Annual Report 2013
www.brambles.com
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
JP MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
AMP LIFE LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
CS FOURTH NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
ARGO INVESTMENTS LIMITED
UBS NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
SHARE DIRECT NOMINEES PTY LTD <10026 A/C>
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
UBS NOMINEES PTY LTD
Number of ordinary
shares
% of issued ordinary
share capital
422,702,565
315,261,202
287,862,165
78,905,089
45,319,515
41,923,544
36,303,872
11,963,661
11,173,530
8,402,043
7,615,334
6,782,494
5,862,224
5,433,100
4,556,341
3,710,094
3,656,470
3,504,829
3,355,396
3,325,000
27.14%
20.24%
18.48%
5.07%
2.91%
2.69%
2.33%
0.77%
0.72%
0.54%
0.49%
0.44%
0.38%
0.35%
0.29%
0.24%
0.23%
0.23%
0.22%
0.21%
Percentage of total holdings of 20 largest holders
1,307,618,468
83.97%
VOTING RIGHTS: ORDINARY SHARES
Brambles Limited’s constitution provides that each member entitled
to attend and vote may do so in person or by proxy, by attorney or,
where the member is a body corporate, by representative. The
Directors may also determine that at any general meeting, a
member who is entitled to attend and vote on a resolution at that
meeting is entitled to a direct vote in relation to that resolution.
The Directors have prescribed rules to govern direct voting which
are available at www.brambles.com.
On a show of hands, every member present in person, by proxy, by
attorney or, where the member is a body corporate, by
representative and having the right to vote on a resolution has one
vote. The Directors have determined that members who submit a
direct vote will be excluded on a vote by a show of hands.
On a poll, every member present in person, by proxy, by attorney
or, where the member is a body corporate, by representative and
having the right to vote on the resolution has one vote for each
ordinary share held. The Directors have determined that votes cast
by members who submit a direct vote will be included on a vote by
a poll, being one vote for each ordinary share held.
VOTING RIGHTS: SHARE RIGHTS
Performance share rights over ordinary shares and MyShare Matching
Awards do not carry any voting rights.
Brambles Annual Report 2013 - Page 58
FINANCIAL REPORT
for the year ended 30 June 2013
INDEX
PAGE
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to the financial statements
1. Basis of preparation
2. Significant accounting policies
3. Critical accounting estimates and judgements
4. Segment information
5. Profit from ordinary activities - continuing operations
6. Significant items - continuing operations
7. Employment costs - continuing operations
8. Net finance costs
9. Income tax
10. Earnings per share
11. Dividends
12. Discontinued operations
13. Business combinations
14. Cash and cash equivalents
15. Trade and other receivables
16. Inventories
17. Derivative financial instruments
18. Other assets
19. Investments
20. Property, plant and equipment
21. Goodwill
22. Intangible assets
23. Trade and other payables
24. Borrowings
25. Provisions
26. Retirement benefit obligations
27. Contributed equity
28. Share-based payments
29. Reserves and retained earnings
30. Financial risk management
31. Cash flow statement - additional information
32. Commitments
33. Contingencies
34. Auditors' remuneration
35. Key management personnel
36. Related party information
37. Events after balance sheet date
38. Parent entity financial information
Directors' declaration
Independent auditors' report
Auditors' independence declaration
58
59
60
61
62
63
63
69
70
72
73
74
74
75
78
79
80
80
81
81
82
83
83
84
85
86
87
88
88
90
91
94
95
97
99
109
111
112
113
113
116
118
119
120
121
123
Brambles Annual Report 2013 - Page 59
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2013
Continuing operations
Sales revenue
Other income
Operating expenses
Share of results of joint ventures
Operating profit
Finance revenue
Finance costs
Net finance costs
Profit before tax
Tax expense
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Profit attributable to members of the parent entity
Earnings per share (cents)
Total
- basic
- diluted
Continuing operations
- basic
- diluted
The consolidated income statement should be read in conjunction with the accompanying notes.
Note
5A
5A
5B
19C
8
9
12
10
2013
US$m
2012
US$m
5,889.9
5,625.0
145.1
142.6
(5,030.2)
(4,833.9)
6.4
1,011.2
20.3
(131.2)
(110.9)
900.3
(260.4)
639.9
0.7
640.6
640.6
41.2
40.9
41.1
40.9
5.5
939.2
21.5
(173.5)
(152.0)
787.2
(212.3)
574.9
1.4
576.3
576.3
38.9
38.6
38.8
38.5
Brambles Annual Report 2013 - Page 60 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2013
Profit for the year
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial losses on defined benefit pension plans
Income tax on items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss:
Exchange differences:
- on translation of foreign subsidiaries
- FCTR released to profit
- on entities disposed taken to profit
Cash flow hedges
Income tax on items that may be reclassified to profit or loss
Other comprehensive loss for the year
Total comprehensive income for the year attributable to members of the parent entity
The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Note
2013
US$m
2012
US$m
640.6
576.3
26E
9A
29
29
29
29
9A
(11.1)
2.4
(8.7)
(70.7)
-
-
1.8
(0.7)
(69.6)
(78.3)
562.3
(19.7)
5.4
(14.3)
(192.5)
(12.5)
(1.7)
5.1
(1.7)
(203.3)
(217.6)
358.7
Brambles Annual Report 2013 - Page 61 CONSOLIDATED BALANCE SHEET
as at 30 June 2013
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other assets
Total current assets
Non-current assets
Other receivables
Investments
Property, plant and equipment
Goodwill
Intangible assets
Deferred tax assets
Derivative financial instruments
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Retirement benefit obligations
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
The consolidated balance sheet should be read in conjunction with the accompanying notes.
Note
2013
US$m
2012
US$m
14
15
16
17
18
15
19
20
21
22
9C
17
18
23
24
17
25
24
17
25
26
9D
23
27
29
29
128.9
1,124.2
56.2
10.9
60.7
174.2
1,054.8
48.2
8.9
66.2
1,380.9
1,352.3
9.2
20.1
4,407.9
1,736.7
336.5
48.2
9.8
2.6
6,571.0
7,951.9
8.5
17.1
4,138.6
1,607.4
362.2
37.6
19.0
3.0
6,193.4
7,545.7
1,253.5
1,176.8
156.9
9.5
62.9
110.8
86.4
5.0
46.5
90.1
1,593.6
1,404.8
2,686.4
2,777.7
-
25.8
51.2
545.2
24.3
3,332.9
4,926.5
3,025.4
6,618.5
(6,748.2)
3,155.1
3,025.4
0.8
30.4
58.8
505.7
27.1
3,400.5
4,805.3
2,740.4
6,484.1
(6,689.1)
2,945.4
2,740.4
Brambles Annual Report 2013 - Page 62 CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2013
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Dividends received from joint ventures
Interest received
Interest paid
Income taxes paid on operating activities
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for intangible assets
Costs incurred on disposal of businesses
Acquisition of subsidiaries, net of cash acquired
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Net inflow from hedge instruments
Proceeds from issues of ordinary shares
Dividends paid
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and deposits, net of overdrafts, at beginning of the year
Effect of exchange rate changes
Cash and deposits, net of overdrafts, at end of the year
31A
The consolidated cash flow statement should be read in conjunction with the accompanying notes.
Note
2013
US$m
2012
US$m
6,604.8
6,217.7
(4,961.6)
(4,759.2)
1,643.2
1,458.5
3.5
4.1
(119.8)
(191.1)
4.2
5.8
(164.2)
(215.1)
31B
1,339.9
1,089.2
(905.1)
(949.4)
110.5
(36.7)
-
(179.0)
93.5
(53.8)
(0.4)
(22.7)
(1,010.3)
(932.8)
1,585.7
1,721.5
(1,679.6)
(1,710.0)
6.6
117.4
(425.5)
(395.4)
(65.8)
152.7
(11.9)
75.0
4.6
326.6
(397.7)
(55.0)
101.4
80.4
(29.1)
152.7
Brambles Annual Report 2013 - Page 63 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2013
Note
Share
capital
US$m
Reserves1
US$m
Retained
earnings
controlling
interest
US$m
US$m
Total
US$m
Non-
Year ended 30 June 2012
Opening balance
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments:
- expense recognised
- shares issued
- equity component of related tax
Transactions with owners in their capacity as owners:
- dividends declared
- issues of ordinary shares, net of transaction costs
- capital reduction
- disposal of non-controlling interest
Closing balance
Year ended 30 June 2013
Opening balance
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments:
- expense recognised
- shares issued
- equity component of related tax
Transactions with owners in their capacity as owners:
- dividends declared
- issues of ordinary shares, net of transaction costs
29
27
29
27
14,370.2
(14,716.8)
2,797.6
0.4
2,451.4
-
-
-
-
-
-
-
337.3
-
(203.3)
(203.3)
18.6
(11.1)
0.1
-
-
(8,223.4)
8,223.4
-
-
576.3
(14.3)
562.0
-
-
-
(414.2)
-
-
-
-
-
-
-
-
-
-
-
-
(0.4)
576.3
(217.6)
358.7
18.6
(11.1)
0.1
(414.2)
337.3
-
(0.4)
6,484.1
(6,689.1)
2,945.4
-
2,740.4
6,484.1
(6,689.1)
2,945.4
-
-
-
-
-
-
-
134.4
-
640.6
(69.6)
(8.7)
(69.6)
631.9
23.0
(17.1)
4.6
-
-
-
-
-
(422.2)
-
-
-
-
-
-
-
-
-
-
-
2,740.4
640.6
(78.3)
562.3
23.0
(17.1)
4.6
(422.2)
134.4
3,025.4
Closing balance
6,618.5
(6,748.2)
3,155.1
1 Refer Note 29 for further information on reserves.
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Brambles Annual Report 2013 - Page 64 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 June 2013
Investment in joint ventures
Investments in joint venture entities are accounted for using the
equity method in the consolidated financial statements, and include
any goodwill arising on acquisition. Under this method, Brambles’
share of the post-acquisition profits or losses of the joint venture is
recognised in the income statement and its share of post-acquisition
movements in reserves is recognised in consolidated reserves. The
cumulative post-acquisition movements are adjusted against the
carrying amount of the investment.
If Brambles’ share of losses in a joint venture equals or exceeds its
interest in the joint venture, Brambles does not recognise further
losses unless it has incurred obligations or made payments on behalf
of the joint venture.
Loans to equity accounted joint ventures under formal loan
agreements are long term in nature and are included as
investments.
Where there has been a change recognised directly in the joint
venture’s equity, Brambles recognises its share of any changes as a
change in equity.
Non-current assets held for sale
Non-current assets and disposal groups classified as held for sale are
measured at the lower of carrying amount and fair value less costs
to sell.
Non-current assets and disposal groups are classified as held for sale
if their carrying amount will be recovered through a sale transaction
rather than through continuing use. This condition is regarded as
met only when the sale is highly probable and the asset (or disposal
group) is available for immediate sale in its present condition.
Management must be committed to the sale which should be
expected to qualify for recognition as a completed sale within one
year from the date of classification.
Discontinued operations
The trading results for business operations disposed during the year
or classified as held for sale are disclosed separately as discontinued
operations in the income statement. The amount disclosed includes
any related impairment losses recognised and any gains or losses
arising on disposal.
Comparative amounts for the prior year are restated in the income
statement to include current year discontinued operations.
Presentation currency
The consolidated and summarised parent entity financial statements
are presented in US dollars.
Brambles uses the US dollar as its presentation currency because:
- a significant portion of Brambles’ activity is denominated in US
dollars; and
- the US dollar is widely understood by Australian, UK and
international investors and analysts.
NOTE 1. BASIS OF PREPARATION
These financial statements present the consolidated results of
Brambles Limited (ACN 118 896 021) (Company) and its subsidiaries
(Brambles or the Group) for the year ended 30 June 2013.
The financial statements comply with International Financial
Reporting Standards (IFRS). This general purpose financial report has
been prepared in accordance with Australian Accounting Standards
(AAS), other authoritative pronouncements of the Australian
Accounting Standards Board (AASB) and the requirements of the
Corporations Act 2001 (Act).
The financial statements are drawn up in accordance with the
conventions of historical cost accounting, except for derivative
financial instruments and financial assets and liabilities at fair value
through profit or loss.
References to 2013 and 2012 are to the financial years ended
30 June 2013 and 30 June 2012 respectively.
Details of Unification, whereby Brambles Limited acquired all the
share capital of Brambles Industries Limited (BIL) and Brambles
Industries plc (BIP) under separate schemes of arrangement on
4 December 2006, are set out in Brambles’ 2007 Annual Report.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements and all comparatives have
been prepared using the accounting policies set out below which are
consistent with the prior year, except for financial statements
presentation.
Changes in accounting policies
Brambles has applied revised AASB 101: Presentation of Financial
Statements from 1 July 2012. The revised standard requires entities
to separate items presented in other comprehensive income into
two groups, based on whether the items may be recycled to profit
or loss in the future. This change in accounting policy only relates to
disclosures and does not impact amounts recognised in the financial
statements. Comparative information has been re-presented to
conform to the revised standard.
Basis of consolidation
The consolidated financial statements of Brambles include the
assets, liabilities and results of Brambles Limited and all its legal
subsidiaries. The consolidation process eliminates all inter-entity
accounts and transactions. Any financial statements of overseas
subsidiaries that have been prepared in accordance with overseas
accounting practices have been adjusted to comply with AAS before
inclusion in the consolidation process. The financial statements of
all material subsidiaries are prepared for the same reporting period.
Business combinations
On acquisition, the assets and liabilities and contingent liabilities of
a subsidiary are measured at their fair values at the date of
acquisition. Any excess of the cost of acquisition over the fair values
of the identifiable net assets acquired is recognised as goodwill. Any
deficiency of the cost of acquisition below the fair values of the
identifiable net assets acquired (i.e. discount on acquisition) is
credited to the income statement in the period of acquisition. The
interest of non-controlling shareholders is stated at the non-
controlling proportion of the fair values of the assets and liabilities
recognised. Any acquisition-related transaction costs are expensed
in the period of acquisition.
The results of subsidiaries acquired or disposed of during the year
are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal,
as appropriate.
Investment in controlled entities
Shares in controlled entities, as recorded in the parent entity, are
recorded at cost, less provision for impairment.
Brambles Annual Report 2013 - Page 65
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – CONTINUED
for the year ended 30 June 2013
Dividends
Dividend revenue is recognised when Brambles’ right to receive the
payment is established. Dividends received from investments in
subsidiaries and joint ventures are recognised as revenue, even if
they are paid out of pre-acquisition profits.
Finance revenue
Interest revenue is recognised as the interest accrues (using the
effective interest method, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the
financial instrument) to the net carrying amount of the financial
asset.
Borrowing costs
Borrowing costs are recognised as expenses in the year in which they
are incurred, except where they are included in the cost of
qualifying assets.
The capitalisation rate used to determine the amount of borrowing
costs to be capitalised is the weighted average interest rate
applicable to the entity’s outstanding borrowings during the year.
No borrowing costs were capitalised in 2013 or 2012.
Pensions and other post-employment benefits
Payments to defined contribution pension schemes are charged as
an expense as they fall due. Payments made to state-managed
retirement benefit schemes are dealt with as payments to defined
contribution schemes where Brambles’ obligations under the
schemes are equivalent to those arising in a defined contribution
pension scheme.
A liability in respect of defined benefit pension schemes is
recognised in the balance sheet, measured as the present value of
the defined benefit obligation at the reporting date less the fair
value of the pension scheme’s assets at that date. Pension
obligations are measured as the present value of estimated future
cash flows discounted at rates reflecting the yields of high quality
corporate bonds.
The costs of providing pensions under defined benefit schemes are
calculated using the projected unit credit method, with actuarial
valuations being carried out at each balance sheet date. Past
service cost is recognised immediately to the extent that the
benefits are already vested, and otherwise is amortised on a
straight-line basis over the average period until the benefits become
vested.
Actuarial gains and losses arising from differences between
expected and actual returns, and the effect of changes in actuarial
assumptions are recognised in full through the statement of
comprehensive income in the period in which they arise.
The costs of other post-employment liabilities are calculated in a
similar way to defined benefit pension schemes and spread over
the period during which benefit is expected to be derived from the
employees’ services, in accordance with the advice of qualified
actuaries.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
Foreign currency
Items included in the financial statements of each of Brambles’
entities are measured using the functional currency of each entity.
Foreign currency transactions are translated into the functional
currency of each entity using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions, and from the
translation at year-end rates of monetary assets and liabilities
denominated in foreign currencies, are recognised in the income
statement, except where deferred in equity as qualifying cash flow
hedges or qualifying net investment hedges.
Non-monetary assets and liabilities carried at fair value that are
denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Gains
and losses arising on retranslation are recognised directly in equity.
The results and cash flows of Brambles Limited, subsidiaries and
joint ventures are translated into US dollars using the average
exchange rates for the period. Where this average is not a
reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, the exchange rate on the
transaction date is used. Assets and liabilities of Brambles Limited,
subsidiaries and joint ventures are translated into US dollars at the
exchange rate ruling at the balance sheet date. The share capital of
Brambles Limited is translated into US dollars at historical rates. All
resulting exchange differences arising on the translation of
Brambles’ overseas and Australian entities are recognised as a
separate component of equity.
The financial statements of foreign subsidiaries and joint ventures
that report in the currency of a hyperinflationary economy are
restated in terms of the measuring unit current at the balance sheet
date before they are translated into US dollars.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate.
The principal exchange rates affecting Brambles were:
US$:A$
US$:€
US$:£
Average 2013
1.0212
1.2939
1.5667
2012
1.0304
1.3325
1.5834
Year end 30 June 2013
0.9134
1.3015
1.5206
30 June 2012
1.0032
1.2440
1.5515
Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to Brambles and the revenue can be
reliably measured. Revenue is measured at the fair value of the
consideration received or receivable. Amounts disclosed as revenue
are net of duties and taxes paid (Goods and Services Tax and local
equivalents).
Revenue for services is recognised when invoicing the customer
following the provision of the service and/or under the terms of
agreed contracts in accordance with agreed contractual terms in the
period in which the service is provided.
Other income
Other income includes net gains on disposal of property, plant and
equipment in the ordinary course of business, which are recognised
when control of the property has passed to the buyer. Amounts
arising from compensation for irrecoverable pooling equipment are
recognised only when it is probable that they will be received.
Brambles Annual Report 2013 - Page 66
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – CONTINUED
for the year ended 30 June 2013
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
Executive and employee share-based compensation plans
Incentives in the form of share-based compensation benefits are
provided to executives and employees under performance share and
MyShare employee share plans approved by shareholders.
Performance share awards are fair valued by qualified actuaries at
their grant dates in accordance with the requirements of AASB 2:
Share-based Payments, using a binomial model. The cost of equity-
settled transactions is recognised, together with a corresponding
increase in equity, on a straight-line basis over the period in which
the performance conditions are fulfilled, ending on the date on
which the relevant employees become fully entitled to the award
(vesting date).
Executives and employees in certain jurisdictions are provided cash
incentives calculated by reference to the awards under the share-
based compensation schemes (phantom shares). These phantom
shares are fair valued on initial grant and at each subsequent
reporting date.
The cost of such phantom shares is charged to the income statement
over the relevant vesting periods, with a corresponding increase in
provisions.
The fair value calculation of performance shares granted excludes
the impact of any non-market vesting conditions. Non-market
vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. At each balance
sheet date, Brambles reviews its estimate of the number of
performance shares that are expected to become exercisable. The
employee benefit expense recognised each period takes into
account the most recent estimate.
Significant Items and Underlying Profit
Significant Items are items of income or expense which are, either
individually or in aggregate, material to Brambles or to the relevant
business segment and:
- outside the ordinary course of business (e.g. gains or losses on the
sale or termination of operations, the cost of significant
reorganisations or restructuring); or
- part of the ordinary activities of the business but unusual due to
their size and nature.
