Annual Report 2015
www.brambles.com
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).
16 Directors’ 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.
31 Directors’ 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
Australian Foundation Investment Company Limited
RBC Investor Services Australia Nominees Pty Limited
AMP Life Limited
BNP Paribas Nominees Pty Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Argo Investments Limited
National Nominees Limited
AET SFS Pty Ltd
Bond Street Custodians Limited
UBS Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
Number of ordinary
shares
607,808,724
% of issued ordinary
share capital
38.79%
291,477,489
231,764,128
87,273,306
35,612,348
11,173,530
9,079,141
8,917,731
7,872,151
7,513,456
7,236,245
5,422,449
2,830,200
2,793,477
2,232,165
2,100,000
1,890,771
1,776,876
1,761,076
1,732,733
18.60%
14.79%
5.57%
2.27%
0.71%
0.58%
0.57%
0.50%
0.48%
0.46%
0.35%
0.18%
0.18%
0.14%
0.13%
0.12%
0.11%
0.11%
0.11%
Percentage of total holdings of 20 largest holders
1,328,267,996
84.77%
Voting Rights: Ordinary Shares
Brambles Limited’s constitution provides that each member entitled to
attend and vote may do so in person or by proxy, by attorney or, where
the member is a body corporate, by representative. The Directors may also
determine that at any general meeting, a member who is entitled to attend
and vote on a resolution at that meeting is entitled to a direct vote in
relation to that resolution. The Directors have prescribed rules to govern
direct voting which are available at www.brambles.com.
On a show of hands, every member present in person, by proxy, by
attorney or, where the member is a body corporate, by representative and
having the right to vote on a resolution has one vote. The Directors have
determined that members who submit a direct vote will be excluded on a
vote by a show of hands. a poll, every member present in person, by proxy,
by attorney or, where the member is a body corporate, by representative
and having the right to vote on the resolution has one vote for each
ordinary share held. The Directors have determined that votes cast by
members who submit a direct vote will be included on a vote by a poll,
being one vote for each ordinary share held.
Voting Rights: Share Rights
Performance share rights over ordinary shares and MyShare Matching
Awards do not carry any voting rights.
36
Financial Report
for the year ended 30 June 2015
INDEX
PAGE
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to the financial statements
1 Basis of preparation
2 Significant accounting policies
3 Critical accounting estimates and judgements
4 Segment information
5 Operating expenses - continuing operations
6 Significant Items - continuing operations
7 Net finance costs - continuing operations
8 Income tax
9 Earnings per share
10 Dividends
11 Discontinued operations
12 Business combinations
13 Trade and other receivables
14 Inventories
15 Other assets
16 Property, plant and equipment
17 Goodwill
18 Intangible assets
19 Trade and other payables
20 Provisions
21 Retirement benefit obligations
22 Contributed equity
23 Share-based payments
24 Reserves and retained earnings
25 Financial risk management
26 Cash flow statement - additional information
27 Commitments
28 Contingencies
29 Auditor's remuneration
30 Key Management Personnel
31 Related party information
32 Events after balance sheet date
33 Net assets per share
34 Parent entity financial information
Directors' declaration
Independent auditor's report
Auditor's independence declaration
38
39
40
41
42
43
43
48
49
51
52
52
53
56
57
58
58
59
60
60
61
62
63
64
64
65
65
66
68
70
77
79
79
80
80
81
82
82
83
84
85
87
37 Consolidated Income Statement
for the year ended 30 June 2015
Continuing operations
Sales revenue
Other income
Operating expenses
Share of results of joint ventures and associates
Operating profit
Finance revenue
Finance costs
Net finance costs
Profit before tax
Tax expense
Profit from continuing operations
(Loss)/profit from discontinued operations1
Profit for the year attributable to members of the parent entity2
Earnings per share (cents)
Total
- basic
- diluted
Continuing operations
- basic
- diluted
Note
2015
US$M
2014
US$M
4
5
7
8
11
9
5,464.6
114.7
5,404.5
132.6
(4,641.6)
(4,609.4)
0.8
938.5
13.8
(125.7)
(111.9)
826.6
(241.1)
585.5
(1.1)
584.4
37.3
37.2
37.4
37.3
1.8
929.5
15.5
(128.5)
(113.0)
816.5
(232.0)
584.5
683.2
1,267.7
81.2
80.8
37.5
37.3
The consolidated income statement should be read in conjunction with the accompanying notes.
1
2
Recall earnings up until the demerger date were included in discontinued operations in 2014.
Profit after tax for 2014 includes non-cash demerger profit of US$662.0 million (refer Note 11).
38 Consolidated Statement of Comprehensive Income
for the year ended 30 June 2015
Profit for the year
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial losses on defined benefit pension plans
Income tax on items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign subsidiaries
Reserves released to profit on demerger of Recall
Cash flow hedges
Income tax on items that may be reclassified to profit or loss
Other comprehensive (loss)/profit for the year
Total comprehensive income for the year attributable to members of the parent entity
Note
2015
US$M
2014
US$M
584.4
1,267.7
8A
24
24
24
8A
(1.0)
0.3
(0.7)
(350.0)
-
-
-
(350.0)
(350.7)
233.7
(7.9)
(2.7)
(10.6)
50.8
(29.4)
0.1
(0.1)
21.4
10.8
1,278.5
The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Total comprehensive income for 2014 attributable to members of the parent entity comprised US$624.7 million from continuing operations
and US$653.8 million from discontinued operations.
39 Consolidated Balance Sheet
as at 30 June 2015
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets
Non-current assets
Investments
Property, plant and equipment
Goodwill
Intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Retirement benefit obligations
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
The consolidated balance sheet should be read in conjunction with the accompanying notes.
Note
2015
US$M
2014
US$M
26
13
14
15
16
17
18
8C
15
19
25
20
25
20
21
8D
19
22
24
24
166.2
1,044.6
81.3
59.0
222.3
1,103.5
66.9
70.2
1,351.1
1,462.9
5.9
4,424.7
1,530.5
220.5
41.9
20.0
6,243.5
7,594.6
6.2
4,367.5
1,322.4
221.1
44.3
13.3
5,974.8
7,437.7
1,285.8
1,311.4
127.5
63.2
103.0
497.8
41.6
113.5
1,579.5
1,964.3
2,727.6
2,086.2
19.2
55.0
564.3
7.9
3,374.0
4,953.5
2,641.1
6,027.4
(7,101.8)
3,715.5
2,641.1
20.9
60.9
541.0
13.4
2,722.4
4,686.7
2,751.0
5,993.4
(6,742.5)
3,500.1
2,751.0
40 Consolidated Cash Flow Statement
for the year ended 30 June 2015
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Dividends received from joint ventures
Interest received
Interest paid
Income taxes paid on operating activities
Net cash inflow from operating activities2
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for intangible assets
Proceeds from Recall demerger, net of cash disposed
Acquisition of subsidiaries, net of cash acquired
Payments for investments in associates
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Net (outflow)/inflow from hedge instruments
Proceeds from issues of ordinary shares
Dividends paid
Net cash inflow/(outflow) from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and deposits, net of overdrafts, at beginning of the year
Effect of exchange rate changes
Cash and deposits, net of overdrafts, at end of the year
26A
The consolidated cash flow statement should be read in conjunction with the accompanying notes.
1
Recall cash flows up until the demerger date were included in 2014.
2 Net cash inflow from operating activities for 2014 included US$(7.9) million relating to discontinued operations.
Note
2015
US$M
20141
US$M
6,128.3
(4,532.7)
1,595.6
-
1.7
(107.5)
(166.6)
26B
1,323.2
6,487.3
(4,889.2)
1,598.1
0.2
3.3
(121.5)
(212.2)
1,267.9
(983.6)
(889.5)
78.4
(13.8)
-
(497.8)
-
81.1
(25.8)
417.3
(40.7)
(2.8)
(1,416.8)
(460.4)
1,578.3
(1,120.5)
1,612.3
(1,908.0)
(38.5)
-
(359.3)
60.0
(33.6)
221.8
(31.5)
156.7
34.9
5.1
(394.2)
(649.9)
157.6
75.0
(10.8)
221.8
41 Consolidated Statement of Changes in Equity
for the year ended 30 June 2015
Year ended 30 June 2014
Opening balance
Profit for the year
Other comprehensive income
Total comprehensive income
Share-based payments:
- expense recognised
- shares issued
- equity component of related tax
- transfer to retained earnings on demerger of Recall
Transactions with owners in their capacity as owners:
- dividends declared
- issues of ordinary shares, net of transaction costs
- capital reduction on Recall demerger
- Recall demerger dividend
Closing balance
Year ended 30 June 2015
Opening balance
Profit for the year
Other comprehensive loss
Total comprehensive income
Share-based payments:
- expense recognised
- shares issued
- equity component of related tax
Transactions with owners in their capacity as owners:
- dividends declared
- issues of ordinary shares, net of transaction costs
Note
Contributed
equity
US$M
Reserves1
US$M
Retained
earnings
US$M
Total
equity
US$M
6,618.5
(6,748.2)
3,155.1
3,025.4
-
-
-
-
-
-
-
24
22
22
-
44.1
(669.2)
-
-
1,267.7
1,267.7
21.4
21.4
27.2
(43.1)
4.6
(4.4)
-
-
-
-
(10.6)
10.8
1,257.1
1,278.5
-
-
-
4.4
27.2
(43.1)
4.6
-
(376.1)
(376.1)
-
-
(540.4)
44.1
(669.2)
(540.4)
5,993.4
(6,742.5)
3,500.1
2,751.0
5,993.4
(6,742.5)
3,500.1
2,751.0
-
-
-
-
-
-
-
584.4
584.4
(350.0)
(0.7)
(350.7)
(350.0)
583.7
233.7
21.8
(34.0)
2.9
-
-
-
21.8
(34.0)
2.9
24
22
-
34.0
-
-
(368.3)
(368.3)
-
34.0
Closing balance
6,027.4
(7,101.8)
3,715.5
2,641.1
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
1 Refer Note 24 for further information on reserves.
42 Notes to and Forming Part of the Financial Statements
for the year ended 30 June 2015
Note 1. Basis of Preparation
These financial statements present the consolidated results of Brambles
Limited (ACN 118 896 021) (Company) and its subsidiaries (Brambles or
the Group) for the year ended 30 June 2015. These financial statements
have been authorised for issue in accordance with a resolution of the
Directors on 20 August 2015.
The financial statements comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards
Board (IASB). This general purpose financial report has been prepared in
accordance with Australian Accounting Standards (AAS), other
authoritative pronouncements of the Australian Accounting Standards
Board (AASB) and the requirements of the Corporations Act 2001 (Act).
The financial statements are drawn up in accordance with the conventions
of historical cost accounting, except for derivative financial instruments
and financial assets at fair value through profit or loss.
References to 2015 and 2014 are to the financial years ended 30 June 2015
and 30 June 2014 respectively.
The Recall business was demerged effective 18 December 2013. Recall’s
comprehensive income for the period up to the date of demerger has
been presented within discontinued operations in 2014. Recall’s assets and
liabilities are excluded from the consolidated balance sheet at 30 June
2014.
Certain comparative information in the notes to the financial statements
has been reclassified to conform with the current period’s presentation.
Note 2. Significant Accounting Policies
The consolidated financial statements and all comparatives have been
prepared using the accounting policies set out below which are consistent
with the prior year.
Changes in Accounting Policies
Brambles has applied AASB 2012-3: Amendments to Australian Accounting
Standard - Offsetting Financial Assets and Financial Liabilities and AASB
2014-1: Amendments to Australian Accounting Standards - Defined
Benefit Plans from 1 July 2014. The impact of these new accounting
standards and interpretations do not have a significant impact on
Brambles’ financial statements.
Basis of Consolidation
The consolidated financial statements of Brambles include the assets,
liabilities and results of Brambles Limited and all its legal subsidiaries. The
consolidation process eliminates all inter-entity accounts and transactions.
Any financial statements of overseas subsidiaries that have been prepared
in accordance with overseas accounting practices have been adjusted to
comply with AAS before inclusion in the consolidation process. The
financial statements of all material subsidiaries are prepared for the same
reporting period.
Business Combinations
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired (i.e.
discount on acquisition) is credited to the income statement in the period
of acquisition. The interest of non-controlling shareholders is stated at the
non-controlling proportion of the fair values of the assets and liabilities
recognised. Any acquisition-related transaction costs are expensed in the
period of acquisition.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
Investment in Controlled Entities
Shares in controlled entities, as recorded in the parent entity, are recorded
at cost, less provision for impairment.
Investment in Joint Ventures and Associates
Associates are those entities in which Brambles has significant influence,
but not control or joint control, over the financial and operating policies. A
joint venture is an arrangement in which Brambles has joint control,
whereby Brambles has rights to the net assets of the arrangement rather
than rights to its assets and obligations for its liabilities.
Investments in joint venture and associate entities are accounted for using
the equity method in the consolidated financial statements, and include
any goodwill arising on acquisition. Under this method, Brambles’ share of
the post-acquisition profits or losses of the joint venture and associate is
recognised in the income statement and its share of post-acquisition
movements in reserves is recognised in consolidated reserves. The
cumulative post-acquisition movements are adjusted against the carrying
amount of the investment.
If Brambles’ share of losses in a joint venture or associate equals or
exceeds its interest in the joint venture or associate, Brambles does not
recognise further losses unless it has incurred obligations or made
payments on behalf of the joint venture or associate.
Loans to equity accounted joint ventures or associates under formal loan
agreements that are long term in nature are included as investments.
Where there has been a change recognised directly in the joint venture’s
equity, Brambles recognises its share of any changes as a change in equity.
Discontinued Operations
The trading results for business operations disposed during the year or
classified as held for sale are disclosed separately as discontinued
operations in the income statement. The amount disclosed includes any
related impairment losses recognised and any gains or losses arising on
disposal.
Presentation Currency
The consolidated and summarised parent entity financial statements are
presented in US dollars.
Brambles uses the US dollar as its presentation currency because:
-
-
a significant portion of Brambles’ activity is denominated in US
dollars; and
the US dollar is widely understood by Australian, UK and international
investors and analysts.
Foreign Currency
Items included in the financial statements of each of Brambles’ entities are
measured using the functional currency of each entity.
Foreign currency transactions are translated into the functional currency of
each entity using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions, and from the translation at year-end rates
of monetary assets and liabilities denominated in foreign currencies, are
recognised in the income statement, except where deferred in equity as
qualifying cash flow hedges, qualifying net investment hedges or are
attributable to part of the net investment in foreign subsidiaries and joint
ventures.
Non-monetary assets and liabilities carried at fair value that are
denominated in foreign currencies are translated at the rates prevailing at
the date when the fair value was determined. Gains and losses arising on
retranslation are recognised directly in equity.
The results and cash flows of Brambles Limited, subsidiaries and joint
ventures are translated into US dollars using the average exchange rates
for the period. Where this average is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction dates, the
exchange rate on the transaction date is used. Assets and liabilities of
Brambles Limited, subsidiaries and joint ventures are translated into US
dollars at the exchange rate ruling at the balance sheet date. The share
capital of Brambles Limited is translated into US dollars at historical rates.
All resulting exchange differences arising on the translation of Brambles’
overseas and Australian entities are recognised as a separate component
of equity.
43
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
benefits are already vested, and otherwise is amortised on a straight-line
basis over the average period until the benefits vest.
Actuarial gains and losses arising from differences between expected and
actual returns, and the effect of changes in actuarial assumptions are
recognised in full through the statement of comprehensive income in the
period in which they arise.
The costs of other post-employment liabilities are calculated in a similar
way to defined benefit pension schemes and spread over the period
during which benefit is expected to be derived from the employees’
services, in accordance with the advice of qualified actuaries.
Executive and Employee Share-Based Compensation Plans
Incentives in the form of share-based compensation benefits are provided
to executives and employees under performance share and MyShare
employee share plans approved by shareholders.
