Annual Report 2018
www.brambles.com
Go to brambles.com to
review the Group’s online
annual review for 2018
Contents
Letter from the Chairman
Letter from the CEO
Operating & Financial Review
Board & Executive Leadership Team
Directors’ Report – Remuneration Report
Directors’ Report – Other Information
4
5
6
19
24
43
Shareholder Information
Consolidated Financial Report
Independent Auditor’s Report
Auditor’s Independence Declaration
Five-year Financial Performance Summary
Glossary
49
51
109
117
118
119
All acronyms and terminology referred to in this document are defined in the Glossary on page 119.
Forward-Looking Statements
Certain statements made in this report are “forward-looking statements” – that is, statements related to future, not past, events. Words such as
“anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “will”, “should”, 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.
Past performance cannot be relied on as a guide to future performance.
Brambles Limited
ABN 89 118 896 021
1
Brambles’ purpose is to
connect people with life’s
essentials every day.
Through its share and reuse
model, Brambles moves
more goods to more people
in more places than any
other organisation.
That’s how Brambles
contributes to a more
sustainable future.
What Brambles does:
As a pioneer of the sharing economy, Brambles has created
one of the world’s most sustainable logistics businesses.
Its circular business model perpetuates the share and reuse
of the world’s largest pool of reusable pallets, crates and
containers. This enables Brambles to serve its customers while
minimising the impact on the environment and improving the
efficiency and safety of supply chains around the world.
Brambles’ platforms form the invisible backbone of global
supply chains, primarily serving the fast-moving consumer
goods, fresh produce, beverage, retail and general
manufacturing industries. The world’s largest brands trust
Brambles to help them transport life’s essentials more
efficiently, safely and sustainably.
How Brambles creates value:
Brambles uses the power of its circular business model,
network advantage and unique expertise to leverage the key
capital inputs into its business to generate significant value
for customers, shareholders and employees.
For customers, Brambles’ end-to-end supply chain solutions
deliver operational, financial and environmental efficiencies
not otherwise available through one-way, single use
alternatives. Further details are available on page 7.
For shareholders, Brambles delivers sustainable growth at returns well
in excess of the cost of capital and seeks to generate sufficient cash
flow through the cycle to fund dividends and support reinvestment in
growth, innovation and the development of its people. Further details
are available on page 9.
For employees, Brambles provides development and exciting career
opportunities in over 60 countries. By fostering a culture of innovation
and agility, Brambles seeks to attract and retain the talent which is
integral to its success.
In a resource constrained world, circular business models like that
operated by Brambles are recognised as a critical economic evolution
to enable the world to trade more responsibly. By regenerating
what it extracts and by providing its products via a service, Brambles
helps reduce both the constant pressure on natural resources and
the waste production typical of conventional linear business models.
Brambles capitalises on its unique position in the supply chain to
enable customer collaboration and address sustainable development
challenges, such as optimising transport networks and addressing
food waste and promoting sustainable use of the world’s forests.
In this way, Brambles creates a circular economy, on a global scale.
As a first step towards producing an integrated value story, Brambles
has used the Integrated Reporting () ‘capitals’ framework,1 to
illustrate the interaction and interdependencies between its sources
of value, business model and ability to create value over time. This is
outlined in the infographic below.
¹ The International Integrated Reporting Framework.
As at 30 June 2018, Brambles:
Operated in…
60+
countries
Employed...
~12,000
people
Owned...
~610 million
pallets, crates and containers
Through a network of…
850+
service centres
INPUTS
VALUE CREATION
OUTPUTS
Natural Capital
99.4% wood from certified sources
regenerates stocks of raw materials
Manufactured Capital
Circular, share & reuse model
maximises asset utility
Human and Intellectual Capital
Attracting talent, ideas & innovation
Financial Capital
Attracting long-term investment
Social and Relationship Capital
Fostering positive stakeholder
relationships
Producer
Manufacturer
Brambles’ platforms help
reduce food waste
Transport and other
customer collaboration
Circular
Share and Reuse
Model
Committed to zero product
waste to landfill
Service Centre
Retailer
By sharing and reusing Brambles’ products versus single use alternatives,
value is created for its customers, the environment, and society.
Natural Capital
Customer-driven
environmental savings:
2.6m tonnes of CO2
4,100 megalitres of water
1.6m cubic meters of wood
1.7m trees
1.4m tonnes of waste
Human Capital
Developing, engaging
and remunerating our people
Financial Capital
Cash flow generation
Reinvestment
Social and Relationship Capital
Customer value:
• Enhance operational efficiency
• Free up cash and resources
• Lower overall supply-chain costs
Social licence:
Advocacy for a circular economy
Intellectual Capital
Network advantage
creates supply
chains of the future
Dividends
Taxes paid
2
Scale-related
operational efficiencies
Network scale density
and expertise
Growth, innovation
and people
3
Letter from the Chairman
The way the world makes, moves and sells goods is
being transformed. By connecting the global supply
chain, Brambles contributes to a more sustainable future.
The fast moving consumer goods sector and retail landscape
are changing. The rise of omni-channel retail, e-commerce and
hard discounters, coupled with changing consumer demand,
are putting pressure on manufacturers and retailers. Businesses
are increasingly expected to meet this demand more efficiently
and sustainably.
IFCO is a strong business and the global leader in RPC pooling
with a large addressable market, strong financial profile and clear
opportunities to capitalise on growth prospects in the sector. IFCO
has benefited from substantial investments made under Brambles’
ownership and is well positioned for its future as an independent
company with a singular focus.
At Brambles, our pallets, crates and containers form the invisible
backbone of the global supply chain. This strong logistics
platform, which centres on our inherently sustainable ‘share and
reuse’ business model, uniquely positions us to support our
customers and solve shared challenges in this evolving landscape.
As a company, we are committed to delivering sustainable value
to our customers, shareholders and employees over the long
term. We seek to partner with customers to deliver innovative,
value-added solutions that meet their evolving needs. For
employees, we seek to be an employer of choice that fosters
and develops talent through exciting career opportunities in
over 60 countries. For shareholders, we seek to deliver sustainable
growth with attractive returns.
FY18 in Review
Following the challenges of FY17, in FY18 we refocused on
the core drivers of value and further streamlined our portfolio
to optimise the growth and return potential of Brambles over
the long term.
Despite inflationary pressures and robust competition in our
major markets, management’s resolute focus on executing
against our strategic priorities delivered strong revenue growth
and significant improvements in cash flow generation during
the Year. While Underlying Profit growth this Year did not meet
our longer-term expectations, our teams have identified, and
commenced implementing, numerous initiatives which we
expect to deliver operating efficiencies and improve profitability
over the medium term, particularly in our US pallets business.
Separation of IFCO
Following a strategic review of Brambles’ portfolio, we have
determined to pursue a separation of our IFCO RPC business
through a demerger with IFCO becoming a separately listed
company. We will also pursue a dual-track process whereby
an outright sale of the business will be investigated. It is
the Board’s determination that a separation of IFCO from
Brambles will optimise shareholder outcomes and better
position both businesses to pursue a broad range of growth
and value-creating opportunities.
Following the proposed separation, Brambles will remain the clear
global leader in platform pooling - a highly attractive industry with
significant scope for sustained growth, substantial benefits from
established scale and highly attractive returns. Brambles will be
positioned to continue generating strong revenue growth in its
core markets, while also focusing on additional opportunities in
emerging markets, first and last mile solutions and BXB Digital’s
investment in technology and innovation through the supply chain.
2 Continuing operations
Other Portfolio Actions
During the Year we further consolidated our portfolio by divesting
our CHEP Recycled business and our 50% interest in the Hoover
Ferguson Group (HFG) Oil & Gas containers joint venture.
The proceeds of these divestments are being used to fund
growth and operational investments, such as plant automation,
in businesses that generate attractive shareholder returns in the
medium to long term.
Board Renewal
In light of my intention to step down as Chairman at the end
of my current term, the Nominations Committee has formed a
Sub-Committee, chaired by Tony Froggatt, to conduct the process
to appoint my successor. As part of that process, George El-Zoghbi
was appointed to the Nominations Committee on 26 June 2018
and an external professional search firm has been appointed. The
Sub-Committee is on track to select a successor and facilitate a
smooth transition well in advance of my retirement in 2020.
As part of the ongoing Board renewal process, Elizabeth Fagan
joined the Brambles Board as a Non-Executive Director on
1 June 2018. Ms. Fagan, who has filled a vacancy created by
the retirement of Christine Cross in August 2017, has extensive
knowledge and experience in the international retail sector
developed over a 30-year career. For the past 12 years, she has
worked in senior executive positions at Boots UK & Ireland where
she is currently Managing Director. On 1 September 2018, she will
step down from this role and become the Non-Executive Chairman
of Boots UK & Ireland. Given the importance of the retail sector to
Brambles, Ms. Fagan is an ideal addition to the Brambles Board.
In addition, Carolyn Kay will be retiring from the Board at this Year’s
AGM in October. Ms. Kay has served as a Non-Executive Director
for 12 years and, on behalf of the Board, I thank her for her valuable
contribution to Brambles.
On behalf of the Board, I would like to thank our management team
and staff for their efforts and ongoing commitment during the
Year. Brambles remains a resilient business with an exciting future.
As we enter FY19, we are well positioned to continue to work
towards achieving our strategic priorities and focus on delivering
sustainable value for our customers, shareholders and employees
over the long term.
Stephen Johns
Chairman
Sales Revenue2
Underlying Profit2
Total Dividends
US$5,596.6m
US$996.7m
29.0 AU cents per share
Up 6% at constant-currency
In line with prior year
Final dividend of 14.5 AU cents per share (30% franked)
4
Letter from the CEO
In FY18, we addressed the fundamentals of the business
and set the foundations for sustainable value creation
in an increasingly challenging operating environment.
As my first full year as CEO of Brambles, FY18 was focused on
implementing the strategic, operating and financial initiatives
required to support our long-term success. It was pleasing to
see these initiatives start delivering meaningful improvements in
cash flow generation and growth momentum despite increasingly
challenging operating conditions during the Year. We have also
taken a number of strategic portfolio actions, including the decision
to separate IFCO, which highlight our commitment to maximising
shareholder value over the long term.
Operating Environment
In FY18, we experienced significant input-cost inflation, particularly
in the US and Europe. At the same time, our customers are
increasingly turning to our business to deliver additional cost
savings and efficiencies in their supply chains.
We know that our customers are being asked to meet changing
patterns of demand. Consumers want things faster, easier, and
cheaper – while at the same time expecting businesses to shrink
the environmental impact of their operations. We will succeed by
leveraging our global scale and industry-leading expertise to help
our customers rise to this challenge, and by building the smarter
and more sustainable supply chains of the future.
Strategic Priorities
In this operating context, delivering against our five strategic
priorities is critical to maintaining our industry-leading position,
remaining the partner of choice for customers, while delivering
sustainable growth and attractive returns for shareholders over
the long term.
That is why we continue to focus on strengthening our network
advantage by funding growth in our core pooling businesses.
We are also fostering a culture of innovation to ensure we are
faster and more responsive to our customers’ needs and through
BXB Digital, we are taking meaningful steps towards identifying the
role technology can play in improving the efficiency of our own
operations as well as providing richer customer insights.
In response to increasing inflationary pressures and structural cost
increases, we implemented pricing initiatives and committed to
multi-year automation and procurement programmes which will
deliver cost, cash and capital efficiencies over the medium term.
Details of our strategic priorities can be found on page 8 in the
Operating & Financial Review.
Separation of IFCO
Our decision to separate IFCO is in line with our strategic priorities.
Although both CHEP and IFCO are pooling businesses, they
are materially different in nature, with distinct financial profiles,
offerings and customer bases. There is limited operational overlap
and no material customer-related synergies that will be lost on
separation. As separate entities, Brambles and IFCO will have
greater focus on their distinct strategic agendas and increased
flexibility to pursue growth opportunities. For shareholders,
a separation provides focused investments in two world-class,
global businesses that are positioned for long-term success.
FY18 Financial Performance
Brambles delivered strong constant-currency sales revenue
growth of 6%, reflecting ongoing expansion with new and
existing customers in key CHEP pallet and IFCO markets, as well
as price realisation in US pallets, emerging markets and IFCO
North America. Underlying Profit remained in line with the prior
year despite inflationary cost pressures, direct cost challenges in
CHEP Americas and the adverse impact of RPC and automotive
contract losses in CHEP Australia, which we announced to the
market in 2016. Our cash flow generation improved significantly
during the Year as Cash Flow from Operations increased by
US$300.9 million and we delivered positive Free Cash Flow
after dividends for the first time since FY15. A full analysis
of our financial results is on pages 15 to 18 in the Operating
& Financial Review.
People, Safety & Sustainability
Every day, our 12,000 employees work together to support
our customers and share the knowledge we’ve developed over
70 years of managing supply chains across six continents. It’s
their passion and drive that makes Brambles such a great business
and I’d like to thank them for their efforts over the past year.
I am extremely proud that our safety performance once again
improved in FY18 and that we continue to progress towards our
2020 sustainability goals. Our sustainability framework is outlined
on page 6 of the Operating & Financial Review, and further
details about our 2020 sustainability goals are located on our
website. Our full Sustainability Review for 2018 will be published
in September.
Outlook
FY19 Underlying Profit will continue to reflect ongoing input-cost
inflation and other cost challenges. We expect the multi-year
automation, procurement and pricing initiatives we are currently
undertaking to progressively deliver efficiencies and earnings
benefits over the medium term.
We believe our continued focus on our five strategic priorities
will deliver sustainable growth at returns well in excess of the cost
of capital. We expect constant-currency sales revenue growth
in the mid-single digits and Underlying Profit growth to exceed
sales revenue growth, through the cycle. We will also focus on
generating sufficient cash to fully fund dividends and reinvestment
for growth, innovation, and the development of our people.
Graham Chipchase
Chief Executive Officer
Cash Flow from Operations2
Return on Capital Invested2
Brambles Injury Frequency Rate (BIFR)
US$892.4m
Up US$300.9m
16.1%
Down 0.9 percentage points at
constant-currency
4.7
Down from 6.6 in FY17
5
Operating Model
Brambles manages the world’s largest pool of reusable pallets, crates and
containers. As a pioneer of the sharing economy, Brambles promotes the
shared use of its platforms among multiple supply chain participants,
under a circular ‘share and reuse’ model known as pooling.
Through its inherently sustainable operating model, superior network
advantage and unique expertise, Brambles leads the market in smarter
and more sustainable supply chains.
Inherently Sustainable Operating Model
Brambles’ share and reuse model follows the principles of
the circular and sharing economies, creating more efficient
supply chains by reducing operating costs and demand
on natural resources. By promoting the share and reuse of
assets among multiple parties in the supply chain, Brambles
offers customers a more efficient and sustainable alternative
to the use of disposable products or managing their own
proprietary platforms.
Network Advantage and Supply Chain
Expertise
Brambles’ sustainable operating model is underpinned by
its superior network advantage and industry-leading supply
chain expertise, developed over 70 years of managing
customers’ supply chains around the world. With operations
in over 60 countries, Brambles’ network advantage comprises
the scale and density of its service centre network and the
strength of its customer relationships in every market in which
it operates. This means Brambles can be faster and more
responsive to customers’ needs.
Sustainability Framework
Brambles’ sustainability framework organises the Group’s
sustainability activities and goals under three broad programmes:
Better Business; Better Planet; and Better Communities.
The Group’s 2020 goals are incorporated into this framework
and address the material sustainability aspects of Brambles’
value chain. These goals are also aligned to the United Nations
Sustainable Development Goals (SDGs), in particular SDG
12: Responsible Consumption and Production, which aligns
with Brambles’ sustainable business model. Further details of
Brambles’ sustainability framework and 2020 goals are located
on Brambles’ website.
In FY18, Brambles’ Sustainability Risk Committee
conducted a review of the economic, environmental and
social sustainability risks to which the Group is subject.
This review identified material sourcing and safety as the
Group’s material sustainability risks. Details of the Group’s
FY18 safety performance and material sourcing are detailed
on pages 10 and 11, respectively. A full review of Brambles’
sustainability risks and performance will be included in
the 2018 Sustainability Review, which will be available on
Brambles’ website in September 2018.
Share and reuse: How it works
1
1
PRODUCER
GROWER
CONTAINERS
RPCs
2
2
1
3
3
3
MANUFACTURER
PALLETS
RETAILER
2
Using its network advantage and asset management
expertise, Brambles seamlessly connects supply chain
participants, ensuring the efficient flow of goods
through the supply chain. By reducing transport
distances and the number of platforms required to
service the supply chain, Brambles delivers savings in
which all participants share.
6
1
2
3
Brambles provides standardised pallets, crates and
containers to customers from its service centres as and
when the customer requires.
Customers use this equipment and Brambles’ support
services to transport goods through the supply chain.
Customers either arrange for the equipment’s return to
Brambles or transfer it to another participant for reuse.
Brambles retains ownership of its equipment at all times,
inspecting, cleaning and repairing it in order to maintain
appropriate quality levels.
Brambles generates sales revenue predominantly from
rental and other service fees that customers pay based on
their use of its platforms and services.
Operating & Financial Review Customer Value Proposition
Brambles’ pallets, crates and containers form the invisible backbone of the
global supply chain. This gives Brambles unique insights that help customers
meet evolving consumer demands while minimising their environmental
impact and improving the safety and efficiency of their supply chains.
With a comprehensive suite of supply chain solutions, Brambles provides
customers with operational, financial and environmental efficiencies
not otherwise available through the use of disposable alternatives and
proprietary models.
End-to-End Supply Chain Solutions
Brambles is integral to customers’ supply chains, working closely with all participants including manufacturers, producers,
growers and retailers. With end-to-end visibility, Brambles has unique insights into what impacts the safe, efficient and
sustainable operation of global supply chains.
By leveraging these insights and its unmatched expertise, Brambles offers customers comprehensive solutions that improve
the performance of the supply chain. This helps address the challenges associated with the increasing complexity and rapid
evolution of modern supply chains. Brambles’ suite of customer solutions comprises:
Platform Solutions
Brambles offers customers the widest range of supply-chain
platforms including: pallets (timber, plastic and display),
Reusable Plastic Crates (RPCs), bins, specialised containers as
well as unit-load containment and safe handling equipment.
Retail Store Solutions
Brambles works closely with customers to develop
store-solution strategies and consumer-facing platforms that
improve the efficiency of the shared supply chain by increasing
sales at lower costs to the supplier, retailer and consumer.
By eliminating the need for customers to purchase and
manage their own platforms, Brambles reduces the capital
requirements and complexity of customers’ operations while
simultaneously reducing waste from their supply chains.
These merchandising and fulfilment solutions, which include
full size and fractional display pallets, trays and RPCs, effectively
reduce the time, labour and activity required to move goods
from the point of production to the point of sale.
System-Wide Solutions
Brambles conducts in-depth studies of customers’ supply
chains to map the flow of goods, information and platforms
in order to identify the causes of network inefficiencies and
product damage.
By determining the optimal mix of platforms and processes
for customers’ individual supply chains, Brambles can mitigate
network inefficiencies and ensure the safe and sustainable
transportation of goods through the supply chain.
Transportation Solutions
Brambles’ superior network scale provides a unique capability
to coordinate collaboration between multiple supply chain
participants to deliver transport efficiencies. This includes
matching and eliminating empty transport lanes, sharing
transport and contracting transport for and from customers.
Manufacturing, Warehouse and Distribution
Centre Solutions
Using its experience in managing platforms, optimising
automated facilities and packaging performance testing,
Brambles has developed solutions that improve the overall
performance and efficiency of customers’ facilities. These
solutions include: customising customers’ platform processes;
optimising how customers configure, build and protect
product loads; and providing higher quality platforms
and engineering services to improve the performance
of automated facilities.
Environmental Benefits
Brambles’ supply chain solutions help customers address key sustainability issues by managing deforestation risks associated
with sourcing of wood for pallets and preventing the carbon emissions and solid waste associated with the production, use and
disposal of single-use platform solutions. In FY18, Brambles helped customers:
Eliminate 2.6 million tonnes
of CO2 and 1.4 million tonnes
of waste by using pallets
and RPCs
Save 1.6 million cubic metres
of raw materials through the
repair and reuse of pallets
Save 1.7 million trees and
4,100 megalitres of water
through the share and reuse
of pallets and RPCs
Eliminate 4,719 tonnes
of food waste through
the use of RPCs
7
Operating & Financial Review Strategic Priorities
Brambles is committed to being the global leader in platform pooling solutions, with
number one market positions in all major regions of operation. Brambles seeks to lead
the industry in customer service, innovation and sustainability while being an employer
of choice through best-in-class safety, diversity and talent development programmes.
Brambles’ five strategic priorities are integral to this commitment and the delivery of
superior value for customers, shareholders and employees over the long term.
Grow and
strengthen
network
advantage
Deliver operational
and organisational
efficiencies
Disciplined
allocation of capital
and improved cash
flow generation
Innovate to
create new
value
Develop
world-class
talent
Grow and Strengthen Network Advantage
Brambles’ network advantage, comprising the scale and
density of its customer and service centre network and its
industry-leading asset management expertise, is critical to the
Group’s value proposition for both its customers and investors.
Innovate to Create New Value
Understanding customers’ evolving needs and
providing differentiated value-enhancing solutions is core
to the sustainability of Brambles’ business model and
competitive advantage.
Faced with a changing retail landscape, including the
expansion of e-commerce and omni-channel retail formats,
Brambles is investing in new platform solutions that enable its
customers to increase sales, gain greater market insights and
improve operational efficiencies.
Brambles is also investing in its BXB Digital business, which
is working to apply technology to collect and transform data
into services that track goods, optimise transport solutions
and operations, and improve supply chain efficiency.
Develop World-Class Talent
Successfully attracting and retaining high calibre people
is integral to Brambles’ ongoing success. Brambles’ key
priorities for its employees are safety, engagement and
capability. The Group is committed to fostering a culture
of agility and innovation where employees can grow their
skills and capabilities through comprehensive, world-class
development programmes.
By investing in platform quality and a differentiated,
value-enhancing service offering, Brambles is committed
to optimising its network, growing its business and
strengthening its industry-leading position.
Deliver Operational and Organisational
Efficiencies
Through a focus on Group-wide operational and
organisational efficiencies, Brambles seeks to offset the impact
of cost inflation and competitive price pressures. To achieve
additional efficiencies, Brambles will continue to leverage its
global scale and implement global best practice in areas such
as procurement, plant automation and transport optimisation.
Disciplined Allocation of Capital and
Improved Cash Flow Generation
Brambles allocates capital to maintain and grow its existing
businesses, to drive innovation and to diversify its portfolio
of products and services. Brambles adopts a disciplined
approach to capital allocation focused on: growing businesses
with proven economic returns; measured expansion of
new businesses achieving the right balance between near-
and long-term returns; investing in innovation to deliver
differentiated customer solutions; and focused strategy in
relation to mergers and acquisitions.
A key strategic objective for the Group is to deliver
strong and sustainable cash generation. Brambles aims
to achieve this through an increased focus on improving
asset utilisation, reducing equipment loss and lowering
equipment damage rates.
8
Operating & Financial Review Investor Value Proposition
Brambles generates value
through a virtuous circle that
leverages its scale, density and
expertise to achieve superior
operational efficiencies.
These efficiencies in turn
generate cash flow that
can either be returned to
shareholders or reinvested in
the business to fund growth,
innovation and development
of its people.
Scale-related
operational
efficiencies
First mover
advantage
Shareholders
Network scale,
density and expertise
Cash flow
generation
Reinvest in growth,
innovation and people
Long-Term Value Creation
and Superior Shareholder Returns
Brambles shares the efficiencies generated by its scale, density and expertise with its customers, providing a compelling value
proposition compared to alternatives. By providing customers with supply chain solutions in over 60 countries, Brambles offers
shareholders exposure to geographically diversified earning streams, primarily from the global consumer staples sector.
The supply chains served by Brambles also provide a broad range of growth opportunities including: 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 exploring the digitisation of supply chains.
Within this context, Brambles is committed to striking the right balance between growing its business and delivering superior
shareholder returns over the long term. By focusing on its core drivers of value, Brambles expects to deliver:
Sustainable growth and returns well in excess of the
cost of capital
• Sales revenue growth3 in the mid-single digits;
Cash generation to fund growth, innovation and
shareholder returns
• Free Cash Flow sufficient to fully fund capital expenditure
• Underlying Profit growth3 in excess of sales
revenue growth through the cycle; and
• Strong Return on Capital Invested.
and dividends.
Dividend Policy and Payment
Brambles has a progressive dividend policy. Under this
policy, the Group seeks to maintain or increase dividend per
share each year, in Australian cents, subject to its financial
performance and cash requirements.
The Board has declared a final dividend for 2018 of
14.5 Australian cents per share, in line with the previous interim
and final dividend. The 2018 final dividend will be 30% franked
and is payable on 11 October 2018 to shareholders on
the Brambles register at 5.00pm on 12 September 2018.
The ex-dividend date is 11 September 2018.
Total dividends for the Year were 29.0 Australian cents per
share, in line with the prior year. Brambles paid the 2018 interim
dividend of 14.5 Australian cents per share on 12 April 2018.
Dividend Reinvestment Plan
Brambles’ Board maintained the Dividend Reinvestment
Plan (DRP) for the 2018 financial year. Shares issued under
the DRP do not attract a discount. Any dilutive impact on
earnings per share of DRP-issued shares will be neutralised
through the transfer of existing shares to participating
shareholders via on-market purchases rather than issuing
new shares to them.
ESG Recognition
Third-party Environmental, Social and Governance (ESG) investor research consistently recognises Brambles’ strong
governance processes and the long-term sustainability of its business model and strategies. In 2018, Brambles continues
to be placed amongst the leading companies in the global industrial services sector by the following ESG research firms:
3 At constant-currency
9
Operating & Financial Review Key Performance Drivers and Metrics
Brambles monitors its performance and value creation through a number of financial and non-financial metrics.
These include:
4,831
4,806
4,900
4,831
4,806
4,831
4,806
4,900
4,900
5,104
5,104
5,104
5,597
5,597
5,597
Sales Revenue Growth
Key Drivers
• General increases in sales volumes in line with economic/industry trends;
Sales revenue growth
• The rate at which the Group expands its operations (often described as
‘net new business wins’); and
Sales revenue growth
• Movements in pricing and changes in product/customer mix.
Sales revenue growth
5-Year Performance – Continuing Operations
Sales revenue of US$5,596.6 million in FY18 reflected a five-year compound
annual growth rate of 7%, at fixed 30 June 2017 FX rates. This growth reflects
the expansion of the global CHEP pallets and IFCO RPC businesses through the
ongoing conversion of new customers to pooled solutions, new market entry
and expansion of the core product offering.
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY14
FY15
FY17
FY18
FY17
FY18
FY16
(US$m)
FY16
(US$m)
(US$m)
Return on capital Invested (ROCI) and Brambles Value Add
Return on capital Invested (ROCI) and Brambles Value Add
Return on capital Invested (ROCI) and Brambles Value Add
Underlying Profit
Key Drivers
• Transport, logistics and asset management costs (including external factors
such as fuel and freight prices, as well as labour costs);
• Plant operating costs in relation to management of service centre networks
and the inspection, cleaning and repair of assets (including labour costs and
raw materials costs);
951
951
951
950
950
950
985
985
985
958
958
958
997
997
997
• Other operational expenses (primarily overheads such as selling, general and
administrative expenses); and
Underlying Profit
• Depreciation, as well as provisioning for irrecoverable pooling equipment.
Underlying Profit
Underlying Profit
5-Year Performance – Continuing Operations
Underlying Profit of US$996.7 million in FY18 reflected a five-year compound
annual growth rate of 4%, at fixed 30 June 2017 FX rates. Profit growth during
the period reflected sales revenue growth, direct cost efficiencies and indirect
cost reductions across the Group. The lower rate of profit growth relative to
sales growth is largely driven by the impact on FY17 and FY18 Underlying Profit
of direct cost challenges in CHEP Americas, losses in the HFG joint venture and
increased investment in BXB Digital.
Safety
Brambles’ Zero Harm Charter states that everyone has the right to be
safe at work and to return home as healthy as they started the day.
5-Year Performance
Brambles gauges its safety performance through the Brambles Injury Frequency
Rate (BIFR), which measures work-related incidents resulting in fatalities, lost
time, modified duty or medical treatment per million hours worked.