Underlying Profit is a non-statutory profit measure and represents
profit from continuing operations before finance costs, tax and
Significant Items. It is presented within the segment information
note to assist users of the financial statements to better understand
Brambles’ business results.
ASSETS
Cash and cash equivalents
For purposes of the cash flow statement, cash includes deposits at
call with financial institutions and other highly liquid investments
which are readily convertible to cash on hand and are subject to an
insignificant risk of changes in value, net of outstanding bank
overdrafts. Bank overdrafts are presented within borrowings in the
balance sheet.
Receivables
Trade receivables due within one year do not carry any interest and
are recognised at amounts receivable less an allowance for any
uncollectible amounts. Trade receivables are recognised when
services are provided and settlement is expected within normal
credit terms.
Bad debts are written-off when identified. A provision for doubtful
receivables is established when there is a level of uncertainty as to
the full recoverability of the receivable, based on objective
evidence. Significant financial difficulties of the debtor, probability
that the debtor will enter liquidation, receivership or bankruptcy,
and default or significant delay in payment are considered
indicators that the trade receivable is doubtful.
The amount of the provision is measured as the difference between
the carrying amount of the trade receivables and the estimated
future cash flows expected to be received from the relevant
debtors. When a trade receivable for which a provision had been
recognised becomes uncollectible in a subsequent period, it is
written off against the provision account. Subsequent recoveries of
amounts previously written off are credited against other expenses
in the income statement.
Inventories
Stock and stores on hand are valued at the lower of cost and net
realisable value and, where appropriate, provision is made for
possible obsolescence. Work in progress, which represents partly-
completed work undertaken at pre-arranged rates but not invoiced
at the balance sheet date, is recorded at the lower of cost or net
realisable value.
Cost is determined on a first-in, first-out basis and, where relevant,
includes an appropriate portion of overhead expenditure. Net
realisable value is the estimated selling price in the ordinary course
of business, less estimated costs of completion and costs to make
the sale.
Recoverable amount of non-current assets
At each reporting date, Brambles assesses whether there is any
indication that an asset, or cash generating unit to which the asset
belongs, may be impaired. Where an indicator of impairment exists,
Brambles makes a formal estimate of recoverable amount. The
recoverable amount of an asset is the greater of its fair value less
costs to sell and its value in use.
Where the carrying value of an asset exceeds its recoverable
amount, the asset is considered to be impaired and is written down
to its recoverable amount. The impairment loss is recognised in the
income statement in the reporting period in which the write-down
occurs.
The expected net cash flows included in determining recoverable
amounts of non-current assets are discounted to their present
values using a market risk adjusted discount rate.
Property, plant and equipment
Property, plant and equipment (PPE) is stated at cost, net of
depreciation and any impairment, except land which is shown at
cost less impairment. Cost includes expenditure that is directly
attributable to the acquisition of assets, and, where applicable, an
initial estimate of the cost of dismantling and removing the item
and restoring the site on which it is located.
Subsequent expenditure is capitalised only when it is probable that
future economic benefits associated with the expenditure will flow
to Brambles. Repairs and maintenance are expensed in the income
statement in the period they are incurred.
Depreciation is charged in the financial statements so as to write-off
the cost of all PPE, other than freehold land, to their residual value
on a straight-line or reducing balance basis over their expected
useful lives to Brambles. Residual values and useful lives are
reviewed, and adjusted if appropriate, at each balance sheet date.
Brambles Annual Report 2013 - Page 67
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – CONTINUED
for the year ended 30 June 2013
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
The expected useful lives of PPE are generally:
- buildings 50 years
- pooling equipment 5–10 years
- other plant and equipment (owned and leased) 3–20 years
The cost of improvements to leasehold properties is amortised over
the unexpired portion of the lease, or the estimated useful life of
the improvement to Brambles, whichever is the shorter.
Provision is made for irrecoverable pooling equipment based on
experience in each market. The provision is presented within
accumulated depreciation.
The carrying values of PPE are reviewed for impairment when
circumstances indicate their carrying values may not be
recoverable. Assets are assessed within the cash generating unit to
which they belong. Any impairment losses are recognised in the
income statement.
The recoverable amount of PPE is the greater of its fair value less
costs to sell and its value in use. Value in use is determined as
estimated future cash flows discounted to their present value using
a pre-tax discount rate reflecting current market assessments of the
time value of money and the risk specific to the asset.
PPE is derecognised upon disposal or when no future economic
benefits are expected to arise from continued use of the asset. Any
net gain or loss arising on derecognition of the asset is included in
the income statement and presented within other income in the
period in which the asset is derecognised.
Goodwill
Goodwill is carried at cost less accumulated impairment losses.
Goodwill is not amortised.
Goodwill represents the excess of the cost of an acquisition over the
fair value of Brambles’ share of the net identifiable assets of the
acquired subsidiary or joint venture at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisitions of joint ventures is included in
investments in joint ventures.
Upon acquisition, any goodwill arising is allocated to each cash
generating unit expected to benefit from the acquisition. Goodwill
is tested annually for impairment, or more frequently if events or
changes in circumstances indicate that it might be impaired. An
impairment loss is recognised when the recoverable amount of the
cash generating unit is less than its carrying amount.
On disposal of an operation, goodwill associated with the disposed
operation is included in the carrying amount of the operation when
determining the gain or loss on disposal.
Intangible assets
Intangible assets acquired are capitalised at cost, unless acquired as
part of a business combination in which case they are capitalised at
fair value as at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less provisions for amortisation
and impairment.
The costs of acquiring and developing computer software for
internal use are capitalised as intangible non-current assets where it
is used to support a significant business system and the expenditure
leads to the creation of a durable asset.
Useful lives have been established for all non-goodwill intangible
assets. Amortisation charges are expensed in the income statement
on a straight-line basis over those useful lives. Estimated useful lives
are reviewed annually.
The expected useful lives of intangible assets are generally:
- customer lists and relationships
- computer software
3–20 years
3–10 years
There are no non-goodwill intangible assets with indefinite lives.
Intangible assets are tested for impairment where an indicator of
impairment exists, either individually or at the cash generating unit
level.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and
the carrying amount of the asset and are recognised in the income
statement when the asset is derecognised.
LIABILITIES
Payables
Trade and other creditors represent liabilities for goods and services
provided to Brambles prior to the end of the financial year which
remain unpaid at the reporting date. The amounts are unsecured
and are paid within normal credit terms.
Non-current payables are discounted to present value using the
effective interest method.
Provisions
Provisions for liabilities are made on the basis that, due to a past
event, the business has a constructive or legal obligation to transfer
economic benefits that are of uncertain timing or amount.
Provisions are measured at the present value of management’s best
estimate at the balance sheet date of the expenditure required to
settle the obligation. The discount rate used is a pre-tax rate that
reflects current market assessments of the time value of money and
the risks appropriate to the liability.
Where discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost in the income
statement.
Interest bearing liabilities
Borrowings are initially recognised at fair value, net of transaction
costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the borrowing proceeds (net of
transaction costs) and the redemption amount is recognised in the
income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless Brambles has
an unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date.
Employee entitlements
Employee entitlements are provided by Brambles in accordance with
the legal and social requirements of the country of employment.
Principal entitlements are for annual leave, sick leave, long service
leave and contract entitlements. Annual leave and sick leave
entitlements are presented within trade and other payables.
Liabilities for annual leave, as well as those employee entitlements
which are expected to be settled within one year, are measured at
the amounts expected to be paid when they are settled. All other
employee entitlement liabilities are measured at the estimated
present value of the future cash outflows to be made in respect of
services provided by employees up to the reporting date.
Dividends
A provision for dividends is only recognised where the dividends
have been declared prior to the reporting date.
Brambles Annual Report 2013 - Page 68
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – CONTINUED
for the year ended 30 June 2013
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
Leases
Leases are classified at their inception as either operating or
finance leases based on the economic substance of the agreement
so as to reflect the risks and benefits incidental to ownership.
Operating leases
The minimum lease payments under operating leases, where the
lessor effectively retains substantially all of the risks and benefits of
ownership of the leased item, are recognised as an expense on a
straight-line basis over the term of the lease.
Finance leases
Finance leases, which effectively transfer substantially all of the
risks and benefits incidental to ownership of the leased item to
Brambles, are capitalised at the inception of the lease at the fair
value of the leased asset or, if lower, present value of the minimum
lease payments, and disclosed as property, plant and equipment
held under lease. A lease liability of equal value is also recognised.
Lease payments are allocated between finance charges and a
reduction of the lease liability so as to achieve a constant period
rate of interest on the lease liability outstanding each period. The
finance charge is recognised as a finance cost in the income
statement.
Capitalised lease assets are depreciated over the shorter of the
estimated useful life of the assets and the lease term.
Income tax
The income tax expense or benefit for the year is the tax payable or
receivable on the current year’s taxable income based on the
national income tax rate for each jurisdiction, adjusted by changes
in deferred tax assets and liabilities attributable to temporary
differences between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, and to unused tax
losses.
Deferred tax is accounted for using the balance sheet liability
method in respect of temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the
corresponding tax basis used in the computation of taxable profit,
calculated using tax rates which are enacted or substantively
enacted by the balance sheet date.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary
differences and losses. The carrying amount of deferred tax assets is
reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are not recognised:
- where the deferred tax arises from the initial recognition of an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; or
- in respect of temporary differences associated with investments in
subsidiaries and joint ventures where the timing of the reversal of
the temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the foreseeable
future.
Current and deferred tax attributable to amounts recognised
directly in equity are also recognised directly in equity.
Financial assets
Brambles classifies its financial assets in the following two
categories: financial assets at fair value through profit or loss and
loans and receivables. The classification depends on the purpose for
which the financial assets were acquired.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial
assets held for trading. A financial asset is classified in this category
if acquired principally for the purpose of selling in the short term.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
Financial assets are recognised on Brambles’ balance sheet when
Brambles becomes a party to the contractual provisions of the
instrument. Derecognition takes place when Brambles no longer
controls the contractual rights that comprise the financial
instrument, which is normally the case when the instrument is sold,
or all the cash flows attributable to the instrument are passed
through to an independent third party.
Derivatives and hedging activities
Derivative instruments used by Brambles, which are used solely for
hedging purposes (i.e. to offset foreign exchange and interest rate
risks), comprise interest rate swaps, caps, collars, forward rate
agreements and forward foreign exchange contracts. Such derivative
instruments are used to alter the risk profile of Brambles’ existing
underlying exposure in line with Brambles’ risk management
policies.
Derivative financial instruments are stated at fair value. The fair
value of forward exchange contracts is calculated by reference to
current forward exchange rates for contracts with similar maturities
at the balance sheet date. The fair value of interest rate swap
contracts is calculated as the present value of the forward cash
flows of the instrument after applying market rates and standard
valuation techniques.
For the purposes of hedge accounting, hedges are classified as
either fair value hedges, cash flow hedges or net investment
hedges.
Fair value hedges
Fair value hedges are derivatives that hedge exposure to changes in
the fair value of a recognised asset or liability, or an unrecognised
firm commitment. In relation to fair value hedges which meet the
conditions for hedge accounting, any gain or loss from remeasuring
the hedging instrument at fair value is recognised immediately in
the income statement.
Any gain or loss attributable to the hedged risk on remeasurement
of the hedged item is adjusted against the carrying amount of the
hedged item and recognised in the income statement. Where the
adjustment is to the carrying amount of a hedged interest-bearing
financial instrument, the adjustment is amortised to the income
statement such that it is fully amortised by maturity.
Hedge accounting is discontinued prospectively if the hedge is
terminated or no longer meets the hedge accounting criteria. In this
case, any adjustment to the carrying amounts of the hedged item
for the designated risk for interest-bearing financial instruments is
amortised to the income statement following termination of the
hedge.
Brambles Annual Report 2013 - Page 69
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – CONTINUED
for the year ended 30 June 2013
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
Cash flow hedges
Cash flow hedges are derivatives that hedge exposure to variability
in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability, or a highly probable
forecast transaction.
In relation to cash flow hedges to hedge forecast transactions which
meet the conditions for hedge accounting, the portion of the gain or
loss on the hedging instrument that is determined to be an effective
hedge is recognised in other comprehensive income and reserves in
equity and the ineffective portion is recognised in the income
statement.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies for
hedge accounting.
At that point in time, any cumulative gain or loss on the hedging
instrument recognised in equity is kept in equity until the forecast
transaction occurs.
If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in equity is transferred to net
profit or loss for the year.
For all other cash flow hedges, the gains or losses that are
recognised in equity are transferred to the income statement in the
same year in which the hedged firm commitment affects the net
profit and loss, for example when the future sale actually occurs.
When the hedged firm commitment results in the recognition of an
asset or a liability, then, at the time the asset or liability is
recognised, the associated gains or losses that had previously been
recognised in equity are included in the initial measurement of the
acquisition cost or other carrying amount of the asset or liability.
Net investment hedges
Hedges for net investments in foreign operations are accounted for
similarly to cash flow hedges.
Any gain or loss on the hedging instrument that is determined to be
an effective hedge is recognised in other comprehensive income and
reserves in equity and the ineffective portion is recognised in the
income statement.
Gains and losses accumulated in equity are included in the income
statement when the foreign operation is partially disposed or sold.
Derivatives that do not qualify for hedge accounting
Where derivatives do not qualify for hedge accounting, gains or
losses arising from changes in their fair value are taken directly to
net profit or loss for the year.
Contributed equity
Ordinary shares including share premium are classified as
contributed equity. No gain or loss is recognised in the income
statement on the purchase, sale, issue or cancellation of Brambles’
own equity instruments.
Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction from the proceeds of
issue.
Earnings per share (EPS)
Basic EPS is calculated as net profit attributable to members of the
parent entity, adjusted to exclude costs of servicing equity (other
than dividends), divided by the weighted average number of
ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members of
the parent entity, adjusted for:
- costs of servicing equity (other than dividends) and preference
share dividends;
- the after-tax effect of dividends and finance costs associated with
dilutive potential ordinary shares that have been recognised as
expenses;
- other non-discretionary changes in revenues or expenses during
the year that would result from the dilution of potential ordinary
shares;
and divided by the weighted average number of ordinary shares and
dilutive potential ordinary shares, adjusted for any bonus element.
EPS on Underlying profit after finance costs and tax is calculated as
Underlying profit after finance costs and tax attributable to
members of the parent entity, divided by the weighted average
number of ordinary shares, adjusted for any bonus element.
New accounting standards and interpretations issued but
not yet applied
At 30 June 2013, certain new accounting standards and
interpretations have been published that will become mandatory in
future reporting periods. Brambles has not early-adopted these new
or amended accounting standards and interpretations in 2013.
AASB 9: Financial Instruments and AASB 2009-11: Amendments to
Australian Accounting Standards arising from AASB 9 are applicable
to annual reporting periods beginning on or after 1 January 2013.
AASB 9 addresses the classification, measurement and derecognition
of financial assets and liabilities and may affect Brambles’
accounting for financial assets and liabilities. Brambles does not
expect that this standard will have a significant impact on its
financial statements.
AASB 10: Consolidated Financial Statements is applicable to annual
reporting periods beginning 1 January 2013. This standard
introduces a single definition of control that applies to all entities.
The standard focuses on the need to have both power and rights or
exposure to variable returns for control to be established. Brambles
does not expect that this standard will have a significant impact on
its financial statements.
AASB 11: Joint Arrangements is applicable to annual reporting
periods beginning 1 January 2013. AASB 11 introduces a principles
based approach to accounting for joint arrangements. The focus has
shifted from the legal structure of the joint arrangements to how
the rights and obligations are shared by the parties to the joint
arrangements. Brambles does not expect that this standard will
have a significant impact on its financial statements.
AASB 12: Disclosure of Interests in Other Entities is applicable to
annual reporting periods beginning 1 January 2013. This standard
sets out the disclosure requirements of AASB 10 and AASB 11.
Application of this standard will not impact amounts recognised in
the financial statements.
AASB 13: Fair Value Measurements and AASB 2011-8: Amendments to
Australian Accounting Standards arising from AASB 13 are applicable
to annual reporting periods beginning 1 January 2013. This standard
provides guidance on measuring fair value and aims to enhance fair
value disclosures. Brambles does not expect that this standard will
have a significant impact on its financial statements.
Brambles Annual Report 2013 - Page 70
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS – CONTINUED
for the year ended 30 June 2013
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES –
CONTINUED
AASB 19: Employee Benefits is applicable to annual reporting
periods beginning on or after 1 January 2013. The revised standard
requires all remeasurements of defined benefit plan assets and
liabilities to be recognised immediately in other comprehensive
income. It further requires net interest expense on net defined
benefit liability to be calculated using a discount rate. The revised
requirements replace the expected return on plan assets that is
currently included in the profit or loss. If this revised standard had
been applied in 2013, pre-tax profit would have been US$2.2 million
lower primarily because the discount rate is lower than the
expected return on plan assets. The net pension deficit would have
been unchanged.
AASB 2011-4 Amendments to Remove Individual Key Management
Personnel Disclosure Requirements (effective 1 July 2013). The
revised standard removes the individual key management personnel
(KMP) disclosure requirements from AASB 124 Related Party
Disclosures, to achieve consistency with the international equivalent
standard and remove a duplication of the requirements with the
Corporations Act 2001. While this will reduce the disclosures that
are currently required in the notes to the financial statements, it
will not affect any of the amounts recognised in the financial
statements. The amendments cannot be adopted early.
AASB 2012-3: Amendments to Australian Accounting Standard –
Offsetting Financial Assets and Financial Liabilities and AASB 2012-2:
Disclosures - Offsetting Financial Assets and Financial Liabilities
(effective 1 January 2014 and 1 January 2013 respectively). The
revised standards clarify requirements to offset financial assets and
financial liabilities in the balance sheet. The revised requirements
are not expected to affect the accounting for any of Brambles’
current offsetting arrangements, however additional disclosures in
relation to offsetting arrangements may be required.
Rounding of amounts
As Brambles is a company of a kind referred to in ASIC Class Order
98/100, relevant amounts in the financial statements and Directors’
Report have been rounded to the nearest hundred thousand US
dollars or, in certain cases, to the nearest thousand US dollars.
NOTE 3. CRITICAL ACCOUNTING ESTIMATES
AND JUDGEMENTS
In applying its accounting policies, Brambles has made estimates
and assumptions concerning the future, which may differ from the
related actual outcomes. Those estimates and assumptions which
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial
year are discussed below.
Irrecoverable pooling equipment provisioning
Loss or damage is an inherent risk of pooling equipment operations.
Brambles’ pooling equipment operations around the world differ in
terms of business model, market dynamics, customer and
distribution channel profiles, contractual arrangements and
operational details. CHEP conducts audits continuously throughout
the year to confirm the existence and the condition of its pooling
equipment assets and to validate CHEP’s customer hire records.
During these audits, which take place at CHEP plants, customer sites
and other locations, pooling equipment is counted on a sample basis
and reconciled to the balances shown in CHEP’s customer hire
records. Brambles also monitors its pooling equipment operations
using detailed key performance indicators (KPIs).
The irrecoverable pooling equipment provision is determined by
reference to historical statistical data in each market, including the
outcome of audits and relevant KPIs, together with management
estimates of future equipment losses.
Impairment of goodwill
Brambles’ business units undertake an impairment review process
annually to ensure that goodwill balances are not carried at
amounts that are in excess of their recoverable amounts. The
recoverable amount of the goodwill in continuing operations is
determined based on value in use calculations undertaken at the
cash generating unit level. These calculations require the use of key
assumptions which are set out in Note 21.
Income taxes
Brambles is a global company and is subject to income taxes in
many jurisdictions around the world. Significant judgement is
required in determining the provision for income taxes on a
worldwide basis. There are many transactions and calculations
undertaken during the ordinary course of business for which the
ultimate tax determination is uncertain. Brambles recognises
liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome
of these matters is different from amounts provided, such
differences will impact the current and deferred tax provisions in
the period in which such outcome is obtained. Refer to Note 9 for
further details.