Performance share awards are fair valued by qualified actuaries at their
grant dates in accordance with the requirements of AASB 2: Share-based
Payments, using a binomial model. The cost of equity-settled transactions
is recognised, together with a corresponding increase in equity, on a
straight-line basis over the period in which the performance conditions are
fulfilled, ending on the date on which the relevant employees become fully
entitled to the award (vesting date).
Executives and employees in certain jurisdictions are provided cash
incentives calculated by reference to the awards under the share-based
compensation schemes (phantom shares). These phantom shares are fair
valued on initial grant and at each subsequent reporting date.
The cost of such phantom shares is charged to the income statement over
the relevant vesting periods, with a corresponding increase in provisions.
The fair value calculation of performance shares granted excludes the
impact of any non-market vesting conditions. Non-market vesting
conditions are included in assumptions about the number of options that
are expected to become exercisable. At each balance sheet date, Brambles
reviews its estimate of the number of performance shares that are
expected to become exercisable. The employee benefit expense
recognised each period takes into account the most recent estimate.
Significant Items and Underlying Profit
Significant Items are items of income or expense which are, either
individually or in aggregate, material to Brambles or to the relevant
business segment and:
-
-
outside the ordinary course of business (e.g. gains or losses on the
sale or termination of operations, the cost of significant
reorganisations or restructuring); or
part of the ordinary activities of the business but unusual due to their
size and nature.
Underlying Profit is a non-statutory profit measure and represents profit
from continuing operations before finance costs, tax and Significant Items.
It is presented within the segment information note to assist users of the
financial statements to better understand Brambles’ business results.
The financial statements of foreign subsidiaries and joint ventures that
report in the currency of a hyperinflationary economy are restated in terms
of the measuring unit current at the balance sheet date before they are
translated into US dollars.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
The principal exchange rates affecting Brambles were:
Average
2015
A$:US$
0.8301
€:US$
1.1946
£:US$
1.5734
2014
0.9142 1.3587
1.6331
Year end 30 June 2015
0.7673 1.1220
1.5729
30 June 2014
0.9415 1.3643
1.7033
Revenue
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to Brambles and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received or
receivable. Amounts disclosed as revenue are net of duties and taxes paid
(Goods and Services Tax and local equivalents).
Revenue for services is recognised when invoicing the customer following
the provision of the service and/or under the terms of agreed contracts in
accordance with agreed contractual terms in the period in which the
service is provided.
Other Income
Other income includes net gains on disposal of property, plant and
equipment in the ordinary course of business, which are recognised when
control of the property has passed to the buyer. Amounts arising from
compensation for irrecoverable pooling equipment are recognised only
when it is probable that they will be received.
Dividend Revenue
Dividend revenue is recognised when Brambles’ right to receive the
payment is established. Dividends received from investments in
subsidiaries and joint ventures are recognised as revenue, even if they are
paid out of pre-acquisition profits.
Finance Revenue
Finance revenue is recognised as the interest accrues (using the effective
interest method, which is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial instrument) to the
net carrying amount of the financial asset.
Borrowing Costs
Borrowing costs are recognised as expenses in the year in which they are
incurred, except where they are included in the cost of qualifying assets.
The capitalisation rate used to determine the amount of borrowing costs
to be capitalised is the weighted average interest rate applicable to the
entity’s outstanding borrowings during the year. No borrowing costs were
capitalised in 2015 or 2014.
Pensions and Other Post-Employment Benefits
Payments to defined contribution pension schemes are charged as an
expense as they fall due. Payments made to state-managed retirement
benefit schemes are dealt with as payments to defined contribution
schemes where Brambles’ obligations under the schemes are equivalent to
those arising in a defined contribution pension scheme.
A liability in respect of defined benefit pension schemes is recognised
in the balance sheet, measured as the present value of the defined benefit
obligation at the reporting date less the fair value of the pension scheme’s
assets at that date. Pension obligations are measured as the present value
of estimated future cash flows discounted at rates reflecting the yields of
high quality corporate bonds. The costs of providing pensions under
defined benefit schemes are calculated using the projected unit credit
method, with actuarial valuations being carried out at each balance sheet
date. Past service cost is recognised immediately to the extent that the
44
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Assets
Cash and Cash Equivalents
For purposes of the cash flow statement, cash and cash equivalents include
deposits at call with financial institutions and other highly liquid
investments which are readily convertible to cash on hand and are subject
to an insignificant risk of changes in value, net of outstanding bank
overdrafts. Bank overdrafts are presented within borrowings in the balance
sheet.
Receivables
Receivables due within one year do not carry any interest and
are recognised at amounts receivable less an allowance for any
uncollectible amounts. Trade receivables are recognised when services are
provided and settlement is expected within normal credit terms.
Bad debts are written-off when identified. A provision for doubtful
receivables is established when there is a level of uncertainty as to the
full recoverability of the receivable, based on objective evidence.
Significant financial difficulties of the debtor, probability that the debtor
will enter liquidation, receivership or bankruptcy, and default or significant
delay in payment are considered indicators that the trade receivable is
doubtful.
The amount of the provision is measured as the difference between the
carrying amount of the trade receivables and the estimated future cash
flows expected to be received from the relevant debtors. When a trade
receivable for which a provision had been recognised becomes
uncollectible in a subsequent period, it is written off against the provision
account. Subsequent recoveries of amounts previously written off are
credited against other expenses in the income statement.
Inventories
Inventories on hand are valued at the lower of cost and net realisable value
and, where appropriate, provision is made for possible obsolescence. Work
in progress, which represents partly-completed work undertaken at pre-
arranged rates but not invoiced at the balance sheet date, is recorded at
the lower of cost or net realisable value.
Cost is determined on a first-in, first-out basis and, where relevant,
includes an appropriate portion of overhead expenditure. Net realisable
value is the estimated selling price in the ordinary course of business, less
estimated costs of completion and costs to make the sale.
Recoverable Amount of Non-Current Assets
At each reporting date, Brambles assesses whether there is any indication
that an asset, or cash generating unit to which the asset belongs, may be
impaired. Where an indicator of impairment exists, Brambles makes a
formal estimate of recoverable amount. The recoverable amount of an
asset is the greater of its fair value less costs to sell and its value in use.
Where the carrying value of an asset exceeds its recoverable amount, the
asset is considered to be impaired and is written down to its recoverable
amount. The impairment loss is recognised in the income statement in the
reporting period in which the write-down occurs.
The expected net cash flows included in determining recoverable amounts
of non-current assets are discounted to their present values using a
market-related risk adjusted discount rate.
Property, Plant and Equipment
Property, plant and equipment (PPE) is stated at cost, net of depreciation
and any impairment, except land which is shown at cost less impairment.
Cost includes expenditure that is directly attributable to the acquisition of
assets, and, where applicable, an initial estimate of the cost of dismantling
and removing the item and restoring the site on which it is located.
Subsequent expenditure is capitalised only when it is probable that future
economic benefits associated with the expenditure will flow to Brambles.
Repairs and maintenance are expensed in the income statement in the
period they are incurred.
Depreciation is charged in the financial statements so as to write-off the
cost of all PPE, other than freehold land, to their residual value on a
straight-line or reducing balance basis over their expected useful lives to
Brambles. Residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.The expected useful lives of PPE
are generally:
-
-
-
buildings: 50 years
pooling equipment: 5–10 years
other plant and equipment (owned and leased): 3–20 years
The cost of improvements to leasehold properties is amortised over
the unexpired portion of the lease, or the estimated useful life of the
improvement to Brambles, whichever is the shorter.
Provision is made for irrecoverable pooling equipment based on
experience in each market. The provision is presented within accumulated
depreciation.
The carrying values of PPE are reviewed for impairment when
circumstances indicate their carrying values may not be recoverable. Assets
are assessed within the cash generating unit to which they belong. Any
impairment losses are recognised in the income statement.
The recoverable amount of PPE is the greater of its fair value less costs to
sell and its value in use. Value in use is determined as estimated future
cash flows discounted to their present value using a pre-tax discount rate
reflecting current market assessments of the time value of money and the
risk specific to the asset.
PPE is derecognised upon disposal or when no future economic benefits
are expected to arise from continued use of the asset. Any net gain or loss
arising on derecognition of the asset is included in the income statement
and presented within other income in the period in which the asset is
derecognised.
Goodwill
Goodwill is carried at cost less accumulated impairment losses. Goodwill is
not amortised.
Goodwill represents the excess of the cost of an acquisition over the fair
value of Brambles’ share of the net identifiable assets of the acquired
subsidiary or joint venture at the date of acquisition. Goodwill on
acquisitions of subsidiaries is included in intangible assets. Goodwill on
acquisitions of joint ventures is included in investments in joint ventures.
Upon acquisition, any goodwill arising is allocated to each cash generating
unit expected to benefit from the acquisition. Goodwill is tested annually
for impairment, or more frequently if events or changes in circumstances
indicate that it might be impaired. An impairment loss is recognised when
the recoverable amount of the cash generating unit is less than its carrying
amount.
On disposal of an operation, goodwill associated with the disposed
operation is included in the carrying amount of the operation when
determining the gain or loss on disposal.
Intangible Assets
Intangible assets acquired are capitalised at cost, unless acquired as part of
a business combination in which case they are capitalised at fair value as at
the date of acquisition. Following initial recognition, intangible assets are
carried at cost less provisions for amortisation and impairment.
45
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
The costs of acquiring and developing computer software for internal use
are capitalised as intangible non-current assets where it is used to support
a significant business system and the expenditure leads to the creation of
an asset.
Useful lives have been established for all non-goodwill intangible assets.
Amortisation charges are expensed in the income statement on a straight-
line basis over those useful lives. Estimated useful lives are reviewed
annually.
The expected useful lives of intangible assets are generally:
-
-
customer lists and relationships: 3–20 years
computer software: 3–10 years
There are no non-goodwill intangible assets with indefinite lives.
Intangible assets are tested for impairment where an indicator of
impairment exists, either individually or at the cash generating unit level.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the income statement
when the asset is derecognised.
Liabilities
Payables
Trade and other creditors represent liabilities for goods and services
provided to Brambles prior to the end of the financial year which remain
unpaid at the reporting date. The amounts are unsecured and are paid
within normal credit terms.
Non-current payables are discounted to present value using the effective
interest method.
Provisions
Provisions for liabilities are made on the basis that, due to a past event, the
business has a constructive or legal obligation to transfer economic
benefits that are of uncertain timing or amount. Provisions are measured
at the present value of management’s best estimate at the balance sheet
date of the expenditure required to settle the obligation. The discount rate
used is a pre-tax rate that reflects current market assessments of the time
value of money and the risks appropriate to the liability.
Where discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost in the income statement.
Interest Bearing Liabilities
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the borrowing proceeds (net of transaction costs) and
the redemption amount is recognised in the income statement over the
period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless Brambles has an
unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.
Employee Entitlements
Employee entitlements are provided by Brambles in accordance with the
legal and social requirements of the country of employment. Principal
entitlements are for annual leave, sick leave, long service leave and
contract entitlements. Annual leave and sick leave entitlements are
presented within trade and other payables.
Liabilities for annual leave, as well as those employee entitlements which
are expected to be settled within one year, are measured at the amounts
expected to be paid when they are settled. All other employee entitlement
liabilities are measured at the estimated present value of the future cash
outflows to be made in respect of services provided by employees up to
the reporting date.
Employee entitlements are classified as current liabilities unless Brambles
has an unconditional right to defer settlement of the liability for at least 12
months after the balance sheet date.
Dividends
A provision for dividends is only recognised where the dividends have
been declared prior to the reporting date.
Leases
Leases are classified at their inception as either operating or finance leases
based on the economic substance of the agreement so as to reflect the
risks and benefits incidental to ownership.
Operating leases
The minimum lease payments under operating leases, where the lessor
effectively retains substantially all of the risks and benefits of ownership of
the leased item, are recognised as an expense on a straight-line basis over
the term of the lease.
Finance leases
Finance leases, which effectively transfer substantially all of the risks and
benefits incidental to ownership of the leased item to Brambles, are
capitalised at the inception of the lease at the fair value of the leased asset
or, if lower, present value of the minimum lease payments, and disclosed
as property, plant and equipment held under lease. A lease liability of
equal value is also recognised.
Lease payments are allocated between finance charges and a reduction of
the lease liability so as to achieve a constant period rate of interest on the
lease liability outstanding each period. The finance charge is recognised as
a finance cost in the income statement.
Capitalised lease assets are depreciated over the shorter of the estimated
useful life of the assets and the lease term.
Income Tax
The income tax expense or benefit for the year is the tax payable or
receivable on the current year’s taxable income based on the national
income tax rate for each jurisdiction, adjusted by changes in deferred tax
assets and liabilities attributable to temporary differences between the tax
bases of assets and liabilities and their carrying amounts in the financial
statements, and to unused tax losses.
Deferred tax is accounted for using the balance sheet liability method in
respect of temporary differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax basis
used in the computation of taxable profit, calculated using tax rates which
are enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognised for deductible temporary differences
and unused tax losses only if it is probable that future taxable amounts will
be available to utilise those temporary differences and losses. The carrying
amount of deferred tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred tax asset to be
utilised.
Deferred tax assets and liabilities are not recognised:
-
-
where the deferred tax arises from the initial recognition of an asset
or liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; or
in respect of temporary differences associated with investments in
subsidiaries and joint ventures where the timing of the reversal of the
temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Current and deferred tax attributable to amounts recognised directly
in equity are also recognised directly in equity.
46
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Financial Assets
Brambles classifies its financial assets in the following two categories:
financial assets at fair value through profit or loss and loans and
receivables. The classification depends on the purpose for which the
financial assets were acquired.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held
for trading. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short term.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market.
Financial assets are recognised on Brambles’ balance sheet when Brambles
becomes a party to the contractual provisions of the instrument.
Derecognition takes place when Brambles no longer controls the
contractual rights that comprise the financial instrument, which is normally
the case when the instrument is sold, or all the cash flows attributable to
the instrument are passed through to an independent third party.
Derivatives and Hedging Activities
Derivative instruments used by Brambles, which are used solely for
hedging purposes (i.e. to offset foreign exchange and interest rate risks),
comprise interest rate swaps, caps, collars, forward rate agreements and
forward foreign exchange contracts. Such derivative instruments are used
to alter the risk profile of Brambles’ existing underlying exposure in line
with Brambles’ risk management policies.
Derivative financial instruments are stated at fair value. The fair value of
forward exchange contracts is calculated by reference to current forward
exchange rates for contracts with similar maturities at the balance sheet
date. The fair value of interest rate swap contracts is calculated as the
present value of the forward cash flows of the instrument after applying
market rates and standard valuation techniques.
For the purposes of hedge accounting, hedges are classified as either fair
value hedges, cash flow hedges or net investment hedges.
Fair value hedges
Fair value hedges are derivatives that hedge exposure to changes in the
fair value of a recognised asset or liability, or an unrecognised firm
commitment. In relation to fair value hedges which meet the conditions for
hedge accounting, any gain or loss from remeasuring the hedging
instrument at fair value is recognised immediately in the income
statement.
Any gain or loss attributable to the hedged risk on remeasurement of the
hedged item is adjusted against the carrying amount of the hedged item
and recognised in the income statement. Where the adjustment is to the
carrying amount of a hedged interest-bearing financial instrument, the
adjustment is amortised to the income statement such that it is fully
amortised by maturity.
Hedge accounting is discontinued prospectively if the hedge is terminated
or no longer meets the hedge accounting criteria. In this case, any
adjustment to the carrying amounts of the hedged item for the designated
risk for interest-bearing financial instruments is amortised to the income
statement following termination of the hedge relationship.
Cash flow hedges
Cash flow hedges are derivatives that hedge exposure to variability in cash
flows that is either attributable to a particular risk associated with a
recognised asset or liability, or a highly probable forecast transaction.
In relation to cash flow hedges to hedge forecast transactions which meet
the conditions for hedge accounting, the portion of the gain or loss on the
hedging instrument that is determined to be an effective hedge is
recognised in other comprehensive income within equity and the
ineffective portion is recognised in the income statement.
