1 July 2012 to date
Gregory John Hayes
1 July 2012 to 1 October 2012
Stephen Paul Johns
1 July 2012 to date
Sarah Carolyn Hailes Kay
1 July 2012 to date
Graham John Kraehe AO
1 July 2012 to date
Christopher Luke Mayhew
1 July 2012 to date
Brian Martin Schwartz AM
1 July 2012 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 118.
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.
DIRECTORS’ MEETINGS
Details of the Board committee memberships are given in the Corporate Governance Statement on pages 21, 24 and 28. 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)
D G Duncan
A G Froggatt
T J Gorman
D P Gosnell(c)
T Hassan
G J Hayes
S P Johns(c)
S C H Kay
G J Kraehe AO
C L Mayhew
11
11
11
10
11
1
10
11
11
10
B M Schwartz AM 11
11
11
11
11
11
2
11
11
11
11
11
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
-
-
-
4
-
4
-
-
-
-
3
-
-
-
4
-
4
-
-
6
6
6
6
6
6
6
6
6
6
1
1
5
5
9
9
9
9
9
9
9
9
5
5
5
5
(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) The meetings each of these Directors did not attend were one-hour telephone conference meetings.
Brambles Annual Report 2013 - Page 53
DIRECTORS’ REPORT – OTHER INFORMATION – CONTINUED
DIRECTORS’ DIRECTORSHIPS OF OTHER LISTED COMPANIES
The following lists the directorships held by the Directors in listed companies (other than Brambles Limited) since 30 June 2010.
Director
Listed company
D G Duncan
J.B. Hunt Transport Services, Inc.
Benchmark Electronics, Inc.
A G Froggatt
AXA Asia Pacific Holdings Limited
Billabong International Limited
Coca-Cola Amatil Limited
T J Gorman
IFCO Systems NV (de-listed in October 2011)
D P Gosnell
None
T Hassan
G J Hayes
None
None
S P Johns
Leighton Holdings Limited
Spark Infrastructure Group
Westfield Group:
Westfield Holdings Limited
Period directorship held
2010 to current
2006 to current
2008 to 2011
2008 to current
2010 to current
2011 to current
-
-
-
2009 to March 2013
2005 to 2011
1985 to May 2013
Westfield America Trust (director of responsible entity, Westfield America Management Limited) 1996 to May 2013
Westfield Trust and Carindale Property Trust (director of responsible entity, Westfield
Management Limited)
1985 to May 2013
S C H Kay
Commonwealth Bank of Australia
G J Kraehe AO
Bluescope Steel Limited
Djerriwarrh Investments Limited
C L Mayhew
WH Smith plc
InterContinental Hotels Group plc
B M Schwartz AM Insurance Australia Group Limited
IAG Finance (New Zealand) Limited
Westfield Group:
Westfield Holdings Limited
2003 to current
2002 to current
2002 to current
2006 to 2010
2011 to current
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
ENVIRONMENT
Brambles’ Environmental Policy is set by the Board. It applies in all
countries where Brambles operates. 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 contained in Brambles’
Sustainability Review which will be available on the Brambles’
website in September 2013. A copy of the complete Environmental
Policy is set out in Brambles’ Code of Conduct, which is available at
www.brambles.com.
OCCUPATIONAL HEALTH AND 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 has adopted a Zero Harm Charter, which sets out the
vision, values and behaviours and commitment required to work
safely and ensure human rights and environmental compliance is
provided to all employees and, together with the complete Health
and Safety Policy, is on the Brambles website www.brambles.com.
The Chief Executive Officer together with the Group Presidents of
the Pallets, Containers, RPC and Recall business segments 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 will be
shown in the Sustainability Review, which will be available on
Brambles’ website in September 2013.
Brambles Annual Report 2013 - Page 54
DIRECTORS’ REPORT – OTHER INFORMATION – CONTINUED
EMPLOYEES
The Sustainability Review, available on Brambles’ website in
September 2013, will contain details of Brambles’ performance as
an employer.
INNOVATION, RESEARCH AND 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. In 2011, Brambles launched an
Innovation Fund, which has reviewed and funded a significant
number of early-stage new business ideas. Brambles carries out
research and development activities in relation to both its Pooled
Solutions 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 Group’s operations 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 42, 43 and 45 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 AND 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 94 to 96.