Brambles Annual Report 2013 - Page 71
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 4. SEGMENT INFORMATION
Brambles' segment information is provided on the same basis as internal management reporting to the CEO and reflects how Brambles is
organised and managed.
Brambles has seven reportable segments, being Pallets - Americas, Pallets - EMEA, Pallets - Asia-Pacific (each pallet pooling businesses),
Reusable Plastic Crates (RPCs) (crate pooling business), Containers (container pooling businesses), Recall (information management
business) and Brambles HQ (corporate centre). Discontinued operations comprise businesses which were divested in prior years.
Segment performance is measured on sales, Underlying Profit, cash flow from operations and Brambles Value Added (BVA). Underlying
Profit is the main measure of segment profit. A reconciliation between Underlying Profit and operating profit is set out below.
Segment sales revenue is measured on the same basis as in the income statement. Segment sales revenue is allocated to segments based
on product categories and physical location of the business unit that invoices the customer. Intersegment revenue during the period was
immaterial. There is no single external customer who contributed more than 10% of Group sales revenue.
Assets and liabilities are measured consistently in segment reporting and in the balance sheet. Assets and liabilities are allocated to
segments based on segment use and physical location. Cash, borrowings and tax balances are managed centrally and are not allocated to
segments.
By operating segment
Pallets - Americas
Pallets - EMEA
Pallets - Asia-Pacific
Pallets
RPCs
Containers
Recall
Brambles HQ
Total Continuing
By geographic origin
Americas
Europe
Australia
Other
Total
By operating segment
Pallets - Americas
Pallets - EMEA
Pallets - Asia-Pacific
Pallets
RPCs
Containers
Recall
Brambles HQ
Continuing operations
Discontinued operations
Total
Cash flow from
operations1
Brambles
Value Added2
2013
US$m
318.3
262.5
63.5
644.3
50.7
37.3
161.7
(35.0)
859.0
2012
US$m
272.3
215.4
25.9
513.6
(40.8)
29.2
131.6
(42.4)
591.2
2013
US$m
170.7
132.2
28.8
331.7
(36.1)
(12.3)
13.3
(26.7)
269.9
2012
US$m
126.4
114.6
27.6
268.6
(38.3)
4.3
41.1
(27.1)
248.6
Sales
revenue
2013
US$m
2012
US$m
2,205.8
1,346.8
391.8
2,041.3
1,326.8
375.8
3,944.4
3,743.9
812.8
325.7
807.0
-
759.5
276.6
845.0
-
5,889.9
5,625.0
2,817.5
2,083.5
635.7
353.2
2,632.4
2,041.4
614.4
336.8
5,889.9
5,625.0
Operating
profit3
Significant Items
before tax4
Underlying
Profit4
2013
US$m
414.6
268.2
77.2
760.0
138.4
28.0
128.2
(43.4)
1,011.2
1.4
1,012.6
2012
US$m
346.4
269.3
75.7
691.4
109.3
32.8
160.1
(54.4)
939.2
0.4
939.6
2013
US$m
(4.5)
(14.2)
(1.6)
(20.3)
(0.3)
(0.4)
(16.0)
(9.0)
(46.0)
1.4
(44.6)
2012
US$m
(17.2)
(5.5)
(0.9)
(23.6)
(16.2)
-
(14.1)
(16.6)
(70.5)
0.4
(70.1)
2013
US$m
419.1
282.4
78.8
780.3
138.7
28.4
144.2
(34.4)
2012
US$m
363.6
274.8
76.6
715.0
125.5
32.8
174.2
(37.8)
1,057.2
1,009.7
Brambles Annual Report 2013 - Page 72 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 4. SEGMENT INFORMATION - CONTINUED
By operating segment
Pallets - Americas
Pallets - EMEA
Pallets - Asia-Pacific
Pallets
RPCs
Containers
Recall
Brambles HQ
Total
By operating segment
Pallets - Americas
Pallets - EMEA
Pallets - Asia-Pacific
Pallets
RPCs
Containers
Recall
Brambles HQ
Total segment assets and liabilities
Cash and borrowings
Current tax balances
Deferred tax balances
Equity-accounted investments
Total assets and liabilities
Non-current assets by geographic origin6
Americas
Europe
Australia
Other
Total
Capital
expenditure5
Depreciation
and amortisation
2013
US$m
340.8
236.1
73.1
650.0
198.2
33.3
81.3
1.6
2012
US$m
297.9
237.7
85.9
621.5
230.0
49.1
70.9
3.4
2013
US$m
193.8
129.6
47.5
370.9
85.5
38.0
61.3
1.3
2012
US$m
186.7
137.3
45.4
369.4
86.1
33.0
62.9
0.8
964.4
974.9
557.0
552.2
Segment assets
Segment liabilities
2013
US$m
2012
US$m
2013
US$m
2012
US$m
2,278.3
1,436.6
412.5
4,127.4
1,940.7
501.9
2,110.1
1,441.4
449.7
4,001.2
1,755.8
303.5
1,144.1
1,174.1
30.5
61.4
7,744.6
7,296.0
128.9
10.1
48.2
20.1
174.2
20.8
37.6
17.1
311.4
330.0
21.5
662.9
461.4
96.8
203.6
50.4
1,475.1
2,843.3
62.9
545.2
-
275.1
337.6
50.4
663.1
411.9
71.8
185.6
56.6
1,389.0
2,864.1
46.5
505.7
-
7,951.9
7,545.7
4,926.5
4,805.3
3,020.8
2,483.7
551.8
456.7
2,896.6
2,231.6
533.5
475.1
6,513.0
6,136.8
1
2
3
4
5
Cash Flow from Operations is cash flow generated after net capital expenditure but excluding Significant Items that are outside the
ordinary course of business.
BVA is a non-statutory profit measure and represents the value generated over and above the cost of the capital used to generate that
value. It is calculated using fixed 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 activities of the business,
multiplied by 12%.
Operating profit is segment revenue less segment expense and excludes net finance costs.
Underlying Profit is a non-statutory profit measure and represents profit from continuing operations before finance costs, tax and
Significant Items (refer Note 6). It is presented to assist users of the financial statements to better understand Brambles' business results.
Capital expenditure is based on an accruals basis and includes expenditure on property, plant & equipment and intangibles.
6 Non-current assets exclude financial instruments and deferred tax assets.
Brambles Annual Report 2013 - Page 73 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 5. PROFIT FROM ORDINARY ACTIVITIES - CONTINUING OPERATIONS
A) REVENUE AND OTHER INCOME - CONTINUING OPERATIONS
Sales revenue
Net gains on disposals of property, plant and equipment
Other operating income
Other income
Total income
B) OPERATING EXPENSES - CONTINUING OPERATIONS
Employment costs (Note 7)
Service suppliers:
- transport
- repairs and maintenance
- subcontractors and other service suppliers
Raw materials and consumables
Occupancy
Depreciation of property, plant and equipment
Impairment of software and property, plant and equipment
Irrecoverable pooling equipment provision expense
Amortisation of intangible assets and deferred expenditure
- software
- acquired intangible assets (other than software)
- deferred expenditure
Other
C) NET FOREIGN EXCHANGE GAINS AND LOSSES - CONTINUING OPERATIONS
Net gains included in operating profit1
Net gains included in net finance costs
2013
US$m
2012
US$m
5,889.9
5,625.0
16.5
128.6
145.1
14.3
128.3
142.6
6,035.0
5,767.6
1,096.9
1,055.6
1,047.9
334.7
941.0
447.4
339.6
492.9
16.8
101.5
23.3
31.8
9.0
147.4
993.0
333.9
914.2
404.6
335.4
480.8
15.2
100.1
30.9
30.9
9.6
129.7
5,030.2
4,833.9
0.3
5.9
6.2
19.3
5.6
24.9
1 Includes a US$12.5 million foreign exchange gain on capital repatriation by overseas subsidiaries during 2012. Refer Note 6 for further
details.
Brambles Annual Report 2013 - Page 74 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 6. SIGNIFICANT ITEMS - CONTINUING OPERATIONS
Significant Items are items of income or expense which are, either individually or in aggregate, material to Brambles or to the relevant
business segment and:
• outside the ordinary course of business (e.g. gains or losses on the sale or termination of operations, the cost of significant
reorganisations or restructuring); or
• part of the ordinary activities of the business but unusual due to their size and nature.
Significant Items are disclosed to assist users of the financial statements to better understand Brambles’ business results.
Items outside the ordinary course of business:
- acquisition-related costsa
- restructuring and integration costsb
- impairment of software development costsc
- Recall transaction costsd
Significant Items from continuing operations
Items outside the ordinary course of business:
- acquisition-related costsa
- restructuring and integration costsb
- Recall transaction costsd
- pension costse
- foreign exchange gain on capital repatriationf
Significant Items from continuing operations
Before
tax
(4.6)
(22.0)
(15.3)
(4.1)
(46.0)
Before
tax
(2.8)
(53.2)
(21.2)
(5.8)
12.5
(70.5)
2013
US$m
Tax
-
8.9
1.5
(1.7)
8.7
2012
US$m
Tax
0.4
16.1
2.8
1.6
-
20.9
After
tax
(4.6)
(13.1)
(13.8)
(5.8)
(37.3)
After
tax
(2.4)
(37.1)
(18.4)
(4.2)
12.5
(49.6)
a
b
c
d
e
f
Professional fees and other transaction costs were incurred in relation to the Pallecon acquisition in 2013 and Driessen Services,
Paramount Pallet and IFCO acquisitions in 2012.
Redundancy, plant closure, integration and other restructuring costs of US$22.0 million were incurred in various countries during the
year, net of reversal of prior year costs not incurred (2012: US$53.2 million).
Following a change in Recall's IT strategy, software development costs were written down to their recoverable values resulting in an
impairment charge of US$15.3 million.
Professional fees of US$4.1 million were incurred during the year in relation to the Recall demerger process (refer Note 37). Costs of
US$21.2 million, primarily professional fees, were incurred in 2012 in relation to the terminated Recall divestment process.
During 2012, CHEP South Africa changed its retirement plan from defined benefit to defined contribution. As required by AASB 119:
Employee benefits, the actuarially-assessed value of a related enhancement in retirement benefits was treated as a past service cost
and recognised in the income statement.
During 2012, capital returns were made by overseas subsidiaries. As required by AASB 121: The Effects of Changes in Foreign Exchange
Rates, a portion of the accumulated foreign currency translation reserve held in relation to the overseas subsidiaries were recognised in
the income statement, resulting in a US$12.5 million foreign exchange gain.
Brambles Annual Report 2013 - Page 75 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 7. EMPLOYMENT COSTS - CONTINUING OPERATIONS
Wages and salaries
Social security costs
Share-based payment expense
Pension costs:
- defined contribution plans
- defined benefit plans
Other post-employment benefits
The average monthly number of employees in continuing operations was:
Pallets
RPCs
Containers
Recall
Brambles HQ
NOTE 8. NET FINANCE COSTS
Finance revenue
Bank accounts and short term deposits
Derivative financial instruments
Other
Finance costs
Interest expense on bank loans and borrowings
Derivative financial instruments
Other
Net finance costs
2013
US$m
907.6
106.6
24.7
25.4
(1.3)
33.9
2012
US$m
873.0
97.2
20.5
23.6
8.2
33.1
1,096.9
1,055.6
2013
2012
11,365
10,629
996
695
4,871
110
18,037
2013
US$m
1.7
16.2
2.4
20.3
(125.6)
(1.3)
(4.3)
(131.2)
(110.9)
914
420
4,952
106
17,021
2012
US$m
2.8
15.6
3.1
21.5
(156.3)
(5.7)
(11.5)
(173.5)
(152.0)
Brambles Annual Report 2013 - Page 76 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 9. INCOME TAX
A) COMPONENTS OF TAX EXPENSE
Amounts recognised in the income statement
Current income tax - continuing operations:
- income tax charge
- prior year adjustments
Deferred tax - continuing operations:
- origination and reversal of temporary differences
- previously unrecognised tax losses
- prior year adjustments
Tax expense - continuing operations
Tax expense/(benefit) - discontinued operations (Note 12)
Tax expense recognised in the income statement
Amounts recognised in the statement of comprehensive income
- on actuarial losses on defined benefit pension plans
- on losses on revaluation of cash flow hedges
Tax expense/(benefit) recognised directly in the statement of comprehensive income
B) RECONCILIATION BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT BEFORE TAX
Profit before tax - continuing operations
Tax at standard Australian rate of 30% (2012: 30%)
Effect of tax rates in other jurisdictions
Prior year adjustments
Current year tax losses not recognised
Foreign withholding tax unrecoverable
Non-deductible expenses
Prior year tax losses recouped/recognised
Other
Tax expense - continuing operations
Tax expense/(benefit) - discontinued operations (Note 12)
Total income tax expense
2013
US$m
2012
US$m
222.4
(4.2)
218.2
58.2
(14.2)
(1.8)
42.2
260.4
0.7
261.1
(2.4)
0.7
(1.7)
900.3
270.1
(25.3)
(6.0)
11.4
9.5
12.9
(14.2)
2.0
260.4
0.7
261.1
203.0
(36.7)
166.3
40.3
(16.9)
22.6
46.0
212.3
(1.0)
211.3
(5.4)
1.7
(3.7)
787.2
236.2
(37.5)
(16.4)
12.9
4.0
22.8
(16.9)
7.2
212.3
(1.0)
211.3
Brambles Annual Report 2013 - Page 77 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 9. INCOME TAX - CONTINUED
C) COMPONENTS OF AND CHANGES IN DEFERRED TAX ASSETS
Deferred tax assets shown in the balance sheet are represented by cumulative temporary differences attributable to:
2013
US$m
2012
US$m
Items recognised through the income statement
Employee benefits
Provisions
Losses available against future taxable income
Other
Items recognised directly in equity
Actuarial losses on defined benefit pension plans
Cash flow hedges
Share-based payments
Set-off against deferred tax liabilities
Net deferred tax assets
Changes in deferred tax assets were as follows:
At 1 July
(Charged)/credited to the income statement
(Charged)/credited directly to equity
Offset against deferred tax liabilities
Acquisition of subsidiary
Currency variations
At 30 June
30.8
46.4
275.2
44.9
397.3
14.9
0.2
13.6
28.7
(377.8)
48.2
37.6
29.1
(8.8)
(10.2)
0.3
0.2
48.2
17.0
36.4
289.5
56.5
399.4
18.7
3.9
3.6
26.2
(388.0)
37.6
36.3
65.4
6.4
(63.2)
-
(7.3)
37.6
Deferred tax assets are recognised for carried forward tax losses to the extent that the realisation of the related tax benefit through
future taxable profits is probable. At reporting date, Brambles has unused tax losses of US$1,301.5 million (2012: US$1,298.5 million)
available for offset against future profits. A deferred tax asset has been recognised in respect of US$852.0 million (2012: US$877.0 million)
of such losses.
The benefit for tax losses will only be obtained if:
-
-
-
Brambles derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the
losses to be realised;
Brambles continues to comply with the conditions for deductibility imposed by tax legislation; and
no changes in tax legislation adversely affect Brambles in realising the benefit from the deductions for the losses.
No deferred tax asset has been recognised in respect of the remaining unused tax losses of US$449.5 million (2012: US$421.5 million) due
to the unpredictability of future profit streams in the relevant jurisdictions. Tax losses of US$563.4 million, which have been recognised in
the balance sheet, will expire between 2014 and 2032. All other losses may be carried forward indefinitely.
Brambles Annual Report 2013 - Page 78 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 9. INCOME TAX - CONTINUED
D) COMPONENTS AND CHANGES IN DEFERRED TAX LIABILITIES
Deferred tax liabilities shown in the balance sheet are represented by cumulative temporary differences attributable to:
2013
US$m
2012
US$m
Items recognised through the income statement
Accelerated depreciation for tax purposes
Other
Items recognised in the statement of comprehensive income
Actuarial gains on defined benefit pension plans
Cash flow hedges
Set-off against deferred tax assets
Net deferred tax liabilities
Changes in deferred tax liabilities were as follows:
At 1 July
Charged to the income statement
(Credited)/charged directly to equity
Acquisition of subsidiary
Offset against deferred tax asset
Currency variations
At 30 June
786.4
132.2
918.6
0.6
3.8
4.4
(377.8)
545.2
505.7
71.3
(16.6)
3.3
(10.2)
(8.3)
545.2
751.9
140.5
892.4
1.3
-
1.3
(388.0)
505.7
529.1
111.4
1.5
(31.8)
(63.2)
(41.3)
505.7
At reporting date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which
deferred tax liabilities have not been recognised in the consolidated financial statements was US$966.2 million (2012: US$508.2 million).
No liability has been recognised for these temporary differences because Brambles controls whether there is a liability in relation to
distributions from its subsidiaries and is satisfied that there is no liability in the foreseeable future.
E) TAX CONSOLIDATION
Brambles Limited and its Australian subsidiaries formed a tax consolidated group in 2006. Brambles Limited, as the head entity of the tax
consolidated group, and its Australian subsidiaries have entered into a tax sharing agreement in order to allocate income tax expense. The
tax sharing agreement uses a stand-alone basis of allocation. Consequently, Brambles Limited and its Australian subsidiaries account for
their own current and deferred tax amounts as if they each continue to be taxable entities in their own right. In addition, the agreement
provides funding rules setting out the basis upon which subsidiaries are to indemnify Brambles Limited in respect of tax liabilities and the
methodology by which subsidiaries in tax loss are to be compensated.
Brambles Annual Report 2013 - Page 79
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 10. EARNINGS PER SHARE
Earnings per share
- basic
- diluted
From continuing operations
- basic
- diluted
- basic, on Underlying Profit after finance costs and tax
From discontinued operations
- basic
- diluted
2013
US cents
2012
US cents
41.2
40.9
41.1
40.9
43.5
0.1
-
38.9
38.6
38.8
38.5
42.1
0.1
0.1
Performance share rights and MyShare matching conditional rights granted under Brambles' share plans are considered to be potential
ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive.
Details are set out in Note 28.
A) WEIGHTED AVERAGE NUMBER OF SHARES DURING THE YEAR
Used in the calculation of basic earnings per share
Adjustment for share rights
Used in the calculation of diluted earnings per share
B) RECONCILIATIONS OF PROFITS USED IN EPS CALCULATIONS
Statutory profit
Profit from continuing operations
Profit from discontinued operations
Profit used in calculating basic and diluted EPS
Underlying Profit after finance costs and tax
Underlying Profit (Note 4)
Net finance costs (Note 8)
Underlying Profit before tax
Tax expense on Underlying Profit
Underlying Profit after finance costs and tax
which reconciles to statutory profit:
Underlying Profit after finance costs and tax
Significant Items after tax (Note 6)
Profit from continuing operations
2013
million
2012
million
1,555.7
1,482.3
10.2
9.0
1,565.9
1,491.3
2013
US$m
2012
US$m
639.9
0.7
640.6
574.9
1.4
576.3
1,057.2
1,009.7
(110.9)
946.3
(269.1)
677.2
677.2
(37.3)
639.9
(152.0)
857.7
(233.2)
624.5
624.5
(49.6)
574.9
Brambles Annual Report 2013 - Page 80 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 11. DIVIDENDS
A) DIVIDENDS PAID DURING THE YEAR
Dividend per share (in Australian cents)
Franked amount at 30% tax (in Australian cents)
Cost (in US$ million)
Payment date
B) DIVIDEND DECLARED AFTER REPORTING DATE
Dividend per share (in Australian cents)
Franked amount at 30% tax (in Australian cents)
Cost (in US$ million)
Payment date
Dividend record date
Interim
2013
13.5
4.1
215.2
Final
2012
13.0
3.9
210.3
11 April 2013
11 October 2012
Final
2013
13.5
4.1
193.8
10 October 2013
13 September 2013
As this dividend had not been declared at the reporting date, it is not reflected in these financial statements.