Hedge accounting is discontinued when the hedging instrument expires or
is sold, terminated or exercised, or no longer qualifies for hedge
accounting.
At that point in time, any cumulative gain or loss on the hedging
instrument recognised in equity is kept in equity until the forecast
transaction occurs.
If a hedged transaction is no longer expected to occur, the net cumulative
gain or loss recognised in equity is transferred to net profit or loss for the
year.
For all other cash flow hedges, the gains or losses that are recognised in
equity are transferred to the income statement in the same year in which
the hedged firm commitment affects the net profit and loss, for example
when the future sale actually occurs.
When the hedged firm commitment results in the recognition of an asset
or a liability, then, at the time the asset or liability is recognised, the
associated gains or losses that had previously been recognised in equity
are included in the initial measurement of the acquisition cost or other
carrying amount of the asset or liability.
Net investment hedges
Hedges for net investments in foreign operations are accounted for
similarly to cash flow hedges.
Any gain or loss on the hedging instrument that is determined to be an
effective hedge is recognised in other comprehensive income within equity
and the ineffective portion is recognised in the income statement.
Gains and losses accumulated in equity are included in the income
statement when the foreign operation is disposed or sold.
Derivatives that do not qualify for hedge accounting
Where derivatives do not qualify for hedge accounting, gains or losses
arising from changes in their fair value are taken directly to net profit or
loss for the year.
Contributed equity
Ordinary shares including share premium are classified as contributed
equity. No gain or loss is recognised in the income statement on the
purchase, sale, issue or cancellation of Brambles’ own equity instruments.
Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction from the proceeds of issue.
47
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Earnings Per Share (EPS)
Basic EPS is calculated as net profit attributable to members of the parent
entity, adjusted to exclude costs of servicing equity (other than dividends),
divided by the weighted average number of ordinary shares, adjusted for
any bonus element.
Diluted EPS is calculated as net profit attributable to members of the
parent entity, adjusted for:
-
-
-
costs of servicing equity (other than dividends) and preference share
dividends;
the after-tax effect of dividends and finance costs associated with
dilutive potential ordinary shares that have been recognised as
expenses;
other non-discretionary changes in revenues or expenses during the
year that would result from the dilution of potential ordinary shares;
and divided by the weighted average number of ordinary shares and
dilutive potential ordinary shares, adjusted for any bonus element.
EPS on Underlying Profit after finance costs and tax is calculated as
Underlying Profit after finance costs and tax attributable to members of
the parent entity, divided by the weighted average number of ordinary
shares, adjusted for any bonus element.
New Accounting Standards and Interpretations Issued But
Not Yet Applied
At 30 June 2015, certain new accounting standards and interpretations
have been published that will become mandatory in future reporting
periods. Brambles has not early-adopted these new or amended
accounting standards and interpretations in 2015.
AASB 9: Financial Instruments is applicable to annual reporting periods
beginning on or after 1 January 2018. AASB 9 addresses the classification,
measurement and derecognition of financial assets and liabilities,
introduces a new impairment model and introduces new rules for hedge
accounting. AASB 9 may affect Brambles’ accounting for financial assets
and liabilities, however it is not expected to have a significant impact on
Brambles financial statements.
AASB 15: Revenue from Contracts with Customers is applicable to annual
reporting periods beginning on or after 1 January 2017 and is based on
the principle that revenue is recognised when control of a good or service
transfers to a customer. The new standard replaces the principle under the
current standard of recognising revenue when risks and rewards transfer to
the customer. Brambles is yet to assess the impact of the new rules on its
revenue recognition policy.
Rounding of Amounts
As Brambles is a company of a kind referred to in ASIC Class Order 98/100,
relevant amounts in the financial statements and Directors’ Report have
been rounded to the nearest hundred thousand US dollars or, in certain
cases, to the nearest thousand US dollars. Amounts in cents have been
rounded to the nearest tenth of a cent.
Note 3. Critical Accounting Estimates and
Judgements
In applying its accounting policies, Brambles has made estimates and
assumptions concerning the future, which may differ from the related
actual outcomes. Those estimates and assumptions which have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed below.
Irrecoverable Pooling Equipment Provisioning
Loss or damage is an inherent risk of pooling equipment operations.
Brambles’ pooling equipment operations around the world differ in terms
of business model, market dynamics, customer and distribution channel
profiles, contractual arrangements and operational details. CHEP conducts
audits continuously throughout the year to confirm the existence and the
condition of its pooling equipment assets and to validate CHEP’s customer
hire records. During these audits, which take place at CHEP plants,
customer sites and other locations, pooling equipment is counted on a
sample basis and reconciled to the balances shown in CHEP’s customer
hire records. Brambles also monitors its pooling equipment operations
using detailed key performance indicators (KPIs).
The irrecoverable pooling equipment provision is determined by reference
to historical statistical data in each market, including the outcome of audits
and relevant KPIs, together with management estimates of future
equipment losses.
Impairment of Goodwill
Brambles’ business units undertake an impairment review process annually
to ensure that goodwill balances are not carried at amounts that are in
excess of their recoverable amounts. The recoverable amount of the
goodwill in continuing operations is determined based on value in use
calculations undertaken at the cash generating unit level. These
calculations require the use of key assumptions which are set out in Note
17.
Income Taxes
Brambles is a global company and is subject to income taxes in many
jurisdictions around the world. Significant judgement is required in
determining the provision for income taxes on a worldwide basis. There
are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain.
Brambles recognises liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from amounts provided, such
differences will impact the current and deferred tax provisions in the
period in which such outcome is obtained. Refer to Note 8 for further
details.
48
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 4. Segment Information
Brambles' segment information is provided on the same basis as internal management reporting to the CEO and reflects how Brambles is
organised and managed.
Brambles has six reportable segments, being Pallets - Americas, Pallets - EMEA, Pallets - Asia-Pacific (each pallet pooling businesses), Reusable
Plastic Crates (RPCs) (crate pooling businesses), Containers (container pooling businesses) and Corporate (corporate centre).
Segment performance is measured on sales revenue, Underlying Profit, Cash Flow from Operations and Brambles Value Added (BVA).
Underlying Profit is the main measure of segment profit. A reconciliation between Underlying Profit and operating profit is set out below.
Segment sales revenue is measured on the same basis as in the income statement. Segment sales revenue is allocated to segments based on
product categories and physical location of the business unit that invoices the customer. Intersegment revenue during the period was
immaterial. There is no single external customer who contributed more than 10% of Group sales revenue.
Assets and liabilities are measured consistently in segment reporting and in the balance sheet. Assets and liabilities are allocated to segments
based on segment use and physical location. Cash, borrowings and tax balances are managed centrally and are not allocated to segments.
Sales
revenue
Cash Flow from
Operations2
Brambles
Value Added3
By operating segment1
Pallets - Americas
Pallets - EMEA
Pallets - Asia-Pacific
Pallets
RPCs
Containers
Corporate
Continuing operations
By geographic origin
Americas
Europe
Australia
Other
Total
By operating segment1
Pallets - Americas
Pallets - EMEA
Pallets - Asia-Pacific
Pallets
RPCs
Containers
Corporate
Continuing operations
2015
US$M
338.1
260.0
71.2
669.3
63.5
30.7
(34.7)
728.8
2014
US$M
395.9
290.4
68.6
754.9
97.3
26.7
(50.7)
828.2
2015
US$M
162.7
210.9
35.1
408.7
(53.9)
(49.0)
(33.8)
272.0
2014
US$M
181.2
168.2
33.1
382.5
(64.2)
(14.0)
(32.1)
272.2
2015
US$M
2014
US$M
2,357.5
1,380.5
343.5
4,081.5
917.6
465.5
-
2,301.9
1,458.6
362.9
4,123.4
895.8
385.3
-
5,464.6
5,404.5
2,659.0
2,077.3
409.7
318.6
2,582.0
2,104.6
421.5
296.4
5,464.6
5,404.5
Operating
profit4
Significant Items
before tax5
Underlying
Profit5
2015
US$M
399.8
341.8
70.6
812.2
130.8
58.1
(62.6)
938.5
2014
US$M
419.0
327.3
75.8
822.1
124.3
35.9
(52.8)
929.5
2015
US$M
(16.7)
(2.1)
(1.0)
(19.8)
(0.7)
(1.2)
(25.6)
(47.3)
2014
US$M
(16.0)
1.2
(0.6)
(15.4)
-
(2.1)
(13.1)
(30.6)
2015
US$M
416.5
343.9
71.6
832.0
131.5
59.3
(37.0)
985.8
2014
US$M
435.0
326.1
76.4
837.5
124.3
38.0
(39.7)
960.1
49 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 4. Segment Information - continued
By operating segment1
Pallets - Americas
Pallets - EMEA
Pallets - Asia-Pacific
Pallets
RPCs
Containers
Corporate
Continuing operations
By operating segment1
Pallets - Americas
Pallets - EMEA
Pallets - Asia-Pacific
Pallets
RPCs
Containers
Corporate
Total segment assets and liabilities
Cash and borrowings
Current tax balances
Deferred tax balances
Equity-accounted investments
Total assets and liabilities
Non-current assets by geographic origin7
Americas
Europe
Australia
Other
Total
Capital
expenditure6
Depreciation
and amortisation
2015
US$M
379.6
256.0
61.6
697.2
238.3
101.0
0.1
1,036.6
2014
US$M
343.6
272.3
57.4
673.3
180.4
54.1
0.2
908.0
2015
US$M
214.8
124.0
40.1
378.9
102.0
66.4
1.7
549.0
2014
US$M
206.1
132.9
42.1
381.1
101.4
44.2
1.6
528.3
Segment assets
Segment liabilities
2015
US$M
2014
US$M
2015
US$M
2014
US$M
2,398.9
1,419.7
397.6
4,216.2
2,025.1
1,100.4
31.8
7,373.5
166.2
7.1
41.9
5.9
2,372.6
1,582.0
460.6
4,415.2
2,095.2
592.5
47.5
7,150.4
222.3
14.5
44.3
6.2
399.3
310.6
75.5
785.4
521.5
112.6
51.4
1,470.9
2,855.1
63.2
564.3
-
375.7
364.9
83.2
823.8
544.0
93.1
59.2
1,520.1
2,584.0
41.6
541.0
-
7,594.6
7,437.7
4,953.5
4,686.7
2,833.4
2,615.6
319.6
424.7
2,703.9
2,460.9
349.3
408.3
6,193.3
5,922.4
1
2
3
4
5
6
7
Following the internal restructuring announced in August 2014, Pallets India is now disclosed within the Pallets EMEA segment. Pallets India
was previously included within Pallets Asia-Pacific. Prior period comparatives have been restated as appropriate.
Cash Flow from Operations is cash flow generated after net capital expenditure but excluding Significant Items that are outside the ordinary
course of business.
Brambles Value Added (BVA) is a non-statutory profit measure and represents the value generated over and above the cost of the capital
used to generate that value. It is calculated using fixed 30 June 2014 exchange rates as:
• Underlying Profit; plus
• Significant Items that are part of the ordinary activities of the business; less
• Average Capital Invested, adjusted for accumulated pre-tax Significant Items that are part of the ordinary activities of the business,
multiplied by 12%.
Operating profit is segment revenue less segment expense and excludes net finance costs.
Underlying Profit is a non-statutory profit measure and represents profit from continuing operations before finance costs, tax and Significant
Items (refer Note 6). It is presented to assist users of the financial statements to better understand Brambles' business results.
Capital expenditure on property, plant & equipment on an accruals basis.
Non-current assets exclude financial instruments and deferred tax assets.
50 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 5. Operating Expenses - Continuing Operations
Employment costs (Note 5A)
Service suppliers:
- transport
- repairs and maintenance
- subcontractors and other service suppliers
Raw materials and consumables
Occupancy
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Irrecoverable pooling equipment provision expense
Amortisation of intangible assets and deferred expenditure:
- software
- acquired intangible assets (other than software)
- deferred expenditure
Net foreign exchange (gains)/losses
Other
A) Employment Costs
Wages and salaries
Social security costs
Share-based payment expense1
Pension costs:
- defined contribution plans
- defined benefit plans
Other post-employment benefits
2015
US$M
892.8
2014
US$M
890.9
1,080.5
1,084.6
741.6
498.4
447.7
209.0
501.3
5.0
79.7
15.2
30.3
2.2
(1.5)
749.1
469.3
441.3
216.0
480.8
9.5
88.3
15.3
29.7
2.5
1.3
139.4
4,641.6
130.8
4,609.4
722.8
88.7
22.8
21.9
(0.6)
37.2
892.8
720.6
90.3
25.4
20.5
2.6
31.5
890.9
1 Brambles recognised a total expense of US$21.8 million (2014: US$27.2 million) relating to equity-settled share-based payments and US$1.0
million relating to cash-settled share-based payments (2014: US$2.0 million). Of these amounts, nil (2014: US$3.8 million) related to
discontinued operations.
51 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 6. Significant Items - Continuing Operations
Significant Items are items of income or expense which are, either individually or in aggregate, material to Brambles or to the relevant business
segment and:
• outside the ordinary course of business (e.g. gains or losses on the sale or termination of operations, the cost of significant
reorganisations or restructuring); or
• part of the ordinary activities of the business but unusual due to their size and nature.
Significant Items are disclosed to assist users of the financial statements to better understand Brambles’ business results.
Items outside the ordinary course of business:
- acquisition-related costs1
- restructuring and integration costs2
Significant Items from continuing operations
Items outside the ordinary course of business:
- acquisition-related costs1
- restructuring and integration costs2
Significant Items from continuing operations
Before tax
(12.5)
(34.8)
(47.3)
Before tax
(1.0)
(29.6)
(30.6)
2015
US$M
Tax
0.9
10.8
11.7
2014
US$M
Tax
-
10.4
10.4
After tax
(11.6)
(24.0)
(35.6)
After tax
(1.0)
(19.2)
(20.2)
1
2
Professional fees and other transaction costs were incurred in relation to the Ferguson, Rentapack and other acquisition activities in 2015
and Transpac and Airworld acquisitions in 2014.
Redundancy, integration and other restructuring costs of US$34.8 million were incurred during the year (2014: US$29.6 million), of which
US$28.0 million related to the One Better program (2014: US$7.5 million).
