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ConduentAnnual Report 2015
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Contents
Letter from the Chairman and the CEO
Strategy Scorecard
Operating & Financial Review
Board and Executive Leadership Team
Directors’ Report – Remuneration Report
Directors’ Report – Other Information
1
2
3
12
15
31
Shareholder Information
Financial Report
Independent Auditor’s Report
Auditor’s Independence Declaration
Five-Year Financial Performance Summary
Glossary
35
37
85
87
88
89
Brambles Limited
ABN 89 118 896 021
Go to Brambles.com to review
the Group’s online annual review
for 2015, including an interactive
strategy scorecard and other features.
Forward-Looking Statements
Certain statements made in this release are “forward-looking statements” – that is, statements related to future, not past,
events. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions are
intended to identify forward-looking statements. These forward-looking statements are not historical facts but rather are
based on Brambles’ current beliefs, assumptions, expectations, estimates and projections. Forward-looking statements are
not guarantees of future performance, as they address matters that are uncertain and subject to known and unknown risks,
uncertainties and other factors that are beyond the control of Brambles, are difficult to predict and could cause actual results
to differ materially from those expressed or forecasted in the forward-looking statements. Brambles cautions shareholders
and prospective shareholders not to place undue reliance on these forward-looking statements, which reflect the views of
Brambles only as of the date of this release. The forward-looking statements made in this release relate only to events as
of the date on which the statements are made – Brambles will not undertake any obligation to release publicly any revisions
or updates to these forward-looking statements to reflect events, circumstances or events occurring after the date of
this release, except as may be required by law or by any appropriate regulatory authority.
Letter from the Chairman and the CEO
20 August 2015
Network advantage is the theme of Brambles’ 2015
Annual Report. The strength of our network and the
advantage we derive from the integral role we play in our
customers' supply chains is at the heart of our value
proposition to investors. That's why "everything begins
with the customer" is the first of our shared values.
It is through continually working together with our customers to make
their supply chains more efficient and sustainable that we can maintain
and enhance our network advantage and deliver sustainably strong returns
to shareholders. It is this focus on building better supply chains together
with customers that has enabled us to identify US$1.5 billion of growth
capital expenditure opportunities to FY19. These opportunities primarily
relate to customer initiatives in our Pallets and RPCs businesses serving the
consumer goods, fresh food and grocery supply chains.
Strategy and Objectives
We remain focused on our targets, set in December 2013, to deliver annual
percentage growth in sales revenue in the high single digits, at constant
currency, and Return on Capital Invested1 of 20% by FY192. However,
because the scale of investment opportunity in our existing businesses is
larger than we estimated when we set those targets, we now anticipate
average annual growth in Average Capital Invested, before acquisitions,
will be higher than our previous expectation of 5%.
Our investment in growth programs that strengthen our existing business,
coupled with actions to deliver operational efficiencies, such as the One
Better program launched in 2014, are intended to sustain our competitive
advantage. By strengthening our networks and our customer relationships,
we can support the continued delivery of attractive returns to shareholders
today and in the future. In addition, our disciplined approach to
investment in new growth opportunities – even though these may dilute
returns in the near-term – supports our focus on creating value for
shareholders sustainably and for the long term. Our Strategy Scorecard,
overleaf, sets out our progress relative to our key targets and objectives.
Acquisitions
In September 2014, we acquired Ferguson Group, a leading provider of
container management solutions to the offshore oil and gas sector, for
US$523 million. This acquisition represented an opportunity for Brambles
to enter a new supply chain, which has attractive long-term characteristics
and in which we believe we can create value through our extensive and
longstanding equipment-pooling expertise. We anticipate any acquisitions
in 2016 will be in support of our existing businesses and will be relatively
small and accretive, such as the Rentapack and IFCO Japan acquisitions we
have completed in recent months.
2015 Performance
We delivered a strong result in FY15, despite underlying economic
conditions remaining quite uncertain. At constant currency3, sales revenue
was US$5,465 million, up 8% while operating profit was US$939 million, up
8% and Underlying Profit4 was US$986 million, up 10%. The contribution of
acquisitions to growth in both sales revenue and Underlying Profit was
2 percentage points. Return on Capital Invested was down 0.6 percentage
Brambles’ Chairman Stephen Johns (left) and CEO Tom Gorman (right)
points to 15.7%, reflecting increased capital invested from acquisitions.
Excluding acquired businesses, Return on Capital Invested increased by
0.3 percentage points to 16.6%. A full analysis of our financial results is
contained in the Operating & Financial Review on Pages 7 to 11.
People, Safety and Sustainability
We wish to thank Brambles' more than 14,000 employees, the senior
management team and our fellow Directors for their contribution to
another successful year. In support of our people, we strive to make our
Zero Harm vision a reality, and were able to report an improvement in the
Brambles Injury Frequency Rate. It was, therefore, very sad that we lost a
colleague to a workplace fatality. A truck driver in our recycled pallets
operations in the USA was involved in a tragic road traffic accident in
December 2014 as a result of which both he and another driver were
fatally injured. A summary of our progress in relation to our Sustainability
objectives is included in the Operating & Financial Review on Page 5. Our
full Sustainability Review is scheduled for publication in October 2015.
Detail of how we assess economic, environmental and social sustainability
matters is in the Corporate Governance Statement on our website.
Dividends
Total dividends declared for the Year were 28 Australian cents per share,
up 1 cent from 2014 and 30% franked. The Board has reactivated the
Dividend Reinvestment Plan (DRP) on a non-underwritten basis with
respect to the 2015 final dividend of 14 Australian cents per share. Full
details in relation to dividends are on Page 6. Reactivating the DRP on a
non-underwritten basis provides eligible shareholders who wish to reinvest
their dividends with an opportunity to do so, while providing Brambles
flexibility in support of its funding strategy and future growth investment
needs. The DRP Booklet will be sent separately to eligible shareholders and
will be accessible on our website.
Chairman Succession and Board Renewal
In September 2014, Graham Kraehe retired after six years as Chairman and
a 14-year association with the Board. We wish to express our thanks to
Graham, who oversaw the transformation of Brambles from an industrial
conglomerate to a leading supply chain solutions company. We had two
changes to the Board during the Year. Doug Duncan retired in February
2015 and, in June 2015, Scott Perkins joined the Board. Full Board
biographies are on Pages 12 and 13. Details of our Board skills matrix are
in the Corporate Governance Statement.
Outlook
Subject to there being no material change in underlying economic
conditions, in FY16 we expect to deliver constant-currency growth in sales
revenue and Underlying Profit in the range of 6% to 8%. We have forecast
Underlying Profit to be between US$1,000 million and US$1,020 million, at
30 June 2015 foreign exchange rates.
Stephen Johns
Chairman
Tom Gorman
Chief Executive Officer
1 Underlying Profit divided by Average Capital Invested (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 or losses and net equity adjustments for equity-settled share-based payments).
2 Five-year performance objectives are provided on a constant-currency basis, exclusive of the impact of merger, acquisition or divestment activity.
3 Calculated by translating reported period results into US dollars at the actual monthly exchange rates applicable in the prior corresponding period.
4 Profit from continuing operations before finance costs, tax and Significant Items.
1
Strategy Scorecard
Our customer value proposition
enables a
…which drives superior
rates of
… and positions us uniquely
to deliver superior
competitive advantage…
(high quality of opportunity)…
(high quantity of opportunity)
Invest in product and service quality, asset
management and business development
in support of customer value
Consistently improve Group Return on
Capital Invested to at least 20% by FY19
Deliver annual percentage sales growth
in the high single digits
Continued investment in maintaining
and enhancing value proposition
through innovation and customer
collaboration
Key investments in the period included
investment in expansion of equipment
pools in support of European RPCs and
Pallets Americas customers
On track: Return on Capital Invested
prior to acquisition impacts up 0.3
percentage points to 16.6%
Final stages completed of Global Supply
Chain program to remove US$100M of
direct costs through plant network
optimisation and other operational
improvements
One Better program launched to reduce
indirect cost burden by US$100M by
end FY19
Sales revenue growth of 6%, slightly
below five-year average target
Targeted M&A in offshore oil and gas
container logistics sector through
acquisition of Ferguson Group
Continued careful expansion into
new countries
Geographic expansion of RPCs sector
through targeted M&A in Chile
and Japan
1
2
3
Investing in network advantage: organic
capital expenditure opportunities of
US$1.5 billion identified to FY19.
Focus areas of investment:
• Expansion of US pallet pool to support
ongoing supply-chain restocking;
• Expansion of differentiated RPC
offerings in support of major retail
partner merchandising;
• Rollout of new pallet platforms to provide
better solutions for customers; and
• Refresh of brands and go-to-market
strategies.
Driving operational and organisational
efficiency: Brambles supports its
investment programs with internal
efficiency initiatives that enable financial
resources to be redirected to activities
that are value-adding for customers.
One Better program on track to have
removed initial US$30M of indirect costs
by end FY16 which are being retargeted
to key initiatives such as the relaunch of
myCHEP, the Group’s main customer
portal, and simplified invoicing and pricing
initiatives.
Capital allocation for long-term growth
where Brambles’ specific supply-chain
expertise can add value and long-term
characteristics are attractive.
Continued disciplined approach to
investing in new or unproven supply
chains, with emphasis on managing
Brambles’ portfolio to prioritise
opportunities that can generate
adequate returns at scale.
Macro-economic environment: expectations for global
growth remain challenging in the foreseeable future
Continued focus on driving growth through investment
in expanded customer value proposition, and targeted
diversification in opportunities with attractive
long-term characteristics
Industry trends, in particular in the context of a
dynamically changing retailing landscape and the
ongoing globalisation of many supply chains
Ongoing programs to drive customer intimacy throughout
the supply chain and uncover opportunities to leverage
Brambles’ unique global scale and value proposition
Customer demand for sustainable outsourced
supply-chain solutions amid an intensifying competitive
environment
Rejuvenated sustainability strategy and key brand
programs focused on leveraging inherent sustainability
of Brambles business models and driving new level of
customer engagement
1 Five-year performance objectives are provided on a constant-currency basis, exclusive of the impact of acquisitions since December 2013.
2
Operating & Financial Review
1. Overview of Operations
Brambles Limited is a supply-chain logistics company operating primarily
through the CHEP and IFCO brands. Brambles is listed on the Australian
Securities Exchange (ASX) and has its headquarters in Sydney, Australia,
but operates in more than 60 countries, with its largest operations in North
America and Western Europe.
Brambles primarily serves customers in the fast-moving consumer goods
(e.g. dry food, grocery, and health and personal care), fresh produce,
beverage, retail and general manufacturing industries, counting many of
the world's best-known brands among its customers.
Brambles provides supply-chain logistics services to these customers,
based upon the Group's longstanding expertise in the management of
reusable unit-load equipment1 such as pallets, crates and containers. The
Group also operates specialist container logistics businesses serving the
automotive, aerospace and oil and gas sectors.
At 30 June 2015, the Group employed more than 14,000 people and
owned more than 500 million pallets, crates and containers (before
provisions) through a network of approximately 850 service centres.
For financial reporting purposes, Brambles is grouped into three segments:
-
-
-
Pallets, primarily serving the fast-moving consumer goods (e.g. dry
food grocery, and health and personal care), fresh produce and
beverage industries, and sub-divided into three regions:
-
-
-
Americas (comprising the CHEP pooled pallet operations
throughout that region, the recycled pallet management
operations in North America, and LeanLogistics, a transport
management software business operating globally);
Europe, Middle East & Africa (comprising the CHEP pallet-
pooling operations in those regions, as well as India); and
Asia-Pacific (comprising the CHEP pallet-pooling operations in
that region);
RPCs (an acronym for Reusable Plastic or Produce Crates), serving
the fresh produce and broader food industry and comprising the
IFCO RPC pooling business worldwide and the CHEP RPC pooling
businesses in Australia, New Zealand and South Africa; and
Containers, comprising four distinct business units:
-
-
-
-
Automotive, serving the automotive manufacturing industry;
IBCs, primarily serving customers transporting raw materials in
the food and general manufacturing industries using
intermediate bulk containers (IBCs);
Oil & Gas, comprising Ferguson Group, a provider of container
management solutions to the offshore oil and gas industry, and
CHEP Catalyst & Chemical Containers, which rents containers
and provides associated services in the refining sector; and
Aerospace, which rents containers and pallets for the
transportation of baggage and cargo to airlines, as well as
maintaining these and other equipment.
Commentary on the performance of Brambles' operating segments during
the Year, is included in Section 7 of this Operating & Financial Review.
2. Customer Value and Operating Model
Brambles enhances performance for customers by helping them transport
goods through their supply chains more efficiently, sustainably and safely.
The Group's primary activity is the provision of reusable pallets, crates and
containers for shared use by multiple participants throughout the supply
chain, under a model known as "pooling".
Under various pooling models, Brambles provides standardised reusable
pallets, crates and containers to customers from its service centres, as and
when customers require. Customers then use that equipment to transport
goods through their supply chains, and – depending on the specific
pooling model in operation – either arrange for its return to Brambles or
transfer it to another participant in the network for that participant's use
prior to its return to Brambles.
Pooling enables customers to eliminate the need to purchase and manage
their own unit-load equipment, thereby reducing the capital invested and
complexity in customers' operations while reducing waste from their
supply chains. Customers benefit from the shared scale efficiencies
generated by Brambles’ network and systems, as well as the Group’s asset
management knowledge and development of additional value-adding
services, products and solutions.
Brambles generates sales revenue predominantly from the rental and other
service fees that customers pay based on their usage of the Group’s
equipment. Brambles retains ownership of its equipment at all times,
inspecting, cleaning and repairing it as required to maintain appropriate
quality levels.
3. Shared Values
Brambles’ shared values are articulated in Brambles’ Code of Conduct and
are a core component of the Group’s culture:
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.
4. Investor Value Proposition
Brambles' relative competitive position is defined by the scale and density
of its pooling networks, and the additional service and value these
networks enable the Group to provide to customers.
Over time, disciplined expansion of these networks and accompanying
investment in customer service create a sustainable competitive advantage
that enables the delivery of attractive returns to shareholders.
In addition to providing barriers to entry, the scale of Brambles'
established operations and customer relationships also provide the Group
unique access to additional customer growth opportunities.
4.1 Performance Drivers and Metrics
The Group monitors performance and value creation through non-financial
metrics (such as customer loyalty, safety performance and employee
engagement and enablement) and through financial metrics (such as sales
revenue growth, profitability, return on capital and shareholder returns).
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 its operations (often described
as “net new business wins2”); and
- Movements in pricing.