Brambles met its target of year-on-year improvement in BIFR in FY18, recording
a BIFR of 4.7, an improvement from 6.6 in FY17, with no work-related fatalities.4
Hand and finger injuries were reduced by more than 30% through targeted
initiatives. This result reflects continuous improvement in the safety culture of
Brambles. Brambles’ Zero Harm Charter and safety targets align with SDG 3:
Good Health and Wellbeing.
Safety
Safety
Safety
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY14
FY15
FY16
(US$m)
FY16
(US$m)
(US$m)
FY17
FY18
FY17
FY18
15.6
15.6
15.6
13.3
13.3
13.3
9.7
9.7
9.7
FY14
FY15
FY16
6.6
6.6
6.6
FY17
FY14
FY15
FY16
FY17
4.7
4.7
FY18
4.7
FY18
FY14
FY15
FY16
FY17
FY18
Cashflow from Operations
Cashflow from Operations
Cashflow from Operations
Sustainability - Material sourcing
Sustainability - Material sourcing
Sustainability - Material sourcing
4 The safety statistics for sites opened during any given fiscal year are tracked as required by law, but not included in the Group’s overall safety reporting. For FY18,
the impact of new sites was more significant than in previous years so the decision has been made to include those sites in the safety results for completeness which
resulted in an increase in the reported BIFR from 4.3 to 4.7.
10
18.9
18.9
18.9
265
265
265
19.0
19.0
19.0
277
277
277
19.3
19.3
333
19.3
333
333
17.0
17.0
17.0
235
235
235
16.1
16.1
16.1
201
201
201
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
Brambles Value Added (US$m)
FY17
FY18
FY14
FY15
Return on Capital Invested (%)
Brambles Value Added (US$m)
FY16
FY17
FY18
Return on Capital Invested (%)
Brambles Value Added (US$m)
Return on Capital Invested (%)
800
800
800
702
702
702
892
892
892
592
592
592
519
519
519
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY14
FY15
FY17
FY18
FY17
FY18
FY16
(US$m)
FY16
(US$m)
(US$m)
94%
94%
94%
97%
97%
97%
97.3% 99.1%
99.4%
97.3% 99.1%
99.4%
97.3% 99.1%
99.4%
67%
43%
43%
43%
43%
43%
43%
48%
48%
48%
56%
56%
56%
67%
67%
FY14
FY15
FY16
FY17
FY18
FY17
FY18
FY17
FY18
FY14
% of certified sources
FY15
FY16
FY14
% of chain of custody
FY16
FY15
% of certified sources
% of chain of custody
% of certified sources
% of chain of custody
Operating & Financial Review Sales revenue growth
Underlying Profit
Safety
4,831
4,806
4,900
5,104
5,597
FY14
FY15
FY16
FY17
FY18
(US$m)
951
950
985
958
997
FY14
FY15
FY16
FY17
FY18
(US$m)
15.6
13.3
9.7
6.6
4.7
FY14
FY15
FY16
FY17
FY18
Return on Capital Invested (ROCI) and Brambles Value Added (BVA)
Key Drivers
• Capital expenditure on pooling equipment, which is primarily dependent
on the rate of sales growth. Brambles’ main capital cost exposures are raw
materials, primarily wood and plastic resin;
• Asset control factors, i.e. the amount of pooling equipment not recoverable
or repairable each year (and therefore requiring replacement); and
• Frequency with which customers return or exchange pooling equipment.
Return on capital Invested (ROCI) and Brambles Value Add
5-Year Performance – Continuing Operations
The trend in Brambles’ key return on capital metrics, ROCI and BVA, over the
five-year period ended 30 June 2018 reflected the Group’s expansion through both
organic growth and acquisitions. ROCI declined from 18.9% in FY14 to 16.1% in
FY18. The decline since FY16 largely reflected: lower Underlying Profit margins in
CHEP Americas; the impact of RPC and automotive contract losses in CHEP Australia
announced in 2016; an increase in Average Capital Invested in line with higher
equipment balances to support growth; and the recognition of the Group’s
investment in the HFG Oil & Gas containers joint venture following its formation
in FY17. Note: Pre-FY17 comparatives recognise Brambles’ Oil & Gas containers
businesses in discontinued operations and are therefore not captured in this chart.
The trend in BVA – a measure of economic profit over and above the cost of capital
invested to create that profit – was driven by the same factors as ROCI.
Cash Flow from Operations
Key Drivers
• Profitability;
• Capital expenditure; and
• Movements in working capital.
Cashflow from Operations
5-Year Performance – Continuing Operations
The five years to FY18 was a period of solid overall profit growth, facilitated largely
by significant investments in capital expenditure to support growth. In FY16, capital
expenditure increased to support growth in the pallets operations and there was
a one-time change to payment processes that increased working capital. The
significant improvement in FY18 reflects increased EBITDA, strong working capital
management, higher collections of asset compensations and US$150 million cash
inflow related to the repayment of the HFG joint venture loan, which offset increases
in cash capital expenditure.
Material Sourcing
Ongoing secure supply of materials for the production and repair of pooling
equipment, in particular wood used for pallets, is critical to Brambles.
5-Year Performance
Brambles aims to source 100% of timber from certified sources by 2020. For the FY18
period, 99.4% of wood purchased was from third-party certified sources, representing a
small but important 0.3% improvement towards its goal compared to FY17 results. The
remaining 0.6% of lumber purchases were subject to Brambles’ stringent 24-step due
diligence process. This process confirms that harvesting operations did not contribute
to deforestation or that lumber was not purchased from controversial sources.
Sustainability - Material sourcing
Brambles believes that increasing the volume of wood purchased under the Chain
of Custody (CoC) certification helps further improve the transparency of forestry
supply chains. Therefore, Brambles aims to increase CoC volumes each year with an
aspirational goal to achieve 100%. In FY18, CoC results were driven by Latin America
and Europe where combined volumes increased 44% on FY17, increasing its overall
performance to 66%.
Brambles’ sustainable sourcing objectives seek to preserve and enhance the Group’s
key resource dependency and are directly linked to SDG 15: Sustainable Use of the
World’s Forests and SDG 13: Climate Action.
18.9
19.0
265
277
19.3
333
17.0
16.1
235
201
FY14
FY15
FY16
FY17
FY18
Brambles Value Added (US$m)
Return on Capital Invested (%)
800
702
892
592
519
FY14
FY15
FY16
FY17
FY18
(US$m)
94.0% 97.0% 97.0% 99.1%
99.4%
66%
57%
49%
43%
43%
FY14
FY15
FY16
FY17
FY18
% of Certified Sources
% of Chain of Custody
11
Operating & Financial Review Strategic and Operating Risks
Brambles’ risk management framework, as described in the Corporate Governance Statement on Brambles’ website, incorporates
effective risk management into its strategic planning processes and requires business operating plans to effectively manage key
risks. The key risks to Brambles’ ability to achieve its financial and strategic objectives and respective mitigating actions are:
Risk
Implication
Mitigating actions
Macro-economic
conditions
Macro-economic conditions, or economic
conditions affecting the supply chain or
industries in which Brambles’ customers
operate, may affect demand for Brambles’
services and/or its financial performance
• Continued focus on driving growth through investment
in expanded customer value proposition and targeted
diversification in opportunities with attractive
long-term characteristics
• Adoption of pricing and cost-recovery strategies to
mitigate the impact of cost inflation
Industry trends in
the retail, grocery
and consumer
goods supply
chains
Industry trends (e.g. fragmentation of the
retail supply chain, growth of e-commerce
and hard discounters, demand for different
pooling equipment materials or designs)
could affect demand for Brambles’ current
service offerings, the value of its existing
assets, and/or its financial performance
Ongoing programmes to:
• Drive customer intimacy throughout the supply chain
and uncover opportunities to leverage the Group’s
unique global scale and value proposition
• Create new products and service lines to meet
customers’ requirements
Maintaining the
quality of pooled
equipment in line
with customer
needs
Maintaining
control of pooling
equipment
Network capacity
A failure to maintain adequate quality
standards may result in reduced customer
satisfaction, additional costs and affect the
Group’s financial performance
• Strict adherence to equipment quality standards,
including continuous monitoring of critical-to-quality
metrics to assess and ensure quality of products issued
to customers
The loss of pooled equipment is inherent in
Brambles’ business model. Failure to maintain
appropriate asset control and recovery
processes may result in additional costs and
affect the Group’s financial performance
• Dedicated asset control teams across all business units
and creation of a comprehensive system of processes
to increase the timely collection of assets
• Regular schedule of customer equipment inventory
audits to assess key asset recovery metrics and identify
potential control issues
The scale and strength of Brambles’ network
of service centre locations is inherent to its
value proposition for customers and other
stakeholders. A lack of capacity within the
network in a major market could adversely
impact service delivery, competitive position
and financial performance
• Adoption of the plant automation project in CHEP
Americas and plant network optimisation projects
in major markets
Competitors
Brambles operates in competitive markets.
Increasing intensity of competitor activity
could affect Brambles’ market penetration
and financial performance
• Leverage Brambles’ unique global scale, network
advantage and sustainable business model to deliver
customer value and strengthen relationships
• Adoption of an innovation programme to enhance
existing/develop new products and services
• The establishment of BXB Digital to explore the role
of technology in Brambles’ business and customer
offering and to engage in innovation of products and
services in the digital space
12
Operating & Financial Review Risk
Implication
Mitigating actions
Retailer acceptance
of pooled solutions
Retailers are integral to Brambles’ operating
model. A reduction or loss of retailer support
for pooled solutions in their supply chains
could result in a loss of customers and/or
market penetration and adversely impact
Brambles’ financial performance
• Dedicated teams with executive-level responsibility
for strengthening retailer relationships, identifying
retailer-specific product requirements and ensuring
retailers understand Brambles’ value proposition
• Improving the value proposition for retailers through
the implementation of joint business plans
Cyber security
The unauthorised access to or use of
Brambles’ IT systems could adversely impact
Brambles’ ability to serve its customers
or compromise customer or employee
data, resulting in reputational damage,
financial loss and/or adverse operational
consequences
• An IT security strategy has been implemented which
utilises technologies and processes to protect systems
and to detect and promptly respond to unauthorised
or inappropriate activities. These controls include, but
are not limited to, e-mail filtering, anti-virus software,
security awareness and training, as well as the use of
penetration testing across our network
Information
security
Regulatory
compliance
• Brambles uses the National Institute of Standards and
Technologies Cyber Security Framework to monitor,
track, and report progress to Senior Management
• Preventative controls have been put in place to
mitigate the risk of loss or misuse of data. These
controls include the encryption of laptops, e-mail
data retention controls and the ability to store data
in secure drives
Brambles relies on its IT systems to
operate its business. The misuse, loss of or
unauthorised access to sensitive data due
to incomplete or unsuitable identification,
storage, processing or disposal procedures
could result in financial loss, operational
disruption and/or reputational damage
Brambles operates in a large number of
countries with widely differing legal regimes,
legislative requirements and compliance
cultures. A failure to comply with regulatory
obligations and local laws could adversely
affect Brambles’ operational and financial
performance and its reputation
• Code of Conduct which provides a framework for
detailed policies addressing regulatory compliance
• Adoption of Group-wide online compliance training
programmes to supplement face-to-face training
• Dedicated Chief Compliance Officer responsible
for monitoring the implementation and ongoing
application of compliance management systems
Attraction and
retention of talent
A failure to attract, develop and retain high
performing individuals could adversely
impact Brambles’ ability to implement and
manage its strategic objectives
• Detailed talent management and succession planning
processes to identify high potential employees and
prepare successors for senior executive positions
• Formal mentoring programmes offered to all employees
Safety
Brambles is subject to inherent operational
risks, including industrial hazards, road
traffic or transportation accidents that
could potentially result in serious injury
or fatality of employees, contractors or
members of the public
• A Zero Harm Charter which states that everyone has
the right of be safe at work and to return home as
healthy as they started the day
• Safety management systems adopted at all workplaces
• Use of safety metrics which measure work related
injuries, lost time, modified duties and incidents
requiring medical treatment
• Regular reporting and monitoring by the
Brambles Board
13
Operating & Financial Review Financial Position and Financial Risk Management
Capital Structure
Brambles manages its capital structure to maintain a solid investment-grade credit rating. During FY18, 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.
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.
The Group uses standard financial derivatives to manage financial exposures in the normal course of business. It does not use
derivatives for speculative purposes and only transacts derivatives with relationship banks. Individual credit limits are assigned to
those relationship banks, thereby limiting exposure to credit-related losses in the event of non-performance by any counterparty.
Funding and Liquidity
Brambles funded its operations during FY18 primarily through retained cash flow, borrowings and divestments. Brambles
generally sources borrowings from relationship banks and debt capital market investors on a medium-to-long-term basis.
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 2023. Borrowings under the 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 paid either annually
or semi-annually. During the Year, Brambles issued a 10-year €500 million Euro Medium Term Note (EMTN) at a coupon of 1.50%.
Proceeds of the note were ultimately used to repay the maturing €500 million 4.625% EMTN in April 2018. At balance date, loan
notes had maturities out to October 2027.
Net Debt and Key Ratios
Current debt
Non-current debt
Gross debt
Less cash
Net debt
Key ratios
Net debt to EBITDA
EBITDA interest cover
June 2018 June 2017
Change
(582.2)
338.1
(244.1)
(20.5)
(264.6)
91.2
2,397.1
2,488.3
(180.2)
2,308.1
FY18
1.46x
15.0x
673.4
2,059.0
2,732.4
(159.7)
2,572.7
FY17
1.73x
15.0x
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.
Maturity Profile of Committed Borrowing Facilities
and Outstanding Bonds
(% of total committed credit facilities)
41%
US$b
1.5
1.0
0.5
26%
18%
4%
6%
5%
< 1 yr
1-2 yrs
2-3 yrs
3-4 yrs
4-5 yrs
> 5 yrs
Bonds/notes
Bank borrowings
Undrawn bank facilities
As at 30 June 2018, Brambles’ total committed credit facilities
were US$4.0 billion. The average term to maturity of Brambles’
committed credit facilities as at 30 June 2018 was 4.5 years
(2017: 3.7 years). In addition to these facilities, Brambles enters
into operating leases for office and operational locations
and certain plant and equipment to achieve flexibility in the
use of certain assets. The rental periods vary according to
business requirements.
14
Operating & Financial Review Operating & Financial Review
1. Financial Review
1.1 Group Overview
1.1.1 Summary of 2018 Financial Result
US$m
(Continuing operations)
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
IFCO
Sales revenue
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
IFCO
Corporate
Underlying Profit
Significant Items
Operating profit
Net finance costs
Tax expense
Profit after tax from continuing operations
Loss from discontinued operations
Profit after tax
Average Capital Invested
Return on Capital Invested
Weighted average number of shares (m)
Basic EPS (US cents)
Basic EPS from continuing operations (US cents)
FY18
2,195.3
1,825.1
475.1
1,101.1
FY17
2,073.5
1,575.2
484.8
970.8
5,596.6
5,104.3
350.6
454.8
111.7
136.5
(56.9)
996.7
(10.7)
986.0
(104.8)
(107.7)
773.5
(26.4)
747.1
6,172.7
16.1%
1,591.2
47.0
48.6
395.1
387.1
112.1
117.6
(54.4)
957.5
(186.1)
771.4
(98.7)
(227.8)
444.9
(262.0)
182.9
5,646.4
17.0%
1,588.3
11.5
28.0
Change
Actual FX
6%
Constant FX
5%
16%
(2)%
13%
10%
(11)%
17%
0%
16%
(5)%
4%
28%
(6)%
53%
74%
308%
9%
8%
(4)%
8%
6%
(12)%
9%
(3)%
10%
1%
0%
22%
(4)%
58%
67%
293%
5%
(0.9)pp
(0.9)pp
0%
309%
74%
0%
292%
67%
Sales revenue from continuing operations was
US$5,596.6 million, up 6% at constant-currency, driven by
strong volume growth across the North American, European
and Latin American pallets businesses and IFCO RPCs globally.
Pricing contributed one percentage point to annual revenue
growth, reflecting price realisation in US pallets, emerging
markets and IFCO North America.
Underlying Profit of US$996.7 million was in line with prior
year at constant-currency and driven by strong sales
contributions to profit in CHEP EMEA and IFCO, coupled with
cost reductions and increased asset compensations in
CHEP Asia-Pacific.
Underlying Profit growth was impacted by a two percentage
point reduction in profit associated with RPC and automotive
contract losses in CHEP Australia announced to the market in
2016. In addition to this, accelerating inflationary cost
pressures in mature markets and direct cost challenges in
CHEP Americas also impacted Underlying Profit growth.
Input cost inflation accelerated during FY18, with particularly
strong increases in labour, lumber and transport rates in the
US and Europe. Resulting cost increases were partially offset
by productivity gains and inflation-related pricing actions
primarily undertaken in the second half of the Year.
In addition to inflationary cost pressures, CHEP Americas was
impacted by the following cost challenges:
-
-
-
Inefficiencies due to network capacity constraints and
higher costs relating to changes in customer and retailer
behaviour in US pallets;
Additional costs associated with the progressive
conversion of the Canadian pallet pool from stringer to
block pallets; and
Increased costs in the high growth Latin American pallets
business.
Operating profit from continuing operations of
US$986.0 million increased 22% at constant-currency,
reflecting a US$175.4 million reduction in Significant Item
charges which was partly driven by the recognition of the
US$120.0 million non-cash impairment of the HFG joint
venture investment in FY17. The balance of the reduction was
largely driven by a US$55.4 million decrease in FY18
15
Operating & Financial Review
Operating & Financial Review – continued
Significant Item charges relating to restructuring costs and
completion of the One Better projects.
Profit after tax from continuing operations was
US$773.5 million, up 67% at constant-currency, driven by the
higher operating profit and a one-off, non-cash benefit to
income tax expense of US$127.9 million. This benefit resulted
from a reduction in the Group’s net deferred tax liabilities
following the US tax reform, which included a decrease in the
federal income tax rate from 35% to 21%, effective
1 January 2018.
The Group's effective tax rate for FY18 on Underlying Profit
decreased to 26.5% from 28.8% in FY17, reflecting the lower
US tax rate and a change in the geographic mix of profits.
Net finance costs of US$104.8 million increased by
US$6.1 million, driven by increased debt and interest rates in
emerging markets and higher interest rates in North America.
Basic earnings per share was US47.0 cents, up 292% at
constant-currency, reflecting the increase in profit after tax.
Average Capital Invested (ACI) of US$6,172.7 million
increased 5% or US$296.5 million at constant-currency, largely
driven by higher growth-related capital expenditure during
the Year. Pooling capital expenditure of US$1,092.5 million
increased US$105.3 million at constant-currency (up
US$140.5 million at actual FX), reflecting:
-
-
-
A US$54 million increase in investments to support
volume growth;
Increased pallet unit costs of US$21 million primarily due
to lumber inflation;
Investments of US$31 million to support new market
entry; and
Increased pallet purchases of US$15 million to support
the conversion of customers to block pallets in Canada.
These increases were partly offset by asset efficiency gains of
US$16 million in CHEP North America and IFCO Europe.
-
Non-pooling capital expenditure of US$100.0 million
increased by US$26.6 million at constant-currency (up
US$28.5 million at actual FX), reflecting higher investment in
supply chain programmes including plant automation across
the Group.
Return on Capital Invested was 16.1%, down 0.9 percentage
points at constant-currency, with 0.4 percentage points of the
decline due to the RPC and automotive contract losses in
CHEP Australia. The balance of the decline was largely due to
lower margins in the CHEP Americas region. Group returns
remain strong and well in excess of the cost of capital.
16
Cash Flow Reconciliation
US$m
Underlying Profit
Depreciation and
amortisation
EBITDA
Capital expenditure (cash
basis)
Proceeds from HFG joint
venture loan
Proceeds from sale of PP&E
Working capital movement
IPEP expense
Other
FY18
996.7
579.5
FY17
Change
957.5
526.7
39.2
52.8
1,576.2 1,484.2
92.0
(1,135.6)
(1,060.1)
(75.5)
150.0
-
150.0
139.6
62.5
109.4
(9.7)
108.9
(25.0)
89.2
(5.7)
30.7
87.5
20.2
(4.0)
Cash Flow from Operations
892.4
591.5
300.9
Significant Items
(22.2)
(50.0)
Discontinued operations
(3.6)
2.0
Financing costs and tax
(312.2)
(319.3)
27.8
(5.6)
7.1
Free Cash Flow
Dividends paid
Free Cash Flow after
dividends
554.4
224.2
330.2
(352.0)
(348.0)
(4.0)
202.4
(123.8)
326.2
Cash Flow from Operations of US$892.4 million increased
US$300.9 million as increased EBITDA, strong working capital
management and higher asset compensations were partially
offset by increased cash capital expenditure to fund growth.
Cash Flow from Operations also included proceeds of
US$150.0 million from the repayment of the HFG joint venture
loan. Key movements during the Year included:
-
An increase in capital expenditure (cash basis) of
US$75.5 million. This was below the increase in capital
expenditure on an accruals basis of US$169.0 million
driven by extended terms with major suppliers;
An increase in proceeds from the sale of PP&E of
US$30.7 million driven by higher collection of asset
compensations; and
Improved working capital management across the Group
resulting in a US$87.5 million increase in cash flow, which
included approximately US$30.0 million of timing
benefits.
-
-
Free Cash Flow after dividends was US$202.4 million as Cash
Flow from Operations fully funded both capital expenditure
and dividend cash payments of US$352.0 million relating to
the final FY17 and interim 1H18 dividends.
Operating & Financial Review
16.5%
20.2%
(3.7)pp
(3.8)pp
1.1.3 CHEP EMEA
US$m
Operating & Financial Review – continued
Segment Analysis
1.1.2 CHEP Americas
US$m
Sales revenue
FY18
FY17
2,195.3 2,073.5
Change
Actual
FX
6%
Constant
FX
5%
Underlying Profit
350.6
395.1
(11)%
(12)%
2,118.7
1,958.7
8%
8%
Average Capital
Invested
Return on
Capital Invested
Sales revenue
Pallets' sales revenue of US$2,142.1 million increased 5% at
constant-currency, reflecting strong volume growth across the
region and increased pricing in US pallets.
US pallets' sales revenue of US$1,580.5 million increased 4%,
reflecting strong volume growth and positive price
contributions despite ongoing competitive intensity and
inflationary pressures.
Growth was driven by expansion with new and existing
customers and comprised:
-
Solid pricing growth of 1%. Effective price, which includes
lumber and labour inflation-related surcharges
recognised as an offset to costs, increased 2% in the
second half of the Year;
Like-for-like volume growth of 1% primarily driven by
customers in the grocery and beverage sectors; and
- Net new business growth of 2% including both wins in
-
the Year and the rollover impact of contracts won during
the prior year.
Canada pallets' sales revenue was US$263.4 million, up 5% at
constant-currency, reflecting volume growth and price/mix
benefits.
Latin America pallets' sales revenue of US$298.2 million, up
10% at constant-currency, reflects strong volume growth and
price realisation in the region.
Containers' sales revenue was US$53.2 million, up 11% at
constant-currency, largely driven by new Intermediate
Bulk Container (IBC) and automotive contracts won in FY17
and FY18.
Profit
Underlying Profit of US$350.6 million declined 12% at
constant-currency due to lower contributions from the US and
Canadian pallet businesses.
At constant-currency, volume, price and mix contributions to
profit of US$52 million were more than offset by:
- Net transport cost increases of US$47 million, largely
reflecting higher costs in US pallets due to third-party
transport inflation, additional relocations in response to
changing customer and retailer behaviour and capacity
constraints. The migration to block pallets in Canada also
contributed to increased transport moves in FY18;
- Net plant cost increases of US$23 million, reflecting
higher operating costs in Canada associated with the
migration to block pallets, and increased repair and
handling costs in US pallets resulting from changing
customer and retailer behaviour, cost inflation and higher
investment in pallet quality; and
IPEP increases of US$15 million, reflecting volume growth,
and increased costs in Latin America and Canada.
-
Return on Capital Invested
Return on Capital Invested of 16.5% decreased 3.8 percentage
points at constant-currency due to lower profitability
throughout the region.
Change
Actual
FX
16%
Constant
FX
8%
17%
18%
9%
10%
Sales revenue
FY18
FY17
1,825.1 1,575.2
Underlying Profit
454.8
387.1
1,850.6
1,568.4
Average Capital
Invested
Return on Capital
Invested
24.6%
24.7%
(0.1)pp
(0.2)pp
Sales revenue
Pallets' sales revenue of US$1,551.8 million, increased 6% at
constant-currency, reflecting strong volume growth across the
region and price increases in the Africa, India and Middle East
pallets business.
Europe pallets' sales revenue of US$1,369.7 million, increased
6% at constant-currency and comprised:
-
-
Broadly flat price in the region as indexation offset
strategic pricing initiatives;
Like-for-like volume growth of 1%, reflecting solid growth
throughout the region with a particularly strong
contribution from Central & Eastern Europe; and
- Net new business growth of 5% driven by the rollover
impact from contracts won in FY17 and strong
contributions from contracts won in FY18, particularly in
Southern Europe and Central & Eastern Europe.
Within Europe pallets:
-
-
Southern Europe (comprising Iberia, Italy, Turkey and
Greece) pallets' sales revenue was US$406.4 million, up
7% at constant-currency;
Central & Eastern Europe (including Germany, Poland and
the Nordics) pallets' sales revenue was
US$339.5 million, up 12% in constant-currency;
- Northern Europe (comprising UK and Ireland) pallets'
sales revenue was US$330.9 million, up 3% at
constant-currency; and
- Western Europe (comprising France and Benelux) pallets'
sales revenue was US$292.9 million, up 4% at
constant-currency.
Africa, India and Middle East pallets' sales revenue was
US$182.1 million, up 7% at constant-currency, reflecting
strong price and volume growth in the region.
RPC and Containers contributed US$273.3 million to sales
revenue, up 18% at constant-currency, largely due to strong
growth in the Automotive and Kegstar businesses.
17
Operating & Financial Review
Operating & Financial Review – continued
Profit
Underlying Profit was US$454.8 million, up 9% at constant-
currency despite transport and lumber inflation.
In constant-currency terms, volume, price and mix
contributions to profit of US$78 million were partly offset by:
- Net transport cost increases of US$8 million, reflecting
Profit
Underlying Profit was US$111.7 million, a decrease of 3% at
constant-currency, reflecting the US$21.6 million Underlying
Profit impact of the RPC and automotive contract losses,
partly offset by higher asset compensations and overhead
cost reductions.
higher fuel prices, supply constraints in the European
third-party freight market and inflationary cost increases
in CHEP Africa, India & Middle East, which were partly
offset by supply chain efficiencies;
Return on Capital Invested
Return on Capital Invested of 25.5% declined 0.5 percentage
points at constant-currency, primarily due to the Underlying
Profit impact of the contract losses in CHEP Australia.
1.1.5 IFCO
US$m
Sales revenue
FY18
1,101.1
FY17
970.8
Underlying Profit
136.5
117.6
1,667.0 1,582.3
Change
Actual
FX
13%
Constant
FX
8%
16%
5%
10%
1%
8.2%
7.4%
0.8pp
0.7pp
Average Capital
Invested
Return on Capital
Invested
Sales revenue
Sales revenue in IFCO RPCs was US$1,101.1 million, up 8% at
constant-currency. The increase reflected strong volume
growth as well as pricing and product mix benefits in
North America. Regional contributions were as follows:
-
Europe sales revenue was US$790.0 million, up 9% at
constant-currency, driven by strong volume growth with
most retailers;
- North America sales revenue was US$228.6 million, up 2%
at constant-currency, primarily due to pricing and
product mix benefits. Overall volume declined by 4% as
the business exited unprofitable contracts; and
- Other regions' (comprising South America and Asia) sales
revenue was US$82.5 million, up 12% at constant-
currency, reflecting volume growth and pricing and
product mix benefits in South America.
Profit
Underlying Profit of US$136.5 million, increased 10% at
constant-currency, reflecting the strong sales contribution to
profit, partly offset by increased depreciation costs in
North America and Europe.
Return on Capital Invested
Return on Capital Invested was 8.2%, up 0.7 percentage points
at constant-currency, reflecting Underlying Profit growth and
modest increases in Average Capital Invested as the business
leveraged capital investments made in FY16 and FY17.
- Net plant cost increases of US$4 million due to lumber
and labour cost inflation, which were partly offset by
supply chain efficiencies;
- Depreciation cost increases of US$12 million due to
higher investment in the pool to support strong volume
growth in both FY17 and FY18; and
- Other indirect cost increases of US$18 million primarily
due to higher overheads to support growth throughout
the segment including First-Mile and Last-Mile Solutions,
expansion into new markets including Russia and India,
and growth in the Automotive and Kegstar businesses.