Note 7. Net Finance Costs - Continuing Operations
Finance revenue
Bank accounts and short term deposits
Derivative financial instruments
Other
Finance costs
2015
US$M
0.9
12.2
0.7
13.8
2014
US$M
1.9
11.3
2.3
15.5
Interest expense on bank loans and borrowings
(121.5)
(124.9)
Derivative financial instruments
Other
Net finance costs
(0.6)
(3.6)
(125.7)
(111.9)
(1.1)
(2.5)
(128.5)
(113.0)
52 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 8. Income Tax
A) Components of Tax Expense
Amounts recognised in the income statement
Current income tax - continuing operations:
- income tax charge
- prior year adjustments
Deferred tax - continuing operations:
- origination and reversal of temporary differences
- previously unrecognised tax losses
- prior year adjustments
Tax expense - continuing operations
Tax expense - discontinued operations (Note 11)
Tax expense recognised in the income statement
Amounts recognised in the statement of comprehensive income
- on actuarial losses on defined benefit pension plans
- on losses on revaluation of cash flow hedges
Tax (benefit)/expense recognised directly in the statement of comprehensive income
B) Reconciliation Between Tax Expense and Accounting Profit Before Tax
Profit before tax - continuing operations
Tax at standard Australian rate of 30% (2014: 30%)
Effect of tax rates in other jurisdictions
Prior year adjustments
Current year tax losses not recognised
Foreign withholding tax unrecoverable
Change in tax rates
Non-deductible expenses
Other taxable items
Prior year tax losses recouped/recognised
Other
Tax expense - continuing operations
Tax expense - discontinued operations (Note 11)
Total income tax expense
2015
US$M
2014
US$M
200.6
3.0
203.6
54.8
(10.3)
(7.0)
37.5
241.1
1.1
242.2
(0.3)
-
(0.3)
826.6
248.0
(23.9)
(4.0)
8.0
6.4
1.1
11.3
4.9
(10.3)
(0.4)
241.1
1.1
242.2
155.6
5.0
160.6
103.3
(12.2)
(19.7)
71.4
232.0
34.3
266.3
2.7
0.1
2.8
816.5
244.9
(23.8)
(14.7)
8.0
2.5
-
9.9
-
(12.2)
17.4
232.0
34.3
266.3
53 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 8. Income Tax - continued
C) Components of and Changes in Deferred Tax Assets
Deferred tax assets shown in the balance sheet are represented by cumulative temporary differences attributable to:
2015
US$M
2014
US$M
Items recognised through the income statement
Employee benefits
Provisions
Losses available against future taxable income
Other
Items recognised in the statement of comprehensive income
Actuarial losses on defined benefit pension plans
Share-based payments
Set-off against deferred tax liabilities
Net deferred tax assets
Changes in deferred tax assets were as follows:
At 1 July
Credited/(charged) to the income statement
Credited/(charged) directly to equity
Offset against deferred tax liabilities
Acquisition of subsidiary
Currency variations
At 30 June
21.9
36.9
241.0
46.1
345.9
11.6
11.6
23.2
(327.2)
41.9
44.3
24.7
0.3
(25.1)
5.3
(7.6)
41.9
24.7
36.1
240.2
40.9
341.9
14.5
13.9
28.4
(326.0)
44.3
48.2
(36.1)
(3.6)
32.4
1.2
2.2
44.3
Deferred tax assets are recognised for carried forward tax losses to the extent that the realisation of the related tax benefit through future
taxable profits is probable. At reporting date, Brambles has unused tax losses of US$1,062.3 million (2014: US$1,170.9 million) available for
offset against future profits. A deferred tax asset has been recognised in respect of US$730.3 million (2014: US$759.2 million) of such losses.
The benefit for tax losses will only be obtained if:
-
Brambles derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses
to be realised;
-
-
Brambles continues to comply with the conditions for deductibility imposed by tax legislation; and
no changes in tax legislation adversely affect Brambles in realising the benefit from the deductions for the losses.
No deferred tax asset has been recognised in respect of the remaining unused tax losses of US$332.0 million (2014: US$411.7 million) due to
the unpredictability of future profit streams in the relevant jurisdictions. Tax losses of US$558.0 million (2014: US$514.5 million), which have
been recognised in the balance sheet, have an expiry date between 2016 and 2035 (2014: between 2015 and 2033), however it is expected that
these losses will be recouped prior to expiry. The remaining tax losses of US$172.3 million (US$244.7 million), which have been recognised in
the balance sheet, can be carried forward indefinitely.
The majority of the deferred tax assets are expected to be recovered after 12 months of the balance date.
54 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 8. Income Tax - continued
D) Components and Changes in Deferred Tax Liabilities
Deferred tax liabilities shown in the balance sheet are represented by cumulative temporary differences attributable to:
2015
US$M
2014
US$M
Items recognised through the income statement
Accelerated depreciation for tax purposes
Other
Items recognised in the statement of comprehensive income
Actuarial gains on defined benefit pension plans
Set-off against deferred tax assets
Net deferred tax liabilities
Changes in deferred tax liabilities were as follows:
At 1 July
Charged to the income statement
Credited directly to equity
Acquisition of subsidiary
Demerger of subsidiaries
Offset against deferred tax asset
Currency variations
At 30 June
805.0
85.3
890.3
1.2
(327.2)
564.3
541.0
62.2
-
32.7
-
(25.1)
(46.5)
564.3
727.2
138.9
866.1
0.9
(326.0)
541.0
545.2
35.3
(0.8)
0.1
(79.5)
32.4
8.3
541.0
The majority of the deferred tax liabilities are expected to be realised after 12 months of the balance date.
At reporting date, undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised in the consolidated financial
statements are US$1,045.5 million (2014: US$1,026.5 million). No deferred tax liability has been recognised for these amounts because
Brambles controls the distributions from its subsidiaries and is satisfied that there is no liability in the foreseeable future.
E) Tax Consolidation
Brambles Limited and its Australian subsidiaries formed a tax consolidated group in 2006. Brambles Limited, as the head entity of the tax
consolidated group, and its Australian subsidiaries have entered into a tax sharing agreement in order to allocate income tax expense. The tax
sharing agreement uses a stand-alone basis of allocation. Consequently, Brambles Limited and its Australian subsidiaries account for their own
current and deferred tax amounts as if they each continue to be taxable entities in their own right. In addition, the agreement provides funding
rules setting out the basis upon which subsidiaries are to indemnify Brambles Limited in respect of tax liabilities and the methodology by which
subsidiaries in tax loss are to be compensated.
55
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 9. Earnings Per Share
Earnings per share
- basic
- diluted
From continuing operations
- basic
- diluted
- basic, on Underlying Profit after finance costs and tax
From discontinued operations
- basic
- diluted
2015
US cents
2014
US cents
37.3
37.2
37.4
37.3
39.7
(0.1)
(0.1)
81.2
80.8
37.5
37.3
38.7
43.7
43.5
Performance share rights and MyShare matching conditional rights granted under Brambles' share plans are considered to be potential
ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. Details are
set out in Note 23.
A) Weighted Average Number of Shares During the Year
Used in the calculation of basic earnings per share
Adjustment for share rights
Used in the calculation of diluted earnings per share
B) Reconciliations of Profits used in Earnings Per Share Calculations
Statutory profit
Profit from continuing operations
(Loss)/profit from discontinued operations
Profit used in calculating basic and diluted EPS
Underlying Profit after finance costs and tax
Underlying Profit (Note 4)
Net finance costs (Note 7)
Underlying Profit before tax
Tax expense on Underlying Profit
Underlying Profit after finance costs and tax
which reconciles to statutory profit:
Underlying Profit after finance costs and tax
Significant Items after tax (Note 6)
Profit from continuing operations
2015
Million
2014
Million
1,566.0
1,560.7
4.8
8.2
1,570.8
1,568.9
2015
US$M
2014
US$M
585.5
(1.1)
584.4
985.8
(111.9)
873.9
(252.8)
621.1
621.1
(35.6)
585.5
584.5
683.2
1,267.7
960.1
(113.0)
847.1
(242.4)
604.7
604.7
(20.2)
584.5
56 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 10. Dividends
A) Dividends Paid During the Year
Dividend per share (in Australian cents)
Cost (in US$ million)
Payment date
B) Dividend Declared after 30 June 2015
Dividend per share (in Australian cents)
Cost (in US$ million)
Payment date
Dividend record date
As this dividend had not been declared at 30 June 2015, it is not reflected in these financial statements.
C) Franking Credits
Franking credits available for subsequent financial years based on a tax rate of 30%
The amounts above represent the balance of the franking account as at the end of the year, adjusted for:
- franking credits that will arise from the payment of the current tax liability;
- franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
- franking credits that will arise from dividends recognised as receivables at the reporting date; and
- franking credits that may be prevented from being distributed in subsequent financial years.
The final 2015 dividend will be franked at 30%.
Interim
2015
14.0
173.1
Final
2014
13.5
186.2
9 April 2015
9 October 2014
Final
2015
14.0
161.8
8 October 2015
11 September 2015
2015
US$M
32.4
2014
US$M
69.5
57 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 11. Discontinued Operations
Discontinued operations primarily comprise the Recall business which was demerged effective 18 December 2013. As a consequence of the
demerger, Recall was presented in discontinued operations in 2014. In addition to Recall, discontinued operations comprise net adjustments
relating to divestments completed in prior years.
Financial information for Recall for the period up to the date of demerger and other discontinued operations is summarised below:
Profit before tax
Tax expense
(Loss)/profit for the year from discontinued operations
2015
US$M
-
(1.1)
(1.1)
2014
US$M
717.5
(34.3)
683.2
Profit before tax in 2014 comprised US$663.7 million profit on demerger (US$662.0 million after tax), US$54.3 million operating profit (which
included US$(32.1) million of depreciation and amortisation expense and US$1.7 million of share of results of joint ventures) and
US$(0.5) million net finance costs.
Significant Items outside the ordinary course of business relating to discontinued operations recognised during 2015 were US$0.7 million
(2014: US$664.1 million).
Further details of the Recall demerger are set out in Brambles’ 2014 Annual Report.
Note 12. Business Combinations
A) Ferguson Acquisition
On 12 September 2014, Brambles acquired 100% of Ferguson Group, a leading provider of container solutions to the offshore oil and gas
sector, for an enterprise value of £320 million (US$522.5 million) with a cash consideration of £278.5 million (US$454.7 million).
For the period from 12 September 2014 to 30 June 2015, Ferguson contributed revenue of US$74.1 million and profit after tax of
US$11.4 million. If the acquisition had occurred on 1 July 2014, Brambles' revenue and profit after tax for 2015 would have been
US$18.2 million higher and US$4.0 million higher, respectively.
The fair value of the Ferguson assets acquired, liabilities assumed and goodwill were as follows, based on preliminary acquisition accounting
data which will be finalised by September 2015:
Purchase consideration
Less: fair value of net identifiable assets acquired
Goodwill (at acquisition date)
2015
US$M
454.7
(133.9)
320.8
The goodwill acquired is attributable to the profitability of the acquired business, as well as benefits derived from the acquired workforce and
other intangible assets that cannot be separately recognised. The goodwill recognised is not expected to be deductible for income tax
purposes.
On acquisition of Ferguson, assets acquired and liabilities assumed were:
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Intangible assets
Other assets
Trade and other payables
Borrowings
Deferred tax liabilities
Other liabilities
Net assets
Fair value
US$M
34.7
25.2
166.8
49.0
4.4
280.1
10.6
105.5
20.5
9.6
146.2
133.9
58 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 12. Business Combinations - continued
Cash outflow on acquisition of Ferguson was as follows:
Purchase consideration
Add: Payments receivable from vendor
Less: cash acquired, net of overdrafts
Net cash outflow
2015
US$M
454.7
2.5
(31.1)
426.1
B) Rentapack Acquisition
On 20 May 2015, Brambles announced its acquisition of Renta Pack SA, Chile's leading provider of RPC pooling services, for an enterprise value
of 38 billion Chilean pesos (US$61.7 million) with a cash consideration of US$49.1 million. A provisional goodwill of US$32.2 million has been
recognised for this acquisition.
C) Other
In addition to the above acquisitions, there were other minor acquisitions during the year with immaterial impact.
Note 13. Trade and Other Receivables
Current
Trade receivables
Provision for doubtful receivables (A)
Net trade receivables
Other debtors (B)
Accrued and unbilled revenue
2015
US$M
817.0
(14.6)
802.4
141.6
100.6
2014
US$M
848.5
(17.0)
831.5
163.8
108.2
1,044.6
1,103.5
A) Provision for Doubtful Receivables
Trade receivables are non-interest bearing and are generally on 30–90 day terms. A provision for doubtful receivables is established when there
is a level of uncertainty as to the full recoverability of the receivable, based on objective evidence. A provision of US$5.6 million
(2014: US$5.9 million) has been recognised as an expense in the current year for specific trade and other receivables for which such evidence
exists.
Movements in the provision for doubtful receivables were as follows:
At 1 July
Charge for the year
Amounts written off
Acquisition of subsidiaries
Demerger of subsidiaries
Foreign exchange differences
At 30 June
17.0
5.6
(6.7)
0.7
-
(2.0)
14.6
27.9
5.9
(4.2)
-
(11.7)
(0.9)
17.0
59 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 13. Trade and Other Receivables - continued
At 30 June, the ageing analysis of trade receivables by reference to due dates was as follows:
Not past due
Past due 0-30 days but not impaired
Past due 31-60 days but not impaired
Past due 61-90 days but not impaired
Past 90 days but not impaired
Impaired
2015
US$M
618.9
134.3
26.4
9.5
13.3
14.6
2014
US$M
628.9
142.3
32.7
11.3
16.3
17.0
817.0
848.5
At 30 June 2015, trade receivables of US$183.5 million (2014: US$202.6 million) were past due but not doubtful. These trade receivables
comprise customers who have a good debt history and are considered recoverable.
At 30 June 2015, trade receivables of US$14.6 million (2014: US$17.0 million) were considered to be impaired. A provision of US$14.6 million
(2014: US$17.0 million) has been recognised for doubtful receivables.
B) Other Debtors
Other debtors primarily comprise GST/VAT recoverable, loss compensation receivables and certain balances arising from outside Brambles'
ordinary business activities, such as deferred proceeds on sale of property, plant and equipment.
At 30 June 2015, other debtors of US$76.3 million (2014: US$98.4 million) were past due but not considered to be impaired. No specific
collection issues have been identified with these receivables. An ageing of these receivables was as follows:
Not past due
Past due 0-30 days but not impaired
Past due 31-60 days but not impaired
Past due 61-90 days but not impaired
Past 90 days but not impaired
Refer to Note 25 for other financial instruments disclosures.
Note 14. Inventories
Raw materials and consumables
Work in progress
Finished goods
Note 15. Other Assets
Current
Prepayments
Current tax receivable
Derivative financial instruments (Note 25)
Non-current
Prepayments
Derivative financial instruments (Note 25)
Other receivables
65.3
5.2
3.8
2.4
64.9
141.6
53.1
2.4
25.8
81.3
46.8
7.1
5.1
59.0
6.2
8.3
5.5
65.4
32.6
3.0
1.7
61.1
163.8
43.3
0.7
22.9
66.9
41.1
14.5
14.6
70.2
1.4
8.1
3.8
20.0
13.3
60
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 16. Property, Plant and Equipment
At 1 July 2013
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2014
Opening net carrying amount
Additions
Acquisition of subsidiaries
Disposals
Demerger of subsidiaries
Depreciation charge
Impairment of pooling equipment
Irrecoverable pooling equipment provision expense
Foreign exchange differences
Closing net carrying amount
At 30 June 2014
Cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2015
Opening net carrying amount
Additions
Acquisition of subsidiaries
Disposals
Depreciation charge
Impairment of pooling equipment
Irrecoverable pooling equipment provision expense
Foreign exchange differences
Closing net carrying amount
At 30 June 2015
Cost
Accumulated depreciation
Net carrying amount
Land and
buildings
US$M
Plant and
equipment
US$M
Total
US$M
212.4
(90.1)
122.3
7,157.3
7,369.7
(2,871.7)
(2,961.8)
4,285.6
4,407.9
122.3
4,285.6
4,407.9
11.7
32.8
-
(136.8)
(7.6)
-
-
5.0
27.4
55.1
(27.7)
27.4
27.4
5.1
15.3
(0.7)
(2.9)
-
-
(3.4)
40.8
932.9
6.7
(76.4)
(282.0)
(494.3)
(7.4)
(88.3)
63.3
944.6
39.5
(76.4)
(418.8)
(501.9)
(7.4)
(88.3)
68.3
4,340.1
4,367.5
7,210.9
(2,870.8)
4,340.1
4,340.1
1,031.5
186.1
(79.7)
7,266.0
(2,898.5)
4,367.5
4,367.5
1,036.6
201.4
(80.4)
(498.4)
(501.3)
(5.0)
(79.7)
(511.0)
4,383.9
(5.0)
(79.7)
(514.4)
4,424.7
68.4
(27.6)
40.8
7,111.7
7,180.1
(2,727.8)
(2,755.4)
4,383.9
4,424.7
The net carrying amounts above include plant and equipment held under finance lease US$34.2 million (2014: US$15.4 million); leasehold
improvements US$20.4 million (2014: US$22.9 million); and capital work in progress US$26.6 million (2014: US$43.5 million).