Brambles’ key profit metric is Underlying Profit3, which is adjusted from
statutory operating profit by removing Significant Items4. The main drivers
of Underlying Profit are:
-
Transport, logistics and asset management costs (including external
factors such as fuel and freight prices, as well as labour costs);
1 Equipment such as pallets, crates and containers used for grouping multiple units of goods (for example, boxes of grocery items) in standardised volumes and
formats for ease of shipment and storage through the supply chain.
2 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.
3 Profit from continuing operations before finance costs, tax and Significant Items.
4 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.
3
Operating & Financial Review – continued
-
-
-
Plant operations costs in relation to management of service centre
networks and the inspection, cleaning 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 lost or otherwise
irrecoverable pooling equipment.
Brambles defines Return on Capital Invested as Underlying Profit divided
by Average Capital Invested5. The main driver of Average Capital Invested
is capital expenditure on pooling equipment, which is primarily influenced
by the rate of sales growth and by 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, which measures value
generated over and above the cost of capital used to generate that value.
Brambles Value Added 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).
4.2 Recent Financial Performance
In recent years, Brambles has consistently delivered profitable growth
comprising superior rates of sales revenue growth and high levels of return
on capital relative to the benchmark Australian share index, the
S&P/ASX200 Index.
Based on Bloomberg data for the five years ended 31 December 2014:
Brambles’ compound average growth rate in sales revenue was 7%,
compared with (1)% for the S&P/ASX200 Index, and Brambles’ average
post-tax return on capital was 14%, compared with 5% for the Index.
Over this period, the Group has consistently delivered superior total
shareholder return compared with the ASX200 and with the index of
ASX200 industrial companies. In the 2015 financial year, Brambles’
delivered total shareholder return6 of 18%, compared with 6% for the
S&P/ASX200 Accumulation Index and 15% for the S&P/ASX200 Industrials
Sector Accumulation Index. On a five-year basis, Brambles’ total
shareholder return has been 146%, compared with 61% for the
S&P/ASX200 Index and 74% for the S&P/ASX200 Industrials.
While there is no guarantee that these absolute or relative returns will
continue, the Company believes that superior execution of its strategy will
enable continued strong performance.
4.3 Financial Performance Targets
In December 2013, Brambles communicated the following targets,
reflecting the Group’s objective for the sustained delivery of its value
proposition to investors through continued profitable growth:
-
-
Annual percentage sales revenue growth in the high single digits (i.e.
on average, between 7% and 9%), at constant currency7; and
Consistent incremental improvement in Return on Capital Invested to
at least 20% by the end of the 2019 financial year.
These targets were set exclusive of the impact of merger or acquisition
activity and in line with certain assumptions in relation to macro-economic
and operational risks (see Section 5).
Details of how the Group uses its remuneration policy to incentivise the
Company’s leadership in the context of these targets are in the
Remuneration Report on Pages 15 to 30.
5. Business Strategies and Future Prospects
Brambles’ aspires to be a world-leading provider of logistics solutions,
working together with its customers to make supply chains that are more
efficient, safer and more sustainable.
The Group's current areas of strategic focus are as follows:
-
-
-
Investing in network advantage: The strength and scale of
Brambles' network of customers, people, service locations and asset
management capability are inherent to the Group's value proposition
to customers and shareholders alike. The Group is committed to
investing to maintain this network advantage and enhance it through
innovation and customer collaboration.
Driving operational and organisational efficiency: Brambles
supports its investment programs with internal efficiency initiatives
that enable financial resources to be redirected to activities that are
value-adding for customers. The Group targets continuous
efficiencies in direct costs while the five-year organisational efficiency
program, One Better, is focused on indirect cost reduction.
Disciplined capital allocation for long-term growth: In addition to
funding its established businesses, Brambles seeks to allocate capital
to organic or business opportunities or acquisitions where the Group
believes its specific supply-chain expertise can add value for
customers and create value for shareholders.
As a result of the dynamic nature of the supply chains Brambles serves, the
Group has a broad range of growth opportunities. These include:
increasing penetration of core equipment-pooling products and services in
existing markets; diversifying the range of products and services; entering
new and adjacent parts of existing supply chains; and/or expanding into
new supply chains or geographies.
The principal factors that define growth opportunities for Brambles in the
pooling of unit-load equipment 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 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.
5.1 Strategic Opportunities
Brambles has identified the following key factors that influence its strategic
objectives and financial performance targets and create areas of
opportunity:
-
-
The macro-economic environment, with expectations for global
growth remaining challenging in the foreseeable future;
Industry trends, in particular in the context of a dynamically changing
retail, grocery and consumer goods supply chain;
Internal execution capabilities, in particular maintaining control and
quality of pooled equipment in line with customer needs; and
- Meeting customer demand for sustainable outsourced supply-chain
-
solutions amid an intensifying competitive environment.
5.2 Strategic and Operating Risks
The opportunities described in Section 5.1 also create risk to the execution
of Brambles' strategic objectives.
To assess these and other operating risks, Brambles has adopted a risk
management framework, which is described under Principle 7 of the
Corporate Governance Statement on Brambles’ website.
5 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.
6 Data sourced from Orient Capital. Total shareholder return reflects share price movements assuming the reinvestment of dividends on the payment date and is
adjusted for the demerger of Recall, the information management business, in December 2013.
7 Calculated by translating reported period results into US dollars at the actual monthly exchange rates applicable in the prior corresponding period.
4
Operating & Financial Review – continued
The risks associated with the external factors identified in Section 5.1 are:
-
-
-
-
The challenging macro-economic environment may affect demand
for Brambles’ services and/or the Group's profitability;
Industry trends (e.g. the fragmentation of the retail supply chain into
multiple channels, demand for differing materials or designs for
pooled equipment; the use of asset-tracking technology) could affect
demand for Brambles' current service offerings, the value of its
existing assets, and/or its profitability;
Failure to maintain adequate quality standards or asset control of
Brambles' pooled equipment may result in reduced customer
satisfaction or additional costs; and
Competitor activity, in particular in relation to changing customer
demands and/or market structures, could affect Brambles’ market
penetration, revenue and profitability.
An assessment of these specific risks and mitigating actions in the current
year, are set out in the Strategy Scorecard on Page 2, in the context of
Brambles' progress in relation to its business strategies and financial
performance objectives.
Brambles has identified the following additional risks that may affect its
financial performance and operations:
-
-
-
-
The successful execution and integration of acquisitions;
The potential for interruption, compromise or failure of the systems
and technology upon which Brambles relies to operate its business;
Regulatory compliance, particularly as Brambles operates in a large
number of countries with widely differing legal regimes, legislative
requirements and compliance cultures; and
Being able to attract, develop and retain high-performing individuals
who can implement and manage Brambles’ strategic objectives, as
well as having proper succession planning in place to develop talent.
5.3 Sustainability
Brambles believes its operating model is inherently sustainable as it
encourages the reuse of assets among multiple parties in the supply chain.
Brambles’ sustainability framework organises Brambles sustainability
activities in three areas: Better Business, Better Planet and Better
Communities. A full review of progress, material risks and new targets will
be included in the Sustainability Review scheduled for publication in
October 2015.
In FY15, Brambles conducted a review of material sustainability risks and
issues, recognising: previously identified material sustainability issues; the
ASX Corporate Governance Principles & Recommendations, particularly
Recommendation 7.4 concerning economic, environmental and social
sustainability risks; and the Global Reporting Initiative’s G4 reporting
framework. This review identified the following material sustainability risks.
- Materials sourcing: Ongoing secure supply of materials for the
production and repair of pooling equipment, in particular wood used
for pallets, is critical to Brambles. In FY11, Brambles set an
aspirational target of achieving chain-of-custody certification for
100% of wood purchased8 for manufacture and repair of CHEP pallets
by FY15. In FY15, Brambles purchased 2.3 million cubic metres of
wood for use in CHEP pooled pallets, up from 1.6 million cubic
metres in FY11. Of the FY15 volume, 97% was from certified sources
with 43% carrying full chain-of-custody certification. The percentage
of chain-of-custody certified wood did not improve in FY15, as a
result of suppliers being unable to provide full evidence of chain-of-
custody certification, as well as the limited supply of appropriate
quantities of wood certified in some countries. Brambles expects an
improvement in the volume of purchased lumber that is chain-of-
custody certified in FY16 as it continues to work with industry bodies
and suppliers in support of more sustainable lumber practices.
Safety: Brambles Zero Harm Charter states that everyone has the
right to be safe at work and to return home as healthy as they started
the day. Brambles measures its safety performance through the
Brambles Injury Frequency Rate (BIFR), which measures work-related
injuries, fatalities, lost time, modified duties and incidents requiring
-
medical treatment per million hours worked. Brambles’ met its target
of year-on-year improvement in the BIFR rate in FY15, recording a
BIFR of 13.3, an improvement from 15.6 in FY14. It was, therefore,
very sad that a truck driver in our recycled pallets operations in the
USA was involved in a tragic road traffic accident in December 2014
as a result of which both he and another driver were fatally injured.
Learning and development: Brambles’ people capability is linked to
its ability to meet its business objectives and, as such, the learning
and development opportunities available to its people are critical.
Brambles recorded more than 17,300 education, training and
development days in FY15, up 2.5% on FY14.
-
Further details of Brambles’ sustainability framework, material
sustainability risks and issues and new Sustainability targets will be
available in the Sustainability Review, scheduled for publication in October
2015.
6. Financial Position and Risk Management
6.1 Capital Structure
Brambles manages its capital structure to maintain a solid investment
grade credit rating. During the financial year ended 30 June 2015,
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, the potential funding requirements of its existing
business, 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,
varying the maturity profile of borrowings and managing discretionary
expenses.
6.2 Treasury Policies
Brambles’ treasury function is responsible for the management of certain
financial risks within Brambles. Key treasury activities include liquidity
management, interest rate and foreign exchange risk management, and
securing access to short and long-term sources of debt finance at
competitive rates. These activities are conducted on a centralised basis in
accordance with Board policies and guidelines, through standard
operating procedures and delegated authorities.
These policies provide the framework for the treasury function 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 25 of the Financial Report on Pages 70 to 76,
including a sensitivity analysis (Page 72) 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.
6.3 Funding and Liquidity
Brambles funded its operations during the 2015 financial year primarily
through retained cash flow and borrowings. Brambles generally sources
borrowings from relationship banks and debt capital market investors on a
medium-to-long-term basis.
There were no new debt capital market issuances during the Year. Bank
borrowing facilities were either maintained or renewed throughout the
Year. These facilities are generally structured on a multi-currency, revolving
basis with maturities ranging to December 2019. Borrowings under the
8 An explanation of chain of custody certification, certified sources and other terms is on Brambles’ website.
5
Operating & Financial Review – continued
facilities are floating-rate, unsecured obligations with covenants and
undertakings typical for these types of arrangements.
The table below shows the maturity profile of the Group’s committed
borrowing facilities and outstanding bonds, including the percentage due
in each 12-month maturity period.
The average term to maturity of Brambles’ committed credit facilities as at
30 June 2015 was 3.9 years (2014: 4.1 years). In addition to these facilities,
Brambles enters into operating 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.
Maturity Profile of Committed Borrowing Facilities and
Outstanding Bonds (% of total committed credit facilities)
6.4 Dividend Policy and Payment
Brambles has a progressive dividend policy. Under this policy, the Group
seeks to maintain or increase dividends per share each year, in Australian
cents, subject to its financial performance and cash requirements. The
Board has declared a final dividend for 2015 of 14.0 Australian cents per
share, in line with the previous interim dividend and up 0.5 Australian cents
per share on the previous final dividend. The 2015 final dividend is payable
on 8 October 2015 to shareholders on the Brambles register at 5pm on
11 September 2015. The ex-dividend date is 9 September 2015.
Total dividends for the Year were 28.0 Australian cents per share, up
1 Australian cent per share. Brambles paid the 2015 interim dividend
of 14.0 Australian cents per share on 9 April 2015.
15%
Brambles 2015 dividends are 30% franked. The unfranked component of
the final dividend is conduit foreign income: shareholders not resident in
Australia will not pay Australian dividend withholding tax on this dividend.
1.0
B
$
S
U
0.5
28%
22%
23%
9%
7%
3%
-
< 1 yr
Bonds/notes
1-2 yrs
2-3 yrs
Bank borrowings
3-4 yrs
4-5 yrs
> 5 yrs
Undrawn bank 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. While the two to three-year maturity profile is slightly above this
policy, action will be taken to refinance credit facilities to bring the profile
within policy.
Net Debt and Key Ratios
US$M
June 2015 June 2014
497.8
127.5
Change
(370.3)
Current debt
Non-current debt
Gross debt
Less cash
Net debt
Key ratios
Net debt to EBITDA
EBITDA interest cover
641.1
271.1
56.1
327.2
2,727.6
2,086.2
2,855.1
2,584.0
(166.2)
(222.3)
2,688.9
2,361.7
FY15
1.75x
13.7x
FY149
1.59x
13.2x
Brambles’ financial policy is to target a net debt to EBITDA ratio 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 1.75 times (2014: 1.59 times) and EBITDA interest cover at
13.7 times (2014: 13.2 times). If EBITDA for all acquisitions completed
during the Year was shown pro rata over a full year, Brambles' 2015 net
debt to EBITDA ratio would be 1.74 times.
Net debt was US$2,688.9 million at 30 June 2015, up US$327.2 million
from 30 June 2014, primarily reflecting the Ferguson Group acquisition.
At 30 June 2015, Brambles had committed credit facilities including bonds
and notes totalling US$3,722.6 million. Undrawn committed borrowing
capacity totalled US$930.2 million, a decrease of US$1,195.0 million from
June 2014, reflecting funding drawn down for the Ferguson acquisition,
bond repayments and foreign exchange impacts.
9 For FY14, based on continuing operations only.
6.4.1 Dividend Reinvestment Plan
With effect from the 2015 final dividend, Brambles has reactivated its
Dividend Reinvestment Plan on a non-underwritten basis and with a
discount of 1.5%, in support of the Group's ongoing funding needs.
Reactivating the DRP on a non-underwritten basis provides eligible
shareholders who wish to reinvest their dividends with an opportunity to
do so, while providing Brambles flexibility in support of its funding strategy
and future growth investment needs.
More details of the DRP will be sent to eligible shareholders separately in
the DRP Booklet, which will also be accessible on Brambles' website.