Return on Capital Invested
Return on Capital Invested was 24.6%, down 0.2 percentage
points at constant-currency, largely reflecting the impact on
Average Capital Invested of increased unit pallet prices in
Europe due to lumber inflation and investments in new
markets, including Automotive and Kegstar.
1.1.4 CHEP Asia-Pacific
US$m
Sales revenue
FY18
475.1
FY17
484.8
Underlying Profit
111.7
112.1
438.2
427.8
Change
Actual
FX
(2)%
Constant
FX
(4)%
0%
2%
(3)%
0%
25.5% 26.2%
(0.7)pp
(0.5)pp
Average Capital
Invested
Return on Capital
Invested
Sales revenue
Sales revenue in CHEP Asia-Pacific was US$475.1 million,
down 4% at constant-currency, largely due to the RPC and
automotive contract losses in Australia announced to the
market in 2016. Excluding the impact of these contract losses,
sales growth in constant-currency was 3%.
Pallets' sales revenue was US$354.4 million, up 4% at
constant-currency, driven by modest pricing gains and
like-for-like volume growth in Australia and New Zealand.
RPC and Containers contributed US$120.7 million to sales
revenue, down 23% at constant-currency, reflecting the
US$35.4 million loss of sales revenue relating to a large
Australian RPC contract and the wind-down of the automotive
industry in Australia as well as the slow-down in the
automotive sector in China.
18
Operating & Financial Review
Board & 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. Stephen is a Non-Executive Director of Goodman Group and a former Chairman and
a Non-Executive Director of Leighton Holdings 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 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: 71.
Graham Chipchase Chief Executive Officer
Chairman of the Executive Leadership Team
Joined Brambles at the beginning of January 2017 as Chief Executive Officer Designate and became
Chief Executive Officer on 20 February 2017. Prior to Brambles, Graham was Chief Executive Officer of
Rexam plc, one of the world’s largest consumer packaging companies, from 2010 to June 2016.
Graham had first joined Rexam in 2003 as Group Finance Director before moving to Group Director of
Plastic Packaging. Graham left Rexam in June 2016, after Rexam was successfully acquired by Ball
Corporation. He is also a Non-Executive Director of AstraZeneca plc and chair of its Remuneration
Committee. He holds a MA (Hons) Chemistry from Oriel College, Oxford and is a Fellow of the
Institute of Chartered Accountants in England and Wales. Age: 55.
George El Zoghbi Non-Executive Director (Independent)
Member of the Nominations and Remuneration Committees
Joined Brambles as a Non-Executive Director in January 2016. George has extensive international
consumer packaged goods and supply-chain experience. He is based in Chicago, USA, and is currently
a Special Advisor to and a Director of Kraft Heinz Company. He previously served as Chief Operating
Officer of US commercial businesses for Kraft Heinz Company from the merger of Kraft Foods Group
and H.J. Heinz in July 2015 until October 2017. Prior to that merger, George held a number of key
leadership roles at Kraft including Chief Operating Officer. Prior to joining Kraft in 2007, he held a
number of executive roles with Fonterra Cooperative and various managerial and sales roles with
Associated British Foods. He holds a Diploma of Business, Marketing, as well as a Masters of
Enterprise from the University of Melbourne and has also completed an Accelerated Development
Program at MC London Business School in the United Kingdom. Age: 51.
Elizabeth Fagan Non-Executive Director (Independent)
Joined Brambles as a Non-Executive Director in June 2018. Elizabeth has extensive experience in the
international retail sector. She is currently Senior Vice President and Managing Director of Boots,
leading all Boots businesses across the UK and the Republic of Ireland. She will step down from this
role to become Non-Executive Chairman of Boots UK & Ireland on 1 September 2018. Previously,
Elizabeth was Senior Vice President, Managing Director, International Retail for Walgreens Boots
Alliance, from the Company’s creation in December 2014 to 2016. Prior to this, Elizabeth was
Marketing Director of Boots and Managing Director of Boots Opticians, and had previously worked
for Boots as Group Buyer from 1983 to 1991. Before re-joining the Boots business in 2006, Elizabeth
worked for DSG International Plc for 10 years, where she held a number of senior positions, including
Marketing Director, Group Marketing Director and Managing Director of The Link. She holds a
Bachelor of Science, Biochemistry from Strathclyde University. Age: 61.
Board & Executive Leadership Team
19
Board & Executive Leadership Team – continued
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 Chairman of Foodbank Australia.
Previously, Tony was a Non-Executive Director of Coca-Cola Amatil, 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 H.J. Heinz, Diageo and Seagram. He holds a Bachelor of Law from Queen Mary
College, London and a Master of Business Administration from Columbia Business School, New York.
Age: 70.
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. 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. He is a Non-Executive Director of Coats Group and Chairman of The Old Bushmills
Distillery. David 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. 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 holds a Bachelor of Science in Electrical & Electronic
Engineering from Middlesex University and is a Fellow of the Institute of Engineering and Technology,
England. Age: 61.
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
Canada Pension Plan Investment Board and was previously a Non-Executive Director of Recall
Holdings. She had a distinguished 26-year 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 & 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: 65.
Carolyn Kay Non-Executive Director (Independent)
Member of the Audit Committee
Joined Brambles as a Non-Executive Director in June 2006. She is Non-Executive Director of
Scentre Group, the Australia-China Council and the General Sir John Monash Foundation, an External
Board Member of Allens Linklaters and a member of the Future Fund Board of Guardians. 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 Bachelors of Law and Arts 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: 57.
20
Board & Executive Leadership Team
Board & Executive Leadership Team – continued
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 the Audit Committee, and of OneMarket
Limited. He was a senior Australian audit partner at EY, 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: 72.
Nessa O'Sullivan Chief Financial Officer
Joined Brambles in October 2016 and was appointed to the role of Chief Financial Officer on 17
November 2016. She became an Executive Director of Brambles in April 2017. Prior to joining
Brambles, Nessa worked for ten years at Coca-Cola Amatil in a number of senior financial and
operating roles, including Group Chief Financial Officer from 2010 to May 2015. She was also Group
Chief Financial Officer for Operations and Chief Financial Officer for Australia and New Zealand. Nessa
began her career working as an auditor at Price Waterhouse in Dublin, New York and Sydney. She
spent two years at Tyco Grinnell Asia Pacific before joining PepsiCo/Yum! Restaurants in 1995. Over a
10-year period at Yum! Restaurants International, she held a number of senior finance, IT and strategy
roles, including five years as Chief Financial Officer for the South Pacific Region. Nessa is a Fellow of
the Institute of Chartered Accountants in Ireland. She holds a Bachelor of Commerce from University
College Dublin and is a graduate of the Australian Institute of Company Directors. Age 53.
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 Group Limited and Origin Energy and 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 and New Zealand and as a member of the Asia-Pacific management
committee. Age: 53.
Board & Executive Leadership Team
21
Board & Executive Leadership Team – continued
Executive Leadership Team
Graham Chipchase Chief Executive Officer
Chairman of the Executive Leadership Team
(See biography on page 19.)
Carmelo Alonso-Bernaola Senior Vice President, Global Supply Chain
Joined Brambles in 1992 and was appointed Senior Vice President Supply Chain for CHEP’s global
operations in February 2011. At Brambles, Carmelo has served in a range of supply chain roles,
ranging from Quality Manager in Iberia; Logistics Director for South Europe; Vice President Logistics
Europe; and Senior Vice President Supply Chain Europe to his current global role in Supply Chain.
Carmelo is a Spanish citizen, and holds an Agro-industrial Engineering degree from the Universidad
Politécnica of Madrid. He also holds a Master of Business Administration from IE Business School,
Madrid and a Diploma of Manufacturing and Production Management. Age 52.
Phillip Austin President, CHEP Pallets Asia-Pacific
Joined Brambles in 1989 and became President CHEP Asia-Pacific in October 2014, having previously
held the positions of President CHEP Australia and New Zealand and President CHEP Australia. Phillip
has held a variety of senior roles across Brambles including Chief Financial Officer of the Brambles
Transport Group; Chief Financial Officer of CHEP Australia; Operations Manager for Wreckair Hire; and
executive roles in the CHEP Australia business responsible for sales, asset management and business
development. Phillip is a board member of Enactus Australia and an Ambassador for the National
Association for Women in Operations (NAWO). He holds a Bachelor of Economics and a Masters of
Logistics Management, both from the University of Sydney. Age 52.
Robert Gerrard Group Vice President, Legal and Secretariat
Joined Brambles in 2003 as Senior Counsel, Brambles Group and was appointed Group Company
Secretary in February 2008. Prior to joining Brambles, he was General Counsel and Company
Secretary of Roc Oil Company Limited; Group Legal Manager, Cairn Energy plc; General Counsel and
Company Secretary of Command Petroleum Limited; and a solicitor and senior associate with Allen
Allen & Hemsley. He holds a Masters of Law from the University of Sydney and a Bachelor of Science
and a Bachelor of Law from the University of New South Wales. He is a Solicitor of the Supreme Court
of New South Wales. Age 56.
Rodney Hefford Chief Information Officer
Rod joined Brambles in June 2017 as Chief Information Officer. Before joining Brambles, Rod was Vice
President, Information Technologies and Services at Ball Corporation, where he integrated the IT
elements of Ball’s acquisition of Rexam and led the development of an IT strategy for the combined
entity. Prior to that, he was Group CIO for Rexam and held several CIO roles at Unilever. He holds a
Bachelors’ of Materials Engineering from Monash University, Australia and a Master of Business
Administration from Warwick Business School in the UK. Age 54.
22
Board & Executive Leadership Team
Board & Executive Leadership Team – continued
Laura Nador President, CHEP North America
Joined Brambles in 2003. Laura became President, CHEP North America in January 2018, after holding
a number of leadership positions within Brambles. Laura was successively Director, Distributor Sales,
CHEP Europe; Vice President, RPCs, Europe; Country General Manager, CHEP Iberia; and Vice
President, Supply Chain, CHEP Latin America. In July 2016, she was appointed Senior Vice President of
the CHEP USA Pooled Pallets business and then President, CHEP USA in March 2017, when she took
on additional responsibilities for the CHEP Recycled, Pallecon and Automotive businesses in the USA.
CHEP Canada was added to her responsibilities in January 2018. Prior to Brambles, Laura worked for a
number of years at the Fortune 500 logistics company, Ryder. Laura holds a Master of Engineering
from the University of Buenos Aires and a Master of Business Administration from the London
Business School. Age: 46.
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 a Master of Business
Administration from the University of Bayreuth, Germany. Age: 61.
Nessa O'Sullivan Chief Financial Officer
(See biography on page 21.)
Michael Pooley President, CHEP Pallets Europe, Middle East & Africa
First joined Brambles in 2002. Michael became President CHEP EMEA in February 2017, having
previously held the following positions within Brambles: President CHEP Europe; Senior Vice President
Sales and Customer Operations, CHEP USA; Managing Director, CHEP UK & Ireland; and Vice
President European Key Accounts. Before joining CHEP in 2002, Michael held management roles
within the BOC Group and, between 2013 and 2015, he worked for Exova Group Plc as Managing
Director Europe and was a member of its executive leadership team that took the company through
an IPO on the London Stock Exchange in 2014. Michael is a Chartered Mechanical Engineer and has a
Master of Business Administration from Henley Management College in the UK. Age 50.
Prasad Srinivasamurthy President, BXB Digital
Joined Brambles in March 2016 as the President of Brambles’ new Silicon Valley-based business, BXB
Digital. Before joining Brambles, Prasad was Senior Vice President of Internet of Things and Customer
Innovation at SAP, where he led a global organisation in building and commercialising new digital
innovations. Prior to that, Prasad held a variety of executive roles through which he created and
scaled new revenue streams for innovative software products in customer relationship management
and supply chain management. He holds a Masters in Computer Science from University of Southern
California and a Master of Business Administration from the University of California, Berkeley. Age 47.
During the Year, Nicholas Smith was Group Senior Vice President, Human Resources. Nicholas left Brambles on 31 July 2018.
Patrick Bradley will commence as Group Senior Vice President, Human Resources, on 3 September 2018.
Board & Executive Leadership Team
23
Directors’ Report – 2018 Remuneration Report
Executive Summary
Business Performance
Remuneration for senior executives for the Year reflected Brambles' results and continued execution of Brambles' business strategy,
as detailed in the Operating & Financial Review pages 6 to 18.
Annual Short Term Incentive
Based on the financial results reviewed by the Audit Committee and approved by the Board, the annual Short Term Incentive (STI)
cash awards for senior executives ranged from 19.5% to 61.4% of base salary. These STI outcomes were driven by Brambles’ financial
performance and by executives’ achievement of specific personal objectives.
Long Term Incentive
The Long Term Incentive (LTI) awards granted during September 2015 had a three-year performance period ending 30 June 2018.
Performance against the conditions to which they were subject were:
-
-
Brambles’ total shareholder return (TSR) was below the median company in the ASX100, resulting in 0% vesting for this
component; and
Brambles' sales revenue compound annual growth rate (CAGR) was over 6.0% and Brambles Value Added (BVA) was just below
the US$850 million midpoint, resulting in 50.0% vesting for this component.
Accordingly, 25.0% of total LTI awards granted in FY16 vested.
Executive Salaries
The base salaries of the Executive Leadership Team (ELT) were determined in accordance with the Company's Remuneration Policy
described in Section 2. The average base salary increase for existing ELT members for the Year was 2.1%, ranging from 0% to 3.6%.
The average increase across the broader employee population was 3.0%. Details of the salaries of key management personnel are set
out in Sections 6.1, 6.2 and 6.3.
Non-Executive Directors' Fees
As reported in last year's Remuneration Report, in FY17 the Board determined that there would be no increase in Chairman and Non-
Executive Director fees for the Year. The annual review of Non-Executive Directors' fees carried out during the Year determined that,
taking into account the prevailing economic circumstances, there would also be no increase to Chairman or Non-Executive Director
fees for FY19.
Non-Executive Director fees are detailed in Section 7.1. The next fee review will be carried out during FY19 and any fee increase
arising from that review will take effect from 1 July 2019.
Remuneration Strategy
The Remuneration Committee carries out annual reviews of Brambles’ remuneration strategy, structure and policy, including share-
based incentive plans. These reviews are undertaken in order to determine when the current approach continues to strongly align
executives' interests with those of the Company and its shareholders. A number of remuneration policy changes were made in FY17
(described in detail in the Company's 2017 Remuneration Report and approved by shareholders at the 2017 Annual General Meeting)
and implemented during the Year. The outcome of the annual review for the FY18 Year was that, due to the implementation of those
changes, no further changes to Brambles' remuneration strategy were necessary.
Contents
1. Background
2. Remuneration Policy and Framework
3. Remuneration Structure
4. Performance of Brambles At Risk Remuneration
5. Employee Share Plan
6. Executive Directors and Disclosable Executives
7. Non-Executive Directors’ Disclosures
8. Remuneration Governance
24
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
1. Background
This Remuneration Report provides information on Brambles’
remuneration policy, the link between that policy, the Group's
business strategy and the performance of Brambles. This report
also provides remuneration information about Brambles’ Key
Management Personnel. Brambles’ Key Management Personnel
are its:
1. Non-Executive Directors;
2. Executive Directors; and
3. Group executives who have authority and responsibility for
planning, directing and controlling the Group’s activities.
The executives who come within this definition are those
set out in Section 6.
In this report, executives coming within points 2 and 3 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.
1.2 Basis of Valuation of STI and LTI Share Awards
Unless otherwise specified, the fair values of the STI and LTI
share awards (see Section 3.1) 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 21 on pages 87
and 88 of the financial statements.
This fair value is not used to calculate the number of STI and LTI
share awards granted to executives. The number of share
awards granted is based on the market value of Brambles
shares calculated on a 5-day volume weighted average share
price prior to the grant date. This is termed a "face value
approach".
2. Remuneration Policy and Framework
The Board has adopted a Remuneration Policy for the Group.
This policy requires remuneration to be consistent with
Brambles’ strategic business objectives, to attract and retain
high‑calibre executives, align executive rewards with the
creation of shareholder value, and motivate executives to
achieve challenging performance targets.
Section 3.4 sets out how Brambles’ Remuneration Policy is
directly linked to the Company’s financial performance, the
creation of shareholder wealth and the delivery of strategy.
Financial and strategic personal objectives are agreed at the
start of the financial year and approved by the Board
Remuneration Committee. The Committee reviews progress
against the objectives during the financial year and assesses
performance at year end following a detailed review of Group,
Business Unit and individual executive performance.
The Group’s remuneration policy is to set pay opportunity
around the median level of remuneration (the comparator
group of companies is set out in the next paragraph) but with
upper-quartile total potential rewards for outstanding
performance and proven capability.
Brambles’ global remuneration framework, which applies to all
salaried employees, 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. Comparative companies used to set pay ranges are 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 year end. This approach
provides a sound basis for delivering a non-discriminatory pay
structure for all Group employees.
Each year, the Board's Remuneration Committee conducts a
review of the Company's remuneration structure and policy to
provide alignment with the Company's strategic and business
objectives. As a result of the review carried out in FY17, a
number of changes were proposed to the remuneration
structure. These changes were described in detail in the 2017
Remuneration Report, were approved by shareholders at
Brambles' 2017 Annual General Meeting and implemented for
FY18.
The FY18 annual review determined that it was not necessary to
make any changes to the current remuneration structure.
3. Remuneration Structure
3.1 Introduction
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, benefits
and superannuation contributions.
A significant proportion of Disclosable Executives’ total reward
is required to be At Risk. 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 Chart 3.5.1 in Section 3.5.
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 (using
the "face value approach" described in Section 1.2) 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.
STI and LTI share awards are governed by the Brambles
Performance Share Plan (PSP) rules, which have been approved
by shareholders.
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 Sections 3.2 and 3.3
and Table 3.3.3. The application of the At Risk element of
remuneration is further described in Section 4.
25
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
The introduction of an international comparator index, the
MSCI World Industrials, reflects the global nature of Brambles'
business. The Company operates in over 60 countries and more
than 90% of its revenue is derived from locations outside of
Australia.
Performance against both the ASX100 and the MSCI World
Industrials is based on the standard ranking approach with
vesting commencing at the 50th percentile and progressively
vesting to full vesting at the 75th percentile as per the table
below.
TSR percentile
% Vesting of shares
Below Threshold
Below 50th
No vesting
Threshold
50th
50%
Between Threshold
and Maximum
Between 50th and
75th
Pro rata straight-
line vesting
Maximum
75th and above
100%
The second component is based on sales revenue CAGR/ROCI
matrix of similar design to the former matrix. The FY18-20 sales
revenue CAGR/ROCI matrix is published in Section 4.3.2.
The reasons why these metrics are used for the LTI share
awards performance conditions are set out in Table 3.3.3.
These LTI share award structural changes are summarised in the
table below.
LTI awards
LTI awards to FY17
LTI awards from FY18
onwards
External metric
50% based on
relative TSR against
ASX100
25% based on
Brambles' TSR
against ASX100
25% based on
Brambles' TSR
against MSCI World
Industrials Index
Internal metric
50% based on
sales revenue
CAGR/BVA matrix
50% based on
sales revenue
CAGR/ROCI matrix
3.2 STI Cash and Share Awards
Each year, Disclosable Executives are eligible to receive an STI
award, with 50% of the award being paid in cash and 50%
being deferred into STI share awards that vest two years after
grant. The Remuneration Committee sets annual STI cash award
performance objectives. Financial objectives comprise 80% of
the value of an STI cash award and are set at a “threshold” (the
minimum necessary to qualify for the awards), “target” (when
the performance target is met) and “maximum” (when targets
have been significantly exceeded and the award has reached its
upper limit) level. The Board approves these financial targets
every year. A key principle is that "threshold" is set at or above
the prior year's outcome. Personal objectives comprise 20% of
the value of an STI cash award. Details of the financial and
personal strategic objectives for the FY18 STI cash award are set
out in Table 3.3.3 and the achievement of those objectives for
FY18 are set out in Section 4.2.
Disclosable Executives are also eligible to receive an annual STI
share award. The value of the STI share award (calculated using
the "face value approach" referred to in Section 1.2) is equal to
the value of the STI cash award and vests two years from the
date of grant, provided the relevant Disclosable Executive
remains an employee of the Group during that period.
The financial objectives for STI cash awards and the reasons
why those objectives were adopted are set out in Table 3.3.3.
3.3 LTI Share Awards
Disclosable Executives are also eligible to receive an annual
grant of LTI share awards. Vesting of these awards occurs three
years from the date the award is granted and is subject to
satisfaction of service and performance conditions over a three-
year performance period (Performance Period).
3.3.1 LTI Share Awards to 2017
LTI share awards granted for the FY16-18 and FY17-19
Performance Periods consist of two components: half are
subject to a relative TSR measure based on the ASX100 and half
on a sales revenue CAGR with a BVA hurdle (see Section 4.3 for
further details). The matrices for these Performance Periods
were set out in the 2016 and 2017 Remuneration Reports
respectively.
3.3.2 LTI Share Awards from 2018 Onwards
LTI share awards granted from FY18 onwards continue to
consist of two components. The relative TSR component
continues to comprise half of the LTI award but will be split
across two metrics:
-
-
half is based on Brambles' TSR against the ASX100; and
the other half is based on Brambles' TSR against the MSCI
World Industrials Index, using 50 companies either side of
Brambles’ rolling 12-month average market capitalisation.
26
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
Performance
conditions
Table 3.3.3 – Remuneration Structure 2018 - Fixed and Variable Pay
Remuneration
element
Fixed Remuneration
Base salary,
superannuation
and benefits
Rationale
N/A
Fixed remuneration reflects the executive’s role,
duties, responsibilities and level of
performance, taking into account the
individual's location and Brambles' size,
geographic scale and complexity. Base salaries
are generally referenced at the market median.
Performance level required for payment
N/A
-
At Risk Remuneration
STI cash award
financial
objectives
(comprising 80%
of the STI cash
award)
-
-
-
-
-
-
-
STI cash award
personal
objectives
(comprising 20%
of the STI cash
award)
Underlying
Profit (ULP)
Cash Flow
from
Operations
Group Free
Cash Flow
Asset
efficiency
Safety
Business
strategy and
growth
objectives
Customer
satisfaction
and retention
Employee
engagement
Financial objectives are chosen to link
Disclosable Executives’ rewards with the
financial performance of the Group, the pursuit
of profitable growth and the efficient use of
capital and generation of cash.
ULP assists in retaining a focus on profitable
growth.
Cash Flow from Operations and Free Cash Flow
are used as measures to provide a strong focus
on the generation of cash.
Asset efficiency is a key driver of business
profitability and assists in maximising revenue
from existing assets and reducing capital costs.
Personal objectives are set to link Disclosable
Executives’ performance to Brambles’ overall
strategic objectives.
The key levels of performance possible against
each of the financial objectives 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).
Personal objectives are set at the beginning of the
financial year, are approved by the Remuneration
Committee and performance against item is
assessed by the Remuneration Committee at year
end.
STI share award
(deferred equity)
As per STI cash
award
LTI share award
(3-year
Performance
Period)
Relative TSR
(comprising half of
the LTI share award)
over the
Performance Period
Provides continuing alignment of Disclosable
Executives' interests with shareholders for an
additional two years beyond the financial year
to which the award relates.
Provides a major retention mechanism for
Disclosable Executives.
Creation of shareholder value
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.
The size of the STI share award is equal in value to
the STI cash award. This results in half of the total
STI award being deferred into Brambles shares,
which vest, subject to continued employment, on
the second anniversary of the grant (i.e. 2-year
deferral).
-
Performance will be measured over 3 years
against both the ASX100 and the MSCI
World Industrials indices, with each measure
separately measured and comprising 25% of
the total LTI award;
Half of LTI share awards will vest if the
Company's TSR performance over the 3-year
Performance Period against the ASX100 and
the MSCI World Industrials equals the TSR of
the median ranked company;
100% will vest for 75th percentile
performance over the 3-year Performance
Period; and
If Brambles’ TSR performance is between
these two levels, vesting will be on a pro
rata straight-line basis.
-
-
-
LTI share award
(3-year
Performance
Period)
Sales revenue CAGR
and ROCI
(comprising half of
the LTI share award)
over the
Performance Period
Profitable growth
Half of the LTI share award incentivises both
long-term sales revenue growth and ROCI.
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 ROCI
hurdles. This is designed to drive profitable
business growth, to maintain quality of
earnings at a strong level and to deliver a
strong return on capital invested. Sales revenue
CAGR is measured in constant currency.
Each year, a sales revenue CAGR/ROCI matrix is set
by the Remuneration Committee for each LTI share
award based on budget targets approved by the
Board. The matrix is published in the subsequent
year's Remuneration Report. This allows the
Remuneration Committee 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 sales revenue CAGR/ROCI matrix provides
performance focus over a 3-year period.
27
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
3.4 Remuneration and the Link to Business Strategy
Brambles’ business strategy is set out in the Operational & Financial Review on pages 6 to 18. The remuneration policy supports
the delivery of this strategy by:
-
-
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 ULP as a performance condition for STI cash awards and the use of CAGR sales
revenue targets with ROCI 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 asset efficiency and cash flow
performance conditions 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 from the date they are granted, helps retain key executives
and aligns their interests with shareholders.
Setting goals linked to implementation of the growth strategy: Each year, a part of a Disclosable 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 TSR performance conditions, to which the vesting of half of all LTI share awards granted are subject.
-
Full details of the link between executives’ remuneration and Brambles’ performance in terms of financial outcome, creation of
shareholder value and the delivery of the Group’s strategy are set out in Section 4.
Definitions of ULP, ROCI, TSR and CAGR measurements and the methods by which they are calculated are included in the Glossary
on pages 119 to 121.
3.5 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 3.5.1 illustrates the level of actual remuneration received by Disclosable Executives compared with their respective total
remuneration package mix. In that chart, the term "Rem Mix" (short for remuneration mix) is the relevant 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 3.5.1 labelled "Actual" comprise:
-
-
-
-
Base salary: base salary for FY18;
STI cash: the STI cash award received in respect of FY18 performance (see Section 4.2);
STI shares: the STI share award received in respect of FY18 performance, the vesting of which is deferred until FY20 (see
Section 4.2); and
LTI shares: the proportion of the FY16-FY18 LTI share awards that vested at the end of the Year (see Section 4.3.3).
The Remuneration Mix column represents the maximum value of each element of the respective Disclosable Executive's
remuneration package mix that could be received in each case by the individual Disclosable Executive. The remuneration mix for
the Group President, RPCs differs due to his remuneration structure with IFCO prior to it being acquired by Brambles. The mix
shown aligns his overall remuneration potential to other Brambles' executives.
28
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
Chart 3.5.1- Remuneration Mix
N
O
I
T
A
R
E
N
U
M
E
R
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
32%
22%
22%
11%
11%
11%
11%
16%
27%
27%
4%
18%
18%
29%
21%
21%
10%
10%
5%
5%
24%
24%
24%
30%
30%
29%
29%
29%
Rem Mix:
CEO, CFO
Actual:
CEO
Actual:
CFO
Rem Mix:
Group
President
RPCs
Actual:
Group
President
RPCs
EXECUTIVES
Rem Mix:
President
North
America
and EMEA
Actual:
President
North
America
Actual:
President
EMEA
Base Salary
STI Cash
STI Shares
LTI
3.6 Clawback of STI and LTI Share Awards
The PSP has included clawback provisions for STI and LTI awards since 2011. The Board sought, and obtained, shareholder approval
at the 2017 Annual General Meeting, for amendments to the PSP rules to enhance the scope of the clawback provisions. The
amendments grant the Board discretion to cancel STI and LTI share awards which have been granted but which have not vested in
the following circumstances:
-
-
-
-
-
-
to protect the financial soundness of the Company or a related body corporate;
to respond to an exceptional event which has a material impact on the value of the Company or a related body corporate;
to respond to any material inaccuracy in the assessment of the performance of the participant where the inaccurate
assessment contributed to the grant of the award;
to respond to any misrepresentation, material misstatement, or material inaccuracy in the measurement of the financial
position or performance of the Company (or any related body corporate), where the misrepresentation, misstatement or
inaccuracy contributed to the grant of the award;
in light of any subsequent or adverse development regarding the personal performance of a participant, the performance of
his or her business unit or the performance of the Company; or
if a participant in the PSP:
-
-
-
-
has engaged or participated in conduct which adversely affects, or is likely to adversely affect, the financial position or
reputation of the Group or a Group Company;
is under investigation for misconduct, where such misconduct may result in financial and/or reputational impact to the
Company or a related body corporate;
has hedged the value of, or entered into a derivative arrangement in respect of any unvested share award; or
has purported to dispose of, or grant any security interest over a share award or the shares (or cash equivalent) to which it
relates.