61
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 17. Goodwill
A) Net Carrying Amounts and Movements During the Year
At 1 July
Carrying amount
Year ended 30 June
Opening net carrying amount
Acquisition of subsidiaries
Demerger of subsidiaries
Foreign exchange differences
Closing net carrying amount
At 30 June
Gross carrying amount
2015
US$M
2014
US$M
1,322.4
1,736.7
1,322.4
351.4
-
(143.3)
1,530.5
1,736.7
154.8
(607.6)
38.5
1,322.4
1,530.5
1,322.4
B) Segment-Level Summary of Net Carrying Amount
Goodwill acquired through business combinations is allocated to cash generating units (CGU), which are the smallest identifiable groupings of
Brambles' cash generating assets. A segment-level summary of the goodwill allocation is presented as follows:
Pallets - Americas
Pallets - EMEA
Pallets - Asia-Pacific
Pallets
RPCs
Containers
Total goodwill
315.2
38.3
24.9
378.4
648.0
504.1
316.5
40.4
31.4
388.3
700.4
233.7
1,530.5
1,322.4
C) Recoverable Amount Testing - Continuing Operations
The recoverable amount of goodwill is determined based on value in use calculations undertaken at the CGU level. The value in use is
calculated using a discounted cash flow methodology covering a five-year period with an appropriate terminal value at the end of that period.
Based on the impairment testing, the carrying amounts of goodwill in the CGUs related to continuing operations at reporting date were fully
supported. The key assumptions on which management has based its cash flow projections were:
Cash flow forecasts
Cash flow forecasts are post tax and based on the most recent financial projections covering a maximum period of five years. Financial
projections are based on assumptions that represent management's best estimates.
Revenue growth rates
Revenue growth rates used are based on management's latest five-year plan. Five-year growth rates ranged between 6.4% and 15.6% (average
rates: Pallets 6.9%; RPCs 11.3% and Containers 11.7%). Growth rates for 2014 ranged between 3.2% and 15.2%.
Terminal value
The terminal value calculated after year five is determined using the stable growth model, having regard to the weighted average cost of
capital and terminal growth factor appropriate to each CGU. Average terminal growth rates used in the financial projections were: Pallets 2.9%;
RPCs 2.2% and Containers 2.3% (2014: Pallets 3.1%; RPCs 3.3% and Containers 2.6%).
Discount rates
Discount rates used are the pre-tax weighted average cost of capital (WACC) and include a premium for market risks appropriate to each
country in which the CGU operates. WACCs ranged between 7.0% and 9.4% (average rates: Pallets 9.2%; RPCs 8.9% and Containers 8.1%).
WACCs for 2014 ranged between 8.8% and 12.5% (average rates: Pallets 12.5%; RPCs 10.2% and Containers 10.7%).
Sensitivity
Any reasonable change to the above key assumptions would not cause the carrying value of any of the CGUs to materially exceed its
recoverable amount.
62 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 18. Intangible Assets
At 1 July 2013
Gross carrying amount
Accumulated amortisation
Net carrying amount
Year ended 30 June 2014
Opening carrying amount
Additions
Acquisition of subsidiaries
Demerger of subsidiaries
Amortisation charge
Impairment charge
Foreign exchange differences
Closing carrying amount
At 30 June 2014
Gross carrying amount
Accumulated amortisation
Net carrying amount
Year ended 30 June 2015
Opening carrying amount
Additions
Acquisition of subsidiaries
Disposals
Amortisation charge
Foreign exchange differences
Closing carrying amount
At 30 June 2015
Gross carrying amount
Accumulated amortisation
Net carrying amount
Software
US$M
419.0
(345.9)
73.1
73.1
19.3
0.2
(25.6)
(20.6)
-
0.8
47.2
341.5
(294.3)
47.2
47.2
11.7
0.1
(0.1)
(15.2)
(1.0)
42.7
328.4
(285.7)
42.7
Other1
US$M
439.2
(175.8)
263.4
263.4
6.6
12.2
(74.6)
(37.9)
(2.1)
6.3
173.9
287.8
(113.9)
173.9
Total
US$M
858.2
(521.7)
336.5
336.5
25.9
12.4
(100.2)
(58.5)
(2.1)
7.1
221.1
629.3
(408.2)
221.1
173.9
221.1
2.1
53.8
(0.1)
(32.5)
(19.4)
177.8
309.9
(132.1)
177.8
13.8
53.9
(0.2)
(47.7)
(20.4)
220.5
638.3
(417.8)
220.5
1 Other intangible assets primarily comprise acquired customer relationships, customer lists and agreements.
63 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 19. Trade and Other Payables
Current
Trade payables
GST/VAT, refundable deposits and other payables
Accruals and deferred income
Derivative financial instruments (Note 25)
Non-current
Derivative financial instruments (Note 25)
Other liabilities
2015
US$M
496.9
471.1
313.8
4.0
2014
US$M
480.1
485.2
345.0
1.1
1,285.8
1,311.4
1.8
6.1
7.9
8.0
5.4
13.4
Trade payables and other current payables are non-interest bearing and are generally settled on 30–90 day terms.
Refer to Note 25 for other financial instruments disclosures.
Note 20. Provisions
At 1 July 2014
Current
Non-current
Charge to income statement
Additional provisions
Unused amounts reversed
Utilisation of provision
Acquisition of subsidiaries
Foreign exchange differences
At 30 June 2015
Current
Non-current
Employee
entitlements
US$M
83.9
4.5
88.4
82.6
-
(87.5)
0.7
(8.7)
75.5
71.6
3.9
Other
US$M
29.6
16.4
46.0
13.8
(1.7)
(17.3)
9.3
(3.4)
46.7
31.4
15.3
Total
US$M
113.5
20.9
134.4
96.4
(1.7)
(104.8)
10.0
(12.1)
122.2
103.0
19.2
Employee entitlements provision comprises US$10.2 million (2014: US$18.8 million) for long service leave, US$1.5 million (2014: US$1.6 million)
for phantom shares and US$63.8 million (2014: US$68.0 million) for bonuses and other employee-related obligations (other than those
resulting from pension plans). None of these amounts related to phantom shares which had vested at reporting date. US$7.5 million (2014:
US$14.7 million) of the long service leave provision has been recognised as current as it is expected to be settled within one year from
reporting date. The remaining balance of long service leave of US$2.7 million (2014: US$4.1 million) is expected to settle within the next two to
ten years and has been discounted to present value.
64
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 21. Retirement Benefit Obligations
A) Defined Contribution Plans
Brambles operates a number of defined contribution retirement benefit plans for qualifying employees. The assets of these plans are held in
separately administered trusts or insurance policies. In some countries, Brambles’ employees are members of state-managed retirement
benefit plans. Brambles is required to contribute a specified percentage of payroll costs to the retirement benefit plan to fund benefits. The
only obligation of Brambles with respect to defined contribution retirement benefit plans is to make the specified contributions.
US$21.9 million (2014: US$24.7 million) representing contributions paid and payable to these plans by Brambles at rates specified in the rules
of the plans has been recognised as an expense in the income statement, all of which relates to continuing operations (2014: US$20.5 million).
B) Defined Benefit Plans
Brambles operates a small number of defined benefit pension plans, which are closed to new entrants. The majority of the plans are self-
administered and the plans’ assets are held independently of Brambles' finances. Under the plans, members are entitled to retirement benefits
based upon a percentage of final salary. No other post-retirement benefits are provided. The plans are funded plans.
The plan assets and the present value of the defined benefit obligation recognised in Brambles' balance sheet are based upon the most recent
formal actuarial valuations which have been updated to 30 June 2015 by independent professionally qualified actuaries and take account of
the requirements of AASB 119. For all plans, the valuation updates have used assumptions, assets and cash flows as at 31 May 2015. The
present value of the defined benefit obligation and the past service cost were measured using the projected unit credit method.
A net expense of US$0.2 million has been recognised in the income statement in respect of defined benefit plans (2014: US$3.8 million), of
which US$0.6 million net income relates to continuing operations (2014: US$2.6 million). Included within the total expense recognised during
the year is a net interest cost of US$1.5 million (2014: US$1.9 million).
The amounts recognised in the balance sheet are as follows:
Present value of defined benefit obligations
Fair value of plan assets
Net liability recognised in the balance sheet
2015
US$M
299.4
(244.4)
55.0
2014
US$M
299.8
(238.9)
60.9
Currency variations and a decline in contributions from sponsoring employees were the key drivers for the changes in the present value of
defined benefit obligations and the fair value of plan assets. Benefits paid during the period were US$6.1 million (2014: US$7.6 million). The
principal assumption used in the actuarial valuations of the defined benefit obligation was the discount rate of 3.5% (2014: 4.2%) for the plans
operating in the United Kingdom and 7.4% (2014: 7.4%) for the South African plans. A reasonably possible change in discount rate or other key
assumptions would not have a material impact on the defined benefit obligation.
Brambles has no legal obligation to settle this liability with an immediate contribution or additional one-off contributions. Brambles intends to
continue to make contributions to the plans at the rates recommended by the funds' actuaries when actuarial valuations are obtained.
Additional annual contributions of US$7.9 million (2014: US$4.8 million) are being paid to remove the identified deficits over a period of 7
years (2014: 9 years).
Note 22. Contributed Equity
Total ordinary shares, of no par value, issued and fully paid:
At 1 July 2013
Issued during the year
Demerger capital reduction
At 30 June 2014
At 1 July 2014
Issued during the year
At 30 June 2015
Shares
US$M
1,557,367,436
6,618.5
5,578,511
-
44.1
(669.2)
1,562,945,947
5,993.4
1,562,945,947
5,993.4
4,019,587
34.0
1,566,965,534
6,027.4
Ordinary shares of Brambles Limited entitle the holder to participate in dividends and the proceeds on any winding up of the Company in
proportion to the number of shares held.
65
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 23. Share-Based Payments
The Remuneration Report sets out details relating to the Brambles share plans (pages 27 to 29), together with details of performance share
rights and MyShare matching conditional rights issued to the Executive Director and other Key Management Personnel (pages 23 to 24). Rights
granted by Brambles do not result in an entitlement to participate in share issues of any other corporation.
Set out below are summaries of rights granted under the plans.
A) Grants over Brambles Limited Shares
Granted
during
the year
Demerger
adjusted
Exercised
during
the year
Forfeited/
lapsed during
the year
Balance
at 30 June
Grant date
Expiry date
2015
Performance share rights
27 Aug 2008
27 Aug 2014
25 Nov 2009
26 Nov 2015
24 Nov 2010
24 Nov 2016
Balance
at 1 July
24,137
7,700
93,704
31 Mar 2011
30 Jun 2017
667,579
06 Sep 2011
06 Sep 2017
2,436,555
07 Jun 2012
07 Jun 2018
15,966
25 Sep 2012
25 Sep 2018
2,829,702
12 Oct 2012
12 Oct 2018
265,279
25 Sep 2013
25 Sep 2019
2,560,091
2 Sep 2014
2 Sep 2020
25 Sep 2014
25 Sep 2020
3 Nov 2014
3 Nov 2020
1 Dec 2014
1 Dec 2020
16 Jan 2015
16 Jan 2021
-
-
-
-
-
MyShare matching conditional rights
2013 Plan Year
31 Mar 2015
2014 Plan Year
31 Mar 2016
2015 Plan Year
31 Mar 2017
579,801
249,910
-
-
-
-
-
-
-
-
-
-
5,500
2,598,263
500
131,760
24,280
-
473,875
267,627
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(24,137)
(4,400)
(68,553)
(630,129)
-
-
-
-
(1,240,738)
(1,164,335)
(15,966)
-
-
3,300
25,151
37,450
31,482
-
(1,333,775)
(4,342)
1,491,585
(54,189)
(5,572)
-
(4,875)
-
-
-
(546,232)
(23,660)
(820)
-
211,090
(2,724)
2,551,795
-
-
-
-
-
(33,569)
(59,807)
(4,244)
5,500
2,593,388
500
131,760
24,280
-
640,318
262,563
(3,953,046)
(1,269,021)
8,010,162
Total rights
9,730,424
3,501,805
2014 (summarised comparative)
Total rights
12,872,961
3,157,860
896,556
(5,525,198)
(1,671,755)
9,730,424
Of the above grants, 237,414 rights were exercisable at 30 June 2015.
Weighted average data:
- fair value at grant date of grants made during the year
- share price at exercise date of grants exercised during the year
- remaining contractual life at 30 June
2015
2014
A$
A$
years
9.20
10.19
4.0
8.12
8.84
3.9
66 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 23. Share-Based Payments - continued
B) Fair Value Calculations
The fair value of performance share rights and MyShare matching conditional rights was determined as at grant date, using a binomial
valuation methodology. The values calculated do not take into account the probability of rights being forfeited prior to vesting, as a probability
adjustment is made when computing the share-based payment expense.
The significant inputs into the valuation models for the grants made during the year were:
Weighted average share price
Expected volatility
Expected life
Annual risk-free interest rate
Expected dividend yield
The expected volatility was determined based on a four-year historic volatility of Brambles' share prices.
2015
Grants
A$9.92
20%
2014
Grants
A$8.58
20%
2-3 years
2-3 years
2.66-2.80%
2.60-2.82%
3.50%
3.50%
67 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 24. Reserves and Retained Earnings
Reserves
Retained earnings
A) Movements in Reserves and Retained Earnings
2015
US$M
2014
US$M
(7,101.8)
(6,742.5)
3,715.5
3,500.1
(3,386.3)
(3,242.4)
Year ended 30 June 2014
Opening balance
Actuarial loss on defined benefit plans
FCTR released to profits on demerger of Recall
Foreign exchange differences
Cash flow hedges:
- fair value losses
- tax on fair value losses
- transfers to property, plant and equipment
- tax on transfers to net profit
Share-based payments:
- expense recognised during the year
- shares issued
- equity component of related tax
- transfer to retained earnings on demerger of Recall
Dividends declared
Demerger dividend
Net profit for the year
Closing balance
Year ended 30 June 2015
Opening balance
Actuarial loss on defined benefit plans
Foreign exchange differences
Share-based payments:
- expense recognised during the year
- shares issued
- equity component of related tax
Dividends declared
Net profit for the year
Closing balance
Reserves
Share-
based
payment
US$M
Foreign
currency
translation
US$M
Hedging
US$M
Unification
Other
US$M US$M
Total
US$M
Retained
earnings
US$M
(0.3)
98.6
148.6
(7,162.4)
167.3
(6,748.2)
3,155.1
-
-
-
(0.4)
0.1
0.5
(0.2)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27.2
(43.1)
4.6
(4.4)
-
-
-
-
(29.4)
50.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(29.4)
50.8
(0.4)
0.1
0.5
(0.2)
27.2
(43.1)
4.6
(4.4)
-
-
-
(0.3)
82.9
170.0
(7,162.4)
167.3
(6,742.5)
(10.6)
-
-
-
-
-
-
-
-
-
4.4
(376.1)
(540.4)
1,267.7
3,500.1
(0.3)
82.9
170.0
(7,162.4)
167.3
(6,742.5)
3,500.1
-
-
-
-
-
-
-
-
-
-
(350.0)
21.8
(34.0)
2.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(350.0)
21.8
(34.0)
2.9
-
-
(0.7)
-
-
-
-
(368.3)
584.4
(0.3)
73.6
(180.0)
(7,162.4)
167.3
(7,101.8)
3,715.5
68 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 24. Reserves And Retained Earnings - continued
B) Nature and Purpose of Reserves
Hedging reserve
This comprises the cumulative portion of the gain or loss of cash flow hedges that are determined to be effective hedges. Amounts are recognised
in the income statement when the associated hedged transaction is recognised or the hedge or the forecast hedged transaction is no longer highly
probable.
Share-based payments reserve
This comprises the cumulative share-based payment expense recognised in the income statement in relation to equity-settled options and share
rights issued but not yet exercised. Refer to Note 23 for further details.
Foreign currency translation reserve
This comprises cumulative exchange differences arising from the translation of the financial statements of foreign subsidiaries, net of qualifying net
investment hedges. The relevant accumulated balance is recognised in the income statement on disposal of a foreign subsidiary.