C) FRANKING CREDITS
Franking credits available for subsequent financial years based on a tax rate of 30%
2013
US$m
71.8
2012
US$m
87.5
The amounts above represent the balance of the franking account as at the end of the year, adjusted for:
- franking credits that will arise from the payment of the current tax liability;
- franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
- franking credits that will arise from dividends recognised as receivables at the reporting date; and
- franking credits that may be prevented from being distributed in subsequent financial years.
The final 2013 dividend has been franked at 30%.
Brambles Annual Report 2013 - Page 81 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 12. DISCONTINUED OPERATIONS
Discontinued operations primarily comprise net adjustments to divestment provisions. Financial information relating to discontinued
operations is summarised below:
Profit before tax
Tax (expense)/benefit
Profit for the year from discontinued operations
Net cash outflow from operating activities
NOTE 13. BUSINESS COMBINATIONS
ACQUISITIONS
2013
US$m
1.4
(0.7)
0.7
(1.0)
2012
US$m
0.4
1.0
1.4
(1.0)
A) Pallecon
On 28 December 2012, Brambles obtained control of Pallecon, a leading provider of IBCs (Intermediate Bulk Containers) in Europe and
Asia-Pacific, for consideration of €136 million.
The fair value of the Pallecon assets acquired, liabilities assumed and goodwill were as follows, based on preliminary acquisition
accounting data which will be finalised by December 2013:
Purchase consideration
Less: fair value of net identifiable assets acquired
Goodwill (at acquisition date)
2013
US$m
179.2
(51.7)
127.5
The goodwill acquired is attributable to the profitability of the acquired business and anticipated synergies with Brambles' existing
Containers operations, as well as benefits derived from the acquired workforce and other intangible assets that cannot be separately
recognised.
On acquisition of Pallecon, assets acquired and liabilities assumed were:
Cash
Receivables
Inventories
Property, plant and equipment
Intangibles
Other assets
Trade and other payables
Borrowings
Deferred taxes
Other liabilities
Net assets
Fair value
US$m
1.6
11.2
4.6
34.0
18.7
0.5
70.6
10.0
2.0
3.1
3.8
18.9
51.7
Brambles Annual Report 2013 - Page 82 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 13. BUSINESS COMBINATIONS - CONTINUED
Cash outflow on acquisition of Pallecon was as follows:
Purchase consideration
Less: cash acquired
Net cash outflow
B) Other
In addition to the Pallecon acquisition, there were other minor acquisitions in 2013 with immaterial impact.
NOTE 14. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short term deposits
2013
US$m
179.2
(1.6)
177.6
2012
US$m
143.4
30.8
174.2
2013
US$m
98.8
30.1
128.9
Cash and cash equivalents include balances of US$3.2 million (2012: US$5.7 million) used as security for various contingent liabilities and is
not readily accessible. Short term deposits have initial maturities varying between 7 days and 3 months.
Refer to Note 30 for other financial instruments disclosures.
NOTE 15. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Provision for doubtful receivables (A)
Net trade receivables
Other debtors
Accrued and unbilled revenue
Non-current
Other receivables
899.7
(27.9)
871.8
125.2
127.2
826.9
(21.3)
805.6
146.4
102.8
1,124.2
1,054.8
9.2
8.5
A) PROVISION FOR DOUBTFUL RECEIVABLES
Trade receivables are non-interest bearing and are generally on 30–90 day terms. A provision for doubtful receivables is established when
there is a level of uncertainty as to the full recoverability of the receivable, based on objective evidence. A provision of US$10.1 million
(2012: US$7.7 million) has been recognised as an expense in the current year for specific trade and other receivables for which such
evidence exists.
Movements in the provision for doubtful receivables were as follows:
At 1 July
Charge for the year
Amounts written off
Acquisition of subsidiaries
Foreign exchange differences
At 30 June
21.3
10.1
(4.1)
0.6
-
27.9
18.4
7.7
(3.9)
1.0
(1.9)
21.3
Brambles Annual Report 2013 - Page 83 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 15. TRADE AND OTHER RECEIVABLES - CONTINUED
At 30 June, the ageing analysis of trade receivables by reference to due dates was as follows:
Not past due
Past due 0-30 days but not impaired
Past due 31-60 days but not impaired
Past due 61-90 days but not impaired
Past 90 days but not impaired
Impaired
2013
US$m
618.0
170.4
45.8
11.3
26.3
27.9
2012
US$m
595.4
131.7
37.4
10.2
30.9
21.3
899.7
826.9
At 30 June 2013, trade receivables of US$253.8 million (2012: US$210.2 million) were past due but not doubtful. These trade receivables
comprise customers who have a good debt history and are considered recoverable.
At 30 June 2013, trade receivables of US$27.9 million (2012: US$21.3 million) were considered to be impaired. A provision of
US$27.9 million (2012: US$21.3 million) has been recognised for doubtful receivables.
Other debtors primarily comprise GST/VAT recoverable, loss compensation receivables and certain balances arising from outside Brambles'
ordinary business activities, such as deferred proceeds on sale of property, plant and equipment.
At 30 June 2013, other debtors of US$96.7 million (2012: US$77.6 million) were past due but not considered to be impaired. No specific
collection issues have been identified with these receivables. An ageing of these receivables was as follows:
Past due 0-30 days but not impaired
Past due 31-60 days but not impaired
Past due 61-90 days but not impaired
Past 90 days but not impaired
29.7
1.6
1.8
63.6
96.7
11.8
4.4
3.0
58.4
77.6
At 30 June 2013, there were no balances within other debtors that were considered to be impaired (2012: nil). No provision has been
recognised (2012: nil).
Refer to Note 30 for other financial instruments disclosures.
NOTE 16. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods
2013
US$m
38.0
0.2
18.0
56.2
2012
US$m
34.8
0.3
13.1
48.2
Brambles Annual Report 2013 - Page 84
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 17. DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swaps - cash flow hedges
Interest rate swaps - fair value hedges
Forward foreign exchange contracts - cash flow hedges
Forward foreign exchange contracts - held for trading
Embedded derivatives
Interest rate swaps - cash flow hedges
Interest rate swaps - fair value hedges
Embedded derivatives
Refer to Note 30 for other financial instruments disclosures.
NOTE 18. OTHER ASSETS
Current
Prepayments
Current tax receivable
Non-current
Prepayments
2013
US$m
2012
US$m
2013
US$m
2012
US$m
Current assets
Current liabilities
-
9.7
0.3
0.4
0.5
10.9
-
8.3
0.1
0.1
0.4
8.9
0.5
-
-
9.0
-
9.5
3.0
-
0.1
1.9
-
5.0
Non-current assets
Non-current liabilities
-
9.8
-
9.8
-
19.0
-
19.0
-
-
-
-
0.8
-
-
0.8
2013
US$m
2012
US$m
50.6
10.1
60.7
45.4
20.8
66.2
2.6
3.0
Brambles Annual Report 2013 - Page 85 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 19. INVESTMENTS
A) JOINT VENTURES
Brambles has investments in the following unlisted jointly controlled entities, which are accounted for using the equity method.
% interest held
at reporting date
Name (and nature of business)
CISCO - Total Information Management Pte. Limited (Information management)
Recall Becker GmbH & Co. KG (Document management services)
IFCO Japan Inc (RPC pooling business)
Place of
incorporation
Singapore
Germany
Japan
B) MOVEMENT IN CARRYING AMOUNT OF INVESTMENTS IN JOINT VENTURES
At 1 July
Share of results after income tax (Note 19C)
Dividends received/receivable
Foreign exchange differences
At 30 June
C) SHARE OF RESULTS OF JOINT VENTURES
Trading revenue
Expenses
Profit from ordinary activities before tax
Tax expense on ordinary activities
Profit for the year
D) SHARE OF ASSETS AND LIABILITIES OF JOINT VENTURES
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
E) SHARE OF COMMITMENTS AND CONTINGENT LIABILITIES OF JOINT VENTURES
Contingent liabilities
Capital commitments
Lease commitments
Total
June
2013
49%
50%
33%
2013
US$m
17.1
6.4
(3.5)
0.1
20.1
2013
US$m
29.3
(21.0)
8.3
(1.9)
6.4
8.2
26.8
35.0
9.1
5.8
14.9
20.1
0.6
0.2
4.0
4.8
June
2012
49%
50%
33%
2012
US$m
16.8
5.5
(4.2)
(1.0)
17.1
2012
US$m
15.7
(9.0)
6.7
(1.2)
5.5
7.8
24.7
32.5
9.5
5.9
15.4
17.1
0.6
1.6
3.5
5.7
Brambles Annual Report 2013 - Page 86 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 20. PROPERTY, PLANT AND EQUIPMENT
At 1 July 2011
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2012
Opening net carrying amount
Additions
Acquisition of subsidiaries
Fair value adjustment of prior year acquisition
Disposals
Disposal of subsidiaries
Other transfers
Depreciation charge
Impairment of pooling equipment
Irrecoverable pooling equipment provision expense
Foreign exchange differences
Closing net carrying amount
At 30 June 2012
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2013
Opening net carrying amount
Additions
Acquisition of subsidiaries
Disposals
Depreciation charge
Impairment of pooling equipment
Irrecoverable pooling equipment provision expense
Foreign exchange differences
Closing net carrying amount
At 30 June 2013
Cost
Accumulated depreciation
Net carrying amount
Land and
buildings
US$m
Plant and
equipment
US$m
Total
US$m
182.5
(75.7)
106.8
106.8
21.6
3.5
-
(2.8)
-
11.2
(9.0)
-
-
(14.6)
116.7
200.7
(84.0)
116.7
6,986.2
7,168.7
(2,814.0)
(2,889.7)
4,172.2
4,279.0
4,172.2
4,279.0
899.5
5.0
(51.1)
(70.0)
(0.2)
(9.8)
(471.8)
(15.2)
(100.1)
(336.6)
921.1
8.5
(51.1)
(72.8)
(0.2)
1.4
(480.8)
(15.2)
(100.1)
(351.2)
4,021.9
4,138.6
6,643.4
6,844.1
(2,621.5)
(2,705.5)
4,021.9
4,138.6
116.7
4,021.9
4,138.6
12.9
1.6
(1.6)
(8.8)
-
-
1.5
914.8
32.1
(88.6)
927.7
33.7
(90.2)
(484.1)
(492.9)
(1.5)
(1.5)
(101.5)
(101.5)
(7.5)
(6.0)
122.3
4,285.6
4,407.9
212.4
(90.1)
122.3
7,157.3
7,369.7
(2,871.7)
(2,961.8)
4,285.6
4,407.9
The net carrying amounts above include plant and equipment held under finance lease US$22.7 million (2012: US$38.5 million); leasehold
improvements US$22.6 million (2012: US$25.7 million); and capital work in progress US$45.7 million (2012: US$54.0 million).
Brambles Annual Report 2013 - Page 87
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 21. GOODWILL
A) NET CARRYING AMOUNTS AND MOVEMENTS DURING THE YEAR
At 1 July
Carrying amount
Year ended 30 June
Opening net carrying amount
Acquisition of subsidiaries
Foreign exchange differences
Closing net carrying amount
At 30 June
Gross carrying amount
Accumulated impairment
Net carrying amount
2013
US$m
2012
US$m
1,607.4
1,694.3
1,607.4
1,694.3
122.8
6.5
1,736.7
19.4
(106.3)
1,607.4
1,736.7
1,607.4
-
-
1,736.7
1,607.4
B) SEGMENT-LEVEL SUMMARY OF NET CARRYING AMOUNT
Goodwill acquired through business combinations is allocated to cash generating units (CGU), which are the smallest identifiable
groupings of Brambles' cash generating assets. A segment-level summary of the goodwill allocation is presented as follows:
Pallets - Americas
Pallets - EMEA
Pallets - Asia-Pacific
Pallets
RPCs
Containers
Recall
Total goodwill
317.0
37.1
28.6
382.7
678.5
169.8
505.7
318.0
37.3
29.8
385.1
658.7
47.7
515.9
1,736.7
1,607.4
C) RECOVERABLE AMOUNT TESTING - CONTINUING OPERATIONS
The recoverable amount of goodwill is determined based on value in use calculations undertaken at the CGU level. The value in use is
calculated using a discounted cash flow methodology covering a 10 year period with an appropriate terminal value at the end of that
period. Based on the impairment testing, the carrying amounts of goodwill in the CGUs related to continuing operations at reporting date
were fully supported. The key assumptions on which management has based its cash flow projections were:
Cash flow forecasts
Cash flow forecasts are based on the most recent financial projections covering a maximum period of five years. Cash flows beyond that
period are extrapolated using estimated growth rates. Financial projections are based on assumptions that represent management's best
estimates.
Growth rates
Average growth rates beyond the period covered in the financial projections were: Pallets - Americas 5.0%; RPCs 2.6%; Containers 4.8%
and Recall 2.5% (2012: Pallets - Americas 2.7%; RPCs 2.5% and Recall 2.5%). They are based on management's expectations for future
performance.
Terminal value
The terminal value calculated after year 10 is determined using the stable growth model, having regard to the weighted average cost of
capital and terminal growth factor appropriate to each CGU.
Discount rates
Discount rates used are the pre-tax weighted average cost of capital (WACC) and include a premium for market risks appropriate to each
country in which the CGU operates. WACCs ranged between 8.4% and 19.9% (average rates: Pallets - Americas 11.2%; RPCs 10.1%;
Containers 9.7% and Recall 11.4%). WACCs for 2012 ranged between 9.7% and 21.2% (average rates: Pallets - Americas 11.5%; RPCs 10.0%
and Recall 11.8%).
Sensitivity
Any reasonable change to the above key assumptions would not cause the carrying value of the CGU to materially exceed its recoverable
amount.
Brambles Annual Report 2013 - Page 88 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 22. INTANGIBLE ASSETS
At 1 July 2011
Gross carrying amount
Accumulated amortisation
Net carrying amount
Year ended 30 June 2012
Opening carrying amount
Additions
Acquisition of subsidiaries
Disposals
Disposal of subsidiaries
Amortisation charge
Foreign exchange differences
Closing carrying amount
At 30 June 2012
Gross carrying amount
Accumulated amortisation
Net carrying amount
Year ended 30 June 2013
Opening carrying amount
Additions
Acquisition of subsidiaries
Disposals
Amortisation charge
Impairment charge
Foreign exchange differences
Closing carrying amount
At 30 June 2013
Gross carrying amount
Accumulated amortisation
Net carrying amount
Software
US$m
371.5
(285.2)
86.3
86.3
34.8
-
(0.3)
-
(30.9)
(1.7)
88.2
402.0
(313.8)
88.2
88.2
24.5
0.3
(2.1)
(23.3)
(15.3)
0.8
73.1
419.0
(345.9)
73.1
Other1
US$m
434.0
(116.6)
317.4
Total
US$m
805.5
(401.8)
403.7
317.4
403.7
19.0
5.6
(0.7)
(0.3)
(40.5)
(26.5)
274.0
418.5
(144.5)
274.0
53.8
5.6
(1.0)
(0.3)
(71.4)
(28.2)
362.2
820.5
(458.3)
362.2
274.0
362.2
12.2
16.6
(0.5)
(40.8)
-
1.9
263.4
439.2
(175.8)
263.4
36.7
16.9
(2.6)
(64.1)
(15.3)
2.7
336.5
858.2
(521.7)
336.5
1 Other intangible assets primarily comprise acquired customer relationships, customer lists and agreements.
Brambles Annual Report 2013 - Page 89 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 23. TRADE AND OTHER PAYABLES
Current
Trade payables
GST/VAT, refundable deposits and other payables
Accruals and deferred income
Non-current
Other liabilities
2013
US$m
469.0
417.2
367.3
2012
US$m
458.5
365.6
352.7
1,253.5
1,176.8
24.3
27.1
Trade payables and other current payables are non-interest bearing and are generally settled on 30–90 day terms.
Refer to Note 30 for other financial instruments disclosures.
NOTE 24. BORROWINGS
Current
Unsecured:
- bank overdraft
- bank loans1
- loan notes3
- accrued interest on loan notes2,3,4,6
- finance lease liabilities (Note 32)
- other loans
Non-current
Unsecured:
- bank loans1
- loan notes2,3,4,5,6
- finance lease liabilities (Note 32)
- other loans
Total borrowings
53.9
31.9
33.3
22.4
11.7
3.7
156.9
934.4
1,740.6
11.0
0.4
2,686.4
2,843.3
21.5
21.7
-
22.1
16.5
4.6
86.4
1,000.6
1,753.3
22.0
1.8
2,777.7
2,864.1
1
2
3
4
5
6
Unsecured bank loans include the following: (i) revolving loans in various currencies priced off LIBOR and drawn under multi-currency global banking
facilities with a range of maturities out to November 2017; and (ii) various regional banking facilities providing local currency funding to certain
subsidiaries. Included in bank loans are borrowings of US$456.2 million (2012: US$436.0 million) which have been designated as a hedge of the net
investment in Brambles' European subsidiaries and are being used to partially hedge Brambles' exposure to foreign exchange risks on these investments.
Notes issued in August 2004 in respect of US$425.0 million US private placement of which US$171.0 million was redeemed in August 2011. The terms of the
outstanding notes are (i) Series B US$157.5 million 5.77% Guaranteed Senior Unsecured Notes due 4 August 2014 and (ii) Series C US$96.5 million 5.94%
Guaranteed Senior Unsecured Notes due 4 August 2016.
Notes issued in May 2009 in respect of US$110.0 million US private placement. The terms of the note are (i) Series A US$35.0 million 7.29% Guaranteed
Senior Unsecured Notes due 7 May 2014; (ii) Series B US$55.0 million 7.83% Guaranteed Senior Unsecured Notes due 7 May 2016; and (iii) Series C
US$20.0 million 8.23% Guaranteed Senior Unsecured Notes due 7 May 2019.
Notes issued in March 2010 to qualified institutional buyers in accordance with Rule 144A and Regulation S of the United States Securities Act. The terms of
the notes are (i) US$250.0 million 3.95% Guaranteed Senior Notes due 1 April 2015; and (ii) US$500.0 million 5.35% Guaranteed Senior Notes due 1 April
2020.
US$450.0 million of loan notes have been hedged with interest rate swaps for fair value risk. In accordance with AASB 139, the carrying value of the notes
have been adjusted to increase debt by US$17.1 million (2012: US$25.1 million) in relation to changes in fair value attributable to the hedged risk.
Notes issued in April 2011 in the European bond market in respect of €500.0 million of 4.625% Guaranteed Senior Notes due 20 April 2018.
Refer to Note 30 for other financial instruments disclosures
Brambles Annual Report 2013 - Page 90
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 24. BORROWINGS - CONTINUED
A) BORROWING FACILITIES AND CREDIT STANDBY ARRANGEMENTS
Total facilities:
- committed borrowing facilities
- loan notes
- credit standby/uncommitted/overdraft arrangements
Facilities used at reporting date:1
- committed borrowing facilities
- loan notes
- credit standby/uncommitted/overdraft arrangements
Facilities available at reporting date:
- committed borrowing facilities
- credit standby/uncommitted/overdraft arrangements
2013
US$m
2012
US$m
2,193.3
1,764.8
280.0
4,238.1
969.1
1,764.8
78.0
2,272.8
1,736.0
240.9
4,249.7
1,049.7
1,736.0
39.5
2,811.9
2,825.2
1,224.2
202.0
1,426.2
1,223.1
201.4
1,424.5
Funding is generally sourced from relationship banks and debt capital market investors on a medium to long term basis. The expiry dates
of committed borrowing facilities range out to November 2017 with loan notes having maturities out to April 2020. The average term to
maturity of the committed borrowing facilities and the loan notes is equivalent to 3.6 years (2012: 3.7 years). These facilities are
unsecured and are guaranteed as described in Note 38B.