6.5 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, sometimes using interest rate
derivatives. The policy requires the level of fixed-rate debt to be within
40% to 80% of total forecast debt arising over the immediate 12-month
period, decreasing to a range of: 30% to 70% for debt maturities of one to
two years; 20% to 60% for debt maturities of two to three years; 10% to
50% for debt maturities of three to five years and 0% to 50% for debt
maturities extending beyond five years.
At 30 June 2015, Brambles had 46% of its weighted average interest-
bearing debt over the next 12 months at fixed interest rates (2014: 50%).
Beyond 12 months, the proportion of fixed-rate debt in the range of one
to two years was: 43% (2014: 54%); 39% for two to three years (2014: 50%);
and 19% for three to four years (2014: 40%). The weighted average
maturity period of fixed debt was 3.4 years (2014: 3.9 years). The fair value
of all interest rate swap instruments was US$10.3 million net gain (2014:
US$13.8 million net gain).
6.6 Foreign Exchange Risk
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,
6
Operating & Financial Review – continued
alternatively, by way of cross-border intercompany transactions. Forward
foreign exchange contracts are primarily used for these purposes. Given
that Brambles both generates income and incurs expenses in its local
currencies of operation, 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$2.7 million net loss (2014:
US$0.2 million net loss).
7. Financial Review
7.1 Group Overview
7.1.1 Summary: Key Metrics
US$M
(Continuing operations)
FY15
FY14
Change
Actual
FX
1%
Constant
FX
8%
Sales revenue
Operating profit
Significant Items
5,464.6 5,404.5
938.5
929.5
1%
8%
47.3
30.6
Underlying Profit
985.8
960.1
3%
10%
Underlying Profit margin
18.0%
17.8%
+0.2pts
+0.4pts
Average Capital Invested
6,291.0
5,889.6
7%
14%
Return on Capital
Invested
15.7%
16.3%
(0.6)pts
(0.5)pts
Brambles Value Added10
272.0
272.2
(0.2)
Cash Flow from
Operations
728.8
828.2
(99.4)
Brambles' financial results for the 12 months ended 30 June 2015 reflected
sales revenue and profit growth from continued execution of the Group's
organic growth strategy and contribution from acquisitions made since the
start of the prior corresponding period.
The delivery of operating efficiencies resulted in an increase in the
Underlying Profit margin, while the modest decline in key return on capital
measures reflected the impact of acquisitions.
The variance between actual and constant-currency performance was
driven by the strengthening of Brambles' reporting currency, the US dollar,
relative to the Group's other operating currencies, particularly the euro.
Sales revenue from continuing operations was US$5,464.6 million, up 1%.
Constant-currency sales revenue growth of 8% was in line with guidance of
8% to 9% constant-currency growth for FY15 and the five-year objective
for average annual constant-currency percentage sales revenue growth in
the high single digits. Constant-currency growth in FY15 was primarily
driven by: market-share expansion in the Pallets and RPCs segments;
pricing and volume growth in the Pallets segment; and acquisitions in the
Containers segment. Excluding the contribution of acquisitions, constant-
currency sales revenue growth was 6%.
Underlying Profit, which excludes Significant Items, was US$985.8 million,
up 3%. Constant-currency growth of 10% was driven by: sales revenue
growth; the delivery of the final US$34 million of efficiencies under the
Global Supply Chain11 program in Pallets; and a reduction in overheads as
a proportion of sales revenue. These drivers more than offset: higher plant
and transport costs in the USA pooled pallet operations; increased
depreciation costs from pool growth in the Pallets and RPCs segments; the
increased cost of pallet cores in the USA recycled pallet business; and the
recognition within continuing operations of an additional US$10 million of
corporate costs (which in FY14, were recharged to the Recall business
demerged in December 2013). Excluding acquisitions, constant-currency
Underlying Profit growth was 8%.
Return on Capital Invested was 15.7%, down 0.6 percentage points,
reflecting the impact of acquisitions made since the beginning of the prior
corresponding period. Excluding these acquisitions, Return on Capital
Invested was 16.6%, up 0.3 percentage points, as strong profitability gains
in the Europe, Middle East & Africa (EMEA) region of the Pallets segment
and in the RPCs segment more than offset lower profit in Pallets Americas.
Average Capital Invested was US$6,291.0 million, up 7% (up 14% at
constant currency), reflecting acquisitions since the start of the prior
corresponding period (Airworld in February 2014, Transpac in June 2014,
Ferguson in September 2014 and Rentapack in May 2015). Excluding
acquisitions, constant-currency growth was 5%.
Brambles Valued Added was US$272.0 million, down US$0.2 million,
reflecting the same trends as for Return on Capital Invested.
Cash Flow from Operations was US$728.8 million, down US$99.4 million,
driven by higher capital expenditure.
7.1.2 Profit Reconciliation
US$M
Underlying Profit
Pallets Americas
Pallets EMEA
Pallets Asia Pacific
Total Pallets
RPCs
Containers
Corporate
FY15
FY14
416.5
343.9
71.6
435.0
326.1
76.4
832.0
837.5
131.5
124.3
59.3
38.0
(37.0)
(39.7)
Total Underlying Profit
985.8
960.1
(47.3)
(30.6)
938.5
929.5
(111.9)
(113.0)
(241.1)
(232.0)
585.5
584.5
1,566.0
1,560.7
Significant Items
Operating profit
Net finance costs
Tax expense
Profit after tax
Weighted average
number of shares (M)
Basic EPS (US cents)
Basic EPS from continuing
operations (US cents)
Change
Actual
FX
Constant
FX
(4)%
5%
(6)%
(1)%
6%
56%
7%
3%
1%
1%
(4)%
0%
0%
(1)%
16%
3%
6%
15%
72%
5%
10%
8%
(7)%
(12)%
7%
0%
(51)%
7%
37.3
37.4
81.2
37.5
(54)%
0%
Operating profit of US$938.5 million, was up 1% (up 8% at constant
currency). Significant Items of US$47.3 million comprised: restructuring
and integration costs of US$34.8 million, $28.0 million of which related to
the One Better program; and acquisition-related costs of $12.5 million.
Net finance costs were US$111.9 million, down 1% reflecting lower euro-
denominated interest costs as a result of the strengthening US dollar. This
more than offset the increase in acquisition-related borrowing costs.
Tax expense was US$241.1 million, up 4%, reflecting profit mix and a
higher level of non-deductible acquisition-related costs in FY15. The
effective tax rate on operating profit was broadly unchanged at 29%.
Profit after tax of US$585.5 million was flat at actual currency. Constant-
currency growth of 7% reflected the increase in operating profit and a
modest increase in tax expense.
Basic earnings per share was 37.3 US cents, down from 81.2 US cents in
FY14 which included a 43.7 US cent contribution from the non-cash profit
associated with the Recall demerger. Basic earnings per share from
continuing operations of 37.4 US cents was flat in actual currency terms.
Constant-currency growth of 7%, reflected the increase in profit after tax.
10 Calculated at 30 June 2014 FX rates.
11 Program completed in FY15 to reduce direct costs by US$100 million through Pallets supply chain and logistics efficiencies and IFCO integration synergies.
7
Operating & Financial Review – continued
7.1.3 Five-Year Trends12
Group Sales Revenue (US$M)
Return on Capital Metrics
4,780
5,083
5,405
5,465
3,857
17.9
15.7
16.4
16.3
15.7
222
204
253
272
272
350
300
250
200
150
100
50
0
20
15
10
5
0
FY11
FY12
Pallets
FY13
RPCs
FY14
FY15
Containers
FY11
FY12
FY13
FY14
FY15
Brambles Value Added (US$M)
Return on Capital Invested (%)
Brambles' sales revenue of US$5,464.6 million in FY15 reflected a five-year
compound annual growth rate of 11%13. This was delivered despite
relatively weak underlying economic conditions in the period. The growth
reflected the execution of the Group's strategy: to expand the Pallets
business through entering new markets and expanding its products
offering; to expand the RPCs operations through the 2011 acquisition of
IFCO Systems and ongoing investment in that business to support
increased retailer conversions; to increase its presence in the Intermediate
Bulk Containers space through acquisitions and continued investment; and
diversification through acquisition into new supply chains in the Containers
segment such as aerospace and oil and gas .
The trend in Brambles' key return on capital metrics (Return on Capital
Invested and Brambles Value Added13) over the five-year period ended 30
June 2015 reflected the Group's expansion through both organic growth
and acquisitions. Return on Capital Invested declined from 17.9% to 15.7%
reflecting the impact on capital invested of acquired intangibles. Excluding
the impact of acquired intangibles, Return on Capital Invested increased
from 20.8% to 22.0%. The trend in Brambles Value Added – a measure of
economic profit over and above the cost of capital invested to create that
profit – demonstrates how profit growth out-stripped growth in capital,
increasing to US$272.0 million in FY15.
Underlying Profit (US$M)
Cash Flow from Operations (US$M)
836
913
960
986
712
828
729
697
633
460
FY11
FY12
FY13
Pallets
RPCs
Containers
FY14
Corporate
FY15
FY11
FY12
FY13
FY14
FY15
Brambles Underlying Profit of US$985.8 million in FY15 reflected a five-
year compound annual growth rate of 12%13. The profit growth primarily
reflected sales revenue growth as well as the delivery of efficiencies in the
Pallets business. Key drivers of profit improvement in the period included:
the successful execution of the Better Everyday program to increase pallet
and service quality through FY10 to FY13 in the USA pooled pallet
operations; the Global Supply Chain program to reduce operating costs by
US$100 million from FY12 to FY15, primarily through plant network
optimisation; and overall reductions in indirect costs worldwide.
By nature of Brambles' business, Cash Flow from Operations in a given
period is largely driven by profitability, capital expenditure and working
capital balances. The five years to FY15 was a period of strong profit
growth, facilitated largely by significant investments in capital expenditure
for growth. In addition, improved asset control practices contributed to
reduced replacement capital expenditure relative to sales growth, and
working capital efficiencies also contributed positively to cash flow. In
FY12, capital expenditure was especially high relative to the size of the
business, reflecting growth programs to support expansion in emerging
markets of the Pallets business, and in the RPCs segment following the
IFCO acquisition.
12 Data shown excludes the contribution of the Recall business demerged in December 2013 and is shown at actual FX rates.
13 Compound annual growth rate and Brambles Value Added calculated at 30 June 2014 FX rates.
8
Operating & Financial Review – continued
7.1.4 Cash Flow Reconciliation
US$M
Underlying Profit
Depreciation and amortisation
FY15
985.8
549.0
EBITDA
1,534.8
1,488.4
Capital expenditure (cash basis)
(983.6)
(854.3)
(129.3)
Proceeds from sale of PP&E
Working capital movement
IPEP expense
Other
Cash Flow from Operations
Significant Items
Discontinued operations
78.4
4.7
79.7
14.8
728.8
(50.9)
(1.4)
FY14 Change
25.7
960.1
528.3
20.7
46.4
77.6
10.6
88.3
17.6
0.8
(5.9)
(8.6)
(2.8)
828.2
(99.4)
(20.9)
(46.0)
(30.0)
44.6
58.0
34.9
8.1
Financing costs and tax
(272.4)
(330.4)
Free Cash Flow
Dividends paid
404.1
430.9
(26.8)
(359.3)
(394.2)
Free Cash Flow after dividends
44.8
36.7
Cash Flow from Operations was US$728.8 million, down US$99.4 million.
Growth in EBITDA and a positive move in working capital in the second
half were insufficient fully to offset the impact of increased capital
expenditure to fund growth. Total capital expenditure was
US$983.6 million, up US$129.3 million, primarily reflecting investment in
the European RPCs and Pallets Americas businesses.
Free Cash Flow after dividends was US$44.8 million, up US$8.1 million,
benefiting from: timing of tax and finance costs; non-repetition of costs
associated with the Recall demerger; and the favourable translational
impact of a strengthening US dollar on Australian dollar dividends. These
drivers more than offset the increase in Significant Items relative to FY14.
7.2 Segment Analysis
7.2.1 Pallets Americas
US$M
Sales revenue
Operating profit
Significant Items
Change
FY14 Actual
FX
2%
2,301.9
Constant
FX
5%
419.0
(5)%
(1)%
16.0
FY15
2,357.5
399.8
16.7
Underlying Profit
416.5
435.0
(4)%
Average Capital Invested
2,308.1
2,251.1
3%
(1)%
5%
Return on Capital
Invested
18.0%
19.3%
(1.3)pts
(1.1)pts
Brambles Value Added
162.7
181.2
(18.5)
Sales
Sales revenue in Pallets Americas was US$2,357.5 million, up 2% (up 5% at
constant currency) reflecting: net new business wins14 in North America;
solid pricing growth in the USA recycled pallet and Latin America
businesses; and modest like-for-like volume growth throughout the
region. The contribution from net new business wins was US$38 million.
-
North America sales revenue was US$2,069.3 million, up 3% (up 4%
in constant currency). Within North America:
-
USA pooled pallet revenue was US$1,372.8 million, up 5%,
reflecting: new customer contract wins and lane expansion; and
rollover benefits from prior-year contract wins. Pricing and like-
for-like volume growth contributions were both modest.
-
-
USA recycled pallet sales revenue was US$422.8 million, up 1%,
as pricing growth more than offset a decline in sales volumes
driven by contract losses and a shortage of used pallet cores,
reflecting an increased demand for pallets to service higher
inventory levels in the US retail supply chain.
Canada sales revenue was US$273.7 million, down 3%,
reflecting the strengthening of the US dollar against the
Canadian dollar. Constant-currency sales revenue growth of 7%
was primarily driven by rollover benefits from prior-year
contract wins.
-
-
Latin America sales revenue was US$264.1 million, down 3%,
reflecting the strength of the US dollar against currencies in the
region. Constant-currency growth of 10%, reflected a moderation on
prior years. Although volume growth continued, there was a
slowdown in the rate of like-for-like volume and net new business
growth resulting from lower levels of customer investment in
response to increased economic uncertainty.
LeanLogistics sales revenue was US$24.1 million, up 9% (up 10% at
constant currency) primarily driven by contract wins.
Profit
Underlying Profit was US$416.5 million, down 4% (down 1% at constant
currency). Volume growth in the USA pooled pallet and Canada
businesses, the delivery of US$16 million of efficiencies under the Global
Supply Chain program and flat overheads were insufficient to offset higher
direct costs in the USA pooled pallet business and core-price inflation in
the USA recycled pallet business.
In constant-currency terms, direct cost increases were driven by:
-
-
-
A US$40 million increase in plant and transportation costs in the USA
pooled pallet business, resulting from improved asset management
practices and an increased damage rate associated with higher asset
utilisation. The business has commenced implementing durability
improvements to new and existing pallets which, over time, are
expected to reduce the damage rate in the US pallet pool.