3.7 ELT Minimum Shareholding Requirements
Brambles has adopted minimum shareholding requirements for ELT members (which includes all Disclosable Executives). These
require ELT members to hold a meaningful stake in the Company and to assist in aligning their interests with those of its
shareholders. The requirements are:
-
The CEO’s minimum shareholding requirement is 150% of base salary, with other ELT members' minimum shareholding
requirement being 100% of their respective base salaries, to be built up over 5 years;
- Whilst building their minimum shareholding requirement, ELT members are not permitted to sell Brambles shares other than
to pay tax obligations they incur by reason of STI or LTI share awards vesting, until they have achieved 100% of their
shareholding requirements; and
- Where an Executive Director steps down from their Executive Director position but continues to be employed by the Company,
they will, under the Company's Securities Trading Policy, need the Chairman’s approval to deal in Brambles shares.
Executive Directors who cease to be employees of the Company shall be required to retain at least 50% of their minimum
shareholding for the 12 months following their cessation of employment.
29
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
4. Performance of Brambles & At Risk
Remuneration
As outlined in the Operating & Financial Review on pages 6 to
18, FY18 financial results were as shown below:
Financial measure
Sales revenue
Operating profit
Profit after tax
Underlying Profit (ULP)
FY18 result
(US$m)
5,596.6
986.0
773.5
996.7
Change from
FY17 (constant
currency)
6%
22%
67%
-
Brambles' TSR for the three years to 30 June 2018 was (7.53%).
4.1 FY18 STI Awards
The following table summarises the components and weighting
of objectives for the FY18 STI cash awards for Disclosable
Executives:
Disclosable
Executive
Financial objectives
Personal
objectives
Group
ULP
Segment
ULP
Group
cash
flow
Segment
cash
flow
50%
20%
-
30%
30%
10%
-
20%
20%
20%
CEO, CFO
Group
Presidents:
Pallets,
IFCO RPC
In addition, the amount of each Disclosable Executive's STI cash
award is subject to the achievement of a specified asset
efficiency metric (pallet cycle times for Pallets EMEA and Pallets
North America, and reusable plastic crates (RPC) asset turns for
IFCO RPC). If the applicable asset efficiency metric is not
achieved, the financial components of the overall STI cash
award otherwise payable to the relevant Disclosable Executive is
reduced by 20%.
4.2 STI Performance Against Financial Objectives
Actual performance against the FY18 STI cash awards' financial
objectives and asset efficiency metrics are summarised in the
following table:
Performance condition1
Brambles ULP
Level of performance achieved
during the Year2
Between Threshold and
Target
Brambles Free Cash Flow
Achieved Target
Brambles Cash Flow from
Operations
Achieved Target
Brambles Asset Efficiency
Achieved Target
Pallets EMEA ULP
Pallets EMEA Cash Flow from
Operations
Between Threshold and
Target
Achieved Target
Pallets EMEA Asset Efficiency
Achieved Target
Pallets North America ULP
Below Threshold
Pallets North America Cash
Flow from Operations
Pallets North America Asset
Efficiency
IFCO RPC ULP
IFCO RPC Cash Flow from
Operations
Did not meet Target
Achieved Target
Between Target and
Maximum
Achieved Targets
IFCO RPC Asset Efficiency
Achieved Target
4.2.1 Actual STI Cash Payable and Forfeited for FY18
Details of the FY18 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:
% of
Target
financial
objectives
achieved
% of
personal
objectives
achieved
Maximum
STI cash
as % of
base
salary
% of
maximum
STI cash
payable
% of
maximum
STI cash
forfeited
Name
Disclosable Executives
G Chipchase
N O’Sullivan
L Nador
72%
72%
27%
W Orgeldinger 108%
M Pooley
72%
83%
93%
89%
80%
89%
90%
90%
75%
90%
75%
49%
51%
26%
68%
50%
51%
49%
74%
32%
50%
1 Definitions of ULP, Free Cash Flow and Cash Flow from Operations measurements and the methods by which they are calculated are included in the Glossary on
pages 119 to 121.
2 "Achieved Target" reflects performance within +/- 1% of Target.
30
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
4.2.2 Personal Objectives
Twenty per cent of the STI award is based on the achievement
of personal objectives. The objectives are agreed at the start of
the financial year and approved by the Remuneration
Committee. The Committee reviews progress against the
objectives during the financial year and assesses performance
at year end. The Committee has full discretion in respect of the
assessment of performance against the personal objectives and
payments may be varied by the Committee in circumstances
where it considers it warranted, including where financial results
or business or personal performance are assessed as below the
required levels.
The types of personal objectives that apply to Disclosable
Executives are shown in the table below. Targets for global
metrics relating to safety, customer and employee engagement
are set at the Group level by the specialist teams that are
responsible for these areas.
Metric
Safety
Measurement
Executives with operational responsibility have
a safety measure as part of their personal
objectives. Safety is measured via the
Brambles Injury Frequency Rate (BIFR). In
addition to meeting BIFR targets, any work-
related fatalities result in reductions in STI
cash award payments for relevant executive.
Customer
satisfaction
Customer satisfaction is measured through
Net Promoter Score (NPS).
Employee
engagement
Brambles conducts a global Employee
Engagement Survey every two years, with
Pulse surveys being conducted in the interim
years.
Business
strategy
and growth
objectives
Strategic objectives are set for each
Disclosable Executive which support and are
aligned with the achievement of Brambles'
overall business strategy (see Section 3.4).
4.3 LTI Share Awards
Disclosable Executives have the opportunity to receive an
annual equity grant in the form of LTI share awards. The
maximum value of LTI share awards to the CEO and CFO may
not exceed 130% of their respective base salaries. The
maximum value of LTI share awards for the Group President of
RPC is 50% of their base salary due to prior contract
arrangements. The maximum value of LTI share awards for the
Group Presidents of Pallets EMEA and North America is 100% of
their respective base salaries.
In all cases, the face value (see Section 1.2) of Brambles shares
is used to determine the number of LTI share awards granted.
4.3.1 LTI Share Award Performance Conditions
The performance conditions to which LTI share awards are
subject are set out in Section 3.3.
4.3.2 Sales Revenue CAGR/ROCI LTI Performance Matrix for
FY18 to FY203
The following table is the sales revenue CAGR/ROCI matrix for
LTI share awards made during the Year. The matrix
encompasses the entire Brambles Group and the applicable
Performance Period is FY18-20. As a policy principle, the
Committee takes into account major acquisitions or
divestments during a Performance Period in determining the
final outcome of the sales revenue CAGR/ROCI 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.
Vesting %
Sales revenue CAGR4
3%
4%
5%
6%
7%
ROCI
16%
30%
50%
70%
90%
100%
15%
-
30%
50%
70%
90%
18%
50%
70%
90%
100%
100%
A sales revenue CAGR of 5.0% and a ROCI outcome of 16%
would provide vesting of 70%. A half point vesting scale applies
between the respective sales revenue and ROCI hurdles. For
example, a sales revenue CAGR of 4.0% and a ROCI outcome of
17% would provide vesting of 60%.
3 Financial targets set for STI share awards, do 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 STI awards.
4 Three-year CAGR over base year is used.
31
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
4.3.3 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.
Level of Vesting of LTI Share Awards based on TSR performance
Awards made
during
Performance condition
Start of
Performance Period
Out-performance of
median company’s TSR5
Vesting triggered (% of original award):
period to 30 June 2018
FY14
FY15
FY16
Relative TSR
Relative TSR
Relative TSR
1 July 2013
35.89 percentage points 100% LTI TSR award
1 July 2014
16.81 percentage points 0.0% LTI TSR award
1 July 2015
(7.53) percentage points 0.0% LTI TSR award
The following table provides similar details for awards based on TSR that have yet to be tested:
Awards made
during
Performance condition
Start of
Performance Period
Out-performance of
median company’s TSR (%)
Period to 30 June 2018: vesting if current
performance is maintained until earliest
testing date (% of original award)
FY17
FY18
FY18
Relative TSR
1 July 2016
(20.14) percentage points 0.0% LTI TSR awards
Relative TSR (ASX100)
1 July 2017
Relative TSR (MSCI)
1 July 2017
N/A6
N/A6
50.0% LTI TSR awards
0.0% LTI TSR awards
Level of Vesting of LTI Share Awards based on Sales Revenue CAGR and BVA/ROCI performance
Awards made
during
Performance condition
Start of
Performance Period
Vesting triggered (% of original award): prior period and period to 30
June 2018
FY14
FY15
FY16
Sales revenue
CAGR/BVA
Sales revenue
CAGR/BVA
Sales revenue
CAGR/BVA
1 July 2013
50.0% of LTI sales revenue CAGR/BVA awards
1 July 2014
40.0% of LTI sales revenue CAGR/BVA awards
1 July 2015
50.0% of LTI sales revenue CAGR/BVA awards
The following table provides similar details for LTI share awards for the Performance Period of which has not yet expired:
Awards made
during
FY17
FY18
Performance condition
Start of Performance Period
Period to 30 June 2018: vesting if
current performance is maintained until
earliest testing date (% of original award)
Sales revenue CAGR/BVA
1 July 2016
0.0% LTI sales revenue CAGR/BVA awards
Sales revenue CAGR/ROCI
1 July 2017
80.0% LTI sales revenue ROCI awards
Total Level of Vesting of LTI Share Awards
The combined vesting of the two LTI share award components for 2014, 2015 and 2016 is shown below.
Awards made
during
FY14
FY15
FY16
Start of Performance Period
End of Performance Period
Total vesting (TSR and sales revenue CAGR/BVA combined)
1 July 2013
1 July 2014
1 July 2015
30 June 2016
30 June 2017
30 June 2018
75.0%
20.0%
25.0%
5 Percentage out-performance of the median company’s TSR against the ASX100 Index.
6 Performance against both the ASX100 and MSCI World Industrials will be based on the standard TSR ranking approach, with threshold vesting commencing at the
50th percentile and progressively vesting to full vesting at the 75th percentile.
32
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
4.4 Summary of STI and LTI share awards
The table below contains details of the STI and LTI awards granted in which former or current Disclosable Executives have unvested
and/or unexercised awards that could affect remuneration in this or future reporting periods. The awards in bold relate to targets
which were relevant to vesting during the Year. STI and LTI share awards do not have an exercise price and carry no dividend or
voting rights.
Details pertaining to the MyShare plan are in Section 5.
Performance Share Plan Awards Vesting condition
STI awards
TSR LTI awards
100% vesting based on continuous employment
50% vesting if TSR is equal to the median ranked company
100% vesting if 25% above the median ranked company
FY15-FY17 BVA LTI award
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
FY16-FY18 BVA LTI award
20% vesting occurs if CAGR is 5% and BVA is US$700m over three-year period
100% vesting occurs if CAGR is 7% and BVA is US$1,000m over three-year period
FY17-FY19 BVA LTI award
20% vesting occurs if CAGR is 5% and BVA is US$950m over three-year period
100% vesting occurs if CAGR is 7% and BVA is US$1,350m over three-year period
FY18-FY20 ROCI LTI award
30% vesting occurs if CAGR is 4% and ROCI is 15% over three-year period
100% vesting occurs if CAGR is 6% and ROCI is 18% over three-year period
The terms and conditions of each grant of STI and LTI share awards affecting remuneration of Disclosable Executives in this or
future reporting periods are outlined in the table below. Awards granted under the plans do not have an exercise price and carry no
dividend or voting rights. The STI awards vest on the second anniversary of their grant date, subject to continued employment. The
LTI share awards described as LTI TSR awards vest on the third anniversary of their grant date, subject to continued employment
and meeting the relevant TSR performance condition set out in Section 3.3. The LTI share awards described as LTI BVA and LTI ROCI
vest on the third anniversary of their grant date, subject to continued employment and meeting a sales revenue CAGR and BVA or
sales revenue CAGR and ROCI performance condition set out in Section 3.3.
Performance Share
Plan Awards
Grant date
Expiry date
Value at grant
Status/vesting date
LTI TSR / LTI 15-17 BVA
25 September 2014
25 September 2020
STI / LTI TSR / LTI 16-18 BVA
25 September 2015
25 September 2021
A$8.83 (BVA) /
A$5.00 (TSR)
A$9.17 (STI) /
A$8.91 (BVA) /
A$4.07 (TSR)
40% (BVA) 0% (TSR) vested on
25 September 2017
STI - 100% vested on 25 September 2017
LTI - 25 September 2018
STI (Sign on)
2 November 2015
2 January 2018
A$10.31 (STI)
STI - 100% vested on 2 January 2018
STI / LTI TSR / LTI 17-19 BVA
2 September 2016
2 September 2022
10 October 2016
6 March 2017
STI / LTI TSR / LTI 18-20 ROCI 23 October 2017
23 October 2023
A$11.50 (STI) /
A$11.20 (BVA )/
A$4.91 (TSR)
A$8.77 (STI) /
A$8.51 (ROCI) /
A$3.44 (TSR-ASX) /
A$3.50 (TSR - MSCI)
STI - 2 September 2018
LTI - 2 September 2019
STI - 23 October 2019
LTI - 23 October 2020
33
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
5. Employee Share Plan
Brambles' 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 (Acquired Shares), which the
Company matches (Matching Shares) on a one-for-one basis after a two-year qualifying period. There is automatic vesting of
Matching Shares on the second anniversary of the first acquisition.
Under the MyShare program, Brambles has over 4,385 participants who held 3,738,807 Brambles shares in total at 30 June 2018.
Disclosable Executives are eligible to participate in MyShare. 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, 1,012,731 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$9.55 per share. The accounting share value at grant ranged from
A$8.92 to A$10.07 based on the monthly share price value. For further details of the share grant values, refer to Note 21 of the
Financial Report.
The terms and conditions of each grant of Matching Shares 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
Grant date
Expiry date
Value at grant
Matching
Shares/vesting
date
MyShare
20167
Each month from
31 March 2016 to 28 February 2017
MyShare
20178
Each month from
31 March 2017 to 28 February 2018
MyShare
20189
Each month from
31 March 2018 to 31 July 2018
1 April 2018
1 April 2019
1 April 2020
Values range per month from
A$8.79 to A$12.72
100% vested on
31 March 2018
Values range per month from
A$8.58 to A$9.97
Values range per month from
A$8.47 to A$9.57
31 March 2019
31 March 2020
7 The Matching Share granted under MyShare vest on 31 March 2018, subject to continuing employment and the retention of the associated Acquired Shares. On
vesting they are automatically exercised.
8 The Matching Share granted under MyShare vest on 31 March 2019, subject to continuing employment and the retention of the associated Acquired Shares. On
vesting they are automatically exercised.
9 The plan "2018 MyShare" ends on 28 February 2019. For FY18 reporting purposes, data is only available up to 31 July 2018. The remaining information will be reported
in the 2019 Annual Report. The Matching Shares granted under MyShare vest on 31 March 2020, subject to continuing employment and the retention of the
associated Acquired Shares. On vesting they are automatically exercised.
34
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
Details of Disclosable Executive’s salaries are shown in table
6.3.1.
6.3.1 Contract Terms for Disclosable Executives
Name and role(s)
Disclosable Executives
G Chipchase, Chief Executive
Officer
N O'Sullivan, Chief Financial
Officer10
L Nador, President,
CHEP Pallets, North America
(ELT from 1 Jan 2018)
W Orgeldinger,
Group President, RPCs
M Pooley, President,
CHEP Pallets Europe, Middle
East & Africa
Base salary at
30 June 2017
Base salary at
30 June 2018
£1,100,000
£1,133,000
A$1,061,000
£635,000
-
US$415,000
€670,000
€670,000
£306,000
£317,000
6. Executive Directors and Disclosable Executives
6.1 Executive Director Changes
There were no changes to Executive Directors during the Year,
with Graham Chipchase as Chief Executive Officer and
Nessa O’Sullivan as Chief Financial Officer.
6.2 Other Disclosable Executive Changes
In addition to Brambles’ Executive Directors, the following
executives comprise current Key Management Personnel:
-
Laura Nador, President, CHEP Pallets, North America, from
1 January 2018 when she was appointed to the ELT;
- Michael Pooley, President, CHEP Pallets Europe, Middle
East & Africa; and
- Wolfgang Orgeldinger, Group President, RPCs.
There have been no changes to the Key Management Personnel
after the reporting date and before the date of signing this
report.
6.3 Service Contracts
Graham Chipchase, Nessa O’Sullivan and Wolfgang Orgeldinger
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.
Michael Pooley and Laura Nador are on continuing contracts,
which may be terminated without cause by the employer giving
six 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 and are subject to limits imposed
under Australian law.
10 N O'Sullivan relocated from Brambles' Sydney office to the London office on 1 March 2018, when her salary was redenominated in Pounds Sterling. Her base salary at
30 June 2017 in Pounds Sterling (using the 30 June 2017 exchange rate) was £628,324.
35
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
6.4 Total Remuneration & 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 and vested in September 2017.
Theoretical accounting values for unvested share awards are shown in Section 8.4; 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.
Please note that the FY17 amounts shown for Graham Chipchase, Nessa O'Sullivan and Michael Pooley reflect part-year amounts
relating to the dates of their commencement as employees (for Graham Chipchase and Nessa O'Sullivan) and when he became a
Disclosable Executive (for Michael Pooley). No FY17 amount is shown for Laura Nador as she was not a Disclosable Executive during
that year.
US$'000
Short-term employee benefits
Post-
employment
benefits
Cash /
salary /
fees
Non-
monetary
benefits11
Cash
bonus
Year
Super-
annuation
Current Disclosable Executives
Name
Executive Directors
G Chipchase13,14
N O'Sullivan13,14
L Nador
W Orgeldinger13
M Pooley13,14
Totals
FY18 1,753
674
19
FY17
817
196
115
FY18 1,064
389
FY17
644
163
FY18
FY17
FY18
FY17
FY18
FY17
216
-
40
-
801
492
731
427
495
159
154
27
FY18 4,329 1,754
FY17
2,346
813
115
159
41
9
1
-
40
32
14
3
Other
Termination
/ sign-on
payments
/ retirement
benefits Other12
Actual
share
income
Total
before
equity
STI/LTI
MyShare
awards
-
-
20
26
10
-
9
8
63
19
102
53
-
-
-
-
-
-
-
-
-
-
-
-
14
2,460
9
1,137
-
1,514
38
880
-
-
1
-
Total
2,460
1,137
1,515
880
8
-
6
5
2
1
30
53
275
-
43
-
318
-
1,348
487
1,835
1,203
835
2,038
733
204
6,330
3,424
57
125
588
960
790
329
6,918
4,384
11 This includes car parking, tax support, club membership, fringe benefit tax and for N O'Sullivan includes relocation costs from Sydney to London.
12 This includes health and salary continuance insurance.
13 The year-on-year comparison of remuneration is affected by the movement of exchange rates from A$1=US$0.7540, €1=US$1.0950 and £1=US$1.2732 for FY17 and
A$1=US$0.7726, €1=US$1.1950 and £1=US$1.3465 for FY18.
14 For FY17 totals G Chipchase, N O'Sullivan and M Pooley reflects a partial year, whereas FY18 reflects the full-year.
36
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
6.5 Equity-Based Awards
The following table shows details of equity-based awards made to Disclosable Executives during the Year. STI and LTI share awards
were made under the PSP, the terms and conditions of which are set out in Section 3. MyShare Matching Shares were made under
MyShare, the terms and conditions of which are set out in Section 5. Approval for the issue of the STI and LTI share awards granted
to Graham Chipchase and Nessa O'Sullivan was obtained under ASX Listing Rule 10.14.
Name
Executive Directors
G Chipchase
N O'Sullivan
Current Disclosable Executives
L Nador
W Orgeldinger
M Pooley
Type of award
Number
Value at grant US$'00015
STI
LTI
MyShare Matching Shares
Totals
STI
LTI
MyShare Matching Shares
Totals
STI
LTI
MyShare Matching Shares
Totals
STI
LTI
MyShare Matching Shares
Totals
STI
LTI
MyShare Matching Shares
Totals
27,740
257,884
558
286,182
23,131
147,428
142
170,701
3,569
51,225
520
55,314
62,699
53,864
562
117,125
11,417
55,181
602
67,200
203
1,884
4
2,091
169
1,077
1
1,247
26
374
4
404
458
393
4
855
83
403
4
490
15 The total value of the relevant equity award(s) is valued as at the date of grant using the methodology set out in Section 1.2. 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.
37
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
6.6 Shareholdings
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.16,17
Ordinary shares
Executive Directors
G Chipchase
N O'Sullivan
Current Disclosable Executives
L Nador
W Orgeldinger
M Pooley
Balance at the start of the Year
Changes during the Year
Balance at the end of the Year
7,375
163
5,197
1,317
490
24,570
215
531
845
808
31,945
378
5,728
2,162
1,298
6.7 Interests in Share Rights18
The following table shows details of rights over Brambles Limited ordinary shares in which the Disclosable Executives held relevant
interests: being STI and LTI share awards made on 25 September 2014, 25 September 2015, 2 November 2015, 2 September 2016,
10 October 2016, 6 March 2017 and 23 October 2017 under the PSP; and Matching Shares, being conditional rights awarded
during the Year under MyShare.19,20,21
Balance at
the start of
the Year
Granted
during
the Year
Exercised
during
the Year
Lapsed
during
the Year
Balance at
the end of
the Year
Vested and
exercisable at the end
of the Year
Value at
exercise
Name
Number
Number
Number
Number
Number
Number
US$'000
Executive Directors
G Chipchase
168,607
286,182
N O'Sullivan
103,014
170,701
-
(118)
Current Disclosable Executives
L Nador
34,292
55,314
(5,950)
-
-
-
W Orgeldinger
351,855
117,125
M Pooley
41,230
67,200
(395)
(350)
(37,363)
-
454,789
273,597
83,656
431,222
108,080
-
-
3,200
157,994
6,906
-
1
43
3
3
16 On 31 July 2018, the following Disclosable Executives acquired ordinary shares under MyShare, which are held by AET Structured Finance Services Pty Limited:
G Chipchase (44), N O'Sullivan (44), L Nador (41), W Orgeldinger (44) and M Pooley (44).
On 31 July 2018, the following Disclosable Executives received Matching Awards under MyShare: G Chipchase (44), N O'Sullivan (44), L Nador (41), W Orgeldinger (44)
and M Pooley (44).
17 N O'Sullivan, W Orgeldinger and M Pooley: All of their shares are held by AET Structured Finance Services Pty Limited.
G Chipchase: Of which 17,200 shares are held by Rathbones Nominees Ltd, 14,000 shares are held by Rathbones Investment Management Ltd and 745 shares are held
by AET Structured Finance Services Pty Limited.
L Nador: Of which 3,773 shares are held by L Nador and 1,955 shares are held by AET Structured Finance Services Pty Limited.
18 Of the awards detailed in Section 4.3, the following plans' items are relevant to Disclosable Executives: G Chipchase, N O'Sullivan, L Nador, W Orgeldinger, M Pooley
(STI, LTI TRS, LTI 17-19 BVA, LTI 18-20 ROCI, MyShare 2017 and 2018); W Orgeldinger (LTI 15-17 BVA, LTI 16-18 BVA); M Pooley (STI) sign-on awards; and
N O'Sullivan, W Orgeldinger, M Pooley (MyShare 2016).
Lapses occurred for: W Orgeldinger (LTI TSR / LTI 15- 17 BVA).
Exercises occurred for: N O'Sullivan, W Orgeldinger, M Pooley (MyShare 2016).
19 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.
20 During the Year, 2,330,059 equity-settled performance share rights were granted under the PSP, of which 285,624 were granted to G Chipchase and 170,559 were
granted to N O’Sullivan. 1,014,122 Matching Awards were granted under MyShare during the Year, of which 558 were granted to G Chipchase and 142 were granted to
N O’Sullivan. Approval for these issues of securities to G Chipchase and N O'Sullivan was obtained under ASX Listing Rule 10.14.
21 "Lapse" in this context means that the Awards were forfeited due to either the applicable service or performance conditions not being met.
38
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 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 Directors. In setting
the fees, advice is sought from external remuneration advisors
on the appropriate level of fees, taking into account the
responsibilities of Non-Executive 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 2, which is consistent with Brambles’ policy on
executive pay.
During the annual fee review carried out in FY17, the Board
determined there would be no increase to the Chairman's and
Non-Executive Directors' fees. The FY18 annual reviews of the
Chairman's and Non-Executive Directors' fees also determined
that, taking into account the prevailing economic
circumstances, there would also be no increase to their
respective fees for FY19.
The fees for the Chairman and Non-Executive Directors remain
as follows:
Chairman: A$627,000; and
-
- Non-Executive Directors: A$209,000.
The following travel allowances and Committee membership
fees were also 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; and
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 July 2019.
7.2 Non-Executive Directors’ Appointment Letters
Non-Executive 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 the PSP 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:22
Ordinary
shares
Balance at the
start of the Year
Changes
during the
Year
Balance at the end
of the Year
Current Non-Executive Directors
G El-Zoghbi
35,000
E Fagan
A G Froggatt
D P Gosnell
T Hassan
S P Johns
S C H Kay
B Long
S Perkins
-
14,890
22,910
15,000
58,156
18,877
24,000
20,000
Former Non-Executive Directors
C Cross
15,000
-
-
-
-
-
1,565
-
-
-
-
35,000
-
14,890
22,910
15,000
59,721
18,877
24,000
20,000
15,000
22 G El-Zoghbi: Held by The George El-Zoghbi Trust Agreement on behalf of George El-Zoghbi.
A G Froggatt: Of which 7,000 shares were held by Christine Joanne Froggatt and 7,890 shares were held by Anthony Grant Froggatt.
D P Gosnell: Held by Charles Stanley & Co Australia in the name of Susan Gosnell.
T Hassan: Held by RBC Dexia Custodian on behalf of Tahira Hassan.
S P Johns: Of which 37,944 ordinary shares held by Canzak Pty Ltd and 21,777 ordinary shares held by Caran Pty Limited.
S C H Kay: Of which 8,477 ordinary shares held by Sarah Carolyn Kay & Simon Swaney ; 4,900 ordinary shares held by Sarah
Carolyn Hailes Kay and 5,500 ordinary shares held by Carolyn Kay .
B Long: Of which 20,000 ordinary shares held by BJ Long Investments Pty Limited ATF BJ Long Super Fund A/C and 4,000 ordinary shares held by BJ Long Investments
Pty Limited ATF.
S Perkins: Held by Perkins Family Super Pty Ltd ATF Perkins Family S/F A/C.
C Cross: Held by Christine Cross. The "Balance at the end of the Year" is as at 31 August 2017; she ceased to be a Brambles director after that date.
39
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
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 below in
US dollars. The full names of the Non-Executive Directors and the dates of any changes in Non-Executive Directors during the Year
are shown in the Directors’ Report – Other Information on page 43. 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.
Table 7.4.1: Non-Executive Directors’ Remuneration for the Year
US$'000
Short-term employee benefits
Post-employment benefits
Name
Year
Directors’ fees
Superannuation
Other23
Total24
CURRENT NON-EXECUTIVE DIRECTORS
G El-Zoghbi25
FY18
E Fagan
A G Froggatt25
D Gosnell25
T Hassan25
S P Johns25
S C H Kay25
B J Long25
S Perkins25
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FORMER NON-EXECUTIVE DIRECTORS
C Cross26
FY18
Totals
FY17
FY18
FY17
169
176
13
-
186
186
173
168
169
176
453
446
165
165
193
192
165
165
31
168
8
8
1
-
18
17
8
8
8
8
43
42
16
15
18
18
16
15
1
8
12
38
-
-
12
29
3
8
-
8
29
47
11
13
12
29
-
-
-
-
189
222
14
-
216
232
184
184
177
192
525
535
192
193
223
239
181
180
32
176
1,717
1,842
137
139
79
172
1,933
2,153
23 “Other” includes car parking, tax services, spouse expenses and Fringe Benefits Tax.
24 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.
25 The year-on-year comparison of remuneration is affected by the movement of exchange rates from A$1=US$0.7540, €1=US$1.0950 and £1=US$1.2732 for FY17 and
A$1=US$0.7726, €1=US$1.1950 and £1=US$1.3465 for FY18.
26 Christine Cross retired on 31 August 2017.
40
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
8. Remuneration Governance
8.1 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
remuneration arrangements for other senior executives.