B) BORROWING FACILITIES MATURITY PROFILE
Maturity
Type
2013
Less than 1 year
Bank loans/loan notes/overdrafts/finance leases/other loans
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Bank loans/loan notes/finance leases/other loans
Bank loans/loan notes/finance leases
Bank loans/loan notes/finance leases
Bank loans/loan notes
Over 5 years
Loan notes
2012
Less than 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Bank loans/overdrafts/finance leases/other loans
Bank loans/loan notes/finance leases/other loans
Bank loans/loan notes/finance leases
Bank loans/loan notes/finance leases
Bank loans/loan notes/finance leases
Over 5 years
Loan notes
Total
facilities
333.7
868.0
950.4
585.1
980.9
520.0
US$m
Facilities
used1
Facilities
available
133.8
490.3
479.1
449.5
739.2
520.0
199.9
377.7
471.3
135.6
241.7
-
4,238.1
2,811.9
1,426.2
277.2
1,042.2
890.8
524.4
373.1
1,142.0
4,249.7
63.2
379.5
577.5
383.8
279.2
1,142.0
2,825.2
214.0
662.7
313.3
140.6
93.9
-
1,424.5
1
Facilities used represents the principal value of loan notes and borrowings drawn against the relevant facilities to reflect the correct
amount of funding headroom. This amount differs by US$31.4 million (2012: US$38.9 million) from loan notes and borrowings as shown
in the balance sheet which are measured on the basis of amortised cost as determined under the effective interest method and
include accrued interest, transaction costs and fair value adjustments on certain hedging instruments.
Brambles Annual Report 2013 - Page 91 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 25. PROVISIONS
At 1 July 2012
Current
Non-current
Charge to income statement
Additional provisions
Utilisation of provision
Acquisition of subsidiaries
Currency variations
At 30 June 2013
Current
Non-current
Employee
entitlements
US$m
Business
disposals
US$m
66.1
9.4
75.5
64.5
(45.1)
1.0
(2.2)
93.7
84.5
9.2
0.9
1.6
2.5
-
(0.4)
-
-
2.1
0.9
1.2
Other
US$m
23.1
19.4
42.5
17.1
(20.9)
2.8
(0.7)
40.8
25.4
15.4
Total
US$m
90.1
30.4
120.5
81.6
(66.4)
3.8
(2.9)
136.6
110.8
25.8
Employee entitlements provision comprises US$20.4 million (2012: US$19.8 million) for long service leave, US$2.3 million (2012:
US$1.8 million) for phantom shares and US$71.0 million (2012: US$53.9 million) for bonuses and other employee-related obligations (other
than those resulting from pension plans). None of these amounts related to phantom shares which had vested at reporting date.
US$11.6 million (2012: US$10.8 million) of the long service leave provision has been recognised as current as it is expected to be settled
within one year from reporting date. The remaining balance of long service leave of US$8.8 million (2012: US$9.0 million) is expected to
settle within the next two to ten years and has been discounted to present value.
Business disposals provision is in respect of divestments completed in 2007 and prior years.
Other provisions comprise US$22.8 million (2012: US$36.4 million) for restructuring and integration costs, US$12.0 million (2012:
US$6.1 million) for litigation and customer disputes and US$6.0 million (2012: nil) for other known exposures.
Brambles Annual Report 2013 - Page 92
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 26. RETIREMENT BENEFIT OBLIGATIONS
A) DEFINED CONTRIBUTION PLANS
Brambles operates a number of defined contribution retirement benefit plans for qualifying employees. The assets of these plans are held
in separately administered trusts or insurance policies. In some countries, Brambles’ employees are members of state-managed
retirement benefit plans. Brambles is required to contribute a specified percentage of payroll costs to the retirement benefit plan to fund
benefits. The only obligation of Brambles with respect to defined contribution retirement benefit plans is to make the specified
contributions.
US$25.4 million (2012: US$23.6 million) representing contributions paid and payable to these plans by Brambles at rates specified in the
rules of the plans relating to continuing operations has been recognised as an expense in the income statement.
B) DEFINED BENEFIT PLANS
Brambles operates a number of defined benefit pension plans, which are closed to new entrants. The majority of the plans are self-
administered and the plans’ assets are held independently of Brambles' finances. Under the plans, members are entitled to retirement
benefits based upon a percentage of final salary. No other post-retirement benefits are provided. The plans are funded plans.
During 2012, four plans operating in the United Kingdom, Ireland and South Africa were closed to future accrual. One plan in the United
Kingdom retained the link between benefits and salary for members still in employment, but for the others the link was broken. In South
Africa, the retirement obligations changed from defined benefit to defined contribution for all members still in employment.
The plan assets and the present value of the defined benefit obligation recognised in Brambles' balance sheet are based upon the most
recent formal actuarial valuations which have been updated to 30 June 2013 by independent professionally qualified actuaries and take
account of the requirements of AASB 119. The present value of the defined benefit obligation and the past service cost were measured
using the projected unit credit method.
In addition to the principal defined benefit plans included in disclosures below, Brambles has a number of other arrangements in several
countries that are either defined benefit pension plans or have certain defined benefit characteristics. Each of these arrangements has
been assessed as immaterial separately and in aggregate and they have not been subjected to an independent AASB 119 valuation.
C) BALANCE SHEET AMOUNTS
The amounts recognised in Brambles' balance sheet in respect of defined benefit plans were as follows:
Present value of defined benefit obligations
Fair value of plan assets
Net liability recognised in the balance sheet
2013
US$m
257.3
(206.1)
51.2
2012
US$m
249.5
(190.7)
58.8
Brambles has no legal obligation to settle this liability with an immediate contribution or additional one-off contributions. Brambles
intends to continue to make contributions to the plans at the rates recommended by the funds' actuaries. Refer Note 26(I).
D) INCOME STATEMENT AMOUNTS
The amounts recognised in Brambles' income statement in respect of defined benefit plans were as follows:
Current service cost
Interest cost
Past service cost
Expected return on plan assets
Changes arising from curtailments and settlements
Net (benefit)/expense included in employment cost (Note 7)
E) STATEMENT OF COMPREHENSIVE INCOME
Actuarial (losses)/gains reported in the consolidated statement of comprehensive income
Cumulative actuarial losses recognised
0.5
10.0
(2.2)
(9.6)
-
(1.3)
(11.1)
(35.2)
1.3
11.1
6.1
(10.1)
(0.2)
8.2
(19.7)
(24.1)
Brambles Annual Report 2013 - Page 93 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 26. RETIREMENT BENEFIT OBLIGATIONS - CONTINUED
F) DEFINED BENEFIT OBLIGATION
Changes in the present value of the defined benefit obligation were as follows:
At 1 July
Current service cost
Past service cost
Interest cost
Contributions from plan members
Actuarial gains and losses
Currency variations
Benefits paid
Curtailments
Acquisition of subsidiaries
Defined contribution movements1
At 30 June
2013
US$m
2012
US$m
249.5
239.6
0.5
(2.2)
10.0
-
17.1
(11.3)
(8.2)
-
0.8
1.1
1.3
6.1
11.1
0.3
14.2
(19.3)
(6.7)
(0.2)
-
3.1
257.3
249.5
1 In 2012, a portion of the defined benefit obligation and assets in the South African pension plan was re-designated as defined
contribution. The defined contribution movements comprise employer contributions paid and expensed of US$1.5 million (2012:
US$1.2 million), investment returns of US$2.1 million (2012: US$1.7 million) and other movements of US$0.3 million (2012:
US$0.2 million), offset by benefits paid of US$2.8 million (2012: nil).
G) PLAN ASSETS
Assets held in the plans fell within the following categories:
Equities
Bonds/gilts
Insurance bonds
Cash
Other
2013
Fair value
2012
Fair value
US$m
%
US$m
%
97.2
38.2
5.5
51.1
14.1
47.2
18.5
2.7
24.8
6.8
70.4
42.1
4.8
56.9
16.5
36.9
22.1
2.5
29.8
8.7
206.1
100.0
190.7
100.0
Changes in the fair value of the plan assets were as follows:
At 1 July
Expected return on plan assets
Actuarial gains and losses
Currency variations
Contributions from sponsoring employers
Contributions from plan members
Benefits paid
Defined contribution movements
At 30 June
The actual return on plan assets was US$15.6 million (2012: US$4.6 million).
2013
US$m
190.7
9.6
6.0
(11.1)
18.0
-
(8.2)
1.1
206.1
2012
US$m
202.2
10.1
(5.5)
(19.0)
6.2
0.3
(6.7)
3.1
190.7
Brambles Annual Report 2013 - Page 94 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 26. RETIREMENT BENEFIT OBLIGATIONS - CONTINUED
H) PRINCIPAL ACTUARIAL ASSUMPTIONS
Principal actuarial assumptions (expressed as weighted averages) used in determining Brambles' defined benefit obligations were:
At 30 June 2013
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Retail price inflation
Return on equities
Return on bonds
Return on cash
At 30 June 2012
Rate of increase in salaries
Rate of increase in pensions
Discount rate
Retail price inflation
Return on equities
Return on bonds
Return on cash
Europe
other
than UK
UK
South
Africa
2.3%
3.7%
4.7%
2.6%
8.0%
4.2%
1.0%
2.0%
3.4%
4.8%
2.1%
8.0%
4.8%
1.0%
3.3%
2.7%
3.2%
2.0%
6.5%
3.1%
1.3%
3.3%
2.7%
3.2%
2.0%
6.8%
3.4%
2.0%
-
6.0%
7.4%
6.0%
-
-
5.5%
8.0%
6.0%
8.0%
6.0%
-
-
5.5%
The expected return on plan assets is based on market expectations at the beginning of the period for returns over the entire life of the
benefit obligation.
I) EMPLOYER CONTRIBUTIONS
Employer contributions to the main defined benefit plans as a percentage of pensionable pay ceased from 1 October 2011 when the plans
closed to future accrual.
The obligation to contribute to the various defined benefit plans is covered by trust deeds and/or legislation. Funding levels and
contributions for these plans are based on actuarial advice. Comprehensive actuarial valuations are made at no more than three yearly
intervals. Additional annual contributions of US$4.4 million (2012: US$4.5 million) are being paid to remove the identified deficits over a
period of 9 years.
Contributions paid to the plans during 2013 were US$18.0 million (2012: US$6.2 million), all of which related to continuing operations. It is
estimated that the amount of contributions to be paid to the plans during 2014 will be US$6.3 million.
Brambles Annual Report 2013 - Page 95 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 26. RETIREMENT BENEFIT OBLIGATIONS - CONTINUED
J) HISTORICAL SUMMARY
2013
US$m
2012
US$m
The history of the defined benefit plan deficit at the end of each year is as follows:
- plan liabilities
- plan assets
Net liability recognised in the balance sheet
(257.3)
206.1
(51.2)
(249.5)
190.7
(58.8)
2011
US$m
(239.6)
202.2
(37.4)
The history of favourable/(unfavourable) experience adjustments made in each year is as follows:
- on plan liabilities
- on plan assets
Net favourable/(unfavourable) adjustment
NOTE 27. CONTRIBUTED EQUITY
(17.1)
6.0
(11.1)
(14.2)
(5.5)
(19.7)
2.2
11.7
13.9
Total ordinary shares, of no par value, issued and fully paid:
At 1 July 2011
Issued during the year
Capital reduction
At 30 June 2012
At 1 July 2012
Issued during the year
At 30 June 2013
2010
US$m
2009
US$m
(211.1)
160.7
(50.4)
(19.3)
13.4
(5.9)
(196.0)
145.2
(50.8)
23.4
(26.3)
(2.9)
Shares
US$m
1,479,367,454
14,370.2
56,692,482
337.3
-
(8,223.4)
1,536,059,936
6,484.1
1,536,059,936
6,484.1
21,307,500
134.4
1,557,367,436
6,618.5
Ordinary shares of Brambles Limited entitle the holder to participate in dividends and the proceeds on any winding up of the Company in
proportion to the number of shares held.
The 21,307,500 shares issued during the year include 19,055,210 new shares issued on 10 July 2012 under the retail component of the
fully underwritten 1 for 20 pro rata accelerated renounceable entitlement offer, raising US$117.4 million, net of transaction costs.
Brambles Annual Report 2013 - Page 96
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 28. SHARE-BASED PAYMENTS
The Remuneration Report sets out details relating to the Brambles share plans (pages 46 to 48), together with details of performance
share rights and MyShare matching conditional rights issued to the Executive Director and other Key Management Personnel (pages 42 to
43). Rights granted by Brambles do not result in an entitlement to participate in share issues of any other corporation.
Set out below are summaries of rights granted under the plans.
A) GRANTS OVER BRAMBLES LIMITED SHARES ISSUED SUBSEQUENT TO UNIFICATION
Grant date
Expiry date
2013
Performance share rights
19 Jan 2007
29 Aug 2007
28 Apr 2008
27 Aug 2008
25 Nov 2009
12 Apr 2010
24 Nov 2010
21 Feb 2011
31 Mar 2011
06 Sep 2011
11 Nov 2011
21 Nov 2011
07 Jun 2012
16 Jul 2012
25 Sep 2012
12 Oct 2012
31 Aug 2012
30 Aug 2013
29 Apr 2014
27 Aug 2014
26 Nov 2015
12 Apr 2016
24 Nov 2016
21 Feb 2017
30 Jun 2017
06 Sep 2017
11 Nov 2017
21 Nov 2017
07 Jun 2018
1 Sep 2014
25 Sep 2018
12 Oct 2018
Balance
at 1 July
Granted
during
the year
Exercised
during
the year
Forfeited/
lapsed during
the year
Balance
at 30 June
48,995
139,021
4,750
205,259
3,145,779
22,902
4,076,785
32,906
732,095
4,324,665
37,000
30,267
14,514
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
90,000
3,081,191
(48,995)
(97,696)
-
(114,269)
-
-
-
-
(1,347,975)
(1,656,998)
-
41,325
4,750
90,990
140,806
22,902
-
-
-
-
-
(293,533)
3,783,252
-
-
32,906
732,095
(32,305)
(527,015)
3,765,345
-
-
-
-
-
-
-
-
-
37,000
30,267
14,514
90,000
(259,370)
2,821,821
406,113
(77,906)
-
328,207
MyShare matching conditional rights
2011 Plan Year
31 Mar 2013
2012 Plan Year
31 Mar 2014
2013 Plan Year
31 Mar 2015
553,988
268,110
-
-
(516,150)
509,724
253,291
(17,782)
(895)
(37,838)
(72,023)
(3,644)
-
688,029
248,752
Total rights
13,637,036
4,340,319
(2,253,973)
(2,850,421)
12,872,961
2012 (summarised)
Total rights
12,288,815
5,342,039
(1,632,837)
(2,360,981)
13,637,036
Of the above grants, 277,871 rights were exercisable at 30 June 2013.
Weighted average data:
- fair value at grant date of grants made during the year
- share price at exercise date of grants exercised during the year
- remaining contractual life at 30 June
2013
2012
A$
A$
years
5.84
7.58
3.9
5.28
6.78
4.0
There were 63,677 grants, 77,967 exercises and 1,137,657 forfeits in performance share rights and MyShare matching conditional rights
over Brambles Limited shares between the end of the financial year and 20 August 2013.
Brambles Annual Report 2013 - Page 97 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 28. SHARE-BASED PAYMENTS - CONTINUED
B) FAIR VALUE CALCULATIONS
The fair value of equity-settled performance share rights and MyShare matching conditional rights was determined as at grant date, using
a binomial valuation methodology. The values calculated do not take into account the probability of rights being forfeited prior to vesting,
as a probability adjustment is made when computing the share-based payment expense.
The significant inputs into the valuation models for the equity-settled grants made during the year were:
Weighted average share price
Expected volatility
Expected life
Annual risk-free interest rate
Expected dividend yield
2013
Grants
A$7.02
25%
2012
Grants
A$6.44
30%
2-3 years
2-3 years
2.54-2.57%
3.67-3.68%
4.00%
4.00%
The expected volatility was determined based on a four-year historic volatility of Brambles' share prices.
C) SHARE-BASED PAYMENT EXPENSE - CONTINUING OPERATIONS
Brambles recognised a total expense of US$24.672 million (2012: US$20.474 million) relating to share-based payments, all within
continuing operations. Of this amount, US$1.672 million related to phantom share provisions (2012: US$1.908 million).
Brambles Annual Report 2013 - Page 98 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 29. RESERVES AND RETAINED EARNINGS
Reserves
Retained earnings
A) MOVEMENTS IN RESERVES AND RETAINED EARNINGS
2013
US$m
2012
US$m
(6,748.2)
(6,689.1)
3,155.1
2,945.4
(3,593.1)
(3,743.7)
Share-
based
payment
US$m
Hedging
US$m
Reserves
Foreign
currency
translation Unification
US$m
US$m
Other
US$m
Total
US$m
Retained
earnings
US$m
(4.8)
80.5
426.0
(15,385.8)
167.3
(14,716.8)
2,797.6
-
-
-
-
5.1
(1.7)
-
-
-
-
-
-
-
-
-
-
-
-
18.6
(11.1)
0.1
-
-
-
-
(12.5)
(1.7)
(192.5)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,223.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(12.5)
(1.7)
(192.5)
5.1
(1.7)
18.6
(11.1)
0.1
8,223.4
-
-
(14.3)
-
-
-
-
-
-
-
-
-
(414.2)
576.3
(1.4)
88.1
219.3
(7,162.4)
167.3
(6,689.1)
2,945.4
(1.4)
88.1
219.3
(7,162.4)
167.3
(6,689.1)
2,945.4
-
-
(1.4)
0.5
-
-
-
-
-
-
-
-
-
-
-
-
-
23.0
(17.1)
4.6
-
-
-
(70.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(70.7)
(1.4)
0.5
-
3.2
(1.2)
23.0
(17.1)
4.6
-
-
(8.7)
-
-
-
-
-
-
-
-
-
(422.2)
640.6
(0.3)
98.6
148.6
(7,162.4)
167.3
(6,748.2)
3,155.1
Year ended 30 June 2012
Opening balance
Actuarial loss on defined benefit plans
FCTR released to profits during the year
FCTR on entities disposed taken to profit
Foreign exchange differences
Cash flow hedges:
- transfers to net profit
- tax on transfers to net profit
Share-based payments:
- expense recognised during the year
- shares issued
- equity component of related tax
Capital reduction
Dividends declared
Net profit for the year
Closing balance
Year ended 30 June 2013
Opening balance
Actuarial loss on defined benefit plans
Foreign exchange differences
Cash flow hedges:
- fair value losses
- tax on fair value losses
- transfers to net profit
Share-based payments:
- expense recognised during the year
- shares issued
- equity component of related tax
Dividends declared
Net profit for the year
Closing balance
- transfers to property, plant and equipment
3.2
- tax on transfers to net profit
(1.2)
Brambles Annual Report 2013 - Page 99 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 29. RESERVES AND RETAINED EARNINGS - CONTINUED
B) NATURE AND PURPOSE OF RESERVES
Hedging reserve
This comprises the cumulative portion of the gain or loss of cash flow hedges that are determined to be effective hedges. Amounts are
recognised in the income statement when the associated hedged transaction is recognised or the hedge or a portion thereof becomes
ineffective.
Share-based payments reserve
This comprises the cumulative share-based payment expense recognised in the income statement in relation to equity-settled options and
share rights issued but not yet exercised. Refer to Note 28 for further details.
Foreign currency translation reserve
This comprises cumulative exchange differences arising from the translation of the financial statements of foreign subsidiaries, net of
qualifying net investment hedges. The relevant accumulated balance is recognised in the income statement on disposal of a foreign
subsidiary.
Unification reserve
On Unification, Brambles Limited issued shares on a one-for-one basis to those Brambles Industries Limited (BIL) and Brambles Industries
plc (BIP) shareholders who did not elect to participate in the Cash Alternative. The Unification reserve of US$15,385.8 million was
established on 4 December 2006, representing the difference between the Brambles Limited share capital measured at fair value and the
carrying value of the share capital of BIL and BIP at that date. In the consolidated financial statements, the reduction in share capital of
US$8,223.4 million on 9 September 2011 by the parent entity in accordance with section 258F of the Corporations Act 2001 was applied
against the Unification reserve.