A US$15 million increase in transport carrier rates in the USA pooled
pallet business, resulting from supply shortages for third-party road
freight amid regulatory changes and tightened labour supply in the
sector. Transportation surcharges introduced in February 2015,
slightly offset this inflation in the second half.
A US$14 million increase in depreciation costs, in line with the growth
in the pallet pool resulting from increased pallet demand in the USA
and expansion in Latin America.
Operating profit of US$399.8 million was down 5% (down 1% at constant
currency). Significant Items of US$16.7 million primarily related to the One
Better program and the first phase of the CHEP brand refresh project.
Return on Capital
Return on Capital Invested was 18.0%, down 1.3 percentage points
(down 1.1 percentage points at constant currency), reflecting the reduction
in Underlying Profit and increased Average Capital Invested. Capital
expenditure15 was US$379.6 million, up $36.0 million, largely reflecting
increased customer cycle times in the USA, resulting from retail supply-
chain restocking.
14 The change in sales revenue in the reporting period resulting from business won or lost in that period and the previous financial year. The revenue impact of net new
business wins is included across reporting periods for a total of 12 months from the date of the win or loss and calculated on a constant-currency basis.
15 Capital expenditure on property, plant and equipment on an accruals basis.
9
Operating & Financial Review – continued
7.2.2 Pallets EMEA
US$M
FY15
FY14
Sales revenue
1,380.5 1,458.6
Change
Actual
FX
(5%)
Constant
FX
5%
7.2.3 Pallets Asia-Pacific
US$M
FY15
FY14
Sales revenue
343.5
362.9
Change
Actual
FX
(5)%
Constant
FX
3%
341.8
327.3
4%
15%
Operating profit
70.6
75.8
(7)%
Operating profit
Significant Items
2.1
(1.2)
Underlying Profit
343.9
326.1
Average Capital Invested
1,253.0
1,330.3
5%
(6)%
16%
6%
Significant Items
Underlying Profit
1.0
0.6
71.6
76.4
Average Capital Invested
357.1
371.9
(6)%
(4)%
3%
3%
2%
Return on Capital
Invested
27.4%
24.5%
2.9pts
2.4pts
Return on Capital
Invested
20.1% 20.5%
(0.4)pts
0.3pts
Brambles Value Added
210.9
168.2
42.7
Brambles Value Added
35.1
33.1
2.0
Sales
Sales revenue in Pallets EMEA was US$1,380.5 million, down 5%, largely
driven by the strengthening of the US dollar against the euro and, to a
lesser extent, the pound. Constant-currency growth of 5%, reflected
broadly equal contributions from pricing, like-for-like volume growth and
net new business wins of US$23 million.
-
Europe sales revenue was US$1,228.1 million, down 6% (up 4% at
constant currency). Within Europe:
-
-
-
-
-
Mid Europe (comprising Germany, Italy, the Benelux region,
Scandinavia, Switzerland and Austria) sales revenue was
US$368.3 million, down 9%. Constant-currency growth of 3%
was primarily driven by continued expansion with new and
existing customers;
UK & Ireland sales revenue was US$363.9 million, down 3%.
Constant-currency growth of 1% was driven by new contract
wins and pricing growth, which more than offset the impact of
contract losses resulting from aggressive price-based
competition;
Iberia was US$234.7 million, down 8%. Constant-currency
growth of 4% represented solid pricing and net new business
growth as well as improved like-for-like volume growth, in line
with economic recovery in the region;
France sales revenue was US$158.6 million, down 10%.
Constant-currency growth of 2% reflected modest like-for-like
volume growth; and
Central & Eastern Europe sales revenue was US$102.6 million,
up 5% (up 20% at constant currency) driven by continued
strong new business growth.
-
Africa, India & Middle East sales revenue was US$152.4 million, up
5% (up 13% at constant currency), primarily driven by like-for-like
volume growth and price increases.
Profit
Underlying Profit was US$343.9 million up 5%. Constant-currency growth
of 16% was primarily driven by: the delivery of US$15 million of efficiencies
under the Global Supply Chain program; sales mix improvements resulting
from changes in the customer portfolio; specific pricing initiatives; and
other direct cost efficiencies. Operating profit was US$341.8 million, up 4%
(15% at constant currency). Significant Items of US$2.1 million primarily
reflected One Better-related costs.
Return on Capital
Return on Capital Invested was 27.4%, up 2.9 percentage points (2.4
percentage points at constant currency) reflecting increased profitability.
Capital expenditure was US$256.0 million, down US$16.3 million. At
constant currency, capital expenditure was up US$16.0 million to fund
growth with key customers in the region.
Sales
Sales revenue in Pallets Asia-Pacific was US$343.5 million, down 5%,
primarily driven by the strengthening of the US dollar against the
Australian dollar. Constant-currency growth of 3% largely reflected robust
pricing gains in Australia and continued expansion with new and existing
customers in Asia. The contribution from net new business wins was
US$3 million.
-
-
-
Australia & New Zealand sales revenue was US$297.7 million,
down 7% (up 2% at constant currency).
China sales revenue was US$28.7 million, up 5%, reflecting continued
growth in wooden pallet volumes as China transitions volumes away
from the legacy plastic pallet business.
South-East Asia sales revenue was US$17.1 million, up 7% (up 11% at
constant currency) reflecting solid like-for-like volume growth.
Profit
Underlying Profit was US$71.6 million, down 6%. Constant-currency
growth of 3% largely reflected the pricing component of sales revenue in
Australia and Global Supply Chain program efficiencies of US$3 million.
Operating profit was US$70.6 million, down 7% (up 3% in constant
currency). Significant Items of US$1.0 million primarily related to the One
Better program.
Return on Capital
Return on Capital Invested was 20.1%, down 0.4 percentage points. At
constant currency, Return on Capital Invested improved by 0.3 percentage
points reflecting Underlying Profit growth. Capital expenditure was
US$61.6 million, up US$4.2 million primarily reflecting ongoing investment
in infrastructure and assets to support growth in Asia.
7.2.4 RPCs
US$M
Sales revenue
Operating profit
Significant Items
Underlying Profit
FY15
FY14
917.6
895.8
Change
Actual
FX
2%
Constant
FX
12%
130.8
124.3
5%
15%
0.7
-
131.5
124.3
6%
(2)%
15%
6%
Average Capital Invested
1,541.2 1,573.2
Return on Capital Invested
8.5%
7.9%
0.6pts
0.7pts
Brambles Value Added
(53.9)
(64.2)
10.3
Sales
Sales revenue in RPCs was US$917.6 million, up 2% reflecting the
strengthening of the US dollar against the other key operating currencies.
Constant-currency growth of 12% was largely driven by continued
expansion with existing retail customers in Europe and North America as
well as significant contributions from recent contract wins with large
European retailers.
10
solid underlying growth in all regions. Excluding acquisitions,
constant-currency sales revenue growth was 9%.
Oil & Gas sales revenue was US$110.9 million, up 168% (up 193% at
constant currency), reflecting the US$74.1 million contribution from
the Ferguson business acquired in September 2014. In the 12 months
ended 30 June 2015, for nine months of which it was under Brambles
ownership, Ferguson delivered constant-currency sales revenue
growth of 7% as growth in Australia, the UK, the Middle East and
Africa more than offset the adverse impact of challenging industry
condition on activity levels in Singapore and Norway, particularly in
the second half. Sales revenue in Brambles' pre-existing CHEP
Catalyst & Chemical Containers business declined 11% (down 5% at
constant currency) as an improved second-half performance in the
Europe, Middle East & Africa region was insufficient to offset the
impact of customers' continued deferral of refinery maintenance in
the USA and Canada.
Aerospace sales revenue was US$77.8 million, up 19% (up 25% at
constant currency), largely driven by the full-year contribution from
the Airworld business acquired in February 2014. Excluding
acquisitions, constant-currency growth was 14%, reflecting a strong
second-half performance as the pooling contract with Cathay Pacific
and key maintenance contract wins with Singapore Airlines and Air
France became active.
Profit
Underlying Profit was US$59.3 million, up 56% (up 72% in constant
currency), primarily reflecting the contribution from the Ferguson
acquisition. Excluding the impact of acquisitions, Underlying Profit was
US$36.3 million, down 2%, reflecting the strengthening of the US dollar.
Constant-currency growth was 10%, reflecting sales growth and scale
efficiencies. Operating profit was US$58.1 million, up 62% (up 79% in
constant currency). Significant Items of US$1.2 million primarily related to
acquisitions and the One Better program.
Return on Capital
Return on Capital Invested was 6.8%, down 2.0 percentage points,
reflecting the increase in Average Capital Invested from acquisitions.
Excluding the impact of acquisitions, Return on Capital Invested was 8.9%,
up 0.2 percentage points (up 0.6 percentage points at constant currency)
reflecting profit growth. Capital expenditure was US$101.0 million, up
US$46.9 million primarily to support growth, particularly with new
customers in Aerospace and acquisitions.
Operating & Financial Review – continued
-
-
-
-
Europe sales revenue was flat at US$582.4 million. Constant-currency
growth of 12% reflected strong volume growth with large retailers
such as Rewe, Waitrose, Carrefour and Dia.
North America sales revenue was US$191.5 million, up 10%,
reflecting continued conversions with existing retail partners
including Walmart, Kroger and Loblaws.
Australia, New Zealand and South Africa sales revenue was
US$117.4 million, down 1%. Constant-currency growth of 9%,
primarily reflected increased conversions with existing retailers in
South Africa and Australia.
South America sales revenue of US$26.3 million was up 20% (up 44%
at constant currency) and included a one-month contribution from
Rentapack, the leading provider of RPC pooling services in Chile,
acquired in May 2015. Excluding the impact of this acquisition,
constant-currency sales revenue growth was 33%, reflecting strong
pricing growth and continued expansion with existing retailers in
Brazil and Argentina.
-
-
Profit
Underlying Profit was US$131.5 million, up 6%. Constant-currency growth
of 15% primarily reflected: sales revenue growth; scale-related network
and transportation efficiencies in Europe; and the absence of one-off
retirement payments, impairment charges and marketing costs incurred in
the prior year. These benefits more than offset higher depreciation costs in
line with growth of the RPC pool and a modest increase in other direct
costs. Operating profit was US$130.8 million, up 5% (up 15% at constant
currency). Significant Items of US$0.7 million largely related to the One
Better program.
Return on Capital
Return on Capital Invested was 8.5%, up 0.6 percentage points (up 0.7
percentage points at constant currency), driven by Underlying Profit
growth. Capital expenditure was US$238.3 million, up US$57.9 million,
primarily reflecting continued equipment purchases to support growth in
all regions.
7.2.5 Containers
US$M
Sales revenue
Operating profit
Significant Items
Underlying Profit
Average Capital Invested
Return on Capital Invested
Change
Actual
FX
21%
Constant
FX
31%
62%
79%
56%
103%
72%
119%
FY15
FY14
465.5
385.3
35.9
2.1
38.0
431.2
58.1
1.2
59.3
874.1
6.8%
8.8%
(2.0pts)
(1.9)pts
Brambles Value Added
(49.0)
(14.0)
(35.0)
Sales
Sales revenue in the Containers segment was US$465.5 million, up 21% (up
31% at constant currency), primarily reflecting the contribution from
businesses acquired since the start of the prior corresponding period
(Ferguson, Transpac and Airworld). Excluding acquisitions, constant-
currency sales revenue growth was 4% as solid underlying growth in the
Intermediate Bulk Containers and Aerospace businesses more than offset
the impact of challenging operating conditions in the Automotive and
CHEP Catalyst & Chemical Containers businesses.
By business line, Containers’ sales revenue was as follows:
-
-
Automotive sales revenue was US$147.3 million, down 9%, reflecting
the US dollar strength against the Australian dollar and the euro.
Constant-currency sales revenue was down 1% as contributions from
new contract wins with General Motors in North America, continued
growth in India and an improved second-half performance in Europe
were insufficient to offset the ongoing decline of the Australian
automotive industry and challenging first-half conditions in Europe.
Intermediate Bulk Containers sales revenue was US$129.5 million, up
11% (up 22% at constant currency), reflecting the full-year
contribution from the Transpac business acquired in June 2014 and
11
Board and Executive Leadership Team
Board of Directors
Stephen Johns Non-Executive Chairman (Independent)
Chairman of the Nominations Committee and member of the Remuneration Committee
Joined Brambles as a Non-Executive Director in August 2004 and was appointed Chairman in September 2014. 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 is also a Director of the Garvan
Institute of Medical Research. 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: 68.
Christine Cross Non-Executive Director (Independent)
Member of the Remuneration Committee
Joined Brambles as a Non-Executive Director in January 2014. Christine is a food scientist by background, having lectured
at Edinburgh and Bath Universities for 15 years, prior to joining Tesco. From 1989 to 2003, she held a variety of Director-
level roles at Tesco, focusing on own brand, non-food and global sourcing, and international and small format expansion.
Christine left Tesco in 2003 and now runs a retail advisory business providing international best practice in customer-led
business planning and value chain management. She has previously served on the Boards of Next, Empire Canada,
Fairmont Hotel Group Canada and Taylor Wimpey and as Chief Retail Advisor for PricewaterhouseCoopers. Christine
currently retains the title of Visiting Professor at the business schools of Belfast University and Hull University and holds
Non-Executive Directorships with Sonae Group, Woolworths, Kathmandu and Plantasjen. She has a Bachelor of Education
degree, Master of Science in Food Science degree and a Diploma in Management. Age: 64.
Tony Froggatt Non-Executive Director (Independent)
Chairman of the Remuneration Committee and Member of the Nominations Committee
Joined Brambles as a Non-Executive Director in June 2006. He is a Non-Executive Director of Coca-Cola Amatil. Previously,
Tony was a Non-Executive Director of AXA Asia Pacific Holdings and Billabong International 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: 67.
Tom Gorman Chief Executive Officer
Chairman of the 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: 55.
David Gosnell Non-Executive Director (Independent)
Member of the Audit Committee and the Nominations Committee
Re-joined Brambles as a Non-Executive Director in December 2011. He retired from his role as President of Global Supply
& Procurement for Diageo plc on 31 December 2014. In that role, he led a global team of 9,000 people across
manufacturing, logistics and technical operations as well as managing Diageo's multi-billion pound 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 in 1998, David spent 20 years at HJ Heinz, where he served on the UK
board and held various European operational positions. He is also a Director of Coats plc. He holds a Bachelor of Science
degree in Electrical & Electronic Engineering from Middlesex University, England. Age: 58.