Other than the share rights in Recall Holdings granted to Mr Doug
Pertz and which are described in Section 6.3 of the Directors’
Report – Remuneration Report, 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 47 to 48 of the Remuneration Report:
- 361 grants under the 2012 MyShare offer (plan numbers 39-50) and
63,316 under the 2013 MyShare offer (plan numbers 51-55);
- 80,172 exercises resulting in the issue of fully paid ordinary
shares: 8,176 under the 2012 MyShare offer (plan numbers 39 to
50); 2,713 under the 2013 MyShare offer (plan numbers 51 to 55);
25,202 under plan 1; 4,867 under plan 2; 32,305 under plan 12;
4,474 under plan 3 and 2,435 under plan 4; and
- 1,137,657 lapses: 12,346 under the 2012 MyShare offer (plan
numbers 39 to 50); 5,249 under the 2013 MyShare offer (plan
numbers 51 to 55); 941,465 under plan 9; 8,015 under plan 6;
18,019 under plan 15; 35,305 under plan 19; 78,953 under plan 14;
35,305 under plan 18; and 3,000 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.
RISK MANAGEMENT
A discussion of Brambles’ risk profile, management and mitigation of
risks can be found in the Operational & Financial Review on page 7
and the Corporate Governance Statement on pages 26 to 28.
TREASURY POLICIES
A discussion of the implementation of treasury policies and
mitigation of treasury risks can be found in the Operational &
Financial Review on pages 3 and 4.
NON-AUDIT SERVICES AND AUDITOR INDEPENDENCE
The amount of US$911,000 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 demerger of Recall, treasury consulting
services, compliance tracking system, 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 15 August 2013 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.
AUDITORS’ INDEPENDENCE DECLARATION
A copy of the auditors’ independence declaration as required under
section 307C of the Act is set out on page 123.
ANNUAL GENERAL MEETING
The AGM will be held at 2.00pm (AEDT) on 22 October 2013 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
22 August 2013
T J Gorman
CEO
Brambles Annual Report 2013 - Page 55
SHAREHOLDER INFORMATION
DIRECTORS
G J Kraehe AO
(Non-executive Chairman)
D G Duncan
(Non-executive Director)
A G Froggatt
(Non-executive Director)
T J Gorman
(Chief Executive Officer)
D P Gosnell
(Non-executive Director)
T Hassan
(Non-executive Director)
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 2013 AGM will be held at 2.00pm (AEDT)
on 22 October 2013 at The Wesley Theatre, Wesley Conference
Centre, 220 Pitt Street, Sydney NSW 2000.
FINANCIAL CALENDAR
FINAL DIVIDEND 2013
Ex dividend date – Monday, 9 September 2013
Record date – Friday, 13 September 2013
Payment date – Thursday, 10 October 2013
2014 (PROVISIONAL)
Announcement of interim results – mid February 2014
Interim dividend – mid April 2014
Announcement of final results – mid August 2014
Final dividend – mid October 2014
AGM – November 2014
Brambles Annual Report 2013 - Page 56
SHAREHOLDER INFORMATION – CONTINUED
ANALYSIS OF HOLDERS OF EQUITY SECURITIES AS AT 6 AUGUST 2013
SUBSTANTIAL SHAREHOLDERS
Brambles has been notified of the following substantial shareholdings:
Holder
Schroder Investment Management Australia Limited
Commonwealth Bank of Australia
(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)
101,032,203
78,315,546
6.49%
5.03%
Holders
26,405
27,450
5,156
3,076
168
Shares
12,851,184
64,683,869
36,107,846
63,716,428
1,380,076,076
62,255
1,557,435,403
The number of members holding less than a marketable parcel of 54 ordinary shares (based on a market price of A$9.40 on 6 August 2013) is
921 and they hold a total of 16,898 ordinary shares. The voting rights of ordinary shares are described on page 56.
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 56.
Holders
2,694
76
34
73
34
Share rights
889,786
264,136
243,505
3,205,189
8,121,539
2,911
12,724,155
Brambles Annual Report 2013 - Page 57
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
BNP PARIBAS NOMS PTY LTD
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