Unification reserve
On Unification, Brambles Limited issued shares on a one-for-one basis to those Brambles Industries Limited (BIL) and Brambles Industries plc (BIP)
shareholders who did not elect to participate in the Cash Alternative. The Unification reserve of US$15,385.8 million was established on 4
December 2006, representing the difference between the Brambles Limited share capital measured at fair value and the carrying value of the share
capital of BIL and BIP at that date. In the consolidated financial statements, the reduction in share capital of US$8,223.4 million on 9 September
2011 by the parent entity in accordance with section 258F of the Corporations Act 2001 was applied against the Unification reserve.
Other
This comprises a merger reserve created in 2001 and a capital redemption reserve created in 2006.
69 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 25. Financial Risk Management
Brambles is exposed to a variety of financial risks: market risk (including the effect of fluctuations in interest rates and exchange rates),
liquidity risk and credit risk.
Brambles' overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of Brambles.
Brambles uses standard derivative financial instruments to manage its risk exposure in the normal course of business. Brambles does not
trade in financial instruments for speculative purposes. Hedging activities are conducted through Brambles' Treasury department on a
centralised basis in accordance with Board policies and guidelines through standard operating procedures and delegated authorities.
Policies with respect to financial risk management and hedging activities are discussed below and should be read in conjunction with detailed
information contained in the Operating & Financial Review on pages 3 to 11.
A) Financial Assets and Liabilities
Set out below are the carrying amounts of financial instruments recognised in the balance sheet. With the exception of loans and receivables
and derivatives designated as hedging instruments, all financial assets are classified as financial assets at fair value through profit or loss.
Financial assets
- cash at bank and in hand (Note 26)
- short term deposits (Note 26)
- trade receivables (Note 13)
- derivative financial instruments (Note 15)
· interest rate swaps - fair value hedges
· forward foreign exchange contracts - held for trading
· embedded derivatives
Financial liabilities
- trade payables (Note 19)
- borrowings
Unsecured:
· bank overdrafts
· bank loans
· loan notes
· other loans
· finance lease liabilities
Secured:
· finance lease liabilities
- derivative financial instruments (Note 19)
· interest rate swaps - fair value hedges
· forward foreign exchange contracts - cash flow hedges
· forward foreign exchange contracts - held for trading
2015
US$M
2014
US$M
2015
US$M
2014
US$M
Current
Non-current
158.3
7.9
802.4
5.1
3.8
1.1
0.2
215.8
6.5
831.5
14.6
14.2
0.4
-
973.7
1,068.4
496.9
127.5
9.5
39.9
68.7
-
8.6
0.8
4.0
-
-
4.0
480.1
497.8
0.5
32.6
436.3
16.5
11.9
-
1.1
-
0.1
1.0
-
-
-
8.3
8.3
-
-
8.3
-
-
-
-
8.1
7.6
-
0.5
8.1
-
2,727.6
2,086.2
-
964.0
-
47.9
1,738.8
2,025.2
-
21.2
3.6
1.8
1.8
-
-
9.6
3.5
-
8.0
8.0
-
-
628.4
979.0
2,729.4
2,094.2
The fair values of all financial instruments held on the balance sheet as at 30 June 2015 equal the carrying amount, with the exception of loan
notes, which has an estimated fair value of US$1,945.9 million (2014: US$2,641.7 million). Financial assets and liabilities held at fair value are
estimated using level 2 estimation techniques which uses inputs that are observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices). The fair value of loan notes has been calculated by discounting future cash flows at prevailing interest rates
for the relevant yield curves. The methodology for calculating fair values of derivative instruments is set out in Note 2.
70 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 25. Financial Risk Management - continued
B) Market Risk
Brambles has the following risk policies in place with respect to market risk.
Interest rate risk
Brambles' exposure to potential volatility in finance costs, predominantly US dollars and euros, is managed by maintaining a mix of fixed and
floating-rate instruments within select target bands over defined periods. In most cases, interest rate derivatives are used to achieve these
targets synthetically.
The following table sets out the financial instruments exposed to interest rate risk at reporting date:
Financial assets (floating rate)
Cash at bank
Short term deposits
Weighted average effective interest rate
Financial liabilities (floating rate)
Bank overdrafts
Bank loans
Interest rate swaps (notional value) - fair value hedges
Net exposure to cash flow interest rate risk
Weighted average effective interest rate
Financial liabilities (fixed rate)
Loan notes
Bank loans
Finance lease liabilities
Other loans
Interest rate swaps (notional value) - fair value hedges
Net exposure to fair value interest rate risk
Weighted average effective interest rate
2015
US$M
158.3
7.9
166.2
1.0%
9.5
965.3
561.0
1,535.8
1.8%
2014
US$M
215.8
6.5
222.3
0.7%
0.5
31.2
1,132.1
1,163.8
2.2%
1,807.5
2,461.5
38.6
34.2
-
(561.0)
1,319.3
5.4%
49.3
15.4
26.1
(1,132.1)
1,420.2
5.4%
71 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 25. Financial Risk Management - continued
B) Market Risk - continued
Interest rate swaps - fair value hedges
Brambles entered into interest rate swap transactions with various banks swapping the €500 million 2024 Euro medium term fixed rate notes
to variable rates for all or part of the term. In accordance with AASB 139, the carrying value of the loan notes have been adjusted to increase
debt by US$11.1 million (2014: US$11.7 million) in relation to changes in fair value attributable to the hedged risk. The fair value of interest
rate swaps at reporting date was US$11.0 million (2014: US$13.8 million).
The terms of the swaps match the terms of the fixed rate bond issue for the amounts and durations being hedged.
The gain or loss from re-measuring the interest rate swaps at fair value is recorded in the income statement together with any changes in the
fair value of the hedged asset or liability that is attributed to the hedged risk. For 2015, all interest rate swaps were effective hedging
instruments.
Sensitivity analysis
The following table sets out the sensitivity of Brambles' financial assets and financial liabilities to interest rate risk applying the following
assumptions:
US dollar interest rates
Australian dollar interest rates
Sterling interest rates
Euro interest rates
Impact on profit after tax
Impact on equity
2015
2014
Interest rate risk
lower rates
- 25 bps
- 25 bps
- 25 bps
- 25 bps
US$M
2.8
-
higher rates
+ 75 bps
+ 50 bps
+ 50 bps
+ 25 bps
US$M
(5.4)
-
lower rates
- 25 bps
- 25 bps
- 25 bps
- 25 bps
US$M
2.0
-
higher rates
+ 50 bps
+ 50 bps
+ 50 bps
+ 50 bps
US$M
(4.0)
-
Based on financial instruments held at 30 June 2015, if interest rates were to parallel shift by the number of basis points in the different
currencies noted above with all other variables held constant, profit after tax for the year would have been US$2.8 million higher or
US$5.4 million lower (2014: US$2.0 million higher or US$4.0 million lower), mainly as a result of lower/higher interest expense on bank
borrowings. The impact on equity would have been nil (2014: nil). Given its geographically diverse operations, Brambles had interest rate
exposure positions against a variety of currencies, predominantly US dollars and euros.
Foreign exchange risk
Exposure to foreign exchange risk generally arises in either the value of transactions translated back to the functional currency of a subsidiary
or the value of assets and liabilities of overseas subsidiaries when translated back to the Group's reporting currency.
Foreign exchange hedging is used when a transaction exposure exceeds certain thresholds and as soon as a defined exposure arises. Within
Brambles, exposures may arise with external parties or, alternatively, by way of cross-border intercompany transactions. Forward foreign
exchange contracts are primarily used to manage these exposures. Given that Brambles both generates income and incurs expenses in its local
currencies of operation, these exposures are not significant.
Brambles generally mitigates translation exposures by raising debt in currencies where there are matching assets.
Currency profile
The following table sets out the currency mix profile of Brambles' financial instruments at reporting date:
2015
Financial assets
Financial liabilities
2014
Financial assets
Financial liabilities
US
dollar
US$M
Aust.
dollar
US$M
241.2
1,353.3
232.9
1,227.8
62.8
28.3
69.9
34.3
Sterling
US$M
Euro
US$M
Other
US$M
Total
US$M
62.0
349.3
266.7
982.0
309.9
1,351.6
314.7
3,357.8
69.2
44.3
419.4
285.1
1,076.5
1,590.1
176.7
3,073.2
72 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 25. Financial Risk Management - continued
B) Market Risk - continued
Forward foreign exchange contracts - cash flow hedges
Brambles enters into forward foreign exchange contracts to hedge currency exposures arising from normal commercial transactions such as
the purchase and sale of equipment and services, intercompany interest and royalties.
During 2015, Brambles entered into forward foreign exchange transactions with various banks in a variety of cross-currencies for terms
ranging up to 6 months. Most contracts create an obligation on Brambles to take receipt of or deliver a foreign currency which is used to fulfil
the foreign currency sale or purchase order.
For 2015 and 2014, all foreign exchange contracts were effective hedging instruments. The fair value of these contracts at reporting date was
nil (2014: US$(0.1) million).
Other forward foreign exchange contracts
Brambles enters into other forward foreign exchange contracts for the purpose of hedging various cross-border intercompany loans to
overseas subsidiaries. In this case, the forward foreign exchange contract provides an economic hedge against exchange fluctuations in the
foreign currency loan balance. The face value and terms of the foreign exchange contracts match the intercompany loan balances. Gains and
losses on realignment of the intercompany loan and foreign exchange contracts to spot rates are offset in the income statement.
Consequently, these foreign exchange contracts are not designated for hedge accounting purposes and are classified as held for trading. The
fair value of these contracts at reporting date was US$(2.9) million (2014: US$(0.6) million).
Hedge of net investment in foreign entity
At 30 June 2015, €350.5 million (US$393.3 million) of the 2024 Euro medium term note has been designated as a hedge of the net investment
in Brambles' European subsidiaries and is being used to partially hedge Brambles' exposure to foreign exchange risks on these investments.
For 2015 and 2014, there was no ineffectiveness to be recorded from such partial hedges of net investments in foreign entities.
Sensitivity analysis
The following table sets out the sensitivity of Brambles' financial assets and financial liabilities to foreign exchange risk (transaction exposures
only):
Exchange rate movement
Impact on profit after tax
Impact on equity
Foreign exchange risk
2015
2014
lower rates
higher rates
lower rates
higher rates
-10%
US$M
0.1
(28.0)
+10%
US$M
(0.1)
28.0
-10%
US$M
0.5
(34.1)
+10%
US$M
(0.5)
34.1
Based on the financial instruments held at 30 June 2015, if exchange rates were to weaken/strengthen by 10% with all other variables held
constant, profit after tax for the year would have been US$0.1 million higher/lower (2014: US$0.5 million higher/lower). The impact on equity
would have been US$28.0 million lower/higher (2014: US$34.1 million lower/higher) as a result of the incremental movement through the
foreign currency translation reserve relating to the effective portion of a net investment hedge.
73 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 25. Financial Risk Management - continued
C) Liquidity Risk
Brambles' objective is to maintain adequate liquidity to meet its financial obligations as and when they fall due. Brambles funds its operations
through existing equity, retained cash flow and borrowings. Funding is generally sourced from relationship banks and debt capital market
investors on a medium to long term basis.
Bank credit facilities are generally structured on a committed multi-currency revolving basis and at balance date had maturities ranging out to
December 2019. Borrowings under the bank credit facilities are floating-rate, unsecured obligations with covenants and undertakings typical
for these types of arrangements.
Borrowings are raised from debt capital markets by the issue of unsecured fixed interest notes, with interest payable semi-annually or annually.
At balance date, loan notes had maturities out to June 2024.
The average term to maturity of the committed borrowing facilities and the loan notes is equivalent to 3.9 years (2014: 4.1 years). These
facilities are unsecured and are guaranteed as described in Note 34B.
Brambles also has access to further funding through overdrafts, uncommitted and standby lines of credit, principally to manage day-to-day
liquidity.
Borrowing facilities maturity profile
Maturity
2015
Type
Less than 1 year
Bank loans/loan notes/overdrafts/finance leases
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Bank loans/loan notes/finance leases
Bank loans/loan notes/finance leases
Bank loans/loan notes/finance leases
Bank loans/loan notes/finance leases
Over 5 years
Loan notes/finance leases
2014
Less than 1 year
Bank loans/loan notes/overdrafts/finance leases/other loans
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Bank loans/loan notes/finance leases/other loans
Bank loans/loan notes/finance leases
Bank loans/loan notes
Bank loans/loan notes
Over 5 years
Loan notes
Total
facilities
331.0
814.1
1,051.2
347.7
871.4
567.5
US$M
Facilities
used1
Facilities
available
109.5
409.5
853.6
114.3
783.7
567.5
221.5
404.6
197.6
233.4
87.7
-
3,982.9
2,838.1
1,144.8
692.3
891.7
803.4
1,027.0
319.1
1,182.1
4,915.6
467.6
77.3
116.3
685.9
36.6
1,182.1
2,565.8
224.7
814.4
687.1
341.1
282.5
-
2,349.8
1
Facilities used represents the principal value of loan notes and borrowings drawn against the relevant facilities to reflect the correct amount
of funding headroom. This amount differs by US$17.0 million (2014: US$18.2 million) from loan notes and borrowings as shown in the
balance sheet which are measured on the basis of amortised cost as determined under the effective interest method and include accrued
interest, transaction costs and fair value adjustments on certain hedging instruments.
Loan notes maturity profile
Outstanding Notes
US private placement Series C US$96.5 million
US private placement Series B US$55.0 million
US private placement Series C US$20.0 million
144A Notes US$500.0 million
Euro medium term note €500.0 million
Euro medium term note €500.0 million
Issue Date
4 August 2004
7 May 2009
7 May 2009
31 March 2010
20 April 2011
12 June 2014
Maturity
4 August 2016
7 May 2016
7 May 2019
1 April 2020
20 April 2018
12 June 2024
Interest Rate
5.94%
7.83%
8.23%
5.35%
4.625%
2.375%
74 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 25. Financial Risk Management - continued
C) Liquidity Risk - continued
Maturities of financial liabilities
The maturities of Brambles' contractual cash flows on non-derivative financial liabilities (for principal and interest) and contractual cash flows
on net and gross settled derivative financial instruments, based on the remaining period to contractual maturity date, are presented below.
Cash flows on interest rate swaps and forward foreign exchange contracts are valued based on forward interest and exchange rates applicable
at reporting date.
Year 1
US$M
Year 2
US$M
Year 3
US$M
Year 4
US$M
Total
Over 4
contractual
years
US$M
cash flows
US$M
Carrying
amount
(assets)/
liabilities
US$M
496.9
9.5
1,003.9
1,807.5
34.2
-
-
320.4
163.0
7.3
490.7
-
-
-
295.1
622.3
5.5
922.9
-
-
-
94.2
60.2
4.8
-
-
281.2
1,155.6
12.0
496.9
9.5
1,051.3
2,147.2
40.8
159.2
1,448.8
3,745.7
3,352.0
-
-
52.6
-
490.7
922.9
159.2
1,448.8
3,798.3
3,352.0
2015
Non-derivative financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease liabilities
Financial guarantees1
496.9
9.5
60.4
146.1
11.2
724.1
52.6
776.7
Derivative financial (assets)/liabilities
Net settled interest rate swaps
Interest rate swaps
- fair value hedges
(4.0)
(4.3)
(2.5)
(1.3)
Gross settled forward foreign exchange contracts
- (inflow)
- outflow
2014
(624.4)
627.3
(1.1)
-
-
-
-
-
-
(4.3)
(2.5)
(1.3)
Non-derivative financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease liabilities
Other loans
Financial guarantees1
480.1
0.5
37.6
526.3
12.7
16.5
1,073.7
61.5
1,135.2
-
-
14.2
138.5
3.3
9.6
165.6
-
165.6
-
-
23.6
170.8
0.4
-
194.8
-
194.8
Derivative financial (assets)/liabilities
Net settled interest rate swaps
1.1
-
-
1.1
-
-
17.5
(11.0)
(10.3)
(624.4)
627.3
(8.1)
480.1
0.5
99.2
-
2.9
(7.4)
480.1
0.5
80.5
-
-
6.3
760.3
1,344.9
2,940.8
2,461.5
-
-
-
-
16.4
26.1
15.4
26.1
766.6
1,362.4
3,563.1
3,064.1
-
-
61.5
-
766.6
1,362.4
3,624.6
3,064.1
- fair value hedges
(14.2)
(3.5)
(2.2)
Gross settled forward foreign exchange contracts
- (inflow)
- outflow
(494.3)
495.0
(13.5)
-
-
(3.5)
-
-
(2.2)
-
-
-
-
6.1
-
-
6.1
(13.8)
(13.8)
(494.3)
495.0
(13.1)
-
0.7
(13.1)
1 Refer to Note 28A for details on financial guarantees. The amounts disclosed above are the maximum amounts allocated to the earliest
period in which the guarantee could be called. Brambles does not expect these payments to eventuate.