12
Board and Executive Leadership Team – continued
Tahira Hassan Non-Executive Director (Independent)
Member of the Remuneration Committee
Joined Brambles as a Non-Executive Director in December 2011. Tahira is a Non-Executive Director of Recall Holdings
Limited. She had a distinguished 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: 62.
Carolyn Kay Non-Executive Director (Independent)
Member of the Audit Committee
Joined Brambles as a Non-Executive Director in June 2006. She is a Guardian of the Future Fund and a Non-Executive
Director of John Swire & Sons Pty Ltd, The Sydney Institute, The General Sir John Monash Foundation and an External
Board Member of Allens Linklaters. She was also a Non-Executive Director of Commonwealth Bank of Australia,
Infrastructure NSW, Symbion Limited, Mayne Group Limited, Pacific Dunlop Limited, Colonial State Bank, Treasury
Corporation of Victoria and Victoria Funds Management Corporation. Carolyn has more than 30 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: 54.
Brian Long Non-Executive Director (Independent)
Chairman of the Audit Committee
Joined Brambles as a Non-Executive Director in July 2014. He is a Non-Executive Director of Commonwealth Bank of
Australia, at which he is Chairman of its Audit Committee, and Ten Network Holdings Limited, at which he is Deputy
Chairman. He was formerly a senior audit partner at Ernst & Young, retiring in 2010 after 29 years with that firm, at which
he was Chairman of both the Global Advisory Council and the Oceania Area Advisory Council (respectively, its worldwide
and regional partner governing bodies). Brian is a Fellow of the Institute of Chartered Accountants in Australia and has
been a member since 1972. Age: 69.
Scott Perkins Non-Executive Director (Independent)
Member of the Audit Committee
Joined Brambles as a Non-Executive Director in June 2015. Scott is a Non-Executive Director of Woolworths Limited and,
effective 1 September 2015, will be a Non-Executive Director of Origin Energy Limited. He was a Director of Meridian
Energy from 1999 to 2002. He is a Director of the Museum of Contemporary Art and is active in the charity and public
policy sector as the founder or director of a number of organisations. Scott has extensive experience in corporate strategy,
capital markets and investment banking. He held senior executive leadership positions at Deutsche Bank from 1999 to
2013, including as Managing Director and Head of Corporate Finance for Australia & New Zealand and as a member of
the Asia-Pacific management committee. Age: 51.
13
Board and Executive Leadership Team – continued
Executive Leadership Team
Tom Gorman Chief Executive Officer
Chairman of the Executive Leadership Team
(See biography on Page 12.)
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: 56.
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: 49.
Wolfgang Orgeldinger Group President, RPCs
Became Group President, RPCs in August 2013, having first joined Brambles in March 2011, following the acquisition of
IFCO Systems. Wolfgang served as Chief Operating Officer of IFCO from January 2002 to August 2011 and Chief
Information Officer, with responsibility for e-logistics and IT, from December 2000 to January 2002. Before joining IFCO,
Wolfgang was a member of the Executive Board at Computer 2000, a European IT distributor, and held various executive
roles. Prior to that, he worked for nine years in management positions at Digital Equipment. He holds an MBA from the
University of Bayreuth, Germany. Age: 58
Jason Rabbino Group President, Containers and Head, Group Strategy
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. Jason was appointed as
Head, Group Strategy on 1 June 2014. Age: 46.
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: 54.
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: 47.
14
Directors’ Report – Remuneration Report
Chairman’s Note
From July to October 2015 I will take the opportunity to once again
meet with a number of our largest domestic and international
institutional shareholders, largest superannuation fund investors and
leading proxy advisory firms. In our meetings last year, investors and
corporate governance firms indicated that they are supportive of
Brambles’ current remuneration policy. There was also an appreciation
for the strong alignment of incentive structures with business strategy.
In response to requests from proxy advisors, we have taken the
opportunity to make some enhancements to the Remuneration Report
this year.
Remuneration for senior executives in FY15 reflected another year of
strong Brambles results and continued execution of Brambles'
business strategy, as shown below:
Financial measure
Sales revenue
Operating profit
Profit after tax
Brambles Value Added
(BVA)
TSR (3 years to 30 June 2015)1
FY15 result
(US$M)
5,464.6
938.5
585.5
272.0
Change from FY14
(constant currency)
8%
8%
7%
91.4 %
Annual Short Term Incentive (STI) cash awards for continuing senior
executives ranged from 48% to 60% of base salary. These STI
outcomes were driven by Brambles’ financial performance and by
executives’ achievement of specific personal objectives.
Brambles’ performance over the three years to FY15 triggered 57.1% of
Long Term Incentive (LTI) awards granted in FY13 to vest.
Where roles remained unchanged, salary increases in the Year for the
Executive Leadership Team (ELT) were between 3% and 5%. Details of
ELT salaries are shown in Section 6.3.1. There were no changes to the
ELT in FY15.
The annual review of Non-Executive Directors' fees was carried out
during the Year. The Board decided, however, to defer the effective
date of any fee increase arising from that review from 1 January 2015
to 1 July 2015. As a result, there were no increases to the Board
Chairman's fees and other Non-Executive Director fees during 2015
and no changes to travel allowances. Base fees will increase by 2%
from 1 July 2015. Non-Executive Director fees are detailed in Section
7.1.
During the Year, the Remuneration Committee carried out its annual
review of Brambles’ remuneration strategy, structure and policy
including share-based incentive plans. The Committee concluded that
the current approach continues strongly to align the long-term
interests of the Company and its shareholders with those of its
executives.
As part of the review, however, the Committee approved two changes
to the manner in which Brambles’ LTI awards vest. These changes will
take effect for LTI share awards granted from FY16 and are outlined in
sections 4.2.1 and 4.2.2.
The Committee also re-affirmed the continuing use of BVA as one of
Brambles' key financial metrics for measuring performance against
incentive plans both short-term and long-term as it focuses on the
effective deployment of capital in growing our profitability.
Tony Froggatt
Non-Executive Director and Chairman of the Remuneration Committee
Contents
1. Background
2. Remuneration Committee
3. Remuneration Policy and Structure
4. Performance of Brambles and At Risk Remuneration
5. Employee Share Plan
6. Executive Directors and Disclosable Executives
7. Non-Executive Directors’ Disclosures
8. Remuneration Advisor
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
c) Other Group executives who have authority and responsibility
for planning, directing and controlling the Group’s activities.
This has been defined as those who, for some or all of the year
ended 30 June 2015 (the Year), were members of the ELT.
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) (the Act), regulations made under the Act and Australian Accounting
Standard AASB 124: Related Party Disclosures. The disclosures required by
section 300A of the Act have been audited. Disclosures required by the Act
cover both Brambles Limited and the Group.
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 senior executives.
During the Year, members of the Committee were Tony Froggatt
(Committee Chairman), Graham Kraehe (until 30 September 2014, when he
retired from the Board), Stephen Johns (from 1 October 2014), Tahira
Hassan and Christine Cross. 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
remuneration advisor, Ernst & Young.
During the Year, the Committee held six meetings.
Details of the Committee’s Charter and the rules of Brambles’ executive
and employee share plans can be found under Charters and Related
Documents in the Corporate Governance section of Brambles’ website.
1 TSR performance indicated is for continuing businesses excluding Recall which was demerged in 2013.
15
Directors’ Report – Remuneration Report – continued
3. Remuneration Policy and Structure
The Board has adopted a remuneration policy for the Group. This policy
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 FY15, the Committee
reviewed the remuneration policy against these objectives and concluded
that overall it remained effective and appropriate.
As a part of that review, however, the Committee approved two changes to
the manner in which Brambles’ LTI awards vest. These changes will take
effect for LTI share awards granted from FY16 and are outlined in sections
4.2.1 and 4.2.2.
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 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 (for details on the comparator group of
companies referred to Section 3.1.1) but with upper-quartile total potential
rewards for outstanding performance and proven capability.
3.1 Fixed and 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 between 3% and 5% during the Year.
3.1.1 Features of Fixed and At Risk Remuneration
Brambles’ remuneration framework is underpinned by its banding
structure. This classifies roles into specific bands, each incorporating roles
with 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 2014. 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 reward is required to
be At Risk.
This means an individual will achieve maximum remuneration only when
they meet challenging objectives in terms of Brambles’ overall financial
performance, returns for shareholders and strategic objectives. The
proportion of Disclosable Executives' total remuneration comprising At
Risk Remuneration is illustrated in Section 3.3.1.
Brambles’ At Risk Remuneration is provided by way of three types of
annual incentive awards: an STI cash award, an STI share award and an LTI
share award. The market value at the date of grant of all STI and LTI share
awards made to any person in respect to any financial year would not
normally exceed two and a half times their base salary. No Brambles shares
were purchased on market during the Year to satisfy the entitlements of
holders of STI share awards or LTI share awards.
The remuneration structure and the key features of Fixed and At Risk
Remuneration are summarised in Diagram 3.1.1 below. The application of
the At Risk element of remuneration is further described in Section 4.
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).
16Directors’ Report – Remuneration Report – continued
3.2 Remuneration and the Link to Business Strategy
Brambles’ business strategy is set out on Pages 3 to 5 of the Operating &
Financial Review. The remuneration policy supports the delivery of this
strategy by:
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.
-
-
-
-
Focusing business performance on profitable growth, the
efficient use of capital and the generation of cash: Profitable
growth is emphasised by both the use of Brambles Value Added
(BVA) as a key performance indicator in STI cash awards and the use
of compound annual growth rate (CAGR) sales revenue targets with
BVA hurdles as the performance conditions that must be satisfied for
half of all 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.
Recruiting and retaining 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.
Setting goals linked to implementation of the growth strategy:
Each year, a part of an executive’s STI cash award is subject to the
achievement of specific personal objectives. These include objectives
focused 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.
Achieving sustainable returns for shareholders: Each of the above
three elements supports 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 are subject.
3.3.1 Remuneration Mix vs. Actual Remuneration
Definitions of BVA, TSR and CAGR measurements and the methods by
which they are calculated are included in the Glossary on Pages 89 and 90.
3.3 Remuneration Mix for Disclosable Executives
Brambles’ executive remuneration mix is strongly linked to performance.
At Risk Remuneration represents 70% to 76% of Disclosable Executives’
maximum remuneration package.
Chart 3.3.1 below illustrates the level of actual remuneration received by
Disclosable Executives compared with their respective total remuneration
package mix. The remuneration mix (Rem Mix) is the Disclosable
Executive’s base salary plus his or her STI cash and STI share awards
assuming the maximum level of performance (see Section 4.1) and full
vesting of all LTI share awards.
The respective columns of Chart 3.3.1 labelled Actual comprise:
-
-
-
-
Base salary: this is base salary for FY15;
STI cash: this represents the STI cash award received in respect to
FY15 performance (see Section 4.1);
STI shares: this is the STI share award earned in respect to FY15
performance, the vesting of which is deferred until FY17 (see Section
4.1); and
LTI shares: this shows the proportion of the FY13-FY15 LTI share
awards that will vest at the end of the year (see Section 4.2).
The Rem Mix column represents the maximum value of each element of
the respective executive's remuneration package mix that could be
received in each case by the individual Disclosable Executive.
n
o
i
t
a
r
e
n
u
m
e
R
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
32%
32%
27%
14%
14%
22%
22%
25%
15%
15%
22%
22%
29%
21%
21%
19%
14%
14%
32%
22%
22%
21%
13%
13%
16%
27%
27%
0%
16%
16%
32%
22%
18%
22%
13%
13%
29%
21%
21%
24%
13%
13%
24% 24%
24% 24%
29% 29%
24% 24%
30% 30%
24% 24%
29% 29%
l
a
u
t
c
A
x
i
M
m
e
R
l
a
u
t
c
A
x
i
M
m
e
R
l
a
u
t
c
A
x
i
M
m
e
R
l
a
u
t
c
A
x
i
M
m
e
R
l
a
u
t
c
A
x
i
M
m
e
R
l
a
u
t
c
A
x
i
M
m
e
R
l
a
u
t
c
A
x
i
M
m
e
R
T Gorman
Z Todorcevski
J Holley
P Mackie
W Orgeldinger
J Rabbino
N Smith
Executives
Base Salary
STI Cash
STI Shares
LTI Shares
17
Directors’ Report – Remuneration Report – continued
3.4 Securities Trading Policy and Incentive Awards
Brambles' Securities Trading Policy applies to awards granted under the
incentive arrangements described above. That policy prohibits designated
persons (including all Disclosable Executives) from acquiring financial
products or entering into arrangements that have the effect of limiting
exposure to the risk of price movements of Brambles’ securities. It is a term
of senior executives’ employment contracts that they are required to
comply with all Brambles policies (including the Securities Trading Policy).
Management declarations are obtained twice yearly and include a
statement that executives have complied with all policies.
Sections 9.2 and 9.3 summarise all the incentive plans under which awards
to Disclosable Executives are still to vest or be exercised.
3.5 Claw Back
The rules of Brambles’ 2006 Performance Share Plan (2006 Share Plan)
include a clawback provision. Under this provision, the Board may cancel
any Award that has been granted but which has not vested, if the Board
reasonably considers that the participant has engaged or participated in
conduct that adversely affects, or is likely to adversely affect, the
Company’s financial position or reputation. Such conduct includes, but is
not limited to, any misrepresentation, material misstatements of the
Company’s financial position due to error or omission, and negligence.
4. Performance of Brambles and At Risk
Remuneration
Brambles’ remuneration policy is directly linked to the Company’s financial
performance, the creation of shareholder wealth and the delivery of
strategy. This link is achieved in the following ways:
-
-
-
By placing a significant portion of executives’ remuneration at risk;
By selecting appropriate KPIs for annual STI cash awards and
performance conditions for LTI share awards; and
By requiring those KPIs or performance conditions to be met in order
for the At Risk Remuneration to be awarded or to vest.
The relationship between Brambles’ remuneration policy and its
performance over the Year and the previous four financial years is set out
in Section 4.2. The tables in Section 4.2.2 show the level of vesting of LTI
share awards triggered by performance over those periods.
4.1 STI Key Performance Indicators
As outlined in Section 3.1, Disclosable Executives have the opportunity to
receive annual STI cash and share awards based on performance against
KPIs. A significant proportion (50%) of overall STI incentives are STI share
awards, which vest two years after the award is made. Disclosable
Executives’ KPIs comprise both financial and non-financial KPIs.
4.1.1 Financial KPIs
Financial KPIs are chosen to link executives’ rewards with the financial
performance of the Group, the pursuit of profitable growth and the
efficient use of capital and generation of cash.