Brambles does not have a separate Board Risk Committee, as it
views risk as a matter best addressed at the Board level by all
Board members. Consequently, all Remuneration Committee
members have a strong understanding of any Brambles’ risk
issues, and reflect consideration of both Brambles’ risk
management framework, and any risk issues, in remuneration
outcomes. The Remuneration Committee also works closely
with the Audit Committee for assurance on the integrity of the
financial performance outcomes underlying remuneration
determination. More broadly, the Remuneration Committee
considers the Group’s overall performance, both financial and
non-financial, in its determinations.
During the Year, members of the Committee were Tony
Froggatt (Committee chairman), Stephen Johns, Tahira Hassan,
George El-Zoghbi and Christine Cross (up to 31 August 2017).
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 Vice President,
Legal & Secretariat and Company Secretary and Group Vice
President of Remuneration & Benefits, as well as Brambles’
external remuneration advisor, EY.
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.
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.
8.2 Securities Trading Policy and Incentive Awards
Brambles' Securities Trading Policy applies to share 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.
Section 4.4 summarises all the incentive plans under which
awards to Disclosable Executives are still to vest or be exercised.
8.3 Remuneration Advisor
The Committee has appointed EY 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 EY.
During the Year, no remuneration recommendations, as defined
by the Act (Recommendations), were provided by EY. EY also
provided taxation, internal audit, share awards 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 EY
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 EY may provide
to Brambles’ management, which excludes
Recommendations;
Any requests to EY from Brambles' management that
might constitute a Recommendation are to be referred by
EY to the Committee for its consideration and direction;
EY is not permitted to provide Recommendations to
Brambles’ management;
If EY 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 EY attend Committee meetings;
Except for the CEO, Disclosable Executives do not attend
Committee meetings;
The CEO does not attend those parts of any Committee
meeting when his or her remuneration is being reviewed or
discussed; and
The Committee meets with EY 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.
41
Directors’ Report – 2018 Remuneration Report
Directors’ Report – 2018 Remuneration Report – continued
8.4 Share-Based Payments – Future Potential
The table below provides annual accounting values for shares granted during years 2016-2018, which have been amortised over
three years. These share awards are subject to conditions set out in Section 4. 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
G Chipchase
N O'Sullivan
Current Disclosable Executives
L Nador
W Orgeldinger
M Pooley
Totals
Year
Total before equity
Awards
Share of FY18
total remuneration
Share-based payment
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
2,460
1,137
1,514
880
275
-
1,348
1,203
733
204
6,330
3,424
529
55
227
90
118
-
687
788
175
176
1,736
1,109
18%
5%
13%
9%
30%
-
34%
40%
19%
46%
Total
2,989
1,192
1,741
970
393
-
2,035
1,991
908
380
8,066
4,533
42
Directors’ Report – 2018 Remuneration Report
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 2018 (the Year).
Principal Activities
The principal activities of the Group during the Year were the
provision of supply chain logistics solutions, 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 the
Operating & Financial Review on page 6.
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 Letters from the Chairman and
the CEO and the Operating & Financial Review from pages
4 to 18.
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 118.
Significant Changes in State of Affairs
On 11 August 2017, Brambles announced its intention to
divest its North American recycled whitewood business,
CHEP Recycled. The divestment of CHEP Recycled was
completed on 14 February 2018. On 12 April 2018, Brambles
announced the entry into and completion of an agreement to
divest its 50% interest in the Hoover Ferguson Group joint
venture to its co-venturer.
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
On 24 August 2018, Brambles announced that following a
strategic review, it had decided to pursue a separation of its
IFCO RPC business. Full details of this decision are in the
Letters from the Chairman and CEO on pages 4 and 5. The
Directors are not aware of any other matter or circumstance
that has arisen since 30 June 2018 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 the Letters from the Chairman and the CEO, and Operating
& Financial Review on pages 4 to 18.
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
14.5 Australian cents per share, which will be 30% franked. The
dividend will be paid on 11 October 2018 to shareholders on
the register on 12 September 2018.
On 12 April 2018, an interim dividend for the Year was paid,
which was 14.5 Australian cents per share and 30% franked.
On 12 October 2017, a final dividend for the year ended
30 June 2017 was paid, which was 14.5 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 they served as a Director during the Year, is set out
below.
The qualifications, experience and special responsibilities of
Directors are set out on pages 19 to 21.
Graham Andrew Chipchase 1 July 2017 to date
Christine Cross
1 July 2017 to 31 August 2017
George El Zoghbi
1 July 2017 to date
Elizabeth Fagan
1 June 2018 to date
Anthony Grant Froggatt
1 July 2017 to date
David Peter Gosnell
1 July 2017 to date
Tahira Hassan
1 July 2017 to date
Stephen Paul Johns
1 July 2017 to date
Sarah Carolyn Hailes Kay
1 July 2017 to date
Brian James Long
1 July 2017 to date
Nessa O'Sullivan
1 July 2017 to date
Scott Redvers Perkins
1 July 2017 to date
Secretary
Details of the qualifications and the experience of
Robert Nies Gerrard, Group Vice President, Legal & Secretariat
and Company Secretary of Brambles Limited, are set out on
page 22.
Details of the qualifications and experience of Carina Thuaux,
Deputy Company Secretary of Brambles Limited, are as
follows: Carina joined Brambles in January 2014 as Assistant
Company Secretary, and was most recently appointed Deputy
Company Secretary and Legal Counsel in April 2018. Prior to
joining Brambles, she was a solicitor with King & Wood
Mallesons. She holds Bachelor of Commerce and Bachelor of
Law degrees from the University of New South Wales. She is a
Solicitor of the Supreme Court of New South Wales.
Indemnities
Under its constitution, to the extent permitted by law,
Brambles Limited indemnifies each person who is, or has
43
Directors’ Report – Other Information Directors’ Report – Other Information – continued
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:
-
in respect of a liability other than for legal costs:
-
-
-
a liability owed to Brambles Limited or a related body
corporate;
a liability for a pecuniary penalty order under section
1317G of the Corporations Act 2001 (Cth) (Act) or a
compensation order under section 1317H of the Act;
or
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
-
in respect of a liability for legal costs:
-
-
-
-
in defending or resisting criminal proceedings in
which the person is found to have a liability for which
they could not have been indemnified in respect of a
liability owed to Brambles Limited or a related body
corporate;
in defending or resisting criminal proceedings in
which the person is found guilty. This does not apply
to costs incurred in responding to actions brought by
Australian Securities & Investment Commission
(ASIC) or a liquidator as part of an investigation
before commencing proceedings for a Court order;
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
in connection with proceedings for relief to any
persons under the Act in which the Court denies the
relief.
As allowed by its constitution, Brambles Limited has provided
indemnities to its 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 Brambles Limited excludes the
following matters:
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;
any Loss to the extent indemnity in respect of that Loss is
prohibited under the Act (or any other law);
any Loss to the extent it arises from private or personal
acts or omissions of the Beneficiary;
any Loss comprising the reimbursement of normal day-
to-day expenses such as travelling expenses;
any Loss to the extent the Beneficiary failed to act
reasonably to mitigate the Loss;
any Loss to the extent it is caused by or arises from acts
or omissions of the Beneficiary after the date the
-
-
-
-
-
-
44
indemnity is revoked by Brambles Limited in accordance
with the terms of the indemnity; and
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 and
executive officers; however, the terms of the policies prohibit
disclosure of the details of the insurance cover and the
premiums paid.
Employees
The 2018 Sustainability Review, which will be available on
Brambles’ website in September 2018, will contain details of
Brambles’ performance as an employer.
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.
Brambles has set environmental performance targets as part
of its sustainability strategy. Reporting of performance against
those targets will be contained in Brambles’ 2018
Sustainability Review, which will be available on the Brambles
website in September 2018. A copy of the complete
Environmental Policy is set out in Brambles’ Code of Conduct,
which is available at www.brambles.com
Occupational Health and Safety
The Board is responsible for setting Brambles’ Health and
Safety Policy, which states that Brambles is to provide and
maintain a healthy and safe working environment and to
prevent injury, illness or impairment to the health of
employees, contractors, customers or the public.
Brambles has adopted a Zero Harm Charter, which sets out
the vision, values and behaviours and commitment required
to work safely and ensure human rights and environmental
compliance is provided to all employees and, together with
the complete Health and Safety Policy, is on the Brambles
website at www.brambles.com.
The Chief Executive Officer, together with the Group's
business unit presidents, 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 provide incentives for improvement. The
Operating & Financial Review on page 10 sets out the
performance of the Group against its principal performance
indicator, the Brambles Injury Frequency Rate. More detailed
reporting on health and safety performance will be shown in
the 2018 Sustainability Review, which will be available on
Brambles’ website in September 2018.
Directors’ Report – Other Information Directors’ Report – Other Information – continued
Directors’ Meetings
Details of Board Committee memberships are given in the Directors' biographies on pages 19 to 21. The following table shows
the actual Board and Committee meetings held during the Year and the number attended by each Director or Committee
member.
Regular1
Special Committees
Directors
G A Chipchase
G El Zoghbi
E Fagan
A G Froggatt
D P Gosnell
T Hassan
S P Johns
S C H Kay
B J Long
N O'Sullivan
S R Perkins
Former Director
C Cross
(a)
11
11
1
11
10
11
11
11
11
11
11
1
(b)
11
11
1
11
11
11
11
11
11
11
11
1
(a)
2
(b)
2
-
-
-
-
-
2
1
3
3
-
-
-
-
-
-
-
2
1
3
3
-
-
Board meetings
Audit Committee
meetings
Remuneration
Committee meetings
Nominations
Committee meetings
(a)
(b)
(a)
(b)
(a)
(b)
-
-
-
-
5
-
-
6
6
-
6
-
-
-
-
-
6
-
-
6
6
-
6
-
-
6
-
6
-
6
6
-
-
-
-
3
-
6
-
6
-
6
6
-
-
-
-
3
-
-
-
5
5
-
-
5
-
-
-
-
-
-
-
5
5
-
-
5
-
-
-
-
a) The number of meetings attended during the period the Director was a member of the Board or relevant Committee which
the Director was eligible to attend.
b) The number of meetings held while the Director was a member of the Board or relevant Committee which the Director was
eligible to attend.
1 Mr Gosnell did not attend one Board and Audit Committee meeting due to illness.
45
Directors’ Report – Other Information
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 2015.
Listed company
AstraZeneca plc
The Kraft Heinz Company
None
Coca-Cola Amatil Limited
Coats plc
Coats Group plc
Recall Holdings Limited
Goodman Group:
Goodman Limited
Period directorship held
2012 to current
April 2018 to current
-
2010 to May 2017
2015 to July 2015
2015 to current
2013 to May 2016
2017 to current
Goodman Funds Management Limited
2017 to current
Scentre Group:
Scentre Group Limited
Scentre Management Limited
RE1 Limited
RE2 Limited
Commonwealth Bank of Australia
OneMarket Limited
Ten Network Holdings Limited
None
Woolworths Limited
Origin Energy Limited
2016 to current
2016 to current
2016 to current
2016 to current
2010 to current
June 2018 to current
2010 to July 2016
-
2014 to current
2015 to current
Director
G A Chipchase
G El Zoghbi
E Fagan
A G Froggatt
D P Gosnell
T Hassan
S P Johns
S C H Kay
B J Long
N O'Sullivan
S R Perkins
46
Directors’ Report – Other Information
Directors’ Report – Other Information – continued
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 breaches 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
its 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'
2018 Corporate Governance Statement is on Brambles'
website at www.brambles.com/corporate-governance-
overview.
Interests in Securities
Pages 38 and 39 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 20 and 21 of the Financial Report on
pages 86 to 88.
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:
-
87,502 grants under the 2018 MyShare offer;
-
-
24,529 exercises resulting in the issue of fully paid
ordinary shares: 3,634 under the 2017 MyShare offer;
19,483 under the PSP STI award; and
110,552 lapses: 13,800 under the 2017 MyShare offer;
10,121 under the 2018 MyShare offer; 7,854 under PSP
STI awards; 39,388 under the PSP TSR LTI awards; 10,240
under the PSP FY17-FY199 BVA LTI award; 29,149 under
the PSP FY18-FY20 ROCI LTI award.
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 12 to 13 in the
Operating & Financial Review and in Principle 7 of Brambles'
2018 Corporate Governance Statement which is available on
the Brambles website.
Treasury Policies
A discussion of the implementation of treasury policies and
mitigation of treasury risks can be found on page 14 in the
Operating & Financial Review.
Non-Audit Services and Auditor Independence
The amount of US$0.082 million was paid or is payable to
PwC, 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 compliance
projects and tax consulting advice.
The Audit Committee has reviewed the provision of non-audit
services by PwC 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 PwC 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
10 August 2018 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.
47
Directors’ Report – Other Information Directors’ Report – Other Information – continued
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 117.
Annual General Meeting
The AGM will be held at 2.00pm (AEDT) on 23 October 2018
at Ballroom 1, The Westin Sydney, 1 Martin Place, Sydney,
NSW 2000.
This Directors’ Report is made in accordance with a resolution
of the Board.
Stephen Johns
Graham Chipchase
Chairman
Chief Executive Officer
24 August 2018
48
Directors’ Report – Other Information
Shareholder Information
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.
American Depository Receipts
Brambles Limited shares may be traded in sponsored
American Depository Receipts form in the United States.
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 inside back cover of this 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 inside back cover of this Annual Report.
Annual General Meeting
The Brambles Limited 2018 AGM will be held at
2.00pm (AEDT) on 23 October 2018 at Ballroom 1,
The Westin Sydney, 1 Martin Place, Sydney, NSW 2000.
Financial Calendar
Final Dividend 2018
Ex-dividend date – Tuesday, 11 September 2018
Record date – Wednesday, 12 September 2018
Payment date – Thursday, 11 October 2018
2019 (Provisional)
Announcement of interim results – mid-February 2019
Interim dividend – mid-April 2019
Announcement of final results – mid-August 2019
Final dividend – mid-October 2019
AGM – October 2019
Company Secretary
R N Gerrard
C Thuaux
Analysis of Holders of Equity Securities as at 31 July 2018
Substantial Shareholders
Brambles has been notified of the following substantial shareholdings:
Holder
Blackrock Group
Commonwealth Bank of Australia
Massachusetts Financial Services Company
("MFS") on behalf of Sun Life Financial Inc.
Schroder Investment Management Australia
Limited
Number of ordinary shares % of issued ordinary share capital1
5.01
6.26
6.46
79,734,871
99,603,571
102,817,589
82,724,920
5.21
Number of Ordinary Shares on Issue and Distribution of Holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
1 Percentages are as disclosed in substantial holding notices given to Brambles Limited.
Holders
34,337
33,774
5,777
3,273
127
77,288
Shares
16,268,152
77,866,936
40,651,328
67,256,114
1,389,879,696
1,591,922,226
49
Shareholder Information
Shareholder Information – continued
The number of members holding less than a marketable parcel of 50 ordinary shares (based on a market price of A$9.88 on
31 July 2018) is 1,725 and they hold a total of 26,993 ordinary shares. The voting rights of ordinary shares are described below.
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
Holders
1,943
1,171
38
92
11
3,255
Share rights
709,403
1,715,224
283,380
3,047,188
2,625,300
8,380,495
The voting rights of performance share rights and MyShare Matching Awards are described below.
Twenty Largest Ordinary Shareholders
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
CITICORP NOMINEES PTY LIMITED
ARGO INVESTMENTS LIMITED
AMP LIFE LIMITED
BNP PARIBAS NOMS (NZ) LTD
NATIONAL NOMINEES LIMITED
AET SFS PTY LTD
IOOF INVESTMENT MANAGEMENT LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
CUSTODIAL SERVICES LIMITED
AUSTRALIAN UNITED INVESTMENT COMPANY LIMITED
NETWEALTH INVESTMENTS LIMITED
DJERRIWARRH INVESTMENTS LIMITED
Number of ordinary
shares
685,358,597
% of issued ordinary
share capital
43.05
320,230,559
106,152,328
85,135,256
34,174,431
34,043,266
13,270,509
12,138,658
11,779,083
6,501,609
5,256,213
4,392,745
3,956,255
3,655,682
3,414,370
2,856,174
2,533,359
2,100,000
2,085,188
1,998,365
20.12
6.67
5.35
2.15
2.14
0.83
0.76
0.74
0.41
0.33
0.28
0.25
0.23
0.21
0.18
0.16
0.13
0.13
0.13
Percentage of total holdings of 20 largest holders
1,341,032,647
84.24
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 on a resolution will be excluded on a vote on that resolution by a show of hands or on a poll. 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.
50
Shareholder Information
Consolidated Financial Report
for the year ended 30 June 2018
INDEX
PAGE
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to and Forming Part of the Financial Statements
1 About this Report
2 Segment Information
3 Operating Expenses – Continuing Operations
4 Significant Items – Continuing Operations
5 Net Finance Costs – Continuing Operations
6 Income Tax
7 Earnings Per Share
8 Dividends
9 Investments
10 Discontinued Operations
11 Trade and Other Receivables
12 Inventories
13 Other Assets
14 Property, Plant and Equipment
15 Goodwill and Intangible Assets
16 Trade and Other Payables
17 Provisions
18 Borrowings
19 Retirement Benefit Obligations
20 Contributed Equity
21 Share-Based Payments
22 Reserves and Retained Earnings
23 Financial Risk Management
24 Cash Flow Statement – Additional Information
25 Commitments
26 Contingencies
27 Auditor’s Remuneration
28 Key Management Personnel
29 Related Party Information
30 Events After Balance Sheet Date
31 Net Assets Per Share
32 Parent Entity Financial Information
Directors' Declaration
Independent Auditor's Report
Auditor's Independence Declaration
52
53
54
55
56
59
64
65
66
67
71
73
74
74
76
77
77
78
80
83
83
84
84
86
87
89
91
99
101
102
103
104
104
105
106
106
108
109
117
51
Consolidated Financial Report
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2018
Continuing operations
Sales revenue
Other income
Operating expenses
Share of results of joint venture
Operating profit �
Finance revenue
Finance costs
Net finance costs�
Profit before tax
Tax expense
Profit from continuing operations
Loss from discontinued operations
Profit for the year attributable to members of the parent entity�
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial gain/(loss) on defined benefit pension plans
Income tax (expense)/benefit 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
Other comprehensive (expense)/income for the year�
Total comprehensive income for the year attributable to members of the
parent entity�
Earnings per share (US cents)
Total
- basic
- diluted
Continuing operations
- basic
- diluted
Note
2
3
2
5
6A
10B
6A
22A
7
2018
US$m
5,596.6�
134.1�
2017
US$m
5,104.3�
95.7�
(4,732.9)
(4,416.1)
(11.8)
986.0�
28.6�
(133.4)
(104.8)
881.2�
(107.7)
773.5�
(26.4)
747.1�
17.8�
(4.7)
13.1�
(100.6)
(87.5)
(12.5)
771.4�
30.1�
(128.8)
(98.7)
672.7�
(227.8)
444.9�
(262.0)
182.9�
(11.6)
1.9�
(9.7)
35.3�
25.6�
659.6�
208.5�
47.0�
46.8�
48.6�
48.5�
11.5�
11.5�
28.0�
27.9�
The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
52
Consolidated Financial Report Consolidated Balance Sheet
as at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Assets classified as held for sale
Total current assets�
Non-current assets
Other receivables
Investments
Property, plant and equipment
Goodwill and intangible assets
Deferred tax assets
Other assets
Total non-current assets�
Total assets�
Liabilities
Current liabilities
Trade and other payables
Borrowings
Tax payable
Provisions
Liabilities classified as held for sale
Total current liabilities�
Non-current liabilities
Borrowings
Provisions
Retirement benefit obligations
Deferred tax liabilities
Other liabilities
Total non-current liabilities�
Total liabilities�
Net assets�
Equity
Contributed equity
Reserves
Retained earnings
Total equity�
Note
2018
US$m
2017
US$m
24
11
12
13
10
11
9
14
15
6C
13
16
18
17
10
18
17
19
6C
16
20
22
22
180.2�
1,257.9�
60.3�
70.9�
-�
1,569.3�
50.4�
-�
5,139.7�
1,022.8�
38.2�
18.1�
6,269.2�
7,838.5�
1,465.6�
91.2�
61.8�
65.9�
-�
159.7�
1,169.0�
56.8�
70.6�
136.0�
1,592.1�
189.5�
20.8�
4,861.1�
1,028.1�
42.6�
13.5�
6,155.6�
7,747.7�
1,243.5�
673.4�
72.5�
79.0�
56.0�
1,684.5�
2,124.4�
2,397.1�
2,059.0�
12.6�
29.7�
550.9�
1.7�
2,992.0�
4,676.5�
3,162.0�
6,218.5�
(7,255.8)
4,199.3�
3,162.0�
25.1�
51.6�
639.7�
1.2�
2,776.6�
4,901.0�
2,846.7�
6,201.1�
(7,152.8)
3,798.4�
2,846.7�
The consolidated balance sheet should be read in conjunction with the accompanying notes.
53
Consolidated Financial Report
Consolidated Cash Flow Statement
for the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Interest received
Interest paid
Income taxes paid on operating activities
Note
2018
US$m
6,582.4�
(4,847.2)
1,735.2�
14.9�
(115.2)
(211.9)
2017
US$m
6,224.5�
(4,694.0)
1,530.5�
12.5�
(111.4)
(220.4)
Net cash inflow from operating activities
24B�
1,423.0�
1,211.2�
Cash flows from investing activities
Payments for property, plant and equipment
(1,138.3)
(1,077.7)
Proceeds from sale of property, plant and equipment
Payments for intangible assets
Proceeds from disposal of businesses, net of cash disposed
10
Proceeds from joint venture loan receivable
Acquisition of subsidiaries, net of cash acquired
139.4�
(19.6)
102.2�
150.0�
(3.9)
111.2�
(20.5)
160.1�
-�
-�
Net cash outflow from investing activities�
(770.2)
(826.9)
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Net inflow from derivative financial instruments
Proceeds from issues of ordinary shares
Dividends paid
8
Net cash outflow from financing activities�
Net increase in cash and cash equivalents
Cash and deposits, net of overdrafts, at beginning of the year
Effect of exchange rate changes
Cash and deposits, net of overdrafts, at end of the year�
24A�
2,786.1�
(3,027.0)
2,312.5�
(2,365.4)
26.6�
-�
(352.0)
(566.3)
86.5�
112.7�
(27.9)
171.3�
23.7�
1.6�
(348.0)
(375.6)
8.7�
115.2�
(11.2)
112.7�
The consolidated cash flow statement should be read in conjunction with the accompanying notes.
Cash flows for CHEP Recycled have been included up to the date of divestment in 2018. The comparative cash flows remain
unchanged.
54
Consolidated Financial Report
Consolidated Statement of Changes in Equity
for the year ended 30 June 2018
Year ended 30 June 2017
Opening balance as at 1 July 2016
Profit for the year
Other comprehensive income/(expense)
Total comprehensive income�
Share-based payments:
- expense recognised
- shares issued
- equity component of related tax
Transactions with owners in their capacity as owners:
- dividends declared
- issues of ordinary shares, net of transaction costs
Contributed
Note
equity
US$m
Reserves
US$m
Retained
earnings
US$m
Total
US$m
6,173.3�
(7,191.5)
3,973.3�
2,955.1�
-�
-�
-
-�
-�
-�
-�
27.8�
-�
35.3�
35.3�
29.7�
(26.2)
(0.1)
-�
-�
182.9�
(9.7)
173.2�
-�
-�
-�
182.9�
25.6�
208.5�
29.7�
(26.2)
(0.1)
(348.1)
(348.1)
-�
27.8�
21
8
20
Closing balance as at 30 June 2017�
6,201.1�
(7,152.8)
3,798.4�
2,846.7�
Year ended 30 June 2018
Opening balance as at 1 July 2017
Profit for the year
Other comprehensive income/(expense)
Total comprehensive income�
Share-based payments:
- expense recognised
- shares issued
- equity component of related tax
- transfer to retained earnings on divestment of
CHEP Recycled
Transactions with owners in their capacity as owners:
- dividends declared
- issues of ordinary shares, net of transaction costs
6,201.1�
(7,152.8)
3,798.4�
2,846.7�
-�
-�
-
-�
-�
-�
-�
-�
(100.6)
(100.6)
15.9�
(17.4)
(0.5)
747.1�
13.1�
760.2�
-�
-�
-�
747.1�
(87.5)
659.6�
15.9�
(17.4)
(0.5)
(0.4)
0.4�
-�
-�
17.4�
-�
-�
(359.7)
(359.7)
-�
17.4�
21
8
20
Closing balance as at 30 June 2018�
6,218.5�
(7,255.8)
4,199.3�
3,162.0�
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
55
Consolidated Financial Report Notes to and Forming Part of the Financial Statements
for the year ended 30 June 2018
Note 1. About this Report
A) 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 2018. These financial statements have been authorised for issue
in accordance with a resolution of the Directors on 24 August 2018.
References to 2018 and 2017 are to the financial years ended 30 June 2018 and 30 June 2017, respectively.
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. It presents information on a historical cost basis, except for derivative financial
instruments and financial assets at fair value through profit or loss.
The financial statements and all comparatives have been prepared using the accounting policies disclosed throughout the
financial statements, which are consistent with the prior year.
As Brambles is a company of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument
2016/191, 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.
On 9 January 2018, Brambles entered into an agreement to sell CHEP Recycled with the completion of the sale occurring on 14
February 2018. Comparative information has been reclassified, where appropriate, to enhance comparability.
B) Principles of Consolidation
The consolidated financial statements of Brambles include the assets, liabilities and results of Brambles Limited and all its
subsidiaries. The consolidation process eliminates all intercompany accounts and transactions. The financial statements of
subsidiaries are prepared using consistent accounting policies and for the same reporting period.
The results of subsidiaries acquired or disposed during the year are included in profit or loss from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
The trading results for business operations disposed during the year or classified as held for sale are disclosed separately as
discontinued operations in the statement of comprehensive income. The amount disclosed includes any related impairment
losses recognised and any gains or losses arising on disposal.
C) Presentation Currency
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 and international investors and analysts.
D) 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 profit or loss,
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.
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. Exchange differences arising on the translation of
Brambles’ overseas and Australian entities are recognised as a separate component of equity.
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.
56
(cid:31)
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 1. About this Report – continued
D) Foreign Currency – continued
The principal exchange rates affecting Brambles were:
A$:US$
€:US$
£:US$
Average
2018
0.7726
1.1950
1.3465
2017
0.7540
1.0950
1.2732
Year end
30 June 2018
0.7348
1.1564
1.3076
30 June 2017
0.7686
1.1439
1.3008
Investment in Joint Ventures
E)
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 entities are equity accounted. Under this method, Brambles’ share of the post-acquisition profits or
losses of the joint venture is recognised in profit or loss 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.
Loans to equity-accounted joint ventures under formal loan agreements that are long term in nature are included as
investments.
F) 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 asset 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.
G) 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.
Material estimates and judgements are found in the following notes:
-
-
-
Income taxes (Note 6F)
Irrecoverable Pooling Equipment Provision (IPEP) (Note 14D)
Impairment of goodwill (Note 15D)
H) New Accounting Standards and Interpretations Not Yet Adopted(cid:31)
At 30 June 2018, certain new accounting standards and interpretations have been published that will become mandatory in
future reporting periods.
A project team has been implemented to assess the impact of the new accounting standards relevant to Brambles' operations.
This assessment process also includes identifying changes to internal and external reporting requirements, IT systems, business
processes and associated internal controls with the aim of quantifying the expected impact of the new standards as well as
supporting compliance with new accounting requirements. The project team has provided periodic updates to management, the
Audit Committee and Brambles' auditors. New and amended accounting standards include:
-
AASB 9: Financial Instruments
AASB 9 is applicable to Brambles from 1 July 2018. AASB 9 addresses the classification, measurement and derecognition of
financial assets and liabilities, introduces a new expected credit loss model for the calculation of the impairment of financial
assets and introduces new rules for hedge accounting.
Following a detailed assessment of the requirements of the standard, Brambles does not expect AASB 9 to have a material
impact on the classification, measurement and derecognition of financial assets and liabilities, nor is it expected to have a
material impact on Brambles' hedging relationships.
Under AASB 9, expected credit losses on financial assets are to be recorded either on a 12-month or lifetime basis. Brambles will
apply the simplified approach and record lifetime expected credit losses on all eligible trade and other receivables. An
adjustment to opening retained earnings will be made at 1 July 2017, with comparative 2018 balances restated; however, the
expected impact of the revised methodology is not considered to be material as a result of the historically low level of bad debt.