Other
This comprises a merger reserve created in 2001 and a capital redemption reserve created in 2006.
Brambles Annual Report 2013 - Page 100 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 30. FINANCIAL RISK MANAGEMENT
Brambles is exposed to a variety of financial risks: market risk (including the effect of fluctuations in interest rates and exchange rates),
liquidity risk and credit risk.
Brambles' overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of Brambles.
Brambles uses standard derivative financial instruments to manage its risk exposure in the normal course of business. Brambles does not
trade in financial instruments for speculative purposes. Hedging activities are conducted through Brambles' Treasury department on a
centralised basis in accordance with Board policies and guidelines through standard operating procedures and delegated authorities.
Policies with respect to financial risk management and hedging activities are discussed below and should be read in conjunction with
detailed information contained in the Operational & Financial Review on pages 3 to 4.
A) FAIR VALUES
Set out below is a comparison by category of the carrying amounts and fair values of financial instruments recognised in the balance
sheet. With the exception of loans and receivables and derivatives designated as hedging instruments, all financial assets are classified
as financial assets at fair value through profit or loss.
Financial assets
- cash at bank and in hand (Note 14)
- short term deposits (Note 14)
- trade receivables (Note 15)
- interest rate swaps (Note 17)
- embedded derivatives (Note 17)
- forward foreign currency contracts (Note 17)
Financial liabilities
- trade payables (Note 23)
- bank overdrafts (Note 24)
- bank loans (Note 24)
- loan notes (Note 24)
- finance lease liabilities (Note 24)
- other loans (Note 24)
- interest rate swaps (Note 17)
- forward foreign currency contracts (Note 17)
Carrying amount
Fair value
2013
US$m
98.8
30.1
871.8
19.5
0.5
0.7
469.0
53.9
966.3
1,796.3
22.7
4.1
0.5
9.0
2012
US$m
143.4
30.8
805.6
27.3
0.4
0.2
458.5
21.5
1,022.3
1,775.4
38.5
6.4
3.8
2.0
2013
US$m
98.8
30.1
871.8
19.5
0.5
0.7
469.0
53.9
966.3
1,944.1
22.7
4.1
0.5
9.0
2012
US$m
143.4
30.8
805.6
27.3
0.4
0.2
458.5
21.5
1,022.3
1,915.2
38.5
6.4
3.8
2.0
Brambles Annual Report 2013 - Page 101 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
A) FAIR VALUES - CONTINUED
Brambles uses the following methods in estimating the fair values of financial instruments:
Level 1 - the fair value is calculated using quoted prices in active markets;
Level 2 - the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices); or
Level 3 - the fair value is estimated using inputs for the asset or liability that are not observable market data.
-
-
-
The table below sets out the fair values and methods used to estimate the fair value of derivatives designated as hedging
instruments.
2013
2012
Level 1
Level 2
Level 3
US$m
US$m
US$m
Total
US$m
Level 1
Level 2
Level 3
US$m
US$m
US$m
Total
US$m
Derivative financial assets
- interest rate swaps
- embedded derivatives
- forward foreign currency contracts
Derivative financial liabilities
- interest rate swaps
- forward foreign currency contracts
-
-
-
-
-
19.5
0.5
0.7
0.5
9.0
-
-
-
-
-
19.5
0.5
0.7
0.5
9.0
-
-
-
-
-
27.3
0.4
0.2
3.8
2.0
-
-
-
-
-
27.3
0.4
0.2
3.8
2.0
The fair values of derivatives designated as hedging instruments are determined using valuation techniques that are based on observable
market data. For forward foreign exchange contracts, the net fair value is taken to be the unrealised gain or loss at balance date
calculated by reference to the current forward rates for contracts with similar maturity dates. Fair value for other financial assets and
liabilities has been calculated by discounting future cash flows at prevailing interest rates for the relevant yield curve.
Brambles Annual Report 2013 - Page 102 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
B) MARKET RISK
Brambles has the following risk policies in place with respect to market risk.
Interest rate risk
Brambles' exposure to potential volatility in finance costs, predominantly US dollars and euros, is managed by maintaining a mix of fixed
and floating-rate instruments within select target bands over defined periods. In most cases, interest rate derivatives are used to achieve
these targets synthetically.
The following table sets out the financial instruments exposed to interest rate risk at reporting date:
Financial assets (floating rate)
Cash at bank
Short term deposits
Weighted average effective interest rate
Financial liabilities (floating rate)
Bank overdrafts
Bank loans
Interest rate swaps (notional value) - cash flow hedges
Interest rate swaps (notional value) - fair value hedges
Net exposure to cash flow interest rate risk
Weighted average effective interest rate
Financial liabilities (fixed rate)
Loan notes
Finance lease liabilities
Other loans
Interest rate swaps (notional value) - cash flow hedges
Interest rate swaps (notional value) - fair value hedges
Net exposure to fair value interest rate risk
Weighted average effective interest rate
2013
US$m
98.8
30.1
128.9
0.8%
53.9
966.3
(50.0)
450.0
1,420.2
1.9%
2012
US$m
143.4
30.8
174.2
1.1%
21.5
1,022.3
(200.0)
450.0
1,293.8
2.3%
1,796.3
1,775.4
22.7
4.1
50.0
(450.0)
1,423.1
5.4%
38.5
6.4
200.0
(450.0)
1,570.3
5.3%
Interest rate swaps - cash flow hedges
Brambles enters into various interest rate risk management transactions for the purpose of managing finance costs to achieve more stable
and predictable finance expense results. The instruments primarily used are interest rate swaps.
During 2013, Brambles entered into or maintained interest rate swap transactions with various banks hedging variable rate borrowings in
US dollars. The purpose of the interest rate swaps was to hedge variable interest expense under borrowings against rising interest rates.
Interest rate swaps achieve this by synthetically converting the variable interest rate payment into a fixed interest liability on the dates
on which interest is payable on the underlying debt. The fair value of these contracts at reporting date was US$(0.5) million
(2012: US$(3.8) million).
The terms of the contracts have been negotiated to match the projected drawdowns and rollovers of variable rate bank debt.
Brambles Annual Report 2013 - Page 103 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
B) MARKET RISK - CONTINUED
Interest rate swaps - fair value hedges
Brambles has entered into interest rate swap transactions with various banks swapping US$450.0 million of the US$750.0 million 144A
bonds to variable rate. The fair value of these contracts at reporting date was US$19.5 million (2012: US$27.3 million).
The terms of the swaps match the terms of the fixed rate bond issue for the amounts and durations being hedged.
The gain or loss from re-measuring the interest rate swaps at fair value is recorded in the income statement together with any changes in
the fair value of the hedged asset or liability that is attributed to the hedged risk. For 2013, all interest rate swaps were effective
hedging instruments.
Sensitivity analysis
The following table sets out the sensitivity of Brambles' financial assets and financial liabilities to interest rate risk applying the following
assumptions:
2013
2012
lower rates
higher rates
lower rates
higher rates
Interest rate risk
US dollar interest rates
Australian dollar interest rates
Sterling interest rates
Euro interest rates
Impact on profit after tax
Impact on equity
- 25 bps
- 50 bps
- 25 bps
- 25 bps
US$m
1.9
(0.1)
+ 75 bps
+ 75 bps
+ 75 bps
+ 75 bps
US$m
(7.5)
0.2
- 25 bps
- 50 bps
- 25 bps
- 25 bps
US$m
1.9
-
+ 75 bps
+ 75 bps
+ 75 bps
+ 75 bps
US$m
(6.8)
0.1
Based on financial instruments held at 30 June 2013, if interest rates were to parallel shift by the number of basis points in the different
currencies noted above with all other variables held constant, profit after tax for the year would have been US$1.9 million higher or
US$7.5 million lower (2012: US$1.9 million higher or US$6.8 million lower), mainly as a result of lower/higher interest expense on bank
borrowings. The impact on equity would have been US$0.1 million lower or US$0.2 million higher (2012: US$nil million or US$0.1 million
higher) mainly as a result of the incremental movement through the hedging reserve relating to the effective portion of cash flow
hedges. Given its geographically diverse operations, Brambles had interest rate exposure positions against a variety of currencies,
predominantly US dollars and euros.
Brambles Annual Report 2013 - Page 104 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
B) MARKET RISK - CONTINUED
Foreign exchange risk
Exposure to foreign exchange risk generally arises in transactions affecting either the value of transactions translated back to the
functional currency of a subsidiary or affecting the value of assets and liabilities of overseas subsidiaries when translated back to the
Group's reporting currency. Foreign exchange hedging is used when a transaction exposure exceeds certain thresholds and as soon as a
defined exposure arises.
Currency profile
The following table sets out the currency mix profile of Brambles' financial instruments at reporting date:
US
dollar
US$m
Aust.
dollar
US$m
Sterling
US$m
Euro
US$m
Other
US$m
Total
US$m
2013
Financial assets
- cash at bank and in hand
- short term deposits
- interest rate swaps
- embedded derivatives
- forward foreign currency contracts
Financial liabilities
- bank overdrafts
- bank loans
- loan notes
- finance lease liabilities
- other loans
- interest rate swaps
- forward foreign currency contracts
- net investment hedge
2012
Financial assets
- cash at bank and in hand
- short term deposits
- interest rate swaps
- embedded derivatives
- forward foreign currency contracts
Financial liabilities
- bank overdrafts
- bank loans
- loan notes
- finance lease liabilities
- other loans
- interest rate swaps
- forward foreign currency contracts
- net investment hedge
1.6
-
19.5
-
1.3
22.4
12.7
408.9
1,143.5
4.0
-
0.5
300.0
-
-
-
-
345.5
354.2
-
0.9
-
-
-
-
9.5
-
-
-
-
5.0
6.9
-
16.7
-
-
-
-
8.7
1.9
31.4
0.3
-
-
55.2
29.8
-
0.5
94.6
24.1
126.3
109.6
98.8
30.1
19.5
0.5
470.5
619.4
19.2
0.4
652.8
18.5
2.4
-
22.0
83.2
53.9
510.1
-
1,796.3
0.2
1.7
-
22.7
4.1
0.5
478.8
456.2
24.5
25.8
119.0
-
456.2
-
1,869.6
10.4
41.2
1,175.3
226.1
3,322.6
19.0
-
27.3
-
0.1
46.4
-
432.9
1,152.2
7.5
-
3.8
321.9
-
1,918.3
2.3
21.6
-
-
160.6
184.5
-
0.8
-
0.1
0.3
-
3.4
-
4.6
8.3
47.2
66.6
143.4
-
-
-
133.9
142.2
0.2
-
-
-
-
-
0.3
-
0.5
-
-
-
55.6
102.8
6.5
76.4
623.2
30.8
4.3
-
147.5
436.0
9.2
-
0.4
191.8
268.0
14.8
76.2
-
0.1
1.8
-
70.7
-
30.8
27.3
0.4
542.0
743.9
21.5
586.3
1,775.4
38.5
6.4
3.8
543.8
436.0
1,324.7
163.6
3,411.7
Brambles Annual Report 2013 - Page 105 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
B) MARKET RISK - CONTINUED
Forward foreign exchange contracts - cash flow hedges
Brambles enters into forward foreign exchange contracts to hedge currency exposures arising from normal commercial transactions such
as the purchase and sale of equipment and services, intercompany interest and royalties.
During 2013, Brambles entered into forward foreign exchange transactions with various banks in a variety of cross-currencies for terms
ranging up to 4 months. Most contracts create an obligation on Brambles to take receipt of or deliver a foreign currency which is used to
fulfil the foreign currency sale or purchase order.
The gain or loss from re-measuring the foreign exchange contracts at fair value is deferred and recognised in the hedging reserve in
equity to the extent that the hedge is effective and reclassified into profit and loss when the hedged item is recognised. Any ineffective
portion is charged to the income statement. For 2013 and 2012, all foreign exchange contracts were effective hedging instruments.
Foreign exchange contracts are fair valued by comparing the contracted rate to the current market rate for a contract with the same
remaining period to maturity. The fair value of these contracts at reporting date was US$0.3 million (2012: nil).
Other forward foreign exchange contracts
Brambles enters into other forward foreign exchange contracts for the purpose of hedging various cross-border intercompany loans to
overseas subsidiaries. In this case, the forward foreign exchange contract provides an economic hedge against exchange fluctuations in
the foreign currency loan balance. The face value and terms of the foreign exchange contracts match the intercompany loan balances.
Gains and losses on realignment of the intercompany loan and foreign exchange contracts to spot rates are offset in the income
statement. Consequently, these foreign exchange contracts are not designated for hedge accounting purposes and are classified as held
for trading.
These contracts are fair valued by comparing the contracted rate to the current market rate for a contract with the same remaining
period to maturity. Any changes in fair values are taken to the income statement immediately. The fair value of these contracts at
reporting date was US$(8.6) million (2012: US$(1.8) million).
Hedge of net investment in foreign entity
Included in bank loans at 30 June 2013 is a borrowing of US$456.2 million (2012: US$436.0 million) denominated in euros. This loan has
been designated as a hedge of the net investment in Brambles' European subsidiaries and is being used to partially hedge Brambles'
exposure to foreign exchange risks on these investments. For 2013 and 2012, there was no ineffectiveness to be recorded from such
partial hedges of net investments in foreign entities.
Sensitivity analysis
The following table sets out the sensitivity of Brambles' financial assets and financial liabilities to foreign exchange risk (transaction
exposures only):
Exchange rate movement
Impact on profit after tax
Impact on equity
Foreign exchange risk
2013
2012
lower rates
higher rates
lower rates
higher rates
-10%
US$m
0.4
(31.9)
+10%
US$m
(0.4)
31.9
-10%
US$m
0.1
(30.5)
+10%
US$m
(0.1)
30.5
Based on the financial instruments held at 30 June 2013, if exchange rates were to weaken/strengthen by 10% with all other variables
held constant, profit after tax for the year would have been US$0.4 million higher/lower (2012: US$0.1 million higher/lower). The impact
on equity would have been US$31.9 million lower/higher (2012: US$30.5 million lower/higher) as a result of the incremental movement
through the foreign currency translation reserve relating to the effective portion of a net investment hedge.
Brambles Annual Report 2013 - Page 106 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
C) LIQUIDITY RISK
Brambles' objective is to maintain adequate liquidity to meet its financial obligations as and when they fall due. Brambles funds its
operations through existing equity, retained cash flow and borrowings. Funding is generally sourced from relationship banks and debt
capital market investors on a medium to long term basis.
Bank credit facilities are generally structured on a committed multi-currency revolving basis and at balance date had maturities ranging
out to November 2017. Borrowings under the bank credit facilities are floating-rate, unsecured obligations with covenants and
undertakings typical for these types of arrangements.
Borrowings are raised from debt capital markets by the issue of unsecured fixed interest notes, with interest payable semi-annually or
annually.
Brambles also has access to further funding through overdrafts, uncommitted and standby lines of credit, principally to manage day-to-day
liquidity.
To minimise foreign exchange risks, borrowings are arranged in the currency of the relevant operating asset to be funded.
Refer to Note 24A for borrowing facilities and credit standby arrangements disclosures.
Maturities of derivative financial assets and liabilities
The maturity of Brambles' contractual cash flows on net and gross settled derivative financial instruments, based on the remaining period
to contractual maturity date, is presented below. Cash flows on interest rate swaps and forward foreign exchange contracts are valued
based on forward interest rates applicable at reporting date.
Year 1
US$m
Year 2
US$m
Year 3
US$m
Year 4
US$m
Over 4
years
US$m
Total
contractual
cash flows
US$m
Carrying
amount
assets/
(liabilities)
US$m
-
9.8
-
-
9.8
2013
Net settled
Interest rate swaps
- cash flow hedges
- fair value hedges
Gross settled
Forward foreign exchange contracts
(0.5)
9.7
470.5
(478.8)
0.9
- inflow
- (outflow)
2012
Net settled
Interest rate swaps
- cash flow hedges
- fair value hedges
Gross settled
(3.0)
8.3
(0.8)
10.5
Forward foreign exchange contracts
- inflow
- (outflow)
542.0
(543.8)
3.5
-
-
9.7
-
-
-
-
-
-
8.5
-
-
8.5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.5)
19.5
(0.5)
19.5
470.5
(478.8)
10.7
(3.8)
27.3
542.0
(543.8)
21.7
-
(8.3)
10.7
(3.8)
27.3
-
(1.8)
21.7
Brambles Annual Report 2013 - Page 107 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
C) LIQUIDITY RISK - CONTINUED
Maturities of non-derivative financial liabilities
The maturity of Brambles' contractual cash flows on non-derivative financial liabilities, based on the remaining period to contractual
maturity date, for principal and interest, is presented below. Refer to Note 24B for borrowing facilities maturity profile.
2013
Financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease liabilities
Other loans
Financial guarantees1
2012
Financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease liabilities
Other loans
Financial guarantees1
Year 1
US$m
Year 2
US$m
Year 3
US$m
Year 4
US$m
Over 4
years
US$m
Total
contractual
cash flows
US$m
Carrying
amount
US$m
469.0
53.9
50.1
139.8
13.0
3.8
729.6
99.5
829.1
458.5
21.5
45.7
104.9
18.5
4.6
653.7
116.7
770.4
-
-
88.8
495.3
8.1
0.4
-
-
432.4
121.5
3.0
-
-
-
-
-
469.0
53.9
358.8
89.5
1,019.6
469.0
53.9
966.3
154.2
1,272.7
2,183.5
1,796.3
0.4
-
-
-
24.5
4.2
22.7
4.1
592.6
556.9
513.4
1,362.2
3,754.7
3,312.3
-
-
-
-
99.5
-
592.6
556.9
513.4
1,362.2
3,854.2
3,312.3
-
-
353.8
116.2
13.4
1.8
-
-
184.1
488.3
8.0
-
-
-
340.9
124.7
3.0
-
-
-
458.5
21.5
458.5
21.5
192.1
1,116.6
1,022.3
1,486.2
2,320.3
1,775.4
0.5
-
43.4
6.4
38.5
6.4
485.2
680.4
468.6
1,678.8
3,966.7
3,322.6
-
-
-
-
116.7
-
485.2
680.4
468.6
1,678.8
4,083.4
3,322.6
1
Refer to Note 33A for details on financial guarantees. The amounts disclosed above are the maximum amounts allocated to the earliest period in which the
guarantee could be called. Brambles does not expect these payments to eventuate.
Brambles Annual Report 2013 - Page 108 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
D) CREDIT RISK EXPOSURE
Brambles is exposed to credit risk on its financial assets, which comprise cash and cash equivalents, trade and other receivables and
derivative financial instruments. The exposure to credit risks arises from the potential failure of counterparties to meet their obligations.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial instruments as set out in Note 30A.
There is no significant concentration of credit risk.
Brambles trades only with recognised, creditworthy third parties. Collateral is generally not obtained from customers.
Customers are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past
experience and industry reputation. Credit limits are set for individual customers and approved by credit managers in accordance with an
approved authority matrix. These credit limits are regularly monitored and revised based on historic turnover activity and credit
performance. In addition, overdue receivable balances are monitored and actioned on a regular basis.
Exposure to credit risk also arises from amounts receivable from unrealised gains on derivative financial instruments. At the reporting
date, this amount was US$20.2 million (2012: US$27.5 million). Brambles transacts derivatives with prominent financial institutions and
has credit limits in place to limit exposure to any potential non-performance by its counterparties.
E) CAPITAL RISK MANAGEMENT
Brambles’ objective when managing capital is to ensure Brambles continues as a going concern as well as to provide a balance between
financial flexibility and balance sheet efficiency. In determining its capital structure, Brambles considers the robustness of future cash
flows, potential funding requirements for growth opportunities and acquisitions, the cost of capital and ease of access to funding sources.