A focus on BVA helps ensure efficient use of capital within Brambles. Profit
after tax (PAT) captures interest and tax charges not directly incorporated
in BVA. Cash Flow from Operations is used as a measure to ensure a strong
focus on the generation of cash.
STI financial KPIs chosen for the Year were BVA and Cash Flow from
Operations plus (for the Chief Executive Officer and Chief Financial Officer),
PAT. For the Group President, Pallets, the Group President, RPCs, KPIs were
Brambles’ and the respective operating segment’s BVA and Cash Flow
from Operations. The Group President, Containers, had the same KPIs
except that Containers’ sales revenue growth replaced that segment’s BVA.
The key levels of performance possible against each of the financial KPIs
relevant to the STI awards for the Year were:
Threshold (the minimum necessary to qualify for the awards);
Target (when performance targets have been met); and
-
-
- Maximum (when targets have been significantly exceeded and the
related rewards have reached their upper limit).
The actual levels of performance achieved for the Year against the financial
KPIs are summarised in the following table:
KPIs2
Brambles BVA4
Brambles PAT4
Brambles Cash Flow from
Operations
Level of performance achieved
during the Year3
Achieved Target
Achieved Target
Achieved Target
Pallets BVA
Between Threshold and Target
Pallets Cash Flow from Operations Achieved Target
Containers Sales
Between Threshold and Target
Containers Cash Flow from
Operations
Achieved Target
IFCO RPCs BVA
Between Target and Maximum
IFCO RPCs Cash Flow from
Operations
Achieved Full Year Target but
below Threshold for Mid-Year
Target
4.1.2 Non-financial KPIs
Non-financial KPIs are set to link Disclosable Executives’ performance to
Brambles’ overall strategic objectives. These include personal objectives in
areas such as safety, business strategy and growth objectives, customer
satisfaction and retention, and people and talent management.
-
-
-
-
Brambles’ safety is measured by Brambles Injury Frequency Rate
(BIFR)5. BIFR targets for each operating segment 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, Human Resources and
relevant Group President will have any incentive related to BIFR
outcomes reduced to zero. The Letter from the Chairman and the
CEO reported on the sad occurrence of a workplace fatality in the
Pallets business in FY15. As a consequence, the CEO, Group Senior
Vice President, Human Resources and the Group President of Pallets
had a zero BIFR outcome for the Year.
Business strategy and growth objectives include the implementation
of clearly specified initiatives allocated to individual ELT members: for
example, new business acquisitions, product and service expansion
and entry into new geographies.
Customer satisfaction and retention are mainly measured using Net
Promoter Score6, for which targets are set and performance is
measured each year.
People and talent management metrics relate to the development of
future leaders in Brambles as well as succession planning for critical
roles.
2 Definitions 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 89 and 90.
3 Financial targets set for FY15 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.
4 "Achieved Target" for BVA, PAT or Sales reflects performance within +/-1% of Target. STI Payments are calculated using the actual performance against Target.
5 A definition of BIFR is included in the Glossary on Page 89. Reporting of the Group’s BIFR performance is included in the Sustainability section of the Operating &
Financial Review on Page 5.
6 An explanation of the Group’s use of Net Promoter Score is included in the Sustainability Review to be published on Brambles’ website during October 2015.
18
Directors’ Report – Remuneration Report – continued
Plan rules. Under the “good leaver” provisions of those rules, 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’ objective
of creating and sustaining profitable growth. To allow a focus on
shareholder value and profitable growth, 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
conditions:
-
-
-
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. For LTI share awards granted from
FY16, this will increase to 50%;
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.
Each year, a sales revenue CAGR/BVA matrix is set by the Committee for
each LTI share award based on budget targets approved by the Board. The
matrix is published in the subsequent Remuneration Report. This allows
the Board to set targets for each LTI share award that reward strong
performance in the light of the prevailing and forecast economic and
trading conditions.
The table overleaf 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.
As a policy principle, the Committee takes into account major acquisitions
or divestments during a Performance Period in determining the final
outcome of the CAGR/BVA matrix for that period. Where there are
acquisitions or divestments that are not material to the overall outcome,
these are excluded from any performance assessment.
The following table summarises the components and weighting of KPIs for
STI cash awards for Disclosable Executives:
Disclosable
Executive
Financial KPIs
Non-
Financial
KPIs
Group
BVA
30%
25%
Segment
BVA/
sales
-
25%
Group
PAT
20%
-
Group
cash
flow
20%
Segment
cash
flow
-
-
20%
30%
30%
50%
-
-
20%
-
30%
CEO, CFO
Group
Presidents:
Pallets, RPCs,
Containers
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. The total Maximum STI cash
potential for the CEO, CFO and Group Presidents of Pallets, RPCs and
Containers is 90% of Base Salary. The total Maximum STI cash potential for
Other Disclosable Executives is 75% of Base Salary.
4.1.3 Actual STI Cash Payable and Forfeited for FY15
% of
maximum
STI
cash
forfeited
% of
maximum
STI
cash
payable
% of
Target
Financial
KPIs
achieved
% of non-
financial
KPIs
achieved
Name
Disclosable Executives
102%
T Gorman
Z Todorcevski
102%
J Holley
P Mackie
100%
94%
W Orgeldinger 88%
J Rabbino
N Smith
89%
100%
87%
93%
100%
80%
90%
85%
87%
65%
66%
67%
60%
59%
59%
64%
35%
34%
33%
40%
41%
41%
36%
4.2 LTI Share Awards
As outlined in Section 3.1, Disclosable Executives have the opportunity to
receive an annual equity grant in the form of LTI share awards. Vesting
occurs three years from the date the award is granted and is subject to
satisfaction of performance conditions (explained in Section 4.2.1) 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 maximum value of LTI awards that are the subject of the annual grant
to the CEO, CFO and Group Presidents of Pallets, RPCs and Containers may
not exceed 130% of those executives' respective base salaries. The
maximum value of LTI awards for the other Disclosable Executives is the
market value of Brambles shares equal in value to 100% of their respective
base salaries.
The table in Section 4.2.2 illustrate 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 that apply to each of the awards are set out in
Sections 9.2 and 9.3.
The awards are governed by the 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
19
Directors’ Report – Remuneration Report – continued
4.2.2 CAGR/BVA LTI Performance Matrix for FY15 to FY17
Vesting %
Sales revenue CAGR7
4%
5%
6%
7%
8%
9%
Cumulative three-year BVA at fixed
30 June 2014 FX rates (US$M)
800
–
20%
40%
60%
80%
100%
1,000
20%
40%
60%
80%
100%
100%
1,200
40%
60%
80%
100%
100%
100%
The sales revenue CAGR currently provides for half-point vesting between
the percentages shown if the sales revenue outcome is more than halfway
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 70%. For LTI
share awards granted from FY16 there will also be a half point vesting
scale between the respective BVA hurdles. For example, a sales revenue
CAGR of 7% and a BVA outcome of US$1,100 million would provide
vesting of 90%.
4.2.3 Performance of LTI Share Awards under the 2006
Share Plan
The tables below detail actual performance against the applicable
performance condition for LTI share awards made during the five financial
years indicated.
As outlined in Section 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
comprise half of the LTI Award.
Level of Vesting of LTI Share Awards based on TSR performance
The following table provides details for the actual performance of LTI share awards against the TSR performance for those awards granted in 2011, 2012
and 2013 that have been tested.
Awards made
during
FY11
Performance condition
Relative TSR
Start of performance
period
1 July 2010
Out-performance of
median company’s TSR8
30.3 percentage points
Vesting triggered (% of original award):
period prior to 30 June 2015
100% LTI TSR Award
FY12
FY13
Relative TSR
Relative TSR
1 July 2011
18.02 percentage points
1 July 2012
29.75 percentage points
83.25% LTI TSR Award
84.17% LTI TSR Award
The following table provides similar details for awards that have yet to be tested:
Awards made
during
FY14
Performance condition
Relative TSR
Start of performance
period
1 July 2013
Out-performance of
median company’s TSR8
(%)
14.10 percentage points
Period to 30 June 2015: vesting if current
performance is maintained until earliest
testing date (% of original award)
67.47% LTI TSR awards
FY15
Relative TSR
1 July 2014
4.18 percentage points
48.57% 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 2011, 2012 and 2013 that have been tested.
Awards made
during
FY11
Performance condition
Sales revenue CAGR/BVA
Start of performance
period
1 July 2010
Sales revenue CAGR/BVA
1 July 2011
FY12
FY13
Vesting triggered (% of
original award): prior
period and period
to 30 June 2014
30.0% LTI sales revenue
CAGR/BVA awards
20.0% of LTI sales revenue
CAGR/BVA awards
Vesting triggered (% of original award):
period to 30 June 2015
N/A
N/A
30.0%
Sales revenue CAGR/BVA
1 July 2012
N/A
The following table provides similar details for LTI sales revenue CAGR/BVA awards which have not yet expired:
Awards made
during
FY14
Performance condition
Sales revenue CAGR/BVA
Start of performance
period
1 July 2013
Period to 30 June 2015 vesting if current performance is maintained
until earliest testing date (% of original award)
40.0% LTI sales revenue CAGR/BVA awards
FY15
Sales revenue
1 July 2014
60.0% LTI sales revenue CAGR/BVA awards
Total level of Vesting of LTI Share Awards
The combined vesting of the two LTI components for 2013, 2014 and 2015 is shown below.
Awards made
during
FY11
Start of performance
period
1 July 2010
End of performance
period
30 June 2013
FY12
FY13
1 July 2011
1 July 2012
30 June 2014
30 June 2015
Total vesting (TSR and sales revenue CAGR/BVA combined)
65.0%
51.6%
57.1%
7 Three-year CAGR over base year is used.
8 Percentage out-performance of the median company’s TSR against the S&P/ASX100 Index.
20
Directors’ Report – Remuneration Report – continued
5. Employee Share Plan
MyShare was launched in October 2008 and was developed as a vehicle to encourage share ownership and retention across the Group. Employees may
buy up to A$5,000 of shares each year, which the Company matches on a one for one basis after a two-year qualifying period.
Under the MyShare program, Brambles has over 3,000 participants who held 2,856,991 Brambles shares in total at 30 June 2015.
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.
During the Year 741,469 Brambles shares were purchased on-market under the MyShare Plan, being the Acquired Shares purchased by participants in that
plan, at an average price of A$10.37 per share.
6. Executive Directors and Disclosable Executives
6.1 Executive Director Changes
There were no changes to Brambles’ Executive Directors during the Year.
6.2 Other Disclosable Executive Changes
There were no changes to Other Disclosable Executives during the Year.
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 state that any
termination payments made would be reduced by any value to be received under any new employment.
Other than Peter Mackie9, executives remunerated on a base salary approach receive pension contributions not exceeding 15% of base salary.
Base salary increases for most executives were around 3% as shown in the table below.
6.3.1 Contract Terms for Disclosable Executives
Name and role(s)
Disclosable Executives
T Gorman, CEO
Z Todorcevski, CFO
J Holley, Chief Information Officer
P Mackie, Group President, Pallets
W Orgeldinger, Group President, RPCs
J Rabbino, Group President, Containers and Head, Group Strategy
N Smith, Group Senior Vice President, Human Resources
Base salary at 30 June 2014
Base salary at 30 June 2015
A$2,122,000
A$1,081,500
US$450,000
£437,750
€630,000
US$675,000
A$654,050
A$2,186,000
A$1,140,000
US$465,000
£460,000
€660,000
US$695,000
A$675,000
9 Mr Mackie received employer superannuation (pension) contributions of 21% of base salary for income up to £153,700 and 15% of base salary for income above
that amount.
21
Directors’ Report – Remuneration Report – continued
6.4 Total Remuneration and Benefits For The Year
The purpose of the table below is to enable shareholders to understand the actual remuneration received by Disclosable Executives. The table provides a
summary of the actual remuneration, before equity, received or receivable by the Disclosable Executives for the Year, together with prior year
comparatives. Income derived from the vesting of shares during the Year has been included below as “Actual share income”. The value shown is the
market value at the time the income became available to the executive. These awards were granted in prior financial years. Theoretical accounting values
for unvested share awards are shown in Section 9.4; those values are a statutory disclosure requirement. Unvested share awards may result in “Actual
share income” in future years and, if so, the income will be reported in the table below in the Remuneration Report for the relevant year).
(US$'000)
Short-term employee benefits
Post-
employment
benefits
Name
EXECUTIVE DIRECTORS
T J Gorman13
CURRENT DISCLOSABLE
EXECUTIVES
Z Todorcevski13
J K Holley
P S Mackie13
W Orgeldinger13
J D Rabbino
N P Smith13
Totals
Year
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
Cash/
salary/
fees
Non-
monetary
benefits 10
Cash
bonus
Super-
annuation
2,174
2,322
1,058
1,167
289
140
1,074
1,156
483
468
829
811
788
642
720
594
635
711
562
586
232
223
390
420
419
452
367
387
269
297
16
14
-
-
1
-
32
31
-
-
2
-
-
-
25
23
62
60
27
42
8
7
89
75
29
23
6,703
3,297
6,704
3,532
340
185
240
230
Other
Termination/
sign-on
payments/
retirement
benefits Other 11
Actual
share
income
Total
before
equity
STI/LTI
MyShare
awards12
3,576
3,645
3,395
4,112
1,696
1,783
794
767
1,249
1,301
1,252
1,137
1,193
1,072
943
1,033
453
807
526
279
1,064
1,472
6
1,685
1
-
813
1,346
Total
6,971
7,757
2,149
2,590
1,320
1,046
2,313
2,773
1,258
2,822
1,194
1,072
1,756
2,379
55
16
19
4
17
16
2
28
5
5
17
16
8
2
123
10,703
6,258
16,961
87
10,738
9,701
20,439
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10 Non-monetary benefits include car parking, motor vehicles, personal/spouse travel, club membership and fringe benefits tax.
11 In FY14 the leave entitlement was included in the "Cash/salary/fees" column, however for FY15 this has been included within the "Other" column.
12 STI/LTI MyShare were exercised when they became available to the executive, with the exception of W Orgeldinger who exercised rights with a market value of
1,367k in FY15 which had become available to him in FY14. As indicated in the 2014 report, STI vesting in 2014 included STI Awards made in 2011 and 2012.
13 The year-on-year comparison of remuneration is affected by the movement of exchange rates from A$1=US$0.9142, €1=US$1.3587 and £1=US$1.6331 for FY14
and A$1=US$0.8301, €1=US$1.1946 and £1=US$1.5734 for FY15.