75 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 25. Financial Risk Management - continued
D) Credit Risk Exposure
Brambles is exposed to credit risk on its financial assets, which comprise cash and cash equivalents, trade and other receivables and derivative
financial instruments. The exposure to credit risks arises from the potential failure of counterparties to meet their obligations. The maximum
exposure to credit risk at the reporting date is the carrying amount of the financial instruments as set out in Note 25A. There is no significant
concentration of credit risk.
Brambles trades only with recognised, creditworthy third parties. Collateral is generally not obtained from customers.
Customers are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past
experience and industry reputation. Credit limits are set for individual customers and approved by credit managers in accordance with an
approved authority matrix. These credit limits are regularly monitored and revised based on historic turnover activity and credit performance. In
addition, overdue receivable balances are monitored and actioned on a regular basis.
Exposure to credit risk also arises from amounts receivable from unrealised gains on derivative financial instruments. At the reporting date, this
amount was US$12.1 million (2014: US$14.2 million). Brambles transacts derivatives with prominent financial institutions and has credit limits
in place to limit exposure to any potential non-performance by its counterparties.
E) Capital Risk Management
Brambles’ objective when managing capital is to ensure Brambles continues as a going concern as well as to provide a balance between
financial flexibility and balance sheet efficiency. In determining its capital structure, Brambles considers the robustness of future cash flows,
potential funding requirements for growth opportunities and acquisitions, the cost of capital and ease of access to funding sources.
Brambles manages its capital structure to be consistent with a solid investment grade credit. At 30 June 2015, Brambles held investment grade
credit ratings of BBB+ from Standard and Poor's and Baa1 from Moody's Investors Service.
Initiatives available to Brambles to achieve its desired capital structure include adjusting the amount of dividends paid to shareholders,
returning capital to shareholders, buying-back share capital, issuing new shares, selling assets to reduce debt, varying the maturity profile of its
borrowings and managing discretionary expenses.
Brambles considers its capital to comprise:
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total capital
2015
US$M
2014
US$M
2,855.1
2,584.0
(166.2)
2,688.9
2,641.1
5,330.0
(222.3)
2,361.7
2,751.0
5,112.7
Under the terms of its major borrowing facilities, Brambles is required to comply with the following financial covenants:
-
-
the ratio of net debt to EBITDA is to be no more than 3.5 to 1; and
the ratio of EBITDA to net finance costs is to be no less than 3.5 to 1.
Brambles has complied with these financial covenants for 2015 and prior years.
76 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 26. Cash Flow Statement - Additional Information
A) Reconciliation of Cash
For the purpose of the cash flow statement, cash comprises:
Cash at bank and in hand
Short term deposits
Bank overdraft (Note 25A)
2015
US$M
158.3
7.9
166.2
(9.5)
156.7
2014
US$M
215.8
6.5
222.3
(0.5)
221.8
Cash and cash equivalents include balances of US$1.5 million (2014: US$1.6 million) used as security for various contingent liabilities and is not
readily accessible. Short term deposits have initial maturities varying between 7 days and 3 months.
Brambles has various master netting and set-off arrangements covering cash pooling. An amount of US$55.3 million has been reduced from
cash at bank and overdraft at 30 June 2015 (2014: US$62.0 million).
B) Reconciliation of Profit After Tax to Net Cash Flows from Operating Activities
Profit after tax
Adjustments for:
- depreciation and amortisation
- irrecoverable pooling equipment provision expense
- net gains on demerger of Recall
- net losses/(gains) on disposals of property, plant and equipment
- impairment of software and property, plant and equipment
- other valuation adjustments
- joint ventures
- equity-settled share-based payments
- finance revenues and costs
Movements in operating assets and liabilities, net of acquisitions and disposals:
- increase in trade and other receivables
- increase in prepayments
- increase in inventories
- increase in deferred taxes
- increase in trade and other payables
- increase/(decrease) in tax payables
- (decrease)/increase in provisions
- other
584.4
1,267.7
549.0
79.7
-
6.0
5.0
(7.2)
(0.8)
21.8
6.1
(57.7)
(9.4)
(14.5)
38.9
96.7
35.9
(5.2)
(5.5)
560.4
88.3
(706.4)
(3.9)
9.5
(7.1)
(3.3)
27.2
(4.7)
(115.1)
(4.9)
(10.7)
72.9
99.0
(18.8)
16.8
1.0
Net cash inflow from operating activities
1,323.2
1,267.9
77
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 26. Cash Flow Statement - Additional Information - continued
C) Reconciliation of Movement in Net Debt
Net debt at beginning of the year
Net cash inflow from operating activities
Net cash outflow from investing activities
Net inflow from hedge instruments
Proceeds from issue of ordinary shares
Dividends paid
Increase on business acquisitions
Interest accruals, finance leases and other
Foreign exchange differences
Net debt at end of the year
Being:
Current borrowings
Non-current borrowings
Cash and cash equivalents
Net debt at end of the year
2015
US$M
2,361.7
(1,323.2)
1,416.8
38.5
-
359.3
116.6
(22.4)
(258.4)
2,688.9
127.5
2,727.6
(166.2)
2,688.9
2014
US$M
2,714.4
(1,267.9)
460.4
(34.9)
(5.1)
394.2
12.7
32.8
55.1
2,361.7
497.8
2,086.2
(222.3)
2,361.7
D) Non-Cash Financing or Investing Activities
There were no financing or investing transactions during the year which had a material effect on the assets and liabilities of Brambles that did
not involve cash flows.
On the demerger of Recall in 2014, dividends of US$540.4 million and a share capital reduction of US$669.2 million were applied by Brambles
on behalf of Scheme participants as payment for the Recall shares.
78 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 27. Commitments
A) Capital Expenditure Commitments
At 30 June 2015, Brambles had commitments of US$302.1 million (2014: US$188.2 million) principally relating to property, plant and
equipment.
Capital expenditure contracted for but not recognised as liabilities at reporting date was as follows:
Within one year
Between one and five years
After five years
2015
US$M
157.7
100.7
43.7
302.1
2014
US$M
135.0
53.2
-
188.2
B) Operating Lease Commitments
Brambles has taken out operating leases for offices, operational locations and plant and equipment. The leases have varying terms, escalation
clauses and renewal rights. Escalation clauses are rare and any impact is considered immaterial.
The future minimum lease payments under such non-cancellable operating leases are as follows:
Within one year
Between one and five years
After five years
Minimum lease payments
Plant
Occupancy
2015
US$M
22.5
48.7
7.6
78.8
2014
US$M
25.7
50.6
11.4
87.7
2015
US$M
107.4
303.5
112.7
523.6
2014
US$M
109.3
310.2
132.6
552.1
During the year, operating lease expense of US$143.6 million (2014: US$205.9 million) was recognised in the income statement.
Note 28. Contingencies
a)
Subsidiaries have contingent unsecured liabilities in respect of guarantees given relating to performance under contracts entered into
totalling US$52.6 million (2014: US$61.5 million), of which US$35.7 million (2014: US$46.8 million) is also guaranteed by Brambles Limited.
US$16.9 million (2014: US$14.5 million) is also guaranteed by Brambles Limited and certain of its subsidiaries under a deed of cross-
guarantee and are included in Note 34B.
b)
Brambles holds and guarantees certain Recall lease obligations. To the extent any claims or liabilities are caused by a Recall Group
company, Recall has indemnified Brambles under the Demerger Deed relating to the demerger of Recall.
c)
Environmental contingent liabilities
Brambles’ activities have previously included the treatment and disposal of hazardous and non-hazardous waste through subsidiaries and
corporate joint ventures. In addition, other activities of Brambles entail using, handling and storing materials which are capable of causing
environmental impairment.
As a consequence of the nature of these activities, Brambles has incurred and may continue to incur environmental costs and liabilities
associated with site and facility operation, closure, remediation, aftercare, monitoring and licensing. Provisions have been made in respect
of estimated environmental liabilities at all sites and facilities where obligations are known to exist and can be reliably measured.
However, additional liabilities may emerge due to a number of factors including changes in the numerous laws and regulations which
govern environmental protection, liability, land use, planning and other matters in each jurisdiction in which Brambles operates or has
operated. These extensive laws and regulations are continually evolving in response to technological advances, scientific developments and
other factors. Brambles cannot predict the extent to which it may be affected in the future by any such changes in legislation or regulation.
d)
In the ordinary course of business, Brambles becomes involved in litigation. Provision has been made for known obligations where the
existence of the liability is probable and can be reasonably quantified. Receivables have been recognised where recoveries, for example
from insurance arrangements, are virtually certain. As the outcomes of these matters remain uncertain, contingent liabilities exist for
possible amounts eventually payable that are in excess of the amounts provided.
79 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 29. Auditor's Remuneration
Amounts received or due and receivable by PwC (Australia) for:
Audit services in Australia:
- audit and review of Brambles' financial reports
- other assurance services
Other services:
- finance due diligence
- tax advisory services
- other
Total remuneration of PwC (Australia)
Amounts received or due and receivable by related practices of PwC (Australia) for:
Audit services outside Australia:
- audit and review of Brambles' financial reports
- other assurance services
Other services:
- finance due diligence
- tax advisory services
- other
Total remuneration of related practices of PwC (Australia)
Total auditor's remuneration
2015
US$'000
2014
US$'000
1,864
-
1,864
291
311
4
606
2,470
3,459
16
3,475
279
4
63
346
3,821
6,291
1,785
187
1,972
1,045
-
-
1,045
3,017
3,734
10
3,744
-
90
65
155
3,899
6,916
From time to time, Brambles employs PwC on assignments additional to its statutory audit duties where PwC, through its detailed knowledge
of the Group, is best placed to perform the services from an efficiency, effectiveness and cost perspective. The performance of such non-audit
related services is always balanced with the fundamental objective of ensuring PwC's objectivity and independence as auditors. To ensure this
balance, Brambles' Charter of Audit Independence requires that the Audit Committee approve any management recommendation that PwC
undertake non-audit work (with approval being delegated to the Chief Financial Officer within specified monetary limits).
Non-audit assignments during the year primarily related to finance due diligence for acquisitions, strategy-based consulting, compliance
tracking system and tax consulting advice. In 2014, non-audit assignments primarily related to finance due diligence for acquisitions and the
Recall demerger, compliance tracking system, forensic accounting services and tax consulting advice.
Note 30. Key Management Personnel
A) Key Management Personnel Compensation
Short term employee benefits
Post employment benefits
Other benefits
Termination/sign-on/retirement benefits
Share-based payment expense
10,340
12,061
240
123
-
6,784
17,487
242
90
583
8,936
21,912
B) Other Transactions with Key Management Personnel
Other transactions with Key Management Personnel are set out in Note 31A.
Further remuneration disclosures are set out in the Directors' Report on pages 15 to 30 of the Annual Report.
80
Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 31. Related Party Information
A) Other Transactions
Other transactions entered into during the year with Directors of Brambles Limited; with Director-related entities; with Key Management
Personnel (KMP, as set out in the Directors' Report); or with KMP-related entities were on terms and conditions no more favourable than those
available to other employees, customers or suppliers and include transactions in respect of the employee share plans, contracts of employment
and reimbursement of expenses. Any other transactions were trivial or domestic in nature.
B) Other Related Parties
A subsidiary has a non-interest bearing advance outstanding as at 30 June 2015 of US$1.095 million (2014: US$1.344 million) to Brambles
Custodians Pty Limited, the trustee under Brambles' employee loan scheme. This scheme enabled employees to acquire shares in BIL and has
been closed to new entrants since August 2002.
C) Material Subsidiaries
The principal subsidiaries of Brambles during the year were:
Name
CHEP USA
CHEP Canada, Inc.
CHEP UK Limited
CHEP Equipment Pooling NV
CHEP South Africa (Proprietary) Limited
CHEP Australia Limited
Pallet Companies LLC
IFCO Systems USA LLC
IFCO Systems GmbH
Brambles USA Inc.
Brambles Finance plc
Brambles Finance Limited
Place of incorporation
% interest held at
reporting date
2015
2014
USA
Canada
UK
Belgium
South Africa
Australia
USA
USA
Germany
USA
UK
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
In addition to the list above, there are a number of other non-material subsidiaries within Brambles.
Investments in subsidiaries are primarily by means of ordinary or common shares. All material subsidiaries prepare accounts with a 30 June
balance date.
81 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 31. Related Party Information - continued
D) Directors' Indemnities
Under its constitution, to the extent permitted by law, Brambles Limited indemnifies each person who is, or has been a Director or Secretary of
Brambles Limited against any liability which results from facts or circumstances relating to the person serving or having served in the capacity
of Director, Secretary, other officer or employee of Brambles Limited or any of its subsidiaries, other than:
(a) in respect of a liability other than for legal costs:
(i) a liability owed to Brambles Limited or a related body corporate;
(ii) a liability for a pecuniary penalty order under section 1317G of the Act or a compensation order under section 1317H of the Act; or
(iii) a liability that is owed to someone (other than Brambles Limited or a related body corporate) and did not arise out of conduct in
good faith; and
(b) in respect of a liability for legal costs:
(i) in defending or resisting proceedings in which the person is found to have a liability for which they could not have been indemnified
under paragraph (a)(i) above;
(ii) in defending or resisting criminal proceedings in which the person is found guilty;
(iii) in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for making the order are found
by the Court to be established; or
(iv) in connection with proceedings for relief to any persons under the Act in which the Court denies the relief.
Paragraph (b)(iii) above does not apply to costs incurred in responding to actions brought by ASIC or a liquidator as part of an investigation
before commencing proceedings for the Court order.
As allowed by its constitution, Brambles Limited has provided indemnities to its Directors and to Directors, Secretaries or other Statutory
Officers of its subsidiaries (Beneficiaries) against all loss, cost and expenses (collectively Loss) caused by or arising from any act or omission by
the relevant person in performance of that person's role as a Director, Secretary or Statutory Officer.
The indemnity given by the Company excludes the following matters:
(a) any Loss to the extent caused by or arising from an act or omission of the Beneficiary prior to the effective date of the indemnity;
(b) any Loss to the extent indemnity in respect of that Loss is prohibited under the Corporations Act (or any other law);
(c) any Loss to the extent it arises from private or personal acts or omissions of the Beneficiary;
(d) any Loss comprising the reimbursement of normal day-to-day expenses such as travelling expenses;
(e) any Loss to the extent the Beneficiary failed to act reasonably to mitigate the Loss;
(f) any Loss to the extent it is caused by or arises from acts or omissions of the Beneficiary after the date the indemnity is revoked by the
Company in accordance with the terms of the indemnity;
(g) any Loss to the extent it is caused by or arises from any breach by the Beneficiary of the terms of the indemnity.
Insurance policies are in place to cover Directors, Secretaries and other Statutory Officers of Brambles Limited and its subsidiaries, however the
terms of the policies prohibit disclosure of the details of the insurance cover and the premiums paid.
Note 32. Events After Balance Sheet Date
As announced on 20 August 2015, Brambles has acquired the remaining two-thirds of IFCO Japan in a transaction valuing IFCO Japan at ¥4.84
billion (US$38.9 million).
Other than those outlined in the Directors' Report or elsewhere in these financial statements, there have been no other events that have
occurred subsequent to 30 June 2015 and up to the date of this Report that have had a material impact on Brambles' financial performance or
position.