(cid:31)
57
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 1. About this Report – continued
H) New Accounting Standards and Interpretations Not Yet Adopted – continued (cid:31)
-
AASB 15: Revenue from Contracts with Customers
AASB 15 is applicable to Brambles from 1 July 2018. AASB 15 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.
Under the current accounting policy, revenue earned on issue of pooling equipment is recognised on issue, and revenue earned
from daily hire is recognised over time.
Upon application of AASB 15, the services provided by Brambles will be deemed a single performance obligation relating to the
provision of an end-to-end pooling solution. The issue and daily hire activities are not distinct services.
Where revenue is currently recognised on issue, a deferral will be required to allocate the revenue across the estimated period
that the pooling equipment will be utilised in the market (referred to as cycle time). The estimated impact of deferring these
issue fees is the recognition of a deferred revenue liability of US$525.0 – US$535.0 million at 30 June 2018. This is estimated to
reduce annual sales revenue and Underlying Profit by US$25.0 – US$35.0 million for the year ended 30 June 2018, had this policy
been applied.
Brambles expects to adopt the full retrospective approach to implementation whereby the comparative period is restated and
the cumulative effect on initial application, as a result of the impact disclosed above, is adjusted through opening retained
earnings at 1 July 2017.
The implementation project is ongoing and therefore all impacts are currently estimates which are subject to finalisation upon
implementation. The project team has determined the IT system requirements and is in the process of finalising system testing,
internal controls and implementation procedures.
The adoption of AASB 15 will result in increased disclosure requirements, which are in the process of being assessed.
-
AASB 16: Leases
AASB 16 is applicable to Brambles from 1 July 2019. AASB 16 requires a lessee to recognise a lease liability representing its
obligation to make future lease payments and a right-of-use asset representing its right to use the underlying asset for the lease
term.
The lease liability is initially measured at the present value of future lease payments for the lease term. This includes variable
lease payments that depend on an index or rate, but excludes other variable lease payments. The right-of-use asset includes the
lease liability, initial direct costs, restoration costs and any lease payments made before the commencement date of the lease.
Lessees are required to recognise right-of-use assets and lease liabilities for all leases with a term of more than 12 months,
unless the underlying asset is of low value. Lessees will be required to separately recognise interest expense on the lease liability
and depreciation on the right-of-use asset rather than recognising an operating lease expense.
Upon application of AASB 16, key balance sheet metrics such as gearing and finance ratios, and profit or loss metrics such as
earnings before interest, taxes, depreciation and amortisation (EBITDA) will be impacted. The cash flow statement will also be
impacted as payments for the principal portion of the lease liability will be presented within financing activities.
The standard permits either a full retrospective or a modified retrospective approach on transition.
The project team has compiled all lease contracts impacted by AASB 16 and is in the process of computing the estimated lease
liability and right-of-use assets to be recognised on transition (including modelling the impact of the two transition methods), as
well as reviewing system requirements. This process will be finalised during 2019, followed by consideration of broader business
impacts, ready for implementation in 2020.
Whilst considerable progress has been made to assess the impact of AASB 16, Brambles cannot reasonably estimate and
quantify the impact of this standard. Brambles is still in the process of assessing the transition method to be adopted.
The adoption of AASB 16 will result in increased disclosure requirements, which are in the process of being assessed.
Brambles does not expect to adopt AASB 16 before its operative date.
58
(cid:31)
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 2. Segment Information
Brambles' segment information is provided on the same basis as internal management reporting to the CEO.
Brambles has five reportable segments:
- CHEP North America and Latin America (CHEP Americas);
- CHEP Europe, Middle East, Africa and India (CHEP EMEA);
-
CHEP Australia, New Zealand and Asia, excluding India (CHEP Asia-Pacific) - each primarily comprising pallet and container
pooling businesses in that region operating under the CHEP brand;
-
-
IFCO – reusable plastic crates (RPCs) pooling businesses operating under the IFCO brand; and
Corporate – corporate centre including BXB Digital and Hoover Ferguson Group (HFG), which is included in the results until
divestment in April 2018.
Segment performance is measured on sales revenue, Underlying Profit, Cash Flow from Operations and Return on Capital
Invested (ROCI). Underlying Profit is the main measure of segment profit. A reconciliation between Underlying Profit and
operating profit is set out on page 61.
Segment sales revenue is measured on the same basis as in the statement of comprehensive income. 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 the period in which the service is provided.
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.
59
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 2. Segment Information – continued
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
IFCO
Corporate2
Continuing operations
By geographic origin
Americas
Europe
Australia
Other
Total
Cash Flow from
Operations1
2018
US$m
219.1�
310.7�
110.8�
158.8�
93.0�
892.4�
2017
US$m
218.9�
262.3�
111.6�
55.0�
(56.3)
591.5�
Sales
revenue
2018
US$m
2017
US$m
2,195.3�
1,825.1�
475.1�
1,101.1�
-�
2,073.5�
1,575.2�
484.8�
970.8�
-�
5,596.6�
5,104.3�
2,477.5�
2,364.8�
373.4�
380.9�
2,343.7�
2,030.6�
383.0�
347.0�
5,596.6�
5,104.3�
Cash Flow from Operations is cash flow generated after net capital expenditure but excluding Significant Items that are
outside the ordinary course of business.
Cash Flow from Operations for the Corporate segment in 2018 includes receipt of the US$150.0 million HFG loan (refer
Note 9).
1
2
60
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 2. Segment Information – continued
Operating
profit3
Significant Items
before tax4
Underlying
Profit4
2018
US$m
310.3�
452.0�
111.4�
173.2�
(60.9)
986.0�
2017
US$m
377.3�
375.1�
110.9�
116.7�
(208.6)
771.4�
2018
US$m
(40.3)
(2.8)
(0.3)
36.7�
(4.0)
(10.7)
2017
US$m
(17.8)
(12.0)
(1.2)
(0.9)
(154.2)
(186.1)
2018
US$m
350.6�
454.8�
111.7�
136.5�
(56.9)
996.7�
2017
US$m
395.1�
387.1�
112.1�
117.6�
(54.4)
957.5�
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
IFCO
Corporate5
Continuing operations�
3
4
5
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 4). It is presented to assist users of the financial statements to better understand
Brambles' business results.
Significant Items for the Corporate segment in 2017 included US$120.0 million relating to the impairment of the HFG
investment (refer Note 4).
Underlying Profit for the Corporate segment includes the following:
Corporate costs
BXB Digital
HFG joint venture results
2018
US$m
(33.5)
(11.6)
(11.8)
(56.9)
2017
US$m
(31.6)
(10.3)
(12.5)
(54.4)
61
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 2. Segment Information – continued
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
IFCO
Corporate8
2018
US$m
16.5%
24.6%
25.5%
8.2%
Return on
Capital Invested6
Average Capital
Invested7
2018
US$m
2017
US$m
2,118.7�
1,850.6�
438.2�
1,958.7�
1,568.4�
427.8�
2017
US$m
20.2%
24.7%
26.2%
7.4%
1,667.0�
1,582.3�
98.2�
109.2�
Continuing operations�
16.1%
17.0%
6,172.7�
5,646.4�
6
7
8
Return on Capital Invested (ROCI) is Underlying Profit divided by Average Capital Invested. ROCI is not disclosed for the
Corporate segment as this is not deemed a relevant measure for this segment. ROCI for continuing operations includes the
Corporate segment.
Average Capital Invested (ACI) is a 12-month average of capital invested. Capital invested is calculated as net assets before
tax balances, cash and borrowings but after adjustment for pension plan actuarial gains and losses and net equity-settled
share-based payments.
Given HFG was formed on 21 October 2016 and divested on 12 April 2018, the Corporate segment in 2018 and 2017 both
include nine months impact of HFG balances, including the US$150.0 million loan receivable and the investment. ACI at 30
June 2018 also includes US$41.8 million HFG-related deferred consideration receivable from First Reserve (2017: US$39.2
million), offset by pension plan actuarial gains and losses and net equity-settled share-based payments of US$52.1 million
(2017: US$56.2 million).
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
IFCO
Corporate
Capital
expenditure9
Depreciation
and amortisation
2018
US$m
512.7�
428.6�
70.9�
180.0�
0.3�
2017
US$m
434.6�
321.6�
64.7�
200.5�
2.1�
2018
US$m
244.8�
166.6�
52.2�
115.2�
0.7�
2017
US$m
233.1�
145.1�
52.3�
95.6�
0.6�
Continuing operations
1,192.5�
1,023.5�
579.5�
526.7�
9
Capital expenditure on property, plant and equipment is on an accruals basis.
62
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 2. Segment Information – continued
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
IFCO
Corporate10
Continuing operations
Discontinued operations
Segment assets
Segment liabilities
2018
US$m
2017
US$m
2,506.4�
2,116.5�
518.5�
2,389.1�
1,915.6�
525.9�
2,376.6�
2,316.7�
83.3�
245.5�
2018
US$m
415.7�
308.5�
86.2�
718.5�
46.6�
2017
US$m
330.1�
254.0�
85.5�
677.3�
49.6�
7,601.3�
7,392.8�
1,575.5�
1,396.5�
-�
140.8�
-
51.5�
1,448.0�
2,740.8�
72.5�
639.7�
Total segment assets and liabilities
7,601.3�
7,533.6�
1,575.5�
Cash and borrowings
Current tax balances
Deferred tax balances
180.2�
160.1�
2,488.3�
18.8�
38.2�
11.4�
42.6�
61.8�
550.9�
Total assets and liabilities
7,838.5�
7,747.7�
4,676.5�
4,901.0�
Non-current assets by geographic origin11
Americas
Europe
Australia
Other
Total
2,889.1�
2,571.7�
304.2�
457.9�
2,778.8�
2,557.8�
308.9�
459.3�
6,222.9�
6,104.8�
10
11
Segment assets for Corporate as at 30 June 2018 include US$41.8 million deferred consideration receivable from First
Reserve, relating to the former HFG investment. Segment assets for 2017 included the US$150.0 million loan to HFG (repaid
in April 2018), US$39.2 million deferred consideration receivable from First Reserve and US$20.8 million in relation to the
investment in HFG (refer Note 9).
Non-current assets exclude financial instruments of US$8.1 million (June 2017: US$8.2 million) and deferred tax assets of
US$38.2 million (June 2017: US$42.6 million).
63
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 3. Operating Expenses – Continuing Operations
Employment costs
Service suppliers:
- transport
- repairs and maintenance
- subcontractors and other service suppliers
Raw materials and consumables1
Occupancy
Depreciation of property, plant and equipment
Impairment of investments (refer Note 4)
Irrecoverable pooling equipment provision expense
Amortisation of intangible asset
Net foreign exchange (gains)/losses
Other
1 Used primarily for the repair of pooling equipment.
2018
US$m
731.1�
2017
US$m
717.7�
1,278.4�
1,113.0�
907.8�
648.2�
234.0�
150.4�
551.0�
-�
109.4�
28.5�
(4.8)
98.9�
821.0�
571.6�
222.9�
150.0�
500.0�
120.0�
89.2�
26.7�
3.6�
80.4�
4,732.9�
4,416.1�
64
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 4. Significant Items – Continuing Operations
Significant Items are items of income or expense which are, either individually or in aggregate, material to Brambles or to the
relevant business segment and:
- outside the ordinary course of business (e.g. gains or losses on the sale or termination of operations, the cost of significant
reorganisations or restructuring); or
- part of the ordinary activities of the business but unusual due to their size and nature.
Significant Items are disclosed to assist users of the financial statements to better understand Brambles’ business results.
2018
US$m
2017
US$m
Before tax
Tax
After tax
Before tax
Tax
After tax
Items outside the ordinary course of business:
- USA tax reform1
- impairment of HFG2
-�
-�
- restructuring & integration costs3
(12.1)
-�
2.7�
- change to accounting estimates and
methodology4
1.4�
(2.3)
- acquisition-related costs
-�
-�
127.9�
127.9�
-�
-�
(9.4)
(0.9)
-�
-�
-�
(120.0)
(65.3)
19.5�
-�
(0.8)
-�
0.1�
-�
(120.0)
(45.8)
-�
(0.7)
Significant Items from continuing
operations
(10.7)
128.3�
117.6�
(186.1)
19.6�
(166.5)
1
2
3
4
The USA Government passed the Tax Cuts and Jobs Act in January 2018, which contains significant tax reform measures
including a decrease in the USA federal corporate tax rate from 35% to 21%. Consequently, Brambles has recognised a one-
time non-cash net benefit of US$127.9 million to income tax expense during 2018, representing the estimated reduction in
Brambles USA's net deferred tax liability.
A non-cash impairment of US$120.0 million was recognised in 2017 in relation to the HFG investment.
Restructuring and integration costs in 2018 primarily include costs relating to the completion of the One Better Program.
Further to a review of accounting estimations and methodologies across the Group, a number of changes as part of
continuous improvements are reflected in the 2018 accounts. The impact of these revisions on the current financial year is a
charge of US$5.0 million, reflected in underlying earnings, and a US$1.4 million credit relating to prior years is reflected in
Significant Items within the relevant segments (refer Note 2). The CHEP Americas charge of US$35.3 million mainly relates
to a change in the methodology used to estimate cost to serve in Latin America reflecting changes to customer and retailer
behaviour as well as the migration of pallet format in Canada to the US standard pallet in response to customer demand.
The IFCO segment credit of US$36.7 million reflects a change in accounting treatment to align the IFCO recognition of
logistics costs with the methodology used across the Group. The prior period adjustments are not material to Group
earnings or segment results in any of the prior periods to which they relate.
65
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 5. Net Finance Costs – Continuing Operations
Finance revenue
Bank accounts and short-term deposits
Derivative financial instruments
Other1
Finance costs
Interest expense on bank loans and borrowings
Derivative financial instruments
Other
Net finance costs
2018
US$m
3.3�
10.8�
14.5�
28.6�
2017
US$m
2.2�
15.6�
12.3�
30.1�
(117.2)
(116.6)
(15.9)
(0.3)
(133.4)
(104.8)
(9.9)
(2.3)
(128.8)
(98.7)
1 Other finance revenue comprises interest on the US$150.0 million loan receivable from HFG and accrued interest on
deferred consideration receivable from First Reserve.
Finance revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the
financial asset.
Finance costs are recognised as expenses in the year in which they are incurred.
66
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 6. Income Tax
A) Components of Tax Expense
Amounts recognised in the statement of comprehensive income
Current income tax – continuing operations:
- income tax charge
- prior year adjustments
Deferred tax – continuing operations:
- origination and reversal of temporary differences
- previously unrecognised tax losses
- tax rate change1
- prior year adjustments
Tax expense – continuing operations
Tax expense – discontinued operations (Note 10)
Tax expense recognised in profit or loss
Amounts recognised in other comprehensive income
- on actuarial gains/losses on defined benefit pension plans
Tax expense/(benefit) recognised directly in other comprehensive income
2018
US$m
2017
US$m
202.9�
(8.3)
194.6�
47.7�
(8.0)
(139.4)
12.8�
(86.9)
107.7�
2.5�
110.2�
4.7�
4.7�
209.7�
1.6�
211.3�
35.5�
(10.1)
-�
(8.9)
16.5�
227.8�
1.5�
229.3�
(1.9)
(1.9)
1 Primarily includes US$127.9 million relating to the US tax reform (refer Note 4).
The income tax expense or benefit for the year is the tax payable or receivable on the current year’s taxable income based on
the national income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements,
and to unused tax losses.
Current and deferred tax attributable to other comprehensive income are recognised in equity.
67
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 6. Income Tax – continued
B) Reconciliation Between Tax Expense and Accounting Profit Before Tax
Profit before tax – continuing operations
Tax at standard Australian rate of 30% (2017: 30%)
Effect of tax rates in other jurisdictions
Equity-accounted results of joint ventures
Prior year adjustments
Prior year tax losses written-off
Current year tax losses not recognised
Foreign withholding tax unrecoverable
Change in tax rates
Non-deductible expenses
Non-deductible impairment charge
Other taxable items
Prior year tax losses recouped/recognised
Other
Tax expense – continuing operations
Tax expense – discontinued operations (Note 10)
Total income tax expense
2018
US$m
881.2�
264.4�
(41.3)
2.2�
1.5�
3.0�
5.7�
10.1�
(139.4)
8.2�
-�
1.7�
(8.0)
(0.4)
107.7�
2.5�
110.2�
2017
US$m
672.7�
201.8�
(16.7)
3.7�
(7.3)
0.2�
5.7�
5.4�
-�
7.9�
36.0�
1.6�
(10.1)
(0.4)
227.8�
1.5�
229.3�
2018
US$m
2017
US$m
Assets
Liabilities
Assets
Liabilities
C) Components of Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities shown in the balance sheet are represented by cumulative temporary differences
attributable to:
Items recognised through the statement of comprehensive income
Employee benefits
Provisions and accruals
Losses available against future taxable income
Accelerated depreciation for tax purposes
Other
Items recognised in other comprehensive income
Actuarial losses/(gains) on defined benefit pension plans
Share-based payments
14.2�
39.6�
161.3�
-�
100.6�
315.7�
7.3�
7.3�
14.6�
-�
-�
-�
(729.7)
(112.3)
(842.0)
(1.0)
-�
(1.0)
Set-off against deferred tax (liabilities)/assets
(292.1)
292.1�
Net deferred tax assets/(liabilities)
38.2�
(550.9)
68
36.8�
71.1�
212.8�
-�
48.8�
369.5�
7.7�
10.9�
18.6�
(345.5)
42.6�
-�
-�
-�
(892.4)
(91.9)
(984.3)
(0.9)
-�
(0.9)
345.5�
(639.7)
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 6. Income Tax – continued
D) Movements in Deferred Tax Assets and Liabilities
At 1 July
Charged to profit or loss
(Charged)/credited directly to equity
Acquisition of subsidiary
Divestment of subsidiaries
Offset against deferred tax (liabilities)/assets
Foreign exchange differences
At 30 June
2018
US$m
2017
US$m
Assets
Liabilities
Assets
Liabilities
42.6�
7.9�
(5.7)
-�
-�
(4.5)
(2.1)
38.2�
(639.7)
36.0�
79.0�
(0.1)
(0.4)
-�
4.5�
5.8�
(550.9)
8.3�
0.2�
-�
(0.5)
(1.9)
0.5�
42.6�
(627.0)
(24.8)
(0.1)
-�
16.5�
1.9�
(6.2)
(639.7)
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 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.
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. 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 assets to be utilised.
At reporting date, Brambles has unused tax losses of US$904.3�million (2017: US$889.2�million) available for offset against
future profits. A deferred tax asset has been recognised in respect of US$672.2 million (2017: US$628.3�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$232.1 million
(2017: US$260.9 million) due to the unpredictability of future profit streams in the relevant jurisdictions. Tax losses of
US$518.9 million (2017: US$489.2 million), which have been recognised in the balance sheet, have an expiry date between
2019 and 2038 (2017: between 2018 and 2037), however it is expected that these losses will be recouped prior to expiry. The
remaining tax losses of US$153.3 million (2017: US$139.1 million), which have been recognised in the balance sheet, can be
carried forward indefinitely.
69
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 6. Income Tax – continued
D) Movements in Deferred Tax Assets and Liabilities – continued
At reporting date, undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised in the
consolidated financial statements are US$2,090.9 million (2017: US$1,837.7�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.
The majority of the deferred tax assets and liabilities are expected to be recovered/realised beyond 12 months after the
balance date.
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.
F) Tax Estimates and Judgements
Brambles is a global Group 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.
In addition, Brambles regularly assesses the recognition and recoverability of deferred tax assets. This requires judgements
about the application of income tax legislation in jurisdictions in which Brambles operates. Changes in circumstances may
alter expectations and affect the carrying amount of deferred tax assets. 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.
G) Tax Policy
Brambles Limited has a Tax Policy approved by the Board of Directors, which sets out the Company’s approach to tax risk
management and governance, tax planning, and dealing with tax authorities. The Tax Policy is included in Brambles Limited’s
Code of Conduct. In addition, Brambles Limited’s Sustainability Review includes a Tax Report which comprises, amongst other
things, details such as the corporate income tax paid by, and effective tax rates of, Brambles. The 2018 Tax Report is
scheduled for publication in September 2018 and will be posted on Brambles’ website.
70
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 7. 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
2018
US cents
2017
US cents
47.0�
46.8�
48.6�
48.5�
41.2�
(1.6)
(1.7)
11.5�
11.5�
28.0�
27.9�
38.5�
(16.5)
(16.4)
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.
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.
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 EPS to the extent to which they are dilutive.
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.
71
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 7. Earnings Per Share – continued
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 from discontinued operations
Profit used in calculating basic and diluted EPS
Underlying Profit after finance costs and tax
Underlying Profit (Note 2)
Net finance costs (Note 5)
Underlying Profit after finance costs 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 4)
Profit from continuing operations
2018
Million
1,591.2�
5.1�
1,596.3�
2018
US$m
773.5�
(26.4)
747.1�
996.7�
(104.8)
891.9�
(236.0)
655.9�
655.9�
117.6�
773.5�
2017
Million
1,588.3�
7.0�
1,595.3�
2017
US$m
444.9�
(262.0)
182.9�
957.5�
(98.7)
858.8�
(247.4)
611.4�
611.4�
(166.5)
444.9�
72
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 8. Dividends
A) Dividends Paid During the Period
Dividend per share (in Australian cents)
Cost (in US$ million)
Payment date
Interim
2018
14.5�
174.0�
Final
2017
14.5�
178.0�
12 April 2018
12 October 2017
Dividends paid during the year of US$352.0 million (2017: US$348.0 million) per the cash flow statement differ from the
amount recognised in the statement of changes in equity of US$359.7 million (2017: US$348.1 million) due to the impact of
foreign exchange movements between the dividend record and payment dates.
The impact of the Dividend Reinvestment Plan (DRP) for the dividend payments made in 2018, relating to the 2018 interim
and 2017 final dividends, were neutralised by an on-market share buy-back.
B) Dividend Declared after 30 June 2018
Dividend per share (in Australian cents)
Cost (in US$ million)
Payment date
Dividend record date
Final
2018
14.5�
169.9�
11 October 2018
12 September 2018
As this dividend had not been declared at 30 June 2018, it is not reflected in these financial statements. A provision for
dividends is only recognised where the dividends have been declared prior to the reporting date.
C) Franking Credits
Franking credits available for subsequent financial years based on an Australian tax
rate of 30%
2018
US$m
62.7�
2017
US$m
56.9�
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 receivable at the reporting date; and
- franking credits that may be prevented from being distributed in subsequent financial years.
The final 2018 dividend will be franked at 30%.
73
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 9. Investments
On 12 April 2018, Brambles completed an agreement to divest its 50% interest in HFG to its co-venturer, First Reserve.
On completion of this transaction, HFG repaid to Brambles the principal and accrued interest on HFG's US$150.0 million
subordinated shareholder loan.
The deferred consideration of US$41.8 million remains in place and will continue to accrue interest at 6.25% per annum and be
guaranteed by First Reserve. The maturity date of the deferred consideration will be no later than 31 July 2026.
Brambles' interest in HFG was transferred to First Reserve for nominal consideration. The divestment of Brambles' interest in
HFG resulted in a non-cash impairment of US$7.3 million recognised within discontinued operations, which represented the
carrying value of the investment at divestment date.
Note 10. Discontinued Operations
A) Divested Entities
CHEP Recycled
On 9 January 2018, Brambles entered into an agreement to sell CHEP Recycled, with the completion of the sale occurring on
14 February 2018. The carrying amount of assets and liabilities relating to CHEP Recycled at divestment date were as follows:
Assets
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Goodwill and intangibles assets
Other assets
Total assets
Liabilities
Trade and other payables
Other liabilities (including overdrafts)
Total liabilities�
Net assets�
At date of
divestment
US$m
1.2�
40.9�
35.0�
43.3�
19.5�
June
2017
US$m
0.4�
45.3�
23.1�
45.1�
22.1�
139.9�
136.0�
29.6�
6.7�
36.3�
103.6�
42.0�
14.0�
56.0�
80.0�
The results up until the date of divestment and in the comparative reporting period have been included within discontinued
operations in the statement of comprehensive income and all related note disclosures. The assets and liabilities of CHEP
Recycled were classified as held for sale in 2017 within the balance sheet and all related note disclosures.
Segment assets and liabilities of discontinued operations in 2017, as disclosed in Note 2, include CHEP Recycled.
74
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 10. Discontinued Operations – continued
B) Results of Discontinued Operations
Financial information for discontinued operations is summarised below:
Operating results (excluding profit or loss on divestments) relate to:
- CHEP Recycled1
- other discontinued operations
Loss on divestment of CHEP Recycled1
Loss on divestment of HFG2
Impairment of CHEP Recycled
Profit on divestment of Aerospace3
Loss on divestment of Oil and Gas3
Total operating loss for the year
Finance costs
Loss before tax
Tax expense
Loss for the year from discontinued operations�
2018
US$m
(6.7)
(1.5)
(8.2)
(8.3)
(7.3)
-�
-�
-�
(23.8)
(0.1)
(23.9)
(2.5)
(26.4)
2017
US$m
(8.9)
(2.0)
(10.9)
-�
-�
(243.8)
19.5�
(24.9)
(260.1)
(0.4)
(260.5)
(1.5)
(262.0)
1
2
3
Operating results include sales revenue of US$246.6 million (2017: US$424.2 million) and US$5.4 million of depreciation and
amortisation expense (2017: US$9.6 million).
A US$8.3 million loss was recognised on divestment of CHEP Recycled, which includes US$6.9 million of separation and
transaction costs. Net proceeds of US$102.2 million were received on divestment.
A US$7.3 million loss was recognised on divestment of HFG (refer Note 9).
The Oil and Gas business and Aerospace were divested on 21 October and 30 November 2016 respectively. The results of
these businesses are presented in discontinued operations in the comparative reporting period.
In addition to these divestments, discontinued operations comprise other net adjustments relating to divestments in prior
periods.
Significant Items outside the ordinary course of business relating to discontinued operations in 2018 were US$(16.2)�million,
which primarily includes the loss on divestment of CHEP Recycled and HFG.
Significant Items outside the ordinary course of business relating to discontinued operations in 2017 were US$(250.0)�million,
which included the impairment of CHEP Recycled US$(243.8) million; the profit on divestment of Aerospace US$19.5 million; the
loss on divestment of Oil and Gas US$(24.9)�million; US$(0.5) million related to CHEP Recycled; and US$(0.3) million of other
costs.
In 2017, proceeds from the disposal of businesses of US$160.1 million comprised net proceeds relating to the sale of Aerospace
of US$128.6 million and US$31.5 million received relating to the creation of the HFG joint venture.
75
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 11. Trade and Other Receivables
Current
Trade receivables
Provision for doubtful receivables
Net trade receivables
Other debtors
Accrued and unbilled revenue
Non-current
Other receivables1
2018
US$m
1,067.0�
(15.6)
1,051.4�
106.5�
100.0�
2017
US$m
982.3�
(13.0)
969.3�
109.5�
90.2�
1,257.9�
1,169.0�
50.4�
50.4�
189.5�
189.5�
1
Other receivables in 2018 primarily comprise deferred consideration due from the HFG joint venture. Other receivables in
2017 also included the loan receivable from HFG, which was repaid in April 2018.�
Trade receivables are recognised when services are provided and settlement is expected within normal credit terms. 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. 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. A
provision of US$6.4�million (2017:�US$5.2�million) has been recognised as an expense in the current year for specific trade and
other receivables for which such evidence exists. The amount of the provision is measured as the difference between the
carrying amount of the trade receivables and the estimated future cash flows expected to be received from the relevant
debtors. When a trade receivable for which a provision had been recognised becomes uncollectible in a subsequent period, it is
written off against the provision account.
Bad debts are written-off when identified. Subsequent recoveries of amounts previously written off are credited against other
expenses in profit or loss.
Other debtors primarily comprise GST/VAT recoverable and loss compensation receivables.
76
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 11. Trade and Other Receivables – continued
Trade receivables
Other debtors
2018
US$m
2017
US$m
2018
US$m
At 30 June, the ageing analysis of trade receivables and other debtors 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
879.6�
123.2�
23.6�
9.7�
15.3�
15.6�
801.2�
127.4�
22.8�
7.3�
10.6�
13.0�
73.2�
10.3�
6.6�
1.0�
15.4�
-�
1,067.0�
982.3�
106.5�
Refer to Note 23 for other financial instruments' disclosures.