22
Directors’ Report – Remuneration Report – continued
6.5 Equity-Based Awards
The following table shows details of equity-based awards made to Disclosable Executives during the Year. STI and LTI share awards were made under the
2006 Share Plan, the terms and conditions of which are set out in Sections 9.2 and 9.3 (see plan numbers 12 to 14). Matching Awards were made under
MyShare, the terms and conditions of which are also set out in Sections 9.2 and 9.3 (plan numbers 15 to 43).
Name
Type of award
Number
Value at grant (US$’000)14
Disclosable Executives
T Gorman
Z Todorcevski
J Holley
P Mackie
W Orgeldinger
J Rabbino
N Smith
STI
LTI
MyShare Matching
Totals
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
STI
LTI
MyShare Matching
Total
130,525
282,052
527
413,104
65,550
143,750
527
209,827
22,262
52,308
578
75,148
48,810
107,970
570
157,350
49,357
46,704
529
96,590
44,966
102,000
455
147,421
33,209
66,872
528
100,609
1,123
2,426
5
3,554
564
1,237
5
1,806
192
450
5
647
420
929
5
1,354
425
402
5
832
387
877
4
1,268
286
575
5
866
14 The total value of the relevant equity award(s) is valued as at the date of grant using the methodology set out in Section 9. 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.
23
Directors’ Report – Remuneration Report – continued
6.6 Share Holdings
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), under Brambles’ Securities Trading Policy.
Ordinary shares
Disclosable Executives
T Gorman16
Z Todorcevski17
J Holley18
P Mackie18
W Orgeldinger18
J Rabbino18
N Smith1619
Balance at the start of the Year
Net changes during the Year Balance at the end of the Year15
267,154
174,880
47,727
85,908
1,827
216
70,804
1,106
(58,737)
39,965
9,816
882
499
3,589
268,260
116,143
87,692
95,724
2,709
715
74,393
6.7 Interests in Share Rights20
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 6 September 2011, 25 September 2012, 12 October 2012, 25 September 2013 and 25 September 2014 under the 2006 Share Plan;
and Matching Awards, being conditional rights awarded during the Year under MyShare.
Balance at
the start of
the Year
Granted during
the Year
Exercised during
the Year21
Lapsed during
the Year
Balance at the
end of the
year22
Vested and
exercisable at the
end of the year
Number
Number23
Number
Number24
Number
Number
Disclosable Executives
T Gorman
Z Todorcevski
J Holley
P Mackie
W Orgeldinger
J Rabbino
N Smith
1,495,238
490,871
244,811
474,775
251,998
233,677
359,438
413,104
209,827
75,148
157,350
96,590
147,421
100,609
(388,393)
(54,778)
(60,101)
(121,889)
(158,584)
(62)
(93,091)
(208,735)
1,311,214
-
(32,469)
(59,177)
-
-
(51,041)
645,920
227,389
451,059
190,004
381,036
315,915
-
-
-
-
37,450
-
-
15 On 31 July 2015, the following Disclosable Executives acquired ordinary shares under MyShare, which are held by AET Structured Finance Services Pty Limited: Tom
Gorman (39), Zlatko Todorcevski (39), Jean Holley (42), Peter Mackie (44), Wolfgang Orgeldinger (39), Jason Rabbino (35) and Nick Smith (38).
16 Of which AET Structured Finance Services Pty Limited holds 3,339 shares for Tom Gorman and 4,393 shares for Nick Smith.
17 Of which 500 shares were held by Zlatko Todorcevski and Robert Todorcevski, 113,845 shares were held by Tentwentyfive Pty Ltd and 1,798 are held by AET
Structured Finance Services Pty Limited.
18 All of these shares are held by AET Structured Finance Services Pty Limited.
19 Of which 70,000 held by Lisa Smith.
20 Of the awards detailed in Section 9.3, the following plan numbers are relevant to Disclosable Executives: Tom Gorman, Jean Holley, Peter Mackie and Nick Smith (1
to 5, 9 to 14 and 15 to 43); Zlatko Todorcevski (6 to 14 and 15 to 43); Wolfgang Orgeldinger (10 to 14 and 15 to 43); Jason Rabbino (5 to 6, 9 to 14 and 15 to 43).
Lapses occurred for Tom Gorman, Jean Holley, Peter Mackie and Nick Smith (1 and 2). Exercises occurred for Tom Gorman, Jean Holley, Peter Mackie and Nick
Smith (1 to 3 and 15 to 26); Zlatko Todorcevski (6 and 15 to 26); Wolfgang Orgeldinger and Jason Rabbino (15 to 26).
21 Of 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.
22 On 31 July 2015, the following Disclosable Executives received Matching Awards under MyShare: Tom Gorman (39), Zlatko Todorcevski (39), Jean Holley (42), Peter
Mackie (44), Wolfgang Orgeldinger (39), Nick Smith (38) and Jason Rabbino (35).
23 During the Year, 2,756,030 equity-settled performance share rights were granted under the 2006 Share Plan, of which 412,577 were granted to Tom Gorman and
209,300 were granted to Zlatko Todorcevski. 781,576 Matching Awards were granted under MyShare during the Year, of which 527 were granted to Tom Gorman
and 527 were granted to Zlatko Todorcevski. Approval for these issues of securities was obtained under ASX Listing Rule 10.14 at the AGM held on 6 November
2014.”
24 "Lapse" in this context means that the Awards was forfeited due to either the applicable service or performance conditions not being met.
24
Directors’ Report – Remuneration Report – continued
7. Non-Executive Directors’ Disclosures
7.1 Non-Executive Directors’ Remuneration Policy
The Chairman’s fees are determined by the Remuneration Committee and
the other Non-Executive Directors’ fees are determined by the Chairman
and Executive Director. 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.
All Non-Executive Directors’ fees are set in Australian dollars and paid in
local currencies.
Brambles’ base fees for Non-Executive Directors are set with reference to
the comparator group of companies referred to in Section 3.1.1, which is
consistent with Brambles’ policy on executive pay.
A review of Non-Executive Director and Board Chairman fees was
undertaken in FY15 to ensure the fees remained in line with the Australian
market practice. Although market data supported a 3% increase the Board
decided to reduce the increase to 2% to align with executive salary
increases in FY16. In addition, the Board decided to defer the effective date
of the fee increase from 1 January 2015 to 1 July 2015, and as a
consequence, there was no increase in FY15.
The revised fees for the Chairman and Non-Executive Directors which will
apply from 1 July 2015 are:
-
-
Chairman: A$609,000; and
Non-Executive Directors: A$203,000.
The following travel allowances and Committee membership fees were not
increased during the Year:
-
-
-
-
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 above supplemental Committee fees do not apply to the Board
Chairman.)
The next fee review will take effect from 1 January 2016.
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, available on Brambles’
website, contains details of the process for appointing and re-electing
Non-Executive Directors and of the years in which the Non-Executive
Directors are next due for re-election by shareholders.
Letters of appointment for Non-Executive Directors, which are contracts
for service but not contracts of employment, have been put in place. These
letters confirm that 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.
Non-Executive Directors do not participate in Brambles’ 2006 Share Plan or
MyShare plans.
7.3 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 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
C Cross
A G Froggatt25
D P Gosnell26
T Hassan27
S P Johns28
S C H Kay29
B Long30
S Perkins
Former Non-Executive Directors
D G Duncan
G J Kraehe AO31
66,965
-
14,890
22,910
8,000
47,500
14,877
4,000
-
-
-
-
-
7,000
-
-
4,000
-
-
-
-
14,890
22,910
15,000
47,500
14,877
8,000
-
-
66,965
7.4 Non-Executive Directors’ Remuneration for the Year
Fees and other benefits provided to Non-Executive Directors during the
Year and the prior year are set out in Table 7.4.1 on Page 26 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 payments.
Any contributions to personal superannuation or pension funds on behalf
of the Non-Executive Directors are deducted from their overall fee
entitlements.
25 Of which 7,000 shares were held by Christine Joanne Froggatt and 7,890 shares were held by Anthony Grant Froggatt.
26 Held by Charles Stanley & Co Australia in the name of Susan Gosnell.
27 Held by RBC Dexia Custodian on behalf of Tahira Hassan.
28 Of which 27,500 shares were held by Canzak Pty Ltd, and 20,000 shares were held by Caran Pty Limited.
29 Of which 4,900 were held by Sarah Carolyn Hailes Kay, 5,500 were held by Carolyn Kay ATF Superannuation Fund A/C, and 4,477 were held by Sarah Carolyn Kay
and Simon Swaney ATF Carolyn Kay Superannuation Fund A/C.
30 Of which 4,000 were held by BJ & VG Long Investments Pty Limited ATF BJ Long Super Fund A/C and 4,000 were held by BJ and VG Long Investment Pty Limited.
31 Held by Invia Custodians for Graham John Kraehe Private Superannuation Fund. The "Balance at end of Year" is as of 30 September 2014; he ceased to be a
Brambles director after that.
25
Directors’ Report – Remuneration Report – continued
Table 7.4.1: Non-Executive Directors’ Remuneration for the Year
(US$'000)
Name
CURRENT NON-EXECUTIVE DIRECTORS
Short-term employee benefits
Post-employment benefits
Year
Directors’ fees
Superannuation
Other 32
Total 33
C Cross34
A G Froggatt34
D Gosnell34
T Hassan34
S P Johns34
S C H Kay34
B J Long34
(from 1 July 2014)
S Perkins34
(from 1 June 2015)
FORMER NON-EXECUTIVE DIRECTORS
D Duncan34
(until 20 Feb 2015)
G J Kraehe AO34
(until 30 Sep 2014)
Totals
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
185
82
197
202
181
206
185
199
407
218
166
185
193
-
16
-
121
209
121
525
1,772
1,826
9
4
19
19
9
9
9
9
29
20
16
17
18
-
2
-
6
9
11
32
128
119
-
-
3
-
25
2
33
7
3
-
3
-
-
-
-
-
35
2
14
18
116
29
194
86
219
221
215
217
227
215
439
238
185
202
211
-
18
-
162
220
146
575
2,016
1,974
8. Remuneration Advisor
The Committee has appointed Ernst & Young as Brambles’ remuneration
advisor to assist the Company with Non-Executive Director and executive
remuneration matters. In performing its role, the Committee directly
requests and receives 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, share rights valuation and project-related
services, as well as 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
Brambles’ management, which excludes Recommendations;
-
-
-
-
-
-
-
Any requests to Ernst & Young from Brambles management that
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;
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;
Representatives of Ernst & Young attend all Committee meetings;
Except for the CEO and Group Senior Vice President, Human
Resources, Disclosable Executives do not attend Committee
meetings;
The CEO and Group Senior Vice President, Human Resources 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.
32 "Other" includes personal/spouse travel, tax services and fringe benefits tax.
33 None of the Non-Executive Directors received rights/awards over Brambles Limited shares during the Year, so there are no relevant share-based payment amounts
for disclosure.
34 The year-on-year comparison of remuneration is affected by the movement of exchange rates from A$1=US$0.9142, €1=US$1.3587 and £1=US$1.6331 for FY14
and A$1=US$0.8301, €1=US$1.1946 and £1=US$1.5734 for FY15.
26
Directors’ Report – Remuneration Report – continued
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 23 on Pages 66 and 67 of the financial statements.
9.2 Summary of 2006 Plans
The table below contains details of the 2006 Share Plan and MyShare Plan under which former or current Disclosable Executives have unvested and/or
unexercised awards that 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
2006 Share Plan
(STI)
Nature
of award Size of award
Up to 100% of
Share
rights
size of STI cash
award
Vesting
condition
Time only
2006 Share Plan
(TSR LTI)
Share
rights
% of salary/TFR Time and
relative TSR
hurdle
2006 Share Plan
(FY12-FY14
BVA LTI)
Share
rights
% of salary/TFR Time and
2006 Share Plan
(FY13-FY15
BVA LTI)
Share
rights
% of salary/TFR
2006 Share Plan
(FY14-FY16 BVA
LTI)
Share
rights
% of salary/TFR
2006 Share Plan
(FY15-FY17 BVA
LTI)
Share
rights
% of salary/TFR
Performance/vesting
period
Two years
Life of award
Maximum six years
Three years
Maximum six years
Three years
Maximum six years
Three years
Maximum six years
Three years
Maximum six years
Three years
Maximum six years
Vesting schedule
100% vesting based on
continuous employment.
40% vesting if TSR is equal to
the median ranked company.
100% vesting if 25% above the
median ranked company.
20% vesting occurs if CAGR is
6% and BVA is US$797M over
three-year period.
100% vesting occurs if CAGR is
8% and BVA is US$1,197M over
three year period.
20% vesting occurs if CAGR is 5%
and BVA is US$848M over three-
year period.
100% vesting occurs if CAGR is 7%
and BVA is US$1,248M over three-
year period.
20% vesting occurs if CAGR is 5%
and BVA is US$800M over three-
year period.
100% vesting occurs if CAGR is 7%
and BVA is US$1,200M over three-
year period.
20% vesting occurs if CAGR is 5%
and BVA is US$800M over three-
year period.
100% vesting occurs if CAGR is 7%
and BVA is US$1,200M over three-
year period.
sales revenue
CAGR and
BVA
performance
Time and sales
revenue CAGR
and BVA
performance
Time and sales
revenue CAGR
and BVA
performance
Time and sales
revenue CAGR
and BVA
performance
MyShare
Matching
Awards
N/A
1:1 Matching
Awards for
every Acquired
Share
purchased
Time and
retention of
Acquired
Shares
Two years from first
acquisition
Automatic exercise
on second
anniversary of first
acquisition
27
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
2006 Share Plans 1
Plan number Grant date
6 September 201135
Expiry date
6 September 201736
Value at grant
A$3.46
Status/vesting date
83.25% vested at 6 September 2014
2
3
4
5
6
7
8
9
10
11
12
13
14
6 September 201137
6 September 201736
A$5.68
20% vested at 6 September 2014
25 September 201238
25 September 201836
A$6.31
100% vested at 25 September 2014
25 September 201235
25 September 201836
A$3.41
25 September 2015
25 September 201237
25 September 201836
A$6.07
25 September 2015
12 October 2012
12 October 2018
A$6.48
100% vested at 31 January 2015
12 October 2012
25 September 2018
A$3.50
25 September 2015
12 October 2012
25 September 2018
A$6.23
25 September 2015
25 September 201338
25 September 201936
A$8.45
25 September 2015
25 September 201335
25 September 201936
A$4.19
25 September 2016
25 September 201337
25 September 201936
A$8.16
25 September 2016
25 September 201438
25 September 202036
A$9.15
25 September 2016
25 September 201435
25 September 202036
A$5.00
25 September 2017
25 September 201437
25 September 202036
A$8.83
25 September 2017
35 These LTI awards vest on the third anniversary of their grant date, subject to continued employment and meeting a TSR performance condition.