Brambles manages its capital structure to be consistent with a solid investment grade credit. At 30 June 2013, Brambles held investment
grade credit ratings of BBB+ from Standard and Poor's and Baa1 from Moody's Investor Services.
Initiatives available to Brambles to achieve its desired capital structure include adjusting the amount of dividends paid to shareholders,
returning capital to shareholders, buying-back share capital, issuing new shares, selling assets to reduce debt and varying the maturity
profile of its borrowings.
Brambles considers its capital to comprise:
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total capital
2013
US$m
2012
US$m
2,843.3
2,864.1
(128.9)
(174.2)
2,714.4
2,689.9
3,025.4
2,740.4
5,739.8
5,430.3
Brambles has a financial policy to target a net debt to EBITDA ratio of less than 1.75 to 1. Brambles is compliant with this financial policy
at 30 June 2013.
Brambles Annual Report 2013 - Page 109 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 30. FINANCIAL RISK MANAGEMENT - CONTINUED
E) CAPITAL RISK MANAGEMENT - CONTINUED
Under the terms of its major borrowing facilities, Brambles is required to comply with the following financial covenants:
-
-
the ratio of net debt to EBITDA is to be no more than 3.5 to 1; and
the ratio of EBITDA to net finance costs is to be no less than 3.5 to 1.
Brambles has complied with these financial covenants for 2013 and prior years. At balance date, based on the definitions below, the ratios
were:
Total borrowings
Less: fair value adjustments due to hedge accounting
Less: cash and cash equivalents
Net debt
EBITDA
Net finance costs
Net debt/EBITDA (times)
EBITDA/net finance cost (times)
2013
US$m
2012
US$m
2,843.3
2,864.1
(17.1)
(128.9)
(25.1)
(174.2)
2,697.3
2,664.8
1,609.3
1,556.4
110.9
1.7
14.5
152.0
1.7
10.2
The following definitions apply in the calculation of these financial covenants:
-
EBITDA means Brambles’ consolidated operating profit (excluding Significant items outside the ordinary course of business) before
depreciation, amortisation, impairment, profit of joint ventures and associates and certain fair value adjustments in respect of
financial derivatives; and
- net debt means Brambles' consolidated total borrowings, excluding the impact of fair value adjustments in relation to hedge
accounting, less cash and cash equivalents.
Brambles Annual Report 2013 - Page 110 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 31. CASH FLOW STATEMENT - ADDITIONAL INFORMATION
A) RECONCILIATION OF CASH
For the purpose of the cash flow statement, cash comprises:
Cash at bank and in hand (Note 14)
Short term deposits (Note 14)
Bank overdraft (Note 24)
B) RECONCILIATION OF PROFIT AFTER TAX TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Profit after tax
Adjustments for:
- depreciation and amortisation
- irrecoverable pooling equipment provision expense
- net gains on disposals of property, plant and equipment
- impairment of software and property, plant and equipment
- other valuation adjustments
- joint ventures
- equity-settled share-based payments
- finance revenues and costs
Movements in operating assets and liabilities, net of acquisitions and disposals:
- increase in trade and other receivables
- increase in prepayments
- (increase)/decrease in inventories
- increase in deferred taxes
- increase in trade and other payables
- increase/(decrease) in tax payables
- increase/(decrease) in provisions
- other
2013
US$m
98.8
30.1
128.9
(53.9)
75.0
2012
US$m
143.4
30.8
174.2
(21.5)
152.7
640.6
576.3
557.0
101.5
(16.5)
16.8
(18.3)
(2.8)
23.0
(4.8)
552.2
100.1
(14.3)
15.2
(0.1)
(1.4)
18.6
(6.4)
(56.7)
(123.1)
(5.9)
(4.2)
42.4
28.6
27.6
11.8
(0.2)
(4.0)
10.3
46.0
8.1
(49.8)
(33.8)
(4.7)
Net cash inflow from operating activities
1,339.9
1,089.2
Brambles Annual Report 2013 - Page 111
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 31. CASH FLOW STATEMENT - ADDITIONAL INFORMATION - CONTINUED
C) RECONCILIATION OF MOVEMENT IN NET DEBT
Net debt at beginning of the year
Net cash inflow from operating activities
Net cash outflow from investing activities
Net inflow from hedge instruments
Proceeds from issue of ordinary shares
Dividends paid
Increase on business acquisitions and disposals
Interest accruals, finance leases and other
Foreign exchange differences
Net debt at end of the year
Being:
Current borrowings
Non-current borrowings
Cash and cash equivalents
Net debt at end of the year
2013
US$m
2012
US$m
2,689.9
2,998.8
(1,339.9)
(1,089.2)
1,010.3
(6.6)
(117.4)
425.5
1.6
8.9
42.1
2,714.4
156.9
2,686.4
(128.9)
2,714.4
932.8
(4.6)
(326.6)
397.7
3.2
7.2
(229.4)
2,689.9
86.4
2,777.7
(174.2)
2,689.9
D) NON-CASH FINANCING OR INVESTING ACTIVITIES
There were no financing or investing transactions during the year which have had a material effect on the assets and liabilities of
Brambles that did not involve cash flows.
Brambles Annual Report 2013 - Page 112 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 32. COMMITMENTS
A) CAPITAL EXPENDITURE COMMITMENTS
At 30 June 2013, Brambles had commitments of US$226.2 million (2012: US$192.4 million) principally relating to property, plant and
equipment.
Capital expenditure contracted for but not recognised as liabilities at reporting date were as follows:
Within one year
Between one and five years
2013
US$m
154.5
71.7
226.2
2012
US$m
129.8
62.6
192.4
B) OPERATING LEASE COMMITMENTS
Brambles has taken out operating leases for offices, operational locations and plant and equipment. The leases have varying terms,
escalation clauses and renewal rights. Escalation clauses are rare and any impact is considered immaterial.
The future minimum lease payments under such non-cancellable operating leases are as follows:
Within one year
Between one and five years
After five years
Minimum lease payments
Plant
Occupancy
2013
US$m
36.9
58.9
7.6
103.4
2012
US$m
35.3
38.9
-
74.2
2013
US$m
195.3
541.6
272.5
1,009.4
2012
US$m
174.3
505.0
276.0
955.3
During the year, operating lease expense of US$262.8 million (2012: US$230.5 million) was recognised in the income statement.
C) FINANCE LEASE COMMITMENTS
Finance leases of plant and equipment are not a material feature of Brambles' funding arrangements. Finance lease commitments are
payable as follows:
Minimum lease payments
Within one year
Between one and five years
Finance costs
Within one year
Between one and five years
Minimum lease payments recognised as a liability
Within one year
Between one and five years
Plant
2013
US$m
13.0
11.5
24.5
(1.3)
(0.5)
(1.8)
11.7
11.0
22.7
2012
US$m
18.5
24.9
43.4
(2.0)
(2.9)
(4.9)
16.5
22.0
38.5
Brambles Annual Report 2013 - Page 113 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 33. CONTINGENCIES
a)
Subsidiaries have contingent unsecured liabilities in respect of guarantees given relating to performance under contracts entered into
totalling US$99.5 million (2012: US$116.7 million), of which US$77.0 million (2012: US$94.6 million) is also guaranteed by Brambles
Limited. US$16.3 million (2012: US$15.3 million) is also guaranteed by Brambles Limited and certain of its subsidiaries under a deed of
cross-guarantee and are included in Note 38B.
b)
c)
d)
e)
f)
A subsidiary has guaranteed certain lease obligations of third parties totalling US$2.3 million (2012: US$5.3 million). A subsidiary has
provided guarantees to support lease facilities entered into by certain other subsidiaries. Total facilities available amount to
US$6.0 million (2012: US$10.3 million), of which US$6.0 million (2012: US$10.3 million) has been drawn.
Environmental contingent liabilities
Brambles’ activities have included the treatment and disposal of hazardous and non-hazardous waste through subsidiaries and
corporate joint ventures. In addition, other activities of Brambles entail using, handling and storing materials which are capable of
causing environmental impairment.
As a consequence of the nature of these activities, Brambles has incurred and may continue to incur environmental costs and liabilities
associated with site and facility operation, closure, remediation, aftercare, monitoring and licensing. Provisions have been made in
respect of estimated environmental liabilities at all sites and facilities where obligations are known to exist and can be reliably
measured.
However, additional liabilities may emerge due to a number of factors including changes in the numerous laws and regulations which
govern environmental protection, liability, land use, planning and other matters in each jurisdiction in which Brambles operates or has
operated. These extensive laws and regulations are continually evolving in response to technological advances, scientific
developments and other factors. Brambles cannot predict the extent to which it may be affected in the future by any such changes in
legislation or regulation.
In the ordinary course of business, Brambles becomes involved in litigation. Provision has been made for known obligations where the
existence of the liability is probable and can be reasonably quantified. Receivables have been recognised where recoveries, for
example from insurance arrangements, are virtually certain. As the outcomes of these matters remain uncertain, contingent liabilities
exist for possible amounts eventually payable that are in excess of the amounts provided.
Brambles has given vendor warranties in relation to businesses sold in prior years. Brambles has recognised the financial impact of such
vendor warranties and adjustments on the basis of information currently available. A contingent liability exists for any amounts which
may ultimately be borne by Brambles which are in excess of the amounts provided at 30 June 2013.
A third party facility leased by Recall had suffered significant structural damage resulting in the facility becoming non-operational.
Consequently, Recall has and will continue to incur costs associated with the incident and the relocation of operations to a new
facility. Provision, net of insurance proceeds received, has been made in respect of Recall’s obligations that are known to exist and
can be reliably measured. The provision is Recall’s current best estimate of the costs it will incur arising from this matter. There are,
however, a number of aspects relating to this matter which have not been finalised and a number of parties are involved in their
resolution. At the date of this report, it is not possible to determine when all of these aspects will be finalised.
Brambles Annual Report 2013 - Page 114 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 34. AUDITORS' REMUNERATION
Amounts received or due and receivable by PwC (Australia) for:
Audit services in Australia:
- audit and review of Brambles' financial reports
- other assurance services
Other services:
- finance due diligence
Total remuneration of PwC (Australia)
Amounts received or due and receivable by related practices of PwC (Australia) for:
Audit services outside Australia:
- audit and review of Brambles' financial reports
- other assurance services
Other services:
- tax advisory services
- other
Total remuneration of related practices of PwC (Australia)
Total auditors' remuneration
2013
US$'000
2012
US$'000
2,090
49
2,139
692
692
2,831
4,238
11
4,249
106
113
219
4,468
7,299
2,068
13
2,081
2,549
2,549
4,630
4,488
123
4,611
152
53
205
4,816
9,446
From time to time, Brambles employs PwC on assignments additional to their statutory audit duties where PwC, through their detailed
knowledge of the Group, are best placed to perform the services from an efficiency, effectiveness and cost perspective. The performance
of such non-audit related services is always balanced with the fundamental objective of ensuring PwC's objectivity and independence as
auditors. To ensure this balance, Brambles' Charter of Audit Independence requires that the Audit Committee approve any management
recommendation that PwC undertake non-audit work (with approval being delegated to the Chief Financial Officer within specified
monetary limits).
Non-audit assignments during the year primarily related to finance due diligence for the Recall proposed demerger, treasury consulting
service, compliance tracking system, regulatory reporting and tax consulting advice. In 2012, non-audit assignments primarily related to
the Recall divestment process, acquisition due diligence, tax consulting advice and implementation of a compliance tracking system.
NOTE 35. KEY MANAGEMENT PERSONNEL
A) KEY MANAGEMENT PERSONNEL COMPENSATION
Short term employee benefits
Post employment benefits
Other benefits
Termination/sign-on/retirement benefits
Share-based payment expense
14,700
13,424
351
98
1,453
8,899
25,501
442
96
2,587
6,585
23,134
Brambles Annual Report 2013 - Page 115
Name and holdings
2013
Executive Director
T J Gorman
Ordinary shares
Share rights
Z Todorcevski
Ordinary shares
Share rights
J Holley
Ordinary shares
Share rights
P S Mackie
Ordinary shares
Share rights
2
D A Pertz
Ordinary shares
Share rights
K Pohler
Ordinary shares
Share rights
J D Rabbino
Ordinary shares
Share rights
N P Smith
Ordinary shares
Share rights
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 35. KEY MANAGEMENT PERSONNEL - CONTINUED
B) EQUITY INSTRUMENTS DISCLOSURE RELATING TO KEY MANAGEMENT PERSONNEL
The number of ordinary shares and options/share rights in Brambles held during the financial year by key management personnel,
including their related parties, are set out below:
Balance
at start
of the year
Granted
during the
year
Exercised
during
the year
Lapsed
during
the year
Changes
during the
year
Balance
at end
of the year1
Vested and
exercisable
at end of
the year
128,782
-
-
-
80,366
209,148
1,316,336
536,092
148,310
178,735
-
1,525,383
Current Key Management Personnel
-
-
-
-
-
500
-
229
-
-
406,298
77,906
-
-
125,859
83,873
32,305
2,165
375,446
-
-
-
251,637
-
-
-
4,132
376,931
-
-
171,843
25,888
27,918
-
-
-
-
-
97,419
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
129,608
46,822
49,649
78,091
-
24,596
-
12,890
-
-
-
-
-
19
-
78,591
328,392
24,825
177,427
15,055
493,483
-
-
-
251,637
19
97,419
71,359
-
75,491
410,068
Former Key Management Personnel
G J Hayes
Ordinary shares
Share rights
E E Potts
Ordinary shares
Share rights
R J Westerbos
Ordinary shares
-
1,159,820
93,059
392,796
-
-
-
-
-
172,739
384,861
-
-
-
-
(19,577)
216,635
50,192
177,717
-
-
602,220
73,482
381,522
101,495
-
-
-
(101,495)
-
Options/share rights
1
-
-
Closing balances are as at the end of the year for ongoing employees and as at cessation of employment for those whose employment
ended during the year.
264,092
140,039
106,648
297,483
-
2
D A Pertz commenced employment on 1 April 2013.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Brambles Annual Report 2013 - Page 116 Name and holdings
2012
Executive Directors
T J Gorman
Ordinary shares
Share rights
G J Hayes
Ordinary shares
Share rights
J Holley
Ordinary shares
Share rights
P S Mackie
Ordinary shares
Share rights
K Pohler
Ordinary shares
Share rights
E E Potts
Ordinary shares
Share rights
J D Rabbino
Ordinary shares
Share rights
N P Smith
Ordinary shares
Share rights
R J Westerbos
Ordinary shares
Share rights
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 35. KEY MANAGEMENT PERSONNEL - CONTINUED
Balance
at start
of the year
Granted
during the
year
Exercised
during
the year
Lapsed
during
the year
Changes
during the
year
Balance
at end
of the year1
Vested and
exercisable
at end of
the year
Current Key Management Personnel
40,967
955,882
-
-
-
87,815
128,782
544,303
94,220
89,629
-
1,316,336
-
-
735,011
424,809
-
-
-
1,159,820
-
-
-
-
-
-
-
-
-
-
-
-
961
-
125,859
-
272,237
166,093
24,894
37,990
-
-
-
-
-
-
-
-
-
137,695
37,668
53,719
-
-
-
-
-
-
-
-
-
140,514
48,682
49,261
-
251,637
66,607
346,488
-
-
2,630
334,360
101,495
116,434
Former Key Management Personnel
J R A Judd
Ordinary shares
Share rights
J D Ritchie
Ordinary shares
Share rights
K J Shuba
79,436
296,916
60,324
200,658
Ordinary shares
57,766
-
147,658
-
-
-
-
-
-
118,444
48,090
153,712
-
-
(15,066)
-
192
-
-
1,103
-
(60,302)
22
84,948
-
114,799
-
-
42,020
99,786
Options/share rights
1
-
Closing balances are as at the end of the year for ongoing employees and as at cessation of employment for those whose employment
ended during the year.
379,094
136,243
175,775
279,054
60,508
-
C) OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Other transactions with key management personnel are set out in Note 36C.
Further remuneration disclosures are set out in the Directors' Report on pages 32 to 49 of the Annual Report.
229
-
1,204
-
-
-
26,452
-
-
-
1,502
-
-
-
229
125,859
2,165
375,446
-
251,637
93,059
392,796
-
-
4,132
376,931
101,495
264,092
64,370
213,558
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Brambles Annual Report 2013 - Page 117 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 36. RELATED PARTY INFORMATION
A) BRAMBLES
Brambles comprises Brambles Limited and the entities which it controls.
Borrowings under the bilateral bank credit facilities are undertaken by a limited number of Brambles subsidiaries. Funding of other
subsidiaries within Brambles is by way of intercompany loans, all of which are documented and carry arms-length interest rates applicable
to the currency and terms of the loans.
Brambles Limited charges Brambles' borrowers an arms-length guarantee fee for the guarantees and cross-guarantees it has given in
relation to borrowing facilities, as described in Note 38B.
Dividends are declared within the group only as required for funding or other commercial reasons.
Brambles has in place cost sharing agreements to ensure that relevant costs are taken up by the entities receiving the benefits.
All amounts receivable and payable by entities within Brambles and any interest thereon are eliminated on consolidation.
B) JOINT VENTURES
Brambles' share of the net results of joint ventures is disclosed in Note 19.
C) OTHER TRANSACTIONS
Other transactions entered into during the year with Directors of Brambles Limited; with Director-related entities; with key management
personnel (KMP, as set out in the Directors' Report); or with KMP-related entities were on terms and conditions no more favourable than
those available to other employees, customers or suppliers and include transactions in respect of the employee option plans, contracts of
employment and reimbursement of expenses. Any other transactions were trivial or domestic in nature.
D) OTHER RELATED PARTIES
A subsidiary has a non-interest bearing advance outstanding as at 30 June 2013 of US$1,304,000 (2012: US$1,432,000) to Brambles
Custodians Pty Limited, the trustee under Brambles' employee loan scheme. This scheme enabled employees to acquire shares in BIL and
has been closed to new entrants since August 2002.
Brambles Annual Report 2013 - Page 118 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 36. RELATED PARTY INFORMATION - CONTINUED
E) MATERIAL SUBSIDIARIES
The principal subsidiaries of Brambles during the year were:
Place of incorporation
% interest held at
reporting date
2013
2012
CHEP Benelux Nederland BV
The Netherlands
CHEP Italia SRL
Brambles Enterprises Limited
Italy
UK
CHEP South Africa (Proprietary) Limited
South Africa
Name
CHEP
CHEP USA
CHEP Canada, Inc.
CHEP UK Limited
CHEP France SA
CHEP Deutschland GmbH
CHEP Espana SA
CHEP Mexico SA de CV
CHEP Australia Limited
CHEP (China) Company Limited
CHEP Technology Pty Limited
CHEP India Pvt Limited
LeanLogistics Inc
Unitpool AG
CHEP Pallecon Solutions BV
CHEP Pallecon Solutions Pty Limited
IFCO
IFCO Systems NV
Recall
Recall Limited
Recall France SA
Recall Corporation, Inc.
Recall do Brasil Ltda
Recall Information Management Pty Limited
Recall Deutschland GmbH
Brambles HQ
Brambles Industries Limited
Brambles Holdings (UK) Limited
USA
Canada
UK
France
Germany
Spain
Mexico
Australia
China
Australia
India
USA
Switzerland
The Netherlands
Australia
UK
France
USA
Brazil
Australia
Germany
Australia
UK
The Netherlands
100
99.5
Brambles International Finance BV
The Netherlands
Brambles USA Inc.
Brambles North America Incorporated
Brambles Finance plc
Brambles Finance Limited
USA
USA
UK
Australia
In addition to the list above, there are a number of other non-material subsidiaries within Brambles.
Investments in subsidiaries are primarily by means of ordinary or common shares. All material subsidiaries prepare accounts with a 30 June
balance date.