Note 33. Net Assets Per Share
Based on 1,567.0 million shares (2014: 1,562.9 million shares):
- Net tangible assets per share
- Net assets per share
2015
US cents
2014
US cents
56.8
168.5
77.3
176.0
Net tangible assets per share is calculated by dividing total equity attributable to the members of the parent entity, less goodwill and
intangible assets, by the number of shares on issue at year end.
Net assets per share is calculated by dividing total equity attributable to the members of the parent entity by the number of shares on issue at
year end.
82 Notes to and Forming Part of the Financial Statements - continued
for the year ended 30 June 2015
Note 34. Parent Entity Financial Information
A) Summarised Financial Data of Brambles Limited
Profit for the year
Other comprehensive (loss)/income for the year
Total comprehensive (loss)/income
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Share-based payment reserve
Foreign currency translation reserve
Retained earnings
Total equity
Parent entity
2015
US$M
296.1
(1,363.4)
(1,067.3)
8.2
6,854.1
6,862.3
15.0
932.0
947.0
2014
US$M
1,001.6
203.7
1,205.3
1.5
8,058.6
8,060.1
23.0
711.9
734.9
5,915.3
7,325.2
6,027.4
41.8
(255.8)
101.9
5,915.3
5,993.4
50.1
1,107.6
174.1
7,325.2
B) Guarantees and Contingent Liabilities
Brambles Limited and certain of its subsidiaries are parties to a deed of cross-guarantee which supports global financing credit facilities
available to certain subsidiaries. Total facilities available amount to US$1,791.8 million (2014: US$2,122.3 million) of which US$878.6 million
(2014: US$14.5 million) has been drawn.
Brambles Limited and certain of its subsidiaries are parties to guarantees which support US Private Placement borrowings of US$171.5 million
(2014: US$329.0 million) by a subsidiary.
Brambles Limited and certain of its subsidiaries are parties to a guarantee which support notes of US$500.0 million (2014: US$750.0 million)
issued by a subsidiary to qualified institutional buyers in accordance with Rule 144A and Regulation S of the United States Securities Act.
Brambles Limited and certain of its subsidiaries are parties to a guarantee which support notes of €1,000.0 million (2014: €1,000.0 million)
issued by two subsidiaries in the European bond market.
Brambles Limited has guaranteed repayment of certain facilities and financial accommodations made available to certain subsidiaries. Total
facilities and financial accommodations available amount to US$553.2 million (2014: US$531.1 million), of which US$139.7 million (2014:
US$121.2 million) has been drawn.
Other than these guarantees, the parent entity did not have any contingent liabilities at 30 June 2015 or 30 June 2014.
C) Contractual Commitments
Brambles Limited did not have any contractual commitments for the acquisition of property, plant and equipment at 30 June 2015 or 30 June
2014.
83 Directors' Declaration
In the opinion of the Directors of Brambles Limited:
(a)
the financial statements and notes set out on pages 37 to 83 are in accordance with the Corporations Act
2001, including:
(i)
complying with Accounting Standards,
the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
(ii)
giving a true and fair view of the financial position of Brambles as at 30 June 2015 and of its performance
for the year ended on that date;
(b)
there are reasonable grounds to believe that Brambles Limited will be able to pay its debts as and when
they become due and payable.
A statement of compliance with International Financial Reporting Standards as issued by the International
Accounting Standards Board is included within Note 1 to the financial statements.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer
required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
S P Johns
Chairman
T J Gorman
Chief Executive Officer
20 August 2015
84 Independent Auditor’s Report
to the Members of Brambles Limited
Report on the financial report
We have audited the accompanying financial report of Brambles Limited (the Company), which comprises the
consolidated balance sheet as at 30 June 2015, the consolidated income statement, the consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the
year ended on that date, a summary of significant accounting policies, other explanatory notes and the Directors’
declaration for Brambles (the consolidated entity). The consolidated entity comprises the Company and the entities
it controlled at year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the Directors determine is necessary to enable the preparation of the financial report that is free from
material misstatement, whether due to fraud or error. In Note 1, the Directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks
of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the consolidated entity’s preparation and fair presentation of the
financial report in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
the Directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
85
Independent Auditor’s Report - continued
to the Members of Brambles Limited
Auditor’s opinion
In our opinion:
(a)
the financial report of Brambles Limited is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity's financial position as at 30 June 2015 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
(b)
the financial report and notes also comply with International Financial Reporting Standards as disclosed in
Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 15 to 30 of the Directors’ Report for the year ended 30
June 2015. The Directors of the Company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion
on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Brambles Limited for the year ended 30 June 2015 complies with
section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Paul Bendall
Partner
Susan Horlin
Partner
Sydney
20 August 2015
Sydney
20 August 2015
86
Auditor’s Independence Declaration
As lead auditor for the audit of Brambles Limited for the year ended 30 June 2015, I declare that to the best of my
knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Brambles Limited and the entities it controlled during the period.
Paul Bendall
Partner
PricewaterhouseCoopers
Sydney
20 August 2015
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
87
Five-Year Financial Performance Summary
Continuing operations1
Sales revenue1
EBITDA1
Depreciation and amortisation1
Operating profit1
Net finance costs1
Profit before tax1
Tax expense1
Profit from continuing operations1
Profit from discontinued operations1
Profit for the year1
Underlying Profit1
Significant Items1
Operating profit1
2015
US$M
2014
US$M
2013
US$M
2012
US$M
2011
US$M
5,464.6
5,404.5
5,082.9
5,625.0
1,487.5
(549.0)
938.5
(111.9)
826.6
(241.1)
585.5
(1.1)
584.4
985.8
(47.3)
938.5
1,457.8
(528.3)
929.5
(113.0)
816.5
(232.0)
584.5
683.2
1,267.7
960.1
(30.6)
929.5
1,382.8
(495.7)
887.1
(110.8)
776.3
(220.0)
556.3
84.3
640.6
913.0
(25.9)
887.1
1,491.4
(552.2)
939.2
(152.0)
787.2
(212.3)
574.9
1.4
576.3
1,009.7
(70.5)
939.2
4,672.2
1,289.0
(479.8)
809.2
(127.5)
681.7
(209.9)
471.8
3.6
475.4
857.2
(48.0)
809.2
Weighted average number of shares (Millions)
1,566.0
1,560.7
1,555.7
1,482.3
1,445.6
Earnings per share (US cents)
Basic
From continuing operations1
On Underlying Profit after finance costs and tax1
ROCI1
BVA1
Capex on property, plant & equipment1
Balance sheet
Capital employed
Net debt
Equity
Average Capital Invested1
Cash flow
Cash flow from operations1
Free cash flow
Dividends paid
Free cash flow after dividends
Net debt ratios
Net debt to EBITDA (times)
EBITDA interest cover (times)
Average employees1
37.3
37.4
39.7
16%
272.0
1,036.6
5,330.0
2,688.9
2,641.1
6,291.0
728.8
404.1
359.3
44.8
1.7
13.7
81.2
37.5
38.7
16%
266.5
908.0
5,112.7
2,361.7
2,751.0
5,889.6
828.2
430.9
394.2
36.7
1.6
13.2
41.2
35.8
36.9
16%
246.8
865.7
5,739.8
2,714.4
3,025.4
5,576.9
697.3
508.6
425.5
83.1
1.7
14.6
38.9
38.8
42.1
16%
248.6
921.1
5,430.3
2,689.9
2,740.4
6,413.7
591.2
179.5
397.7
(218.2)
1.7
10.3
32.9
32.6
36.2
17%
251.6
821.9
5,450.2
2,998.8
2,451.4
5,013.4
725.1
303.3
224.0
79.3
2.2
10.5
14,024
14,086
13,166
17,021
17,134
Dividend declared per share (Australian cents)
28.0
27.0
27.0
26.0
26.0
1 Recall is presented within discontinued operations in 2014 and 2013. Periods prior to 2013 include Recall within continuing operations and are consistent with
previously published data.
88
Glossary
2006 Share Plan
Acquired Shares
The Brambles Limited 2006 Performance Share Plan (as amended)
Brambles Limited shares purchased by Brambles employees under MyShare
actual currency/FX
Results translated into US dollars at the applicable actual monthly exchange rates ruling in each period
AGM
Annual General Meeting
ACI (Average Capital Invested)
A 12-month average of capital invested; capital invested is calculated as net assets before tax balances, cash
and borrowings, but after adjustment for accumulated pre-tax Significant Items, actuarial gains or losses and
net equity adjustments for equity-settled share-based payments
BIFR (Brambles Injuries Frequency Rate)
Safety performance indicator that measures the combined number of fatalities, lost-time injuries, modified
duties and medical treatments per million hours worked
BIL
BIP
Board
BVA (Brambles Value Added)
Brambles Industries Limited, which was one of the two listed entities in the previous dual-listed companies
structure
Brambles Industries plc, which was one of the two listed entities in the previous dual-listed companies
structure
The Board of Directors of Brambles Limited
The value generated over and above the cost of the capital used to generate that value. It is calculated using
fixed June 2014 exchange rates as: Underlying Profit; plus Significant Items that are part of the ordinary
activities of the business; less Average Capital Invested, adjusted for accumulated pre-tax Significant Items
that are part of the ordinary activities of the business, multiplied by 12%
CAGR (compound annual growth rate)
The annualised percentage at which a measure (e.g. sales revenue) would have grown over a period if it grew
at a steady rate
Cash Flow from Operations
Cash flow generated after net capital expenditure but excluding Significant Items that are outside the
ordinary course of business
CGPR
Company
The Australian Securities Exchange Corporate Governance Council Corporate Governance Principles &
Recommendations, Second Edition
Brambles Limited (ACN 118 896 021)
constant currency/constant FX
Current period results translated into US dollars at the actual monthly exchange rates applicable in the
comparable period, so as to show relative performance between the two periods
continuing operations
Disclosable Executives
Continuing operations refers to Pallets, RPCs, Containers and the Corporate office
Brambles Limited’s Executive Directors, Non-Executive Directors and other Group executives whose
remuneration details are required to be disclosed in the Remuneration Report
discontinued operations
Operations which have been divested/demerged or which are held for sale
Dividend Share Program
A program, under MyShare, which enables employees to reinvest dividends from their Acquired Shares; the
share purchase price is calculated using a volume-weighted average of the Brambles share price over the five
trading days up to and including the record date for the applicable dividend
DRP (Dividend Reinvestment Plan)
The Brambles Dividend Reinvestment Plan, under which Australian and New Zealand shareholders can elect
to apply some or all of their dividends to the purchase of shares in Brambles instead of receiving cash
DLC
Dual-listed companies structure: the contractual arrangement between Brambles Industries Limited and
Brambles Industries plc from August 2001 to December 2006 under which they operated as if a single
economic enterprise, while retaining separate legal identities, tax residences and stock exchange listings
EPS (earnings per share)
Profit after finance costs, tax, minority interests and Significant Items, divided by the weighted average
number of shares on issue during the period
EBITA (earnings before interest, tax and
amortisation)
EBITDA (earnings before interest,
taxation, depreciation and amortisation)
ELT
Free Cash Flow
Operating profit from continuing operations after adding back depreciation
Operating profit from continuing operations after adding back depreciation and amortisation
Brambles’ Executive Leadership Team, details of which are on Page 14
Cash flow generated after net capital expenditure, finance costs and tax, but excluding the net cost of
acquisitions and proceeds from business disposals
FY (financial year)
Brambles’ financial year is 1 July to 30 June; FY15 indicates the financial year ended 30 June 2015
Group or Brambles
Brambles Limited and all of its related bodies corporate
IBCs (intermediate bulk containers)
Palletised containers used for the transport and storage of bulk products in a variety of industries including
the food, chemical, pharmaceuticals and transportation industries
IPEP (Irrecoverable Pooling Equipment
Provision)
Provision held by Brambles to account for pooling equipment that cannot be economically recovered and for
which there is no reasonable expectation of receiving compensation
Key Management Personnel
Members of the Board of Brambles Limited and Brambles’ Executive Leadership Team
KPI(s)
LTI
Key Performance Indicator(s)
Long Term Incentive
89 Glossary - continued
Matching Awards
Matching Shares
MyShare
operating profit
Performance Period
Matching share rights over Brambles Limited shares allocated to employees when they purchase Acquired
Shares under MyShare; when an employee’s Matching Awards vest, Matching Shares are allocated
Shares allocated to employees who have held Acquired Shares under MyShare for two years, and who remain
employed at the end of that two-year period; one Matching Share is allocated for every Acquired Share held
The Brambles Limited MyShare Plan, an all-employee share plan, under which employees acquire ordinary
shares by means of deductions from their after-tax pay and must hold those shares for a two-year period. If
an employee holds those shares and remains employed at the end of the two-year period, Brambles will
match the number of shares that employee holds by issuing or transferring to them the same number of
shares they held for the qualifying period, at no additional cost to the employee
Statutory definition of profit before finance costs and tax; sometimes called EBIT (earnings before interest and
tax)
A two-to-three year period over which the achievement of performance conditions is assessed to determine
whether STI and LTI share awards will vest
PAT (profit after tax)
Profit after finance costs, tax, minority interests and Significant Items
RPCs
Reusable/returnable plastic/produce container/crate, generally used for shipment and display of fresh
produce items; also the name of one of Brambles’ operating segments
ROCI (Return On Capital Invested)
Underlying Profit divided by Average Capital Invested
Significant Items
Items of income or expense which are, either individually or in aggregate, material to Brambles or to the
relevant business segment and: outside the ordinary course of business (e.g. gains or losses on the sale or
termination of operations, the cost of significant re-organisations or restructuring); or part of the ordinary
activities of the business but unusual because of their size and nature
STI
TFR
Short Term Incentive
Total Fixed Remuneration
TSR (total shareholder return)
Measures the returns that a company has provided for its shareholders, reflecting share price movements and
reinvestment of dividends over a specified performance period
Underlying EPS
Underlying Profit
Unification
unit-load equipment
Profit finance costs, tax and minority interests but before Significant Items, divided by the weighted average
number of shares on issue during the period
Profit from continuing operations before finance costs, tax and Significant Items
The unification of the dual-listed companies structure (between Brambles Industries Limited and Brambles
Industries plc) under a new single Australian holding company, Brambles Limited, which took place in
December 2006
A term for any tools or platforms (such as pallets, crates and containers) used for the shipment or storage of
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.
the Year
Brambles’ 2015 financial year
90
Notes
91
Notes
92
Contact Information
Registered Office
Brambles’ global headquarters is at its registered office in Sydney, Australia:
Level 40, Gateway Building
1 Macquarie Place
Sydney NSW 2000
Australia
ACN 118 896 021
Telephone: +61 (0) 2 9256 5222
Facsimile: +61 (0) 2 9256 5299
Email:
info@brambles.com
Website: www.brambles.com
Investor & Analyst Queries
Telephone: +61 (0) 2 9256 5238
Email:
investorrelations@brambles.com
Share Registry
Access to shareholding information is available to investors through Link Market Services.
Link Market Services Limited
Level 12, 680 George Street, Sydney NSW 2000, Australia
Locked Bag A14, Sydney South NSW 1235, Australia
Telephone: 1300 883 073
Facsimile: +61 (0) 2 9287 0303
Email:
registrars@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
Share Rights Registry
Employees or former employees of Brambles who have queries about the following interests:
- Performance share rights under the 2004 or 2006 share plans;
- Matching share rights under MyShare; or
- Shares acquired under MyShare or other share interests held through AET Structured Finance Services Pty Ltd,
may contact:
Boardroom Pty Limited
Attention: Brambles Employee Share Plans, GPO Box 3993, Sydney NSW 2001, Australia
Telephone: 1800 180 833 (within Australia)
+61 (0) 2 9290 9684 (from outside Australia)
Facsimile: 1300 653 459 (within Australia)
+61 (0) 2 9279 0664 (from outside Australia)
Email:
bramblesesp@boardroomlimited.com.au
Website: www.boardroomlimited.com.au