36 Awards granted to Jean Holley and Jason Rabbino expire three years earlier than the date shown, or immediately after vesting, if earlier.
37 These LTI awards vest on the third anniversary of their grant date, subject to continued employment and meeting a sales revenue CAGR and BVA performance
condition.
38 STI awards vest on the second anniversary of their grant date, subject to continued employment.
28
Directors’ Report – Remuneration Report – continued
Plan
MyShare
Plan number Grant date
15
29 March 201339
Expiry date
1 April 2015
Value at grant
A$8.08
Status/vesting date
100% vested on 31 March 2015
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
30 April 201339
1 April 2015
31 May 201339
1 April 2015
28 June 201339
1 April 2015
31 July 201339
1 April 2015
30 August 201339
1 April 2015
30 September 201339
1 April 2015
31 October 201339
1 April 2015
29 November 201339
1 April 2015
31 December 201339
1 April 2015
31 January 201439
1 April 2015
28 February 201439
1 April 2015
31 March 201440
1 April 2016
30 April 201440
1 April 2016
30 May 201440
1 April 2016
30 June 201440
1 April 2016
31 July 201440
1 April 2016
29 August 201440
1 April 2016
30 September 201440
1 April 2016
31 October 201440
1 April 2016
28 November 201440
1 April 2016
31 December 201440
1 April 2016
30 January 201540
1 April 2016
27 February 201540
1 April 2016
31 March 201541
1 April 2017
30 April 201541
1 April 2017
29 May 201541
1 April 2017
30 June 201541
1 April 2017
31 July 201541
1 April 2017
A$8.31
A$8.86
A$8.92
A$8.74
A$8.39
A$8.70
A$8.84
A$9.11
A$8.71
A$8.63
A$8.95
A$8.86
A$8.94
A$9.19
A$8.74
A$8.87
A$8.98
A$9.05
A$9.00
A$9.27
A$10.17
A$10.20
A$10.45
A$11.01
A$10.24
A$10.95
A$9.98
A$10.32
100% vested on 31 March 2015
100% vested on 31 March 2015
100% vested on 31 March 2015
100% vested on 31 March 2015
100% vested on 31 March 2015
100% vested on 31 March 2015
100% vested on 31 March 2015
100% vested on 31 March 2015
100% vested on 31 March 2015
100% vested on 31 March 2015
100% vested on 31 March 2015
31 March 2016
31 March 2016
31 March 2016
31 March 2016
31 March 2016
31 March 2016
31 March 2016
31 March 2016
31 March 2016
31 March 2016
31 March 2016
31 March 2016
31 March 2017
31 March 2017
31 March 2017
31 March 2017
31 March 2017
39 These Matching Awards granted under MyShare vest on 31 March 2015, subject to continuing employment and the retention of the associated Acquired Shares.
On vesting they are automatically exercised.
40 These Matching Awards granted under MyShare vest on 31 March 2016, subject to continuing employment and the retention of the associated Acquired Shares.
On vesting they are automatically exercised.
41 These Matching Awards granted under MyShare vest on 31 March 2017, subject to continuing employment and the retention of the associated Acquired Shares.
On vesting they are automatically exercised.
29
Directors’ Report – Remuneration Report – continued
9.4 Share Based Payments – Future Potential
The table below provides annual accounting values for shares granted during years 2011-2013, which have been amortised over three years. These share
awards are subject to conditions set out in Section 9.2. Remuneration will normally not be received as a result of the underlying share awards vesting until
the conditions have been met.
(US$’000)
Name
Executive Directors
T Gorman
Current Disclosable Executives
Z Todorcevski
J Holley
P Mackie
W Orgeldinger
J Rabbino
N Smith
Totals
Share based payment
Total before
equity
Awards
Share of FY15
total remuneration
3,576
3,645
1,696
1,783
794
767
1,249
1,301
1,252
1,137
1,193
1,072
943
1,033
2,550
2,546
1,219
980
444
369
881
842
376
444
689
299
625
656
10,703
10,738
6,784
6,136
42%
41%
42%
35%
36%
32%
41%
39%
23%
28%
37%
22%
40%
39%
-
-
Year
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
FY15
FY14
Total
6,126
6,191
2,915
2,763
1,238
1,136
2,130
2,143
1,628
1,581
1,882
1,371
1,568
1,689
17,487
16,874
30
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 2015 (the Year).
Principal Activities
The principal activities of the Group during the Year were the provision
of supply-chain logistics services, focusing on the provision of
reusable pallets, crates and containers, of which Brambles is a leading
global provider.
Further details of the Group’s activities are set out in Section 1 of the
Operating & Financial Review on Page 3.
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 of the results of those operations
are given in the Letter from the Chairman and the CEO, the Strategy
Scorecard and the Operating & Financial Review from Pages 1 to 11.
Information about the financial position of the Group is included in the
Operating & Financial Review and in the Five-Year Financial Performance
Summary on Page 88.
Significant Changes in State of Affairs
On 9 September 2014, Brambles announced the acquisition of Ferguson
Group, a leading provider of container solutions to the international
offshore oil and gas sector. The acquisition of Ferguson Group was
completed on 12 September 2014.
Other than the above, there were no significant changes to the state of
affairs of the Group for the Year.
Matters since the End of the Financial Year
The Directors are not aware of any matter or circumstance that has arisen
since 30 June 2015 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 the CEO,
Strategy Scorecard and Operating & Financial Review on Pages 1 to 11.
Further information in relation to such matters has not been included
because the Directors believe it would be likely to result in unreasonable
prejudice to the Group.
Dividends
The Directors have declared a final dividend for the Year of 14 Australian
cents per share, which will be 30% franked. The dividend will be paid on
8 October 2015 to shareholders on the register on 11 September 2015.
On 9 April 2015, an interim dividend for the Year was paid, which
was 14 Australian cents per share and 30% franked. On 9 October 2014,
a final dividend for the year ended 30 June 2014 was paid, which
was 13.5 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.
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 12 and 13.
Christine Cross
1 July 2014 to date
Douglas Gordon Duncan
1 July 2014 to 19 February 2015
Anthony Grant Froggatt
1 July 2014 to date
Thomas Joseph Gorman
1 July 2014 to date
David Peter Gosnell
Tahira Hassan
Stephen Paul Johns
1 July 2014 to date
1 July 2014 to date
1 July 2014 to date
Sarah Carolyn Hailes Kay
1 July 2014 to date
Graham John Kraehe AO
1 July 2014 to 30 September 2014
Brian James Long
1 July 2014 to date
Scott Redvers Perkins
1 June 2015 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 of Brambles Limited are
detailed in Note 31 of the Financial Report on Page 82. Insurance policies
are in place to cover Directors and executive officers, however, the terms
of the policies prohibit disclosure of the details of the insurance cover and
the premiums paid.
Environment
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’
2015 Sustainability Review which will be available on the Brambles’ website
in October 2015. A copy of the complete Environmental Policy is set out in
Brambles’ Code of Conduct, which is available at www.brambles.com.
31Directors’ Report – Other Information – continued
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, RPCs and Containers 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 2015 Sustainability Review, which will be available on Brambles’
website in October 2015.
Employees
The 2015 Sustainability Review, available on Brambles’ website in October
2015, will contain details of Brambles’ performance as an employer.
Directors’ Meetings
Details of the Board committee memberships are given in the Directors biographies on Pages 12 and 13. 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 Committees
Audit Committee
meetings
Remuneration
Committee meetings
Nominations Committee
meetings
C Cross
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
B J Long
S R Perkins
(a)
11
6
11
11
11
11
11
11
2
11
1
(b)
11
7
11
11
11
11
11
11
2
11
1
(a)
(b)
(a)
(b)
(a)
(b)
(a)
(b)
-
-
-
6
-
-
5
2
1
3
-
-
-
-
6
-
-
5
2
1
3
-
-
3
-
-
5
-
1
5
-
5
-
-
3
-
-
5
-
1
5
-
5
-
4
-
4
-
-
4
3
-
1
-
-
4
-
4
-
-
4
3
-
1
-
-
-
-
7
-
6
-
7
-
1
-
-
-
-
7
-
6
-
7
-
1
-
-
a)
b)
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.
The number of meetings held while the Director was a member of the Board or relevant committee which the Director was eligible to attend.
32
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 2012.
Director
C Cross
Listed company
Kathmandu Holdings Limited
Next plc
Sonae Group plc
Woolworths Limited
D G Duncan
J.B. Hunt Transport Services, Inc
Benchmark Electronics, Inc
A G Froggatt
Billabong International Limited
Coca-Cola Amatil Limited
T J Gorman
None
D P Gosnell
Coats plc
T Hassan
S P Johns
Recall Holdings Limited
Leighton Holdings Limited
Westfield Group:
Westfield Holdings Limited
Westfield America Management Limited (as responsible entity for Westfield America Trust)
Period directorship held
2012 to current
2005 to May 2014
2009 to current
2012 to current
2010 to current
2006 to current
2008 to 2013
2010 to current
-
2015 to current
2013 to current
2009 to March 2013
1985 to May 2013
1996 to May 2013
Westfield Management Limited (as responsible entity for Westfield Trust and Carindale Property Trust)
1985 to May 2013
S C H Kay
Commonwealth Bank of Australia
G J Kraehe AO
Bluescope Steel Limited
Djerriwarrh Investments Limited
B J Long
Commonwealth Bank of Australia
Ten Network Holdings Limited
S R Perkins
Woolworths Limited
Origin Energy Limited
1 Scott Perkins' directorship of Origin Energy Limited will be effective 1 September 2015.
2003 to March 2015
2002 to current
2002 to current
2010 to current
2010 to current
2014 to current
2015 to current1
33
Directors’ Report – Other Information – continued
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, which
activities comprise:
-
-
-
-
Continuously testing its pallets, crates and containers 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; and
Testing and developing unique identifier technologies, including
radio frequency identification.
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.
The Group’s operations are subject to numerous environmental laws and
regulations in the other countries in which it operates. There were no
material beaches of these laws or regulations during the Year.
Corporate Governance Statement
Brambles is committed to observing the corporate governance
requirements applicable to publicly listed companies in Australia. The
Board has adopted a corporate governance framework designed to enable
Brambles to meet is legal, regulatory and governance requirements.
During the Year, the Board believes Brambles met or exceeded all the
requirements of the Australian Securities Exchange Corporate Governance
Council Corporate Governance Principles and Recommendations, Third
Edition. Brambles' 2015 Corporate Governance Statement is on Brambles
website at www.brambles.com/corporate-governance-overview.
Interests in Securities
Pages 24 and 25 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 22
and 23 of the Financial Report on Pages 65 to 67.
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 28
and 29 of the Directors' Report – Remuneration Report:
-
-
68,163 grants under the 2015 MyShare offer (plan numbers 15 to 43);
7,398 exercises resulting in the issue of fully paid ordinary shares: 733
under the 2013 MyShare offer (plan numbers 15 to 26); 2,342 under
-
the 2014 MyShare offer (plan numbers 27 to 38); 1,023 under the
2015 MyShare offer (plan numbers 39 to 43); 3,300 under plan
number 3; and
684,022 lapses: 7,174 under the 2014 MyShare offer (plan numbers
27 to 38); 6,273 under the 2015 MyShare offer (plan numbers 39 to
43); 106,956 under plan number 4; 473,031 under plan number 5;
16,707 under plan number 7; and 73,881 under plan number 8.
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 on Pages 4 and 5 in the Operating & Financial Review and in
Principle 7 of Brambles 2015 Corporate Governance Statement.
Treasury Policies
A discussion of the implementation of treasury policies and mitigation of
treasury risks can be found on Pages 5 to 7 in the Operating & Financial
Review.
Non-Audit Services and Auditor Independence
The amount of US$0.95 million 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
acquisitions, strategy-based consulting, compliance tracking systems, 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 6 August 2015 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.
Auditor's Independence Declaration
A copy of the auditor’s independence declaration as required under
section 307C of the Act is set out on Page 87.
Annual General Meeting
The AGM will be held at 2.00pm (AEDT) on 12 November 2015 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.
Stephen Johns
Tom Gorman
Chairman
20 August 2015
Chief Executive Officer
34
Shareholder Information
Directors
S P Johns
(Non-Executive Chairman)
C Cross
(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 C H Kay
(Non-Executive Director)
B J Long
(Non-Executive Director)
S R Perkins
(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 2015 AGM will be held at 2.00pm (AEDT)
on 12 November 2015 at The Wesley Theatre, Wesley Conference Centre,
220 Pitt Street, Sydney, New South Wales 2000.
Financial Calendar
Final Dividend 2015
Ex-dividend date – Wednesday, 9 September 2015
Record date – Friday, 11 September 2015
Payment date – Thursday, 8 October 2015
2016 (Provisional)
Announcement of interim results – mid February 2016
Interim dividend – mid April 2016
Announcement of final results – mid August 2016
Final dividend – mid October 2016
AGM – November 2016
Analysis of Holders of Equity Securities as at 31 July 2015
Substantial Shareholders
Brambles has been notified of the following substantial shareholdings:
Commonwealth Bank of Australia
Sun Life Financial Inc
Schroder Investment Management Australia Limited
Holder
Number of ordinary
shares
135,094,859
110,348,587
83,885,123
% of issued ordinary
share capital1
8.62%
7.04%
5.36%
Number of Ordinary Shares on Issue and Distribution of Holdings
Shares
14,589,072
1 – 1,000
71,310,261
1,001 – 5,000
38,349,290
5,001 – 10,000
66,212,524
10,001 – 100,000
1,376,509,293
100,001 and over
Total
1,566,970,440
The number of members holding less than a marketable parcel of 46 ordinary shares (based on a market price of A$10.88 on 31 July 2015) is 925 and they
hold a total of 11,448 ordinary shares. The voting rights of ordinary shares are described on Page 36.
Holders
30,129
30,563
5,470
3,195
128
69,485
1 Percentages are as disclosed in substantial holding notices given to Brambles Limited.
35
Shareholder Information – continued
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 below.
Holders
2,784
35
25
84
15
2,943
Share rights
895,231
122,802
184,792
2,351,057
4,491,878
8,045,760
Twenty Largest Ordinary Shareholders
Name
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
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