Note 12. Inventories
Raw materials and consumables
Finished goods
50.2�
10.1�
60.3�
2017
US$m
81.6�
2.2�
0.8�
1.4�
23.5�
-�
109.5�
46.4�
10.4�
56.8�
Inventories on hand are valued at the lower of cost and net realisable value and, where appropriate, a provision is made for
possible obsolescence. Work in progress, which represents partly-completed work undertaken at pre-arranged rates but not
invoiced at the balance sheet date, is recorded at the lower of cost or net realisable value.
Cost is determined on a first-in, first-out basis and, where relevant, includes an appropriate portion of overhead expenditure.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and
costs to make the sale.
Note 13. Other Assets
Current
Prepayments
Current tax receivable
Derivative financial instruments
Non-current
Prepayments
Derivative financial instruments
Refer to Note 23 for other financial instruments' disclosures.
46.4�
18.8�
5.7�
70.9�
10.0�
8.1�
18.1�
45.1�
11.4�
14.1�
70.6�
5.3�
8.2�
13.5�
77
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 14. Property, Plant and Equipment
A) Net Carrying Amounts and Movements During the Year
2018
US$m
2017
US$m
Land and
Plant and
Land and
Plant and
buildings
equipment
Total
buildings
equipment
Total
38.6�
5.8�
16.8�
-�
(6.2)
-�
(0.1)
(5.7)
-�
(0.3)
48.9�
4,822.5�
4,861.1�
17.3�
23.1�
1,178.2�
1,195.0�
1.9�
(28.8)
-�
(178.2)
(549.0)
(109.4)
(63.7)
1.9�
(35.0)
-�
(178.3)
(554.7)
(109.4)
(64.0)
40.1�
-�
17.7�
-�
(11.5)
(5.8)
(0.1)
(3.8)
-�
2.0�
4,692.2�
4,732.3�
-�
-�
1,022.4�
1,040.1�
-�
(186.1)
(17.3)
(137.4)
(513.0)
(89.2)
50.9�
-�
(197.6)
(23.1)
(137.5)
(516.8)
(89.2)
52.9�
5,090.8�
5,139.7�
38.6�
4,822.5�
4,861.1�
Opening net carrying amount
Opening assets held for sale
Additions1
Acquisition of subsidiaries
Divestment of subsidiaries
Assets transferred to held for sale
Disposals
Depreciation charge2
IPEP expense
Foreign exchange differences
Closing net carrying amount�
At 30 June
Cost
Accumulated depreciation3
(50.9)
(2,569.0)
(2,619.9)
Net carrying amount�
48.9�
5,090.8�
5,139.7�
99.8�
7,659.8�
7,759.6�
86.5�
(47.9)
38.6�
7,366.6�
7,453.1�
(2,544.1)
(2,592.0)
4,822.5�
4,861.1�
1 Includes capital expenditure related to discontinued operations of US$2.5 million (2017: US$16.6 million).
2 Includes depreciation charge related to discontinued operations of US$3.7 million (2017: US$16.8 million).
3 Includes the IPEP provision of US$71.5 million (2017: US$62.1 million).
The net carrying amounts above include plant and equipment held under finance lease of US$31.8 million (2017:�US$35.0�million),
leasehold improvements of US$17.4 million (2017: US$18.7 million), and capital work in progress of US$57.9 million
(2017:�US$37.9�million).
B) Recognition and Measurement
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 profit or loss in the period they are incurred.
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 profit or loss and presented within other
income/operating expenses in the period in which the asset is derecognised.
Leases are classified at their inception as either finance or operating leases based on the economic substance of the agreement
so as to reflect the risks and benefits incidental to ownership. 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 PPE held under lease. A lease
liability of equal value is also recognised (refer Note 18). Refer to Note 25B for operating leases.
78
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 14. Property, Plant and Equipment – continued
C) Depreciation of Property, Plant and Equipment
Depreciation is recognised on a straight-line or reducing balance basis on all PPE (excluding land) over their expected useful lives.
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: up to 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 leases, or the estimated useful
life of the improvements to Brambles, whichever is shorter.
Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term.
D) Irrecoverable Pooling Equipment Provision
Loss is an inherent risk of pooling equipment operations. Brambles’ pooling equipment operations around the world differ in
terms of business models, market dynamics, customer and distribution channel profiles, contractual arrangements and
operational details. Brambles monitors its pooling equipment operations using detailed key performance indicators (KPIs) and
conducts audits continuously to confirm the existence and the condition of its pooling equipment assets and to validate its
customer hire records. During these audits, which take place at Brambles' plants, customer sites and other locations, pooling
equipment is counted on a sample basis and reconciled to the balances shown in Brambles’ customer hire records. The
irrecoverable pooling equipment provision (IPEP) is determined by reference to historical statistical data in each market, including
the outcome of audits and relevant KPIs. IPEP is presented within accumulated depreciation.
E) Recoverable Amount of Non-Current Assets
At each reporting date, Brambles assesses whether there is any indication that an asset, or cash generating unit (CGU) to which
the asset belongs, may be impaired. Where an indicator of impairment exists, Brambles makes a formal estimate of the
recoverable amount. The recoverable amount of goodwill is tested for impairment annually (refer to Note 15D). The recoverable
amount of an asset is the greater of its fair value less costs to sell and its value in use.
Value in use is determined as the estimated future cash flows discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset.
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 profit or loss in the reporting period in which the write-down
occurs.
79
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 15. Goodwill and Intangible Assets
A) Net Carrying Amounts and Movements During the Year
Opening carrying amount
907.5�
41.7�
78.9�
1,028.1�
1,453.6�
36.4�
145.2�
1,635.2�
Goodwill
Software
Other1
Total
Goodwill
Software
Other1
Total
2018
US$m
2017
US$m
Divestment of subsidiaries
(33.7)
(43.3)
(264.9)
(2.1)
(33.1)
(300.1)
Opening assets held for
sale
Additions
Disposals
Acquisition of subsidiaries
Assets transferred to held
for sale
Amortisation charge2
Impairment loss3
Foreign exchange
differences
33.7�
-�
11.4�
45.1�
-�
-�
-�
-�
-�
16.1�
-�
-�
-�
4.2�
-�
-�
-�
20.3�
-�
-�
18.7�
(0.3)
2.3�
12.1�
(0.1)
0.3�
(9.6)
-�
-�
(33.7)
-�
(11.4)
(45.1)
(9.8)
(20.4)
(30.2)
-�
(8.7)
(22.7)
(31.4)
2.2�
(0.1)
-�
0.3�
-�
(243.8)
2.4�
(3.7)
-�
-�
-�
(243.8)
(3.3)
(7.0)
-�
-�
2.0�
-�
-�
-�
6.6�
(0.2)
-�
-�
-�
-�
Closing carrying amount�
911.7�
38.2�
72.9�
1,022.8�
907.5�
41.7�
78.9�
1,028.1�
At 30 June
Gross carrying amount
911.7�
169.6�
230.3�
1,311.6�
907.5�
325.0�
218.5�
1,451.0�
Accumulated amortisation
-�
(131.4)
(157.4)
(288.8)
-�
(283.3)
(139.6)
(422.9)
Net carrying amount�
911.7�
38.2�
72.9�
1,022.8�
907.5�
41.7�
78.9�
1,028.1�
Other intangible assets primarily comprise acquired customer relationships, customer lists and agreements.
Includes amortisation charge related to discontinued operations of US$1.7 million (2017: US$4.7 million).
Based on the fair value less costs to sell model used during impairment testing, a goodwill impairment loss of US$243.8 million
was recognised in 2017 in relation to CHEP Recycled.
1�
2�
3�
80
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 15. Goodwill and Intangible Assets – continued
B) Summary of Carrying Value of Goodwill
Goodwill is disclosed at the lowest CGU level at which it is assessed for impairment.
Pallecon EMEA (part of CHEP EMEA)
Pallecon Asia-Pacific (part of CHEP Asia-Pacific)
IFCO
Other1
Total goodwill �
2018
US$m
101.6�
32.0�
2017
US$m
100.6�
33.7�
685.2�
679.6�
92.9�
93.6�
911.7�
907.5�
1�
Includes goodwill in a number of CGUs for which impairment reviews are performed. The goodwill within these CGUs is not
material for separate disclosure.
C) Recognition and Measurement
Goodwill
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 and joint ventures is
included in intangible assets and investments in joint ventures, respectively. Goodwill is carried at cost less accumulated
impairment losses and is not amortised.
Upon acquisition, any goodwill arising is allocated to each CGU expected to benefit from the acquisition. 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.
Other intangible assets
Intangible assets acquired are capitalised at cost, unless acquired as part of a business combination, in which case they are
capitalised at fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less
provisions for amortisation and impairment.
The costs of acquiring 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 profit or loss 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; and
- 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 CGU 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 profit or loss when the asset is derecognised.
81
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 15. Goodwill and Intangible Assets – continued
D) Goodwill Recoverable Amount Testing – Continuing Operations
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. This review may be undertaken more frequently if events or changes
indicate that goodwill may be impaired.
The recoverable amount of goodwill is determined based on the higher of the value in use and the fair value less costs to sell
calculations undertaken at the CGU level. The value in use is calculated using a discounted cash flow methodology covering a
three-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 three 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 three-year plan. Three-year growth rates ranged between 5.3% and
10.1% for these CGUs (rates: Pallecon EMEA 7.0%, Pallecon Asia-Pacific 5.3% and IFCO 8.2%). Sensitivity testing was performed on
these CGUs and a reasonably possible decline in these rates would not cause the carrying value of any of these CGUs to exceed its
recoverable amount. Growth rates for 2017 impairment reviews ranged between 2.9% and 11.6%.
Terminal value
The terminal value calculated after year three is determined using the stable growth model, having regard to the weighted
average cost of capital (WACC) and terminal growth factor appropriate to each CGU. The average terminal growth rate used in the
financial projections was 2.1% (2017: 2.1%).
Discount rates (pre-tax)
Discount rates used are the pre-tax WACC and include a premium for market risks appropriate to each country in which the CGU
operates. Pre-tax WACCs averaged 8.0% (pre-tax rates: Pallecon EMEA 7.4%, Pallecon Asia-Pacific 11.0% and IFCO 8.0%). Average
pre-tax WACC rates used for 2017 impairment reviews were 8.1% for businesses remaining in 2018.
Sensitivity
Any reasonable change to the above key assumptions would not cause the carrying value of any of the remaining CGUs to
materially exceed its recoverable amount.
82
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 16. Trade and Other Payables
Current
Trade payables
GST/VAT, refundable deposits and other payables
Accruals and deferred income
Derivative financial instruments
Non-current
Other liabilities
2018
US$m
526.9�
579.4�
345.8�
13.5�
2017
US$m
423.3�
511.3�
306.0�
2.9�
1,465.6�
1,243.5�
1.7�
1.7�
1.2�
1.2�
Trade and other creditors represent liabilities for goods and services provided to Brambles prior to the end of the financial year
that remain unpaid at the reporting date. The amounts are unsecured, non-interest bearing and are paid within normal credit
terms of 30–120 days.
Non-current payables are discounted to present value using the effective interest method.
Refer to Note 23 for other financial instruments' disclosures.
Note 17. Provisions
Employee entitlements
Other
2018
US$m
2017
US$m
Current
Non-current
Current
Non-current
55.6�
10.3�
65.9�
3.6�
9.0�
12.6�
55.7�
23.3�
79.0�
3.6�
21.5�
25.1�
Provisions for liabilities are made on the basis that, due to a past event, the business has a constructive or legal obligation to
transfer economic benefits that are of uncertain timing or amount. Provisions are measured at the present value of
management’s best estimate at the balance sheet date of the expenditure required to settle the obligation. The discount rate
used is a pre-tax rate that reflects current market assessments of the time value of money and the risks appropriate to the
liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost in profit or
loss.
Employee entitlements are provided by Brambles in accordance with the legal and social requirements of the country of
employment. Principal entitlements are for annual leave, sick leave, long service leave, bonuses and contract entitlements.
Annual leave and sick leave entitlements are presented within other payables.
83
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 17. Provisions – continued
Liabilities for annual leave, as well as those employee entitlements that are expected to be settled within one year, are measured
at the amounts expected to be paid when they are settled. All other employee entitlement liabilities are measured at the
estimated present value of the future cash outflows to be made in respect of services provided by employees up to the
reporting date.
Employee entitlements are classified as current liabilities unless Brambles has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Note 18. Borrowings
Unsecured
Bank overdrafts
Bank loans
Loan notes1
Finance lease liabilities
2018
US$m
2017
US$m
Current
Non-current
Current
Non-current
8.9�
42.0�
35.2�
5.1�
91.2�
-�
226.7�
2,154.1�
16.3�
2,397.1�
39.1�
42.5�
586.3�
5.5�
673.4�
-�
446.6�
1,595.8�
16.6�
2,059.0�
1
In October 2017, Brambles issued €500.0 million medium-term notes in the European bond market, maturing in 10 years. The
notes were priced at a fixed rate, with a coupon rate of 1.5%. Proceeds of the notes were ultimately used to repay the
maturing €500.0 million 4.625% euro medium-term notes in April 2018.
Borrowings are initially recognised at fair value, net of transaction costs incurred and are subsequently measured at amortised
cost. Any difference between the borrowing proceeds (net of transaction costs) and the redemption amount is recognised in
profit or loss 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.
Finance lease payments are allocated between finance charges and a reduction of the lease liability so as to achieve a constant
periodic rate of interest on the lease liability outstanding each period. The finance charge is recognised as a finance cost in profit
or loss.
Financial risks and risk management strategies associated with borrowings, including financial covenants, are disclosed in
Note�23.
Note 19. 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. Payments to defined contribution retirement benefit plans are charged as an expense as they
fall due.
84
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 19. Retirement Benefit Obligations – continued
A) Defined Contribution Plans – continued
US$18.5 million (2017: US$18.6 million) has been recognised as an expense in the statement of comprehensive income
representing contributions paid and payable to these plans by Brambles at rates specified in the rules of the plans, all of which
relate to continuing operations.
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.
A liability in respect of defined benefit pension plans 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 plans' 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 plan assets and the present value of the defined benefit obligations recognised in Brambles’ balance sheet are based upon
the most recent formal actuarial valuations, which have been updated to 30 June 2018 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 2018. The present value of the defined benefit obligations and past service costs were measured
using the projected unit credit method. Past service cost is recognised immediately to the extent that the benefits are already
vested.
Actuarial gains and losses arising from differences between expected and actual returns, and the effect of changes in actuarial
assumptions are recognised in full through other comprehensive income in the period in which they arise.
A net expense of US$2.3 million has been recognised in profit in respect of defined benefit plans (2017: US$1.9 million), of which
US$1.7 million net expense relates to continuing operations (2017: US$1.3 million). Included within the total expense recognised
during the year is a net interest cost of US$0.9 million (2017: US$0.8�million).
The amounts recognised in the balance sheet are as follows:
Present value of defined benefit obligations
Fair value of plan assets
Net liability recognised in the balance sheet �
2018
US$m
271.6�
(241.9)
29.7�
2017
US$m
299.4�
(247.8)
51.6�
Currency variations and an increase in the discount rate 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$11.8 million (2017: US$9.6 million).
The principal assumption used in the actuarial valuations of the defined benefit obligation was the discount rate of 2.8%
(2017: 2.5%) for the plans operating in the United Kingdom and 8.9% (2017: 9.1%) for the South African plan. A reasonably
possible change in discount rate or other key assumptions may 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 plans’ actuaries when
actuarial valuations are obtained. Additional annual contributions of US$6.5 million (2017: US$6.5 million) are being paid to
remove the identified deficits over a period of 5 years (2017: 6 years).
85
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 20. Contributed Equity
Total ordinary shares, of no par value, issued and fully paid:
At 1 July 2016
Issued during the year
At 30 June 2017�
At 1 July 2017
Issued during the year
At 30 June 2018�
Shares
US$m
1,585,991,703�
3,430,091�
1,589,421,794�
6,173.3�
27.8�
6,201.1�
1,589,421,794�
6,201.1�
2,479,529�
17.4�
1,591,901,323�
6,218.5�
Ordinary shares are classified as contributed equity. No gain or loss is recognised in profit or loss 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.
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.
86
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 21. Share-Based Payments
The Remuneration Report sets out details relating to the Brambles share plans (pages 33 to 34), together with details of
performance share rights and MyShare matching conditional rights issued to the Executive Directors and other Key Management
Personnel (pages 37 to 38). 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
Balance
at 1 July
Granted
during
the year
Exercised
Forfeited /
during
year
lapsed
Balance
during year
at 30 June
Grant date
Expiry date
2018
Performance share rights
Awards granted in prior periods
6,764,191�
(1,738,502)
(1,256,112)
3,769,577�
(27,312)
(7,392)
32,091�
(93,458)
2,067,320�
25 Sep 2017
25 Sep 2023
23 Oct 2017
23 Oct 2023
20 Feb 2018
20 Feb 2024
1 Mar 2018
1 Mar 2024
15 Mar 2018
15 Mar 2024
MyShare matching conditional rights
59,403�
2,168,170�
11,295�
87,284�
10,700�
2016 Plan Year
31 Mar 2018
2017 Plan Year
31 Mar 2019
2018 Plan Year
31 Mar 2020
601,361�
322,983�
-�
-�
(551,944)
(49,417)
663,270�
350,852�
(54,019)
(110,349)
(1,181)
(11,822)
Total rights
7,688,535�
3,350,974�
(2,380,350)
(1,521,158)
7,138,001�
2017 (summarised comparative)
Total rights
8,331,350�
3,780,255�
(3,365,108)
(1,057,962)
7,688,535�
Of the above grants, 443,924 were exercisable at 30 June 2018.
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
2018
2017
A$
A$
years
7.84�
9.36�
4.2�
10.01�
11.39�
4.5�
The cost of equity-settled share rights 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).
87
11,295�
87,284�
10,700�
-�
821,885�
337,849�
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 21. Share-Based Payments – continued
A) Grants over Brambles Limited Shares – continued
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 cash-settled share rights is charged to profit or loss over the relevant vesting periods, with a corresponding increase
in provisions.
B) Fair Value Calculations
The fair values of performance share rights and MyShare matching conditional rights were determined as at grant date, using a
binomial valuation methodology and exclude the impact of non-market vesting conditions. The values calculated do not take
into account the probability of rights being forfeited prior to vesting, as Brambles revises its estimate of the number of shares
and performance rights expected to vest at each reporting date.
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�
2018
Grants
A$9.34
20%
2017
Grants
A$11.67
20%
2 – 3 years
2 – 3 years
1.94 – 2.09%
1.44 – 1.45%
3.00%
2.70%
The expected volatility was determined based on a four-year historic volatility of Brambles’ share prices.
C) Share-Based Payments Expense
Brambles recognised a total expense of US$15.9 million (2017: US$29.7 million) relating to equity-settled share-based payments
and US$0.7 million (2017: US$1.4 million) relating to cash-settled share-based payments. Of these amounts, US$0.4 million
(2017: US$0.9 million) related to discontinued operations.
88
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 22. Reserves and Retained Earnings
A) Movements in Reserves and Retained Earnings
Reserves
Share-
based
Foreign
currency
payments
translation
Unification
US$m
US$m
US$m
Other
US$m
Total
US$m
Retained
earnings
US$m
79.3�
(270.2)
(7,162.4)
161.8�
(7,191.5)
3,973.3�
-�
-�
29.7�
(26.2)
(0.1)
-�
-�
-�
35.3�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
35.3�
29.7�
(26.2)
(0.1)
-�
-�
(9.7)
-�
-�
-�
-�
(348.1)
182.9�
Year ended 30 June 2017
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
Profit for the year
Closing balance as at 30 June 2017�
82.7�
(234.9)
(7,162.4)
161.8�
(7,152.8)
3,798.4�
Year ended 30 June 2018
Opening balance
Actuarial gain on defined benefit plans
Foreign exchange differences
Share-based payments:
- expense recognised during the year
- shares issued
- equity component of related tax
- transfer to retained earnings on
divestment of CHEP Recycled
Dividends declared
Profit for the year
82.7�
(234.9)
(7,162.4)
161.8�
(7,152.8)
3,798.4�
-�
-�
-�
(100.6)
15.9�
(17.4)
(0.5)
(0.4)
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
-�
(100.6)
15.9�
(17.4)
(0.5)
13.1�
-�
-�
-�
-�
(0.4)
0.4�
-�
-�
(359.7)
747.1�
Closing balance as at 30 June 2018�
80.3�
(335.5)
(7,162.4)
161.8�
(7,255.8)
4,199.3�
B) Nature and Purpose of Reserves
Share-based payments reserve
This comprises the cumulative share-based payment expense recognised in the statement of comprehensive income in relation
to equity-settled options and share rights issued but not yet exercised. Refer to Note 21 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 profit or loss on disposal of a foreign
subsidiary.
89
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 22. Reserves and Retained Earnings – continued
B) Nature and Purpose of Reserves – continued
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 the hedging reserve. The hedging reserve represents the cumulative
portion of the gain or loss of cash flow hedges that are determined to be effective hedges. Amounts are recognised in the
statement of comprehensive income when the associated hedged transaction is recognised or the hedge or the forecast hedged
transaction is no longer highly probable.
90
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 23. 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. Financial risk management activities are carried out centrally by
Brambles’ treasury function in accordance with Board policies and guidelines through standard operating procedures and
delegated authorities.
Brambles uses interest rate swaps and forward foreign exchange contracts to manage its market risk and does not trade in
financial instruments for speculative purposes.
A) Financial Assets and Liabilities
Financial assets are recognised when Brambles becomes a party to the contractual provisions of the instrument and are classified
in the following two categories: financial assets at fair value through profit or loss; and loans and receivables.
Derecognition occurs when rights to the asset have expired or when Brambles transfers its rights to receive cash flows from the
asset together with substantially all the risks and rewards of the asset.
Refer to Note 18 for the recognition of interest bearing financial liabilities.
The fair values of all financial assets and liabilities held on the balance sheet as at 30 June 2018 equal the carrying amount, with
the exception of loan notes, which have an estimated fair value of US$2,241.9 million (2017: US$2,278.6 million) compared to a
carrying value of US$2,189.3 million (2017: US$2,182.1 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 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.
B) Derivative and Hedging Activities
For the purposes of hedge accounting, hedges are classified as either fair value hedges, cash flow hedges or net investment
hedges.
For fair value hedges, any gain or loss from remeasuring the hedging instrument at fair value is adjusted against the carrying
amount of the hedged item and recognised in profit or loss.
For cash flow hedges, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is
recognised in other comprehensive income and the ineffective portion is recognised in profit or loss.
Hedges for net investments in foreign operations are accounted for similarly to cash flow hedges.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies
for hedge accounting.
91
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 23. Financial Risk Management – continued
C) 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 in US dollars and euros, is managed by maintaining a
mix of fixed and floating-rate instruments within select target bands over defined periods. In some 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:
2018
US$m
179.4�
0.8�
180.2�
1.3%
-�
41.8�
41.8�
6.3%
8.9�
253.7�
173.5�
436.1�
2.8%
2017
US$m
152.4�
7.3�
159.7�
1.0%
150.0�
39.2�
189.2�
9.2%
39.1�
468.5�
572.0�
1,079.6�
1.8%
2,189.3�
2,182.1�
15.0�
21.4�
(173.5)
2,052.2�
3.4%
20.6�
22.1�
(572.0)
1,652.8�
4.8%
Financial assets (floating rate)
Cash at bank
Short-term deposits
Weighted average effective interest rate�
Financial assets (fixed rate)
Loan receivable from HFG joint venture
Deferred consideration from First Reserve
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
Interest rate swaps (notional value) – fair value hedges
Net exposure to fair value interest rate risk�
Weighted average effective interest rate
92
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 23. Financial Risk Management – continued
C) Market Risk – continued
Interest rate swaps – fair value hedges
Brambles entered into interest rate swap transactions with various banks, swapping €150.0 million of the €500.0 million 2024
Euro medium-term fixed-rate notes (EMTN) to variable rates. In accordance with AASB 139, the carrying value of the loan notes
has been adjusted to increase debt by US$11.5 million (2017: US$14.3 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$11.1�million (2017: US$14.1 million).
The terms of the swaps match the terms of the fixed-rate bond issue for the amounts and durations being hedged.
The gain or loss from remeasuring the interest rate swaps at fair value is recorded in profit or loss together with any changes in
the fair value of the hedged asset or liability that is attributed to the hedged risk. For 2018, all interest rate swaps were effective
hedging instruments.
Sensitivity analysis
Given current economic conditions and Brambles’ approach to risk management, the Group’s sensitivity to changes in interest
rates is not material.
Foreign exchange risk
Exposure to foreign exchange risk generally arises in either the value of transactions translated back to the functional currency of
a subsidiary or the value of assets and liabilities of overseas subsidiaries when translated back to the Group’s reporting currency.
Foreign exchange hedging is used when a transaction exposure exceeds certain thresholds and as soon as a defined exposure
arises. Within Brambles, exposures may arise with external parties or, alternatively, by way of cross-border intercompany
transactions. Forward foreign exchange contracts are primarily used to manage exposures from normal commercial transactions
such as the purchase and sale of equipment and services, intercompany interest and royalties. Given that Brambles both
generates income and incurs expenses in its local currencies of operation, these exposures are not significant.
Brambles generally mitigates translation exposures by raising debt in currencies where there are matching assets.
Currency profile
The following table sets out the currency mix profile of Brambles’ financial instruments at reporting date. Financial assets include
cash, trade receivables and derivative assets. Financial liabilities includes trade payables, borrowings and derivative liabilities:
2018
Financial assets
Financial liabilities
2017
Financial assets
Financial liabilities
US
dollar
US$m
272.6�
1,356.3�
405.4�
1,313.0�
Aust.
dollar
US$m
60.5�
25.3�
59.6�
14.9�
Sterling
US$m
Euro
US$m
Other
US$m
Total
US$m
66.4�
40.0�
606.7�
289.6�
1,295.8�
1,403.9�
203.2�
3,028.7�
62.4�
526.5�
174.4�
1,448.5�
286.6�
207.8�
1,340.5�
3,158.6�
93
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 23. Financial Risk Management – continued
C) Market Risk – continued
Forward foreign exchange contracts – cash flow hedges
During 2018, Brambles entered into forward foreign exchange transactions with various banks in a variety of cross-currencies
for terms ranging up to three months.
For 2018 and 2017, all foreign exchange contracts were effective hedging instruments. The fair value of these contracts at
reporting date was nil (2017: nil).
Other forward foreign exchange contracts
Brambles enters into other forward foreign exchange contracts for the purpose of hedging various cross-border
intercompany loans to overseas subsidiaries. In this case, the forward foreign exchange contracts provide an economic hedge
against exchange fluctuations on foreign currency loan balances. The face value and terms of the foreign exchange contracts
match the intercompany loan balances. Gains and losses on realignment of the intercompany loans and foreign exchange
contracts to spot rates are offset in the profit or loss. 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 a
liability of US$10.8 million (2017:�asset of US$5.3 million).
Hedge of net investment in foreign entity
At 30 June 2018, €350.5 million (US$405.3 million) of the 2024 EMTN 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 2018 and 2017, there was no ineffectiveness to be recorded from such partial hedges of net
investments in foreign entities.
Sensitivity analysis
Based on the financial instruments held at 30 June 2018, if exchange rates were to weaken/strengthen against the US dollar
by 10% with all other variables held constant, the transaction exposure within profit after tax for the year would not have
been material. However, the impact on equity would have been US$28.9 million lower/higher (2017: US$28.5�million
lower/higher) as a result of the incremental movement through the foreign currency translation reserve relating to the
effective portion of a net investment hedge.
D) Liquidity Risk
Brambles’ objective is to maintain adequate liquidity to meet its financial obligations as and when they fall due. Brambles
funds its operations through existing equity, retained cash flow and borrowings. Funding is generally sourced from
relationship banks and debt capital market investors on a medium-to-long-term basis.
Bank credit facilities are generally structured on a committed multi-currency revolving basis and at balance date had
maturities ranging out to June 2023. Borrowings under the bank credit facilities are floating-rate, unsecured obligations with
covenants and undertakings typical for these types of arrangements.
Borrowings are raised from debt capital markets by the issue of unsecured fixed-interest notes, with interest payable semi-
annually or annually. At balance date, loan notes had maturities out to October 2027.
Brambles also has access to further funding through overdrafts, uncommitted and standby lines of credit, principally to
manage day-to-day liquidity.
The average term to maturity of the committed borrowing facilities and the loan notes is equivalent to 4.5�years�
(2017: 3.7 years). These facilities are unsecured and are guaranteed as described in Note 32B.