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Brambles Annual Report 2013 - Page 119 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 36. RELATED PARTY INFORMATION - CONTINUED
F) DIRECTORS' INDEMNITIES
Under its constitution, to the extent permitted by law, Brambles Limited indemnifies each person who is, or has been a Director or
Secretary of Brambles Limited against any liability which results from facts or circumstances relating to the person serving or having
served in the capacity of Director, Secretary, other officer or employee of Brambles Limited or any of its subsidiaries, other than:
(a) in respect of a liability other than for legal costs:
(i) a liability owed to Brambles Limited or a related body corporate;
(ii) a liability for a pecuniary penalty order under section 1317G of the Act or a compensation order
under section 1317H of the Act; or
(iii) a liability that is owed to someone (other than Brambles Limited or a related body corporate) and did not
arise out of conduct in good faith; and
(b) in respect of a liability for legal costs:
(i) in defending or resisting proceedings in which the person is found to have a liability for which they could not have
been indemnified under paragraph (a)(i) above;
(ii) in defending or resisting criminal proceedings in which the person is found guilty;
(iii) in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for
making the order are found by the Court to be established; or
(iv) in connection with proceedings for relief to any persons under the Act in which the Court denies the relief.
Paragraph (b)(iii) above does not apply to costs incurred in responding to actions brought by ASIC or a liquidator as part of an investigation
before commencing proceedings for the Court order.
As allowed by its constitution, Brambles Limited has provided indemnities from time to time to Directors, Secretaries or other Statutory
Officers of its subsidiaries (Beneficiaries) against all loss, cost and expenses (collectively Loss) caused by or arising from any act or
omission by the relevant person in performance of that person's role as a Director, Secretary or Statutory Officer.
The indemnity given by the Company excludes the following matters:
(a) any Loss to the extent caused by or arising from an act or omission of the Beneficiary prior to the effective date of the
indemnity;
(b) any Loss to the extent indemnity in respect of that Loss is prohibited under the Corporations Act (or any other law);
(c) any Loss to the extent it arises from private or personal acts or omissions of the Beneficiary;
(d) any Loss comprising the reimbursement of normal day-to-day expenses such as travelling expenses;
(e) any Loss to the extent the Beneficiary failed to act reasonably to mitigate the Loss;
(f) any Loss to the extent it is caused by or arises from acts or omissions of the Beneficiary after the date the indemnity
is revoked by the Company in accordance with the terms of the indemnity;
(g) any Loss to the extent it is caused by or arises from any breach by the Beneficiary of the terms of the indemnity.
Insurance policies are in place to cover Directors, Secretaries and other Statutory Officers of Brambles Limited and its subsidiaries,
however the terms of the policies prohibit disclosure of the details of the insurance cover and the premiums paid.
NOTE 37. EVENTS AFTER BALANCE SHEET DATE
On 2 July 2013, Brambles announced its intention to demerge its Recall business by listing a new holding company, Recall Holdings
Limited, on the ASX. Brambles intends to convene a meeting for shareholders to vote on the demerger proposal in December 2013.
Subject to the outcome of this shareholder vote and the satisfaction of other conditions (including the relevant court and regulatory
approvals), the final separation of Recall from Brambles is expected to occur shortly thereafter.
As Brambles has not commenced the restructuring necessary to effect the proposed de-merger and the necessary shareholder and court
approvals have not been obtained, Recall has been classified as a Continuing operation at 30 June 2013 (consistent with classification at
30 June 2012) in accordance with applicable Accounting Standards.
Other than those outlined in the Directors' Report or elsewhere in these financial statements, there have been no other events that have
occurred subsequent to 30 June 2013 and up to the date of this report that have had a material impact on Brambles' financial performance
or position.
Brambles Annual Report 2013 - Page 120 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS - CONTINUED
for the year ended 30 June 2013
NOTE 38. PARENT ENTITY FINANCIAL INFORMATION
A) SUMMARISED FINANCIAL DATA OF BRAMBLES LIMITED
Profit for the year
Other comprehensive income for the year
Total comprehensive loss
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Share-based payment reserve
Foreign currency translation reserve
Retained earnings
Total equity
Parent entity
2013
US$m
402.6
(754.7)
(352.1)
0.7
8,026.1
8,026.8
32.2
334.4
366.6
2012
US$m
522.7
(1,065.5)
(542.8)
16.9
8,413.6
8,430.5
19.7
110.5
130.2
7,660.2
8,300.3
6,618.5
6,484.1
48.9
903.9
88.9
49.1
1,658.6
108.5
7,660.2
8,300.3
B) GUARANTEES AND CONTINGENT LIABILITIES
Brambles Limited and certain of its subsidiaries are parties to a deed of cross-guarantee which supports global financing credit facilities
available to certain subsidiaries. Total facilities available amount to US$2,134.3 million (2012: US$2,192.8 million) of which
US$929.2 million (2012: US$1,003.5 million) has been drawn.
Brambles Limited and certain of its subsidiaries are parties to guarantees which support US Private Placement borrowings of
US$364.0 million (2012: US$364.0 million) by a subsidiary.
Brambles Limited and certain of its subsidiaries are parties to a guarantee which support notes of US$750.0 million (2012:
US$750.0 million) issued by a subsidiary to qualified institutional buyers in accordance with Rule 144A and Regulation S of the United
States Securities Act.
Brambles Limited and certain of its subsidiaries are parties to a guarantee which support notes of €500.0 million (2012: €500.0 million)
issued by a subsidiary in the European bond market.
Brambles Limited has guaranteed repayment of certain facilities and financial accommodations made available to certain subsidiaries.
Total facilities and financial accommodations available amount to US$569.8 million (2012: US$569.5 million), of which US$130.5 million
(2012: US$138.8 million) has been drawn.
Other than these guarantees, the parent entity did not have any contingent liabilities at 30 June 2013 or 30 June 2012.
C) CONTRACTUAL COMMITMENTS
Brambles Limited did not have any contractual commitments for the acquisition of property, plant and equipment at 30 June 2013 or
30 June 2012.
Brambles Annual Report 2013 - Page 121 DIRECTORS' DECLARATION
In the opinion of the Directors of Brambles Limited:
(a)
the financial statements and notes set out on pages 57 to 119 are in accordance with the Corporations
Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
(ii)
giving a true and fair view of the financial position of Brambles as at 30 June 2013 and of its
performance for the year ended on that date;
(b)
there are reasonable grounds to believe that Brambles Limited will be able to pay its debts as and
when they become due and payable.
A statement of compliance with International Financial Reporting Standards as issued by the International
Accounting Standards Board is included within Note 1 to the financial statements.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer
required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
G J Kraehe AO
Chairman
T J Gorman
Chief Executive Officer
22 August 2013
Brambles Annual Report 2013 - Page 122 INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF BRAMBLES LIMITED
Report on the financial report
We have audited the accompanying financial report of Brambles Limited (the Company), which comprises the consolidated
balance sheet as at 30 June 2013, and the consolidated income statement, the consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated cash flow statement for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the Directors’ declaration for Brambles (the consolidated entity).
The consolidated entity comprises the Company and the entities it controlled at the year’s end or from time to time during the
financial year.
Directors’ responsibility for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to
fraud or error. In Note 1, the Directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditors’ responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements
relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the Directors, as well as evaluating the overall presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material
inconsistencies with the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
DX 77 Sydney, Australia
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Brambles Annual Report 2013 - Page 123
INDEPENDENT AUDITORS’ REPORT - CONTINUED
TO THE MEMBERS OF BRAMBLES LIMITED
Auditors’ opinion
In our opinion:
(a)
the financial report of Brambles Limited is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
(b)
the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 32 to 49 of the Directors’ report for the year ended 30 June 2013.
The Directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based
on our audit conducted in accordance with Australian Auditing Standards.
Auditors’ opinion
In our opinion, the remuneration report of Brambles Limited for the year ended 30 June 2013, complies with section 300A of
the Corporations Act 2001.
Matters relating to the electronic presentation of the audited financial report
This auditors’ report relates to the financial report and remuneration report of Brambles Limited (the Company) for the year
ended 30 June 2013 included on Brambles Limited web site. The Company’s Directors are responsible for the integrity of the
Brambles Limited web site. We have not been engaged to report on the integrity of this web site. The auditors’ report refers only
to the financial report and remuneration report named above. It does not provide an opinion on any other information which
may have been hyperlinked to/from the financial report or the remuneration report. If users of this report are concerned with
the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial
report and remuneration report to confirm the information included in the audited financial report and remuneration report
presented on this web site.
PricewaterhouseCoopers
Paul Bendall
Partner
Mark Dow
Partner
Sydney
22 August 2013
Sydney
22 August 2013
Brambles Annual Report 2013 - Page 124
AUDITORS’ INDEPENDENCE DECLARATION
As lead auditor for the audit of Brambles Limited for the year ended 30 June 2013, I declare that to the best of my knowledge
and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Brambles Limited and the entities it controlled during the period.
Paul Bendall
Partner
PricewaterhouseCoopers
Sydney
22 August 2013
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
DX 77 Sydney, Australia
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Brambles Annual Report 2013 - Page 125
FIVE YEAR FINANCIAL PERFORMANCE SUMMARY
Continuing operations
Sales revenue
EBITDA
Depreciation and amortisation
Operating profit
Net finance costs
Profit before tax
Tax expense
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Underlying Profit
Significant Items
Operating profit
2013
US$m
2012
US$m
2011
US$m
2010
US$m
2009
US$m
5,889.9
5,625.0
4,672.2
4,146.8
4,018.6
1,568.2
1,491.4
1,289.0
1,168.5
1,142.8
557.0
1,011.2
552.2
939.2
479.8
809.2
444.0
724.5
424.6
718.2
(110.9)
(152.0)
(127.5)
(109.6)
(120.9)
900.3
787.2
681.7
614.9
597.3
(260.4)
(212.3)
(209.9)
(171.0)
(163.3)
639.9
574.9
471.8
443.9
434.0
0.7
1.4
3.6
4.9
18.6
640.6
576.3
475.4
448.8
452.6
1,057.2
1,009.7
(46.0)
1,011.2
(70.5)
939.2
857.2
(48.0)
809.2
733.4
900.6
(8.9)
(182.4)
724.5
718.2
Weighted average number of shares (millions)
1,555.7
1,482.3
1,445.6
1,411.3
1,388.3
Earnings per share (US cents)
Basic
From continuing operations
On Underlying Profit after finance costs and tax
ROCI
BVA
41.2
41.1
43.5
38.9
38.8
42.1
32.9
32.6
36.2
31.8
31.5
31.9
32.6
31.3
38.5
16%
16%
17%
17%
21%
269.9
248.6
251.6
212.8
294.6
Capex on property, plant & equipment
927.7
921.1
821.9
498.8
672.4
Balance sheet
Capital employed
Net debt
Equity
5,739.8
5,430.3
5,450.2
3,391.5
3,572.7
2,714.4
2,689.9
2,998.8
1,759.3
2,143.4
3,025.4
2,740.4
2,451.4
1,632.2
1,429.3
Average Capital Invested
6,668.9
6,413.7
5,013.4
4,420.1
4,268.7
Cash flow
Cash flow from operations
Free cash flow
Dividends paid
Free cash flow after dividends
Net debt ratios
Net debt to EBITDA (times)
EBITDA interest cover (times)
859.0
508.6
425.5
591.2
179.5
397.7
83.1
(218.2)
725.1
303.3
224.0
79.3
882.3
548.6
204.5
344.1
722.4
419.5
277.6
141.9
1.7
14.6
1.7
10.3
2.2
10.5
1.5
10.7
1.8
10.0
Average employees
18,037
17,021
17,134
12,714
12,785
Dividend declared per share (Australian cents)
27.0
26.0
26.0
25.0
30.0
Brambles Annual Report 2013 - Page 126
GLOSSARY
2006 Share Plan
The Brambles Limited 2006 Performance Share Plan (as amended).
Acquired Shares
Brambles Limited shares purchased by Brambles employees under MyShare.
Actual currency/FX
In the statutory financial statements, results are translated into US dollars at the applicable actual monthly exchange rates
ruling in each period.
AGM
ASX
Average Capital
Invested
BIFR
BIL
BIP
Board
BVA
Annual General Meeting.
Australian Securities Exchange.
Average capital invested or ACI is a 12 month average of capital invested.
Capital invested is calculated as net assets before tax balances, cash and borrowings, but after adjustment for accumulated
pre-tax Significant items, actuarial gains or losses and net equity adjustments for equity-settled share-based payments.
Brambles Injuries Frequency Rate. This safety performance indicator measures the combined number of fatalities, lost time
injuries, modified duties and medical treatments per million hours worked.
Brambles Industries Limited, which was one of the two listed entities in the previous dual-listed companies structure.
Brambles Industries plc, which was one of the two listed entities in the previous dual-listed companies structure.
The Board of Directors of Brambles Limited.
Brambles Value Added or BVA represents the value generated over and above the cost of the capital used to generate that
value.
It is calculated using fixed June 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 activities of the
business, multiplied by 12%.
CAGR
Compound annual growth rate. The CAGR of sales revenue is the annualised percentage at which sales revenue would have
grown over a period if it grew at a steady rate.
Cash Flow from
Operations
Cash flow generated after net capital expenditure but excluding Significant items that are outside the ordinary course of
business.
CGPR
The Australian Securities Exchange Corporate Governance Council Corporate Governance Principles & Recommendations,
Second Edition.
Company
Brambles Limited (ACN 118 896 021).
constant currency
Constant currency results are presented by translating both current and comparable period results into US dollars at the
actual monthly exchange rates applicable in the comparable period, so as to show relative performance between the two
periods before the translation impact of currency fluctuations.
continuing operations
Continuing operations refers to Pallets, RPCs, Containers, Recall and Brambles HQ.
Disclosable Executives
Brambles Limited’s Executive Directors, Non-executive Directors and other Group executives whose remuneration details are
required to be disclosed in the Remuneration Report.
discontinued
operations
Dividend Share
Program
Operations which have been divested or which are held for sale.
A program which allows Employees to reinvest Dividends from their Employee holding to acquire further Shares in Brambles.
The Share purchase price will be calculated using a volume weighted average of the Brambles Share price over the five trading
days up to and including the Record Date.
Brambles Annual Report 2013 - Page 127 GLOSSARY – CONTINUED
DLC
EBITDA
ELT
EPS
Dual-listed companies structure – the previous contractual arrangement between Brambles Industries Limited and Brambles
Industries plc under which they operated as if they were a single economic enterprise, whilst retaining their separate legal
identities, tax residences and stock exchange listings. BIL and BIP operated as a DLC from August 2001 to December 2006.
Earnings before interest, tax, depreciation and amortisation. EBITDA is defined as Operating profit from continuing operations
after adding back depreciation and amortisation and Significant items outside the ordinary course of business.
Brambles’ Executive Leadership Team, details of which are on pages 17 and 18.
Earnings per share.
financial year
Brambles’ financial year is 1 July - 30 June.
free cash flow
Cash flow generated after net capital expenditure, finance costs and tax, but excluding the net cost of acquisitions
and proceeds from business disposals.
FX
FY
Foreign exchange.
Financial year. For example, FY13 indicates the financial year ended 30 June 2013.
Group or Brambles
Brambles Limited and all of its related bodies corporate.
IBC
IFRS
IPEP
ISO
Key Management
Personnel
KPI(s)
LTI
Matching Awards
Matching Shares
MyShare
Intermediate bulk container, for the transport and storage of bulk products.
International Financial Reporting Standards. Brambles reports its financial results under Australian Accounting Standards,
which are compliant with IFRS.
Irrecoverable Pooling Equipment Provision.
International Organization for Standardization.
Members of the Board of Brambles Limited and Brambles’ Executive Leadership Team.
Key Performance Indicator(s).
Long Term Incentive.
Matching share rights over Brambles Limited shares allocated to employees when they purchase Acquired Shares
under MyShare. When an employee’s Matching Awards vest, Matching Shares are allocated to that employee.
Shares allocated to employees who have held Acquired Shares under MyShare for two years, and who remain employed at the
end of that two year period. One Matching Share is allocated for every one Acquired Share held.
The Brambles Limited MyShare Plan, an all employee share plan, under which employees acquire ordinary shares by means of
deductions from their after-tax pay and must hold those shares for a two year period. If they hold those shares and remain
employed at the end of the two year period, then Brambles will match the number of shares they hold by issuing or
transferring to them the same number of shares which they held for the qualifying period at no additional cost to the
employee.
Net new business wins
The change in sales revenue in a reporting period resulting from business won or lost in that period and the previous financial
year. The revenue impact of net new business is included across reporting periods for a total of 12 months from the date of
the win or loss and calculated on a constant currency basis.
Operating profit
Operating profit is profit before finance costs and tax, as shown in the statutory financial statements.
PAT
Profit after tax.
Brambles Annual Report 2013 - Page 128 GLOSSARY– CONTINUED
Performance Period
A two-to-three year period over which the achievement of performance conditions is assessed to determine whether STI and
LTI share awards will vest.
Recall Holdings
Recall Holdings Limited is the holding company for the Recall business post demerger.
RCC
ROCI
RPC
Risk & Control Committee.
Return on capital invested or ROCI is calculated as Underlying profit divided by Average capital invested.
Reusable plastic container/crate, or returnable/reusable produce crate, generally used for shipment and display of produce
items.
Significant Items
Significant items are items of income or expense which are, either individually or in aggregate, material to Brambles or to the
relevant business segment and:
- outside the ordinary course of business (e.g. gains or losses on the sale or termination of operations, the cost of significant
S&P
STI
TFR
TSR
reorganisations or restructuring); or
- part of the ordinary activities of the business but unusual due to their size and nature.
Standard & Poor’s is an American financial services company that publishes financial research and analysis.
Short Term Incentive.
Total Fixed Remuneration.
Total Shareholder Return. TSR measures the returns that a company has provided for its shareholders, reflecting share price
movements and reinvestment of dividends over a specified performance period.
Underlying Profit
Underlying profit is profit from continuing operations before finance costs, tax and Significant items.
Unification
The unification of the dual-listed companies structure which operated between Brambles Industries Limited and Brambles
Industries plc under a new single Australian holding company, Brambles Limited, which took place in December 2006.
Year
Brambles’ 2013 financial year.
Brambles Annual Report 2013 - Page 129
CONTACT INFORMATION
REGISTERED OFFICE
Brambles global headquarters is at its registered office in Sydney, Australia:
Level 40, Gateway Building
1 Macquarie Place
Sydney NSW 2000
Australia
ACN 118 896 021
Telephone:
Facsimile:
Email:
Website:
+61 (0) 2 9256 5222
+61 (0) 2 9256 5299
info@brambles.com
www.brambles.com
Investor & Analyst Queries
Telephone:
Email:
+61 (0) 2 9256 5238
investorrelations@brambles.com
SHARE REGISTRY
Online access to shareholding information is available to investors through the Link Market Services website.
Link Market Services Limited
Level 12, 680 George Street, Sydney NSW 2000, Australia
Locked Bag A14, Sydney South NSW 1235, Australia
Telephone:
Facsimile:
Email:
Website:
1300 883 073
+61 (0) 2 9287 0303
registrars@linkmarketservices.com.au
www.linkmarketservices.com.au
SHARE RIGHTS REGISTRY
Employees or former employees of Brambles who have queries about the following interests:
• performance share rights under the 2004 or 2006 share plans;
• matching share rights under MyShare; or
• shares acquired under MyShare or other share interests held through
AET Structured Finance Services Pty Ltd, may contact:
Boardroom Pty Limited
Attention: Brambles Employee Share Plans
GPO Box 3993, Sydney NSW 2001, Australia
Telephone:
1800 180 833 (within Australia)
+61 (0) 2 9290 9600 (from outside Australia)
Facsimile:
1300 653 459 (within Australia)
+61 (0) 2 9279 0664 (from outside Australia)
Email:
bramblesesp@boardroomlimited.com.au
Website:
www.boardroomlimited.com.au
Brambles Annual Report 2013 - Page 130
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