94
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 23. Financial Risk Management – continued
D) Liquidity Risk – continued
Borrowing facilities maturity profile
2018
Total facilities
Facilities used1
Facilities available
2017
Total facilities
Facilities used1
Facilities available
Year 1
US$m
Year 2
US$m
Year 3
US$m
Year 4
US$m
>4 years
US$m
Total
US$m
414.7�
1,055.6�
703.0�
252.8�
1,865.4�
4,291.5�
(75.9)
338.8�
887.3�
(659.1)
228.2�
(508.7)
(219.1)
(6.4)
(1,666.2)
(2,476.3)
546.9�
483.9�
246.4�
199.2�
1,815.2�
684.2�
1,048.1�
355.8�
1,428.6�
4,404.0�
(137.7)
546.5�
(657.4)
390.7�
(107.1)
(1,153.8)
(2,715.1)
248.7�
274.8�
1,688.9�
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$12.0 million (2017: US$17.3�million) from loan notes
and borrowings as shown in the balance sheet, which are measured on the basis of amortised cost as determined under
the effective interest method and include accrued interest, transaction costs and fair value adjustments on certain hedging
instruments.
95
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 23. Financial Risk Management – continued
D) Liquidity Risk – continued
Maturities of financial liabilities
The maturities of Brambles’ contractual cash flows on non-derivative financial liabilities (for principal and interest) and
contractual cash flows on net and gross settled derivative financial instruments, based on the remaining period to contractual
maturity date, are presented below. Cash flows on interest rate swaps and forward foreign exchange contracts are valued
based on forward interest and exchange rates applicable at reporting date.
Year 1
US$m
Year 2
US$m
Year 3
US$m
Year 4
US$m
>4 years
US$m
Total
contractual
cash
flows
US$m
Carrying
amount
(assets)/
liabilities
US$m
2018
Non-derivative financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease
liabilities
526.9�
8.9�
50.7�
103.3�
-�
-�
10.8�
559.5�
-�
-�
217.7�
37.7�
-�
-�
3.7�
37.7�
-�
-�
5.6�
526.9�
526.9�
8.9�
8.9�
288.5�
268.7�
1,797.2�
2,535.4�
2,189.3�
5.5�
5.4�
4.2�
3.4�
4.4�
22.9�
21.4�
Financial guarantees1
695.3�
36.6�
731.9�
575.7�
259.6�
44.8�
1,807.2�
3,382.6�
3,015.2�
-�
-�
-�
-�
36.6�
-�
575.7�
259.6�
44.8�
1,807.2�
3,419.2�
3,015.2�
Derivative financial (assets)/liabilities
Net settled interest rate swaps
- fair value hedges
(3.0)
(3.0)
(2.2)
(1.8)
(1.6)
(11.6)
(11.1)
Gross settled forward foreign exchange contracts
- (inflow)
- outflow
(1,124.1)
1,134.9�
-�
-�
-�
-�
-�
-�
-�
-�
(1,124.1)
1,134.9�
7.8�
(3.0)
(2.2)
(1.8)
(1.6)
(0.8)
-�
10.8�
(0.3)
96
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 23. Financial Risk Management – continued
D) Liquidity Risk – continued
Year 1
US$m
Year 2
US$m
Year 3
US$m
Year 4
US$m
>4 years
US$m
Total
contractual
cash
flows
US$m
Carrying
amount
(assets)/
liabilities
US$m
2017
Non-derivative financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease
liabilities
423.3�
39.1�
52.8�
670.8�
-�
-�
121.3�
80.6�
-�
-�
157.9�
554.6�
-�
-�
-�
-�
106.2�
76.8�
423.3�
39.1�
515.0�
423.3�
39.1�
489.1�
32.7�
1,211.2�
2,549.9�
2,182.1�
5.9�
4.6�
4.1�
3.4�
5.8�
23.8�
22.1�
1,191.9�
206.5�
716.6�
142.3�
1,293.8�
3,551.1�
3,155.7�
Financial guarantees1
46.7�
-�
-�
-�
-�
46.7�
-�
1,238.6�
206.5�
716.6�
142.3�
1,293.8�
3,597.8�
3,155.7�
Derivative financial (assets)/liabilities
Net settled interest rate swaps
- fair value hedges
(5.9)
(2.8)
(2.2)
(1.8)
(1.9)
(14.6)
(14.1)
Gross settled forward foreign exchange contracts
- (inflow)
- outflow
(999.8)
994.5�
(11.2)
-�
-�
(2.8)
-�
-�
(2.2)
-�
-�
(1.8)
-�
-�
(1.9)
(999.8)
994.5�
(19.9)
(5.3)
-�
(19.4)
1
Refer to Note 26a) 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.
97
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 23. Financial Risk Management – continued
E) 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. Other than the non-current receivables due from First Reserve totalling US$41.8 million, 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.
Brambles transacts derivatives with prominent financial institutions and has credit limits in place to limit exposure to any
potential non-performance by its counterparties.
F) 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 2018, Brambles held
investment-grade credit ratings of BBB+ from Standard and Poor’s and Baa1 from Moody’s Investor Services.
Initiatives available to Brambles to achieve its desired capital structure include adjusting the amount of dividends paid to
shareholders, returning capital to shareholders, buying-back share capital, issuing new shares, selling assets to reduce debt,
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 debt1
Total equity
Total capital�
2018
US$m
2017
US$m
2,488.3�
2,732.4�
(180.2)
(159.7)
2,308.1�
2,572.7�
3,162.0�
2,846.7�
5,470.1�
5,419.4�
1
Net debt in 2017 excludes amounts which are classified as held for sale. If the assets and liabilities relating to held for sale
balances were included in 2017, the adjusted net debt would be US$2,580.7 million.
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 2018 and prior years.
98
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 24. Cash Flow Statement – Additional Information
A) Reconciliation of Cash
For the purpose of the cash flow statement, cash comprises:
Cash at bank and in hand1
Short-term deposits
Bank overdraft (Note 18)2
�
1
2
In 2017, cash at bank and in hand includes US$0.4 million relating to held for sale operations.
In 2017, bank overdraft includes US$8.3 million relating to held for sale operations.
2018
US$m
179.4�
0.8�
180.2�
(8.9)
171.3�
2017
US$m
152.8�
7.3�
160.1�
(47.4)
112.7�
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. Bank overdrafts are presented within
borrowings in the balance sheet.
Cash and cash equivalents include balances of US$0.2 million (2017: US$1.4 million) used as security for various contingent
liabilities and are not readily accessible.
Cash includes US$11.5 million of cash in Zimbabwe which is subject to government currency controls which currently restrict the
ability to repatriate funds.
Brambles has various master netting and set-off arrangements covering cash pooling. An amount of US$11.3 million has been
reduced from cash at bank and overdraft at 30 June 2018 (2017: US$28.4 million).
99
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 24. Cash Flow Statement – Additional Information – continued
B) Reconciliation of Profit After Tax to Net Cash Flow from Operating Activities
Profit after tax
Adjustments for:
- depreciation and amortisation
- irrecoverable pooling equipment provision expense
- net loss on divestments
- net losses on disposals of property, plant and equipment
- impairment of goodwill and plant and equipment
- impairment of investment
- other valuation adjustments
- joint ventures and associates
- equity-settled share-based payments
- finance revenues and costs
Movements in operating assets and liabilities, net of acquisitions and disposals:
- increase in trade and other receivables
- decrease/(increase) in prepayments
- (increase)/decrease in inventories
- (decrease)/increase in deferred taxes
- increase in trade and other payables
- decrease in tax payables
- decrease in provisions
- other
2018
US$m
747.1�
584.9�
109.4�
15.6�
27.3�
-�
-�
2.0�
11.8�
15.9�
4.5�
(97.5)
1.8�
(3.2)
(86.9)
134.7�
(14.8)
(24.5)
(5.1)
2017
US$m
182.9�
548.2�
89.2�
5.4�
5.9�
243.8�
120.0�
0.3�
12.5�
29.7�
(0.2)
(80.3)
(2.4)
6.6�
24.7�
73.1�
(7.4)
(32.1)
(8.7)
Net cash inflow from operating activities
1,423.0�
1,211.2�
100
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 24. Cash Flow Statement – Additional Information – continued
C) Reconciliation of Movement in Net Debt
Net debt at beginning of the year
Net cash inflow from operating activities
Net cash outflow from investing activities
Net inflow from derivative financial instruments
Proceeds from issue of ordinary shares
Dividends paid
Interest accruals, finance leases and other
Foreign exchange differences
Net debt at end of the year�
Being:
Current borrowings
Non-current borrowings
Cash and cash equivalents
Net debt at end of the year�
2018
US$m
2,572.7�
(1,423.0)
770.2�
(26.6)
-�
352.0�
(1.9)
64.7�
2017
US$m
2,621.8�
(1,211.2)
826.9�
(23.7)
(1.6)
348.0�
(6.7)
19.2�
2,308.1�
2,572.7�
91.2�
2,397.1�
(180.2)
2,308.1�
673.4�
2,059.0�
(159.7)
2,572.7�
D) Non-Cash Financing or Investing Activities
Apart from the Dividend Reinvestment Plan, there were no financing or investing transactions during the year which had a
material effect on the assets and liabilities of Brambles that did not involve cash flows.
Note 25. Commitments
A) Capital Expenditure Commitments
Capital expenditure, principally relating to property, plant and equipment, contracted for but not recognised as liabilities at
reporting date was as follows:
Within one year
Between one and five years
After five years
2018
US$m
192.1�
146.1�
-�
338.2�
2017
US$m
119.6�
156.7�
7.4�
283.7�
101
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 25. Commitments – continued
B) Operating Lease Commitments
Brambles has taken out operating leases for offices, operational locations and plant and equipment. The leases have varying
terms, escalation clauses and renewal rights. Escalation clauses are rare and any impact is considered immaterial.
The minimum lease payments under operating leases, where the lessor effectively retains substantially all of the risks and
benefits of ownership of the leased item, are recognised as an expense on a straight-line basis over the term of the lease. The
future minimum lease payments under such non-cancellable operating leases are as follows:
Within one year
Between one and five years
After five years
Minimum lease payments�
Plant
Occupancy
2017
US$m
27.2�
54.7�
7.1�
89.0�
2018
US$m
102.3�
267.0�
126.3�
495.6�
2017
US$m
105.0�
257.0�
107.8�
469.8�
2018
US$m
28.7�
51.5�
6.8�
87.0�
During the year, operating lease expense of US$146.7 million (2017: US$161.4 million) was recognised in the statement of
comprehensive income.
Note 26. Contingencies
a)
Subsidiaries have contingent unsecured liabilities in respect of guarantees given relating to performance under contracts
entered into totalling US$36.6 million (2017: US$46.7 million), of which US$27.7�million (2017: US$35.2 million) is also
guaranteed by Brambles Limited. US$8.2 million (2017: US$11.3 million) is also guaranteed by Brambles Limited and certain
of its subsidiaries under a deed of cross-guarantee and is included in Note 32B.
b)
Brambles guarantees certain Iron Mountain (formerly Recall) lease obligations. To the extent any claims or liabilities arise
under those guarantees and are caused by an Iron Mountain Group company, Iron Mountain has indemnified Brambles
under the Demerger Deed relating to the demerger of Brambles' former Recall business.
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.
102
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 27. 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:
- 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:
- tax advisory services
- other
Total remuneration of related practices of PwC (Australia) �
Total auditor’s remuneration �
2018
US$’000
2017
US$’000
2,230�
159�
2,389�
8�
2,397�
3,435�
34�
3,469�
22�
52�
74�
3,543�
5,940�
2,178�
60�
2,238�
26�
2,264�
3,093�
37�
3,130�
12�
35�
47�
3,177�
5,441�
From time to time, Brambles employs PwC on assignments additional to its statutory audit duties where PwC, through its detailed
knowledge of the Group, is best placed to perform the services from an efficiency, effectiveness and cost perspective. The
performance of such non-audit related services is always balanced with the fundamental objective of ensuring PwC’s objectivity
and independence as auditors. To ensure this balance, Brambles’ Charter of Audit Independence requires that the
Audit�Committee approves any management recommendation that PwC undertakes non-audit work (with approval being
delegated to the Chief Financial Officer within specified monetary limits).
Non-audit assignments during the year primarily related to compliance projects and tax consulting advice.
103
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 28. Key Management Personnel
A) Key Management Personnel Compensation
Short-term employee benefits
Post-employment benefits
Other benefits
Share-based payment expense
2018
US$’000
6,198�
102�
30�
1,736�
8,066�
2017
US$’000
7,106�
76�
753�
7,270�
15,205�
B) Other Transactions with Key Management Personnel
Other transactions with Key Management Personnel are set out in Note 29A.
Further remuneration disclosures are set out in the Directors’ Report on pages 24 to 42 of the Annual Report.
Note 29. 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 option 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 2018 of US$1,048,818 (2017: US$1,097,063) to Brambles
Custodians Pty Limited, the trustee under Brambles' employee loan scheme. This scheme enabled employees to acquire shares in
BIL and has been closed to new entrants since August 2002.
Brambles contributed a US$150.0 million shareholder loan to HFG upon creation of the joint venture, with a cash interest rate of
10.0% per annum, payable quarterly. This loan was repaid in April 2018 as part of the divestment of HFG (refer Note 9).
104
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 29. Related Party Information – continued
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 Deutschland GmbH
Place of incorporation
USA
Canada
UK
Belgium
Germany
CHEP South Africa (Proprietary) Limited
South Africa
CHEP Australia Limited
CHEP Recycled Pallet Solutions LLC
CHEP Mexico SA de CV
IFCO Systems US LLC
IFCO Systems GmbH
Brambles USA Inc.
Brambles Finance plc
Brambles Finance Limited
Australia
USA
Mexico
USA
Germany
USA
UK
Australia
% interest held at
reporting date
2018
100�
100�
100�
100�
100�
100�
100�
-�
100�
100�
100�
100�
100�
100�
2017
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. Shares in subsidiaries are recorded at cost, less
provision for impairment.
Material subsidiaries which prepare financial statements report a 30 June balance date.
Note 30. Events After Balance Sheet Date
Brambles was served with class action proceedings filed in the Federal Court by Slater & Gordon on 10 August 2018 and by
Maurice Blackburn on 21 August 2018, on behalf of certain shareholders. Brambles will vigorously defend both proceedings
brought against it.
On 24 August 2018, Brambles announced that following a strategic review of its portfolio, it will pursue a separation of its IFCO
RPC business through a demerger with IFCO becoming a separately listed company. Brambles will also pursue a dual track process
whereby an outright sale of the IFCO RPC business will be investigated. As at 30 June 2018 IFCO has been classified as a
continuing operation in accordance with applicable accounting standards.
Other than those outlined in the Directors’ Report or elsewhere in these financial statements, no other events have occurred
subsequent to 30�June 2018 and up to the date of this report that have had a material impact on Brambles’ financial performance
or position.
105
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 31. Net Assets Per Share
Based on 1,591.9 million shares (2017: 1,589.4 million shares):
- Net tangible assets per share
- Net assets per share
2018
2017
US cents
US cents
134.4�
198.6�
111.6�
179.1�
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. In 2017, the net tangible assets include CHEP
Recycled (refer Note 10).
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.
Note 32. Parent Entity Financial Information
A) Summarised Financial Data of Brambles Limited
Profit for the year
Other comprehensive (expense)/income for the year1
Total comprehensive 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
2018
US$m
389.6�
(280.2)
109.4�
-�
7,917.5�
7,917.5�
41.8�
1,912.1�
1,953.9�
5,963.6�
2017
US$m
376.0�
174.8�
550.8�
2.6�
7,810.3�
7,812.9�
33.0�
1,578.5�
1,611.5�
6,201.4�
6,218.5�
6,201.1�
52.5�
(503.5)
196.1�
57.4�
(223.3)
166.2�
5,963.6�
6,201.4�
1
Comprises foreign currency translation movements.
Dividends received from investments in subsidiaries are recognised as revenue even if they are paid out of pre-acquisition
profits.
106
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2018
Note 32. Parent Entity Financial Information – continued
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$1,712.7�million (2017: US$1,827.3 million), of
which US$195.6�million (2017: US$403.8�million) has been drawn.
Brambles Limited and certain of its subsidiaries are parties to guarantees which support US Private Placement borrowings of
US$20.0�million (2017: US$20.0�million) by a subsidiary.
Brambles Limited and certain of its subsidiaries are parties to a guarantee which supports notes of US$1,000.0�million
(2017: US$1,000.0�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 supports notes of €1,000.0 million
(2017: €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$514.3 million (2017: US$558.6�million), of
which US$129.2�million (2017: US$129.1�million) has been drawn.
Other than these guarantees, the parent entity did not have any contingent liabilities at 30 June 2018 or 30�June 2017.
C) Contractual Commitments
Brambles Limited did not have any contractual commitments for the acquisition of property, plant and equipment at 30 June
2018 or 30�June 2017.
107
Consolidated Financial Report Directors’ Declaration
In the opinion of the Directors of Brambles Limited:
(a)
the financial statements and notes set out on pages 51 to 107 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�2018 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
G A Chipchase
Chief Executive Officer
24 August 2018
108
Consolidated Financial Report Independent Auditor’s Report
to the Members of Brambles Limited
Independent auditor’s report
To the members of Brambles Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Brambles Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2018 and of its financial
performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the consolidated balance sheet as at 30 June 2018
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated cash flow statement for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650 Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Independent Auditor’s Report
109
Independent Auditor’s Report
Independent Auditor’s Report – continued
to the Members of Brambles Limited
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
Materiality
For the purpose of our audit we used overall Group materiality of $44 million, which represents
approximately 5% of the Group’s profit before tax from continuing operations.
We applied this threshold, together with qualitative considerations, to determine the scope of
our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
We chose profit before tax from continuing operations because, in our view, it is the benchmark
against which the performance of the Group is most commonly measured by users and it is a
generally accepted benchmark. We selected 5% based on our professional judgement noting it is
within the range of commonly acceptable thresholds.
Audit Scope
The Group’s financial results comprise the consolidation of a network of pooled pallet, crate and
container businesses which are geographically widespread. We tailored the scope of our audit so
that we performed sufficient work to be able to give an opinion on the financial report as a
whole, taking into account the structure of the Group, the significance and risk profile of each
business, the accounting processes and controls, and the industry in which the Group operates.
Our audit also focused on areas of subjective judgement, for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
Audit of significant locations, transactions and balances
● Separate PwC firms each in the relevant locations (“local PwC audit firms”) performed an audit of
the financial information prepared for consolidation purposes for seventeen components of the
Group. The components were selected due to their significance to the Group, either by individual
size or by risk. Certain components in the Group are selected every year due to their size or nature,
while others are included on a rotational basis.
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● In addition, local PwC audit firms performed risk focused targeted audit or specified procedures on
selected transactions and balances for a further ten components.
● The remaining components were financially insignificant, and comprise more than one hundred
and fifty entities. Those entities are considered as part of Group analytical procedures and other
specified procedures.
Audit of shared services functions
● Our audit of IT, tax and certain finance processes was performed by local PwC audit firms based in
various territories, reflecting the location of the Group’s shared services functions. This included
some audit procedures performed at the Group’s finance process outsourced services provider. The
PwC Australia Group audit team (the Group audit team) performed audit procedures over centrally
managed areas such as share based payments, treasury and the consolidation process.
Direction and supervision by the Group audit team
● The audit procedures were performed by PwC Australia and local PwC audit firms operating under
the Group audit team’s instructions. The Group audit team determined the level of involvement
needed in the audit work of local PwC audit firms to be satisfied that sufficient audit evidence had
been obtained for the purpose of the opinion. The Group audit team kept in regular communication
with the local PwC audit firms throughout the year through phone calls, discussions and written
instructions. Senior members of the Group audit team visited certain businesses and met with
management and local PwC audit teams including significant locations (which are visited twice
every year); significant shared services centres (which are visited every year); and certain other
locations (which are visited on a rotational basis).
● The audit team both at Group and at local component levels were appropriately skilled and
competent to perform an audit of a complex global business. This included specialists and experts
in areas such as IT, actuarial, tax, treasury and valuations.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matter
How our audit addressed the key audit matter
Accounting for pooling equipment assets
We performed the following procedures:
(Refer to Note 14)
Brambles’ pooling equipment is accounted for as
depreciable fixed assets, classified within plant
and equipment. The accounting for pooling
equipment was a key audit matter due to the
assets’ financial size and judgement involved. As
disclosed in Note 14 of the financial report, there
Pooled pallets
Evaluated the design effectiveness and
tested a selection of key asset management
controls including attending pallet audits
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Key audit matter
How our audit addressed the key audit matter
is inherent risk in accounting for pooling
equipment due to the high volume of asset
movements through a complex network, and a
limitation on the Group’s ability to physically
verify the quantity of the pallets, crates and
containers due to access and cost prohibitions.
and assessing the results of the Group’s
counts.
Tested key reconciliations between the
numbers of pallets in the accounting records
compared to the operations system.
The two largest categories of pooling equipment
are pallets and reusable plastic crates (RPCs).
To challenge the IPEP provision calculation
methodology and assumptions we:
Pooled pallets
Key areas of judgement in relation to pooled
pallets include the useful economic life and
residual value (and therefore the pattern of
depreciation) and the quantity of lost pallets.
The estimation of the provision for lost pallets
(called the irrecoverable pooling equipment
provision, or “IPEP”) involves significant
estimates and the Group’s judgement.
The provision is calculated by considering the
results of the Group’s pallet audits, historical
experience of pallet loss and flows analysis as
reported through the asset management system.
Reusable plastic crates (RPCs)
Accounting for RPCs is complex and involves
uncertainty in estimating the number of crates
lost per trip, the useful life of crates and crate
residual value. There is further complexity in
accounting for deposits and matching them
against lost crates when they are written off.
- assessed key assumptions and
judgements, with a particular focus on
distributors who are not customers of
CHEP, as losses from such distributors
are historically higher;
- assessed provision estimates for
significant customers where CHEP has
no access to physically count the pallets;
- evaluated how historical pallet loss rates
and flows analysis are used to estimate
future losses; and
-
tested the calculations and extrapolations
of provision estimates across pallet
locations.
Obtained an understanding of useful
economic life and residual value
assumptions and assessed continued
appropriateness based on an understanding
of the business.
Reusable plastic crates (RPCs)
Tested a selection of the Group’s controls
over accounting for RPCs including monthly
pool reconciliations, crate sample counts
and the deposit matching process.
Tested key reconciliations between the
numbers of crates in the accounting records
compared to the operations system.
Inspected historical flows analyses prepared
by the Group to test the reasonableness of
estimates such as crates lost per trip.
Considered and challenged the Group’s key
assumptions and other drivers of the
number and value of recorded crates by
agreeing the cost and residual value of a
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Key audit matter
How our audit addressed the key audit matter
sample of crates to external evidence, taking
part in stock observation, and receiving
confirmations from crate producers.
Tested a sample of the outstanding crate
deposits and performed procedures in
regards to the deposit matching process.
Obtained an understanding of useful life and
residual value assumptions and assessed
continued appropriateness based on an
understanding of the business.
Impairment assessment of goodwill
We performed the following procedures:
(Refer to Note 15)
The Group has goodwill of $911.7m as at 30
June 2018. Australian Accounting Standards
require an annual impairment assessment.
In order to assess the recoverability of goodwill,
the Group prepared financial models at 3o June
2018 for cash generating units to which the
goodwill is ascribed to determine if the carrying
value of goodwill was supported by forecast
future cash flows, discounted to present value
(“the models”).
The assessment of impairment was a key audit
matter due to the quantum of the goodwill
balance as well as the judgements and
assumptions applied in estimating forecasted
cash flows, growth rates and discount rates.
Assessed whether the division of the Group’s
goodwill, other assets and liabilities into
Cash Generating Units (CGUs) to assess
impairment was consistent with our
knowledge of the Group’s operations and
internal Group reporting.
Considered if the impairment models used
to estimate the recoverable amount of the
assets were consistent with the requirements
of Australian Accounting Standards.
Considered whether the cash flows used in
the models were reasonable and based on
supportable assumptions by comparing
actual cash flows for previous years to
forecast cash flows and evaluating the
support available for any deviations.
Assessed the Group’s ability to forecast
future cash flows for the business by
comparing previous forecasts with reported
actual results from recent history.
Undertook testing of the mathematical
accuracy of the models’ calculations.
We were assisted by PwC valuation experts
who assessed the reasonableness of
assumptions in the impairment models by:
-
-
comparing long term market growth
assumptions to external market
data;
comparing elements of the discount
rate against a selection of similar
companies; and,
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Key audit matter
How our audit addressed the key audit matter
-
assessing components of the
discount rate, through the creation
of an independent ‘shadow’
calculation.
Considered the sensitivity of the model to
changes in key assumptions by applying
other values within a range that we
independently assessed as being reasonably
possible.
We performed the following procedures:
Assessed the rationale on which current tax
was calculated and deferred tax assets and
liabilities were recognised.
Tested the Group tax analysis prepared by
management with the assistance of PwC tax
specialists who liaised directly with local
PwC tax specialists in other territories where
required.
Challenged the Group’s tax forecasts for
jurisdictions where there are material
recorded tax losses by comparing these tax
forecasts to future business plans, testing
key tax assumptions and comparing
underlying business results to the Group’s
three year plans. We also assessed the
rationale for and calculation of unrecognised
deferred tax assets which are disclosed.
Considered and challenged the assumptions
made by the Group in making judgemental
tax provisions.
Calculation of current and deferred taxation
balances
(Refer to Note 6)
The calculation of taxation balances was a key
audit matter because the Group operates in a
large number of jurisdictions with different laws,
regulations and authorities resulting in complex
tax calculations.
Judgement is involved in a number of aspects of
the tax calculations, including the assessment of
recorded tax losses for recoverability.
The calculation of income taxes is disclosed in
Note 6 of the financial report including the key
judgements made in the assessment of
the taxation provision.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2018, including the
Letter from the Chairman, Letter from the CEO, Operating & Financial Review, Board & Executive
Leadership Team, Directors’ Report – Other Information, Shareholder Information, Five-year
Financial Performance Summary, Glossary, and Contact Information, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
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In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors 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 Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 24 to 42 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the remuneration report of Brambles Limited for the year ended 30 June 2018
complies with section 300A of the Corporations Act 2001.
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Responsibilities
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.
PricewaterhouseCoopers
Susan Horlin
Partner
Eliza Penny
Partner
Sydney
24 August 2018
Sydney
24 August 2018
116
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Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Brambles Limited for the year ended 30 June 2018, 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.
Susan Horlin
Partner
PricewaterhouseCoopers
Sydney
24 August 2018
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650 Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Auditor’s Independence Declaration
117
Five-Year Financial Performance Summary
US$m
Continuing operations1,2,3
Sales revenue1,2,3
EBITDA1,2,3
Depreciation and amortisation1,2,3
Operating profit1,2,3
Net finance costs1,2,3
Profit before tax1,2,3
Tax expense1,2,3
Profit from continuing operations1,2,3
Profit from discontinued operations1,2,3
Profit for the year1,2,3
Underlying Profit1,2,3
Significant Items1,2,3
Operating profit1,2,3
2018
2017
2016
2015
2014
5,596.6
1,565.5
(579.5)
986.0
(104.8)
881.2
(107.7)
773.5
(26.4)
747.1
996.7
(10.7)
986.0
5,104.3
1,298.1
(526.7)
771.4
(98.7)
672.7
(227.8)
444.9
(262.0)
182.9
957.5
(186.1)
771.4
4,900.1
1,447.4
(502.1)
945.3
(112.9)
832.4
(240.1)
592.3
(4.6)
587.7
984.5
(39.2)
945.3
5,440.5
1,487.9
(546.1)
941.8
(111.9)
829.9
(242.3)
587.6
(3.2)
584.4
986.9
(45.1)
941.8
5,404.5
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
Weighted average number of shares (millions)
1,591.2
1,588.3
1,577.6
1,566.0
1,560.7
Earnings per share (US cents)
Basic
From continuing operations1,2,3
On Underlying Profit after finance costs and tax1,2,3
ROCI1,2,3
47.0
48.6
41.2
16%
11.5
28.0
38.5
17%
37.3
37.5
39.2
19%
37.3
37.5
39.7
16%
81.2
37.5
38.7
16%
Capex on property, plant and equipment1,2,3
1,192.5
1,023.5
1,060.8
1,035.4
908.0
Balance sheet
Capital employed
Net debt
Equity
Average Capital Invested1,2,3,4
Cash Flow
Cash Flow from Operations1,2,3
Free Cash Flow
Dividends paid, net of Dividend Reinvestment Plan
Free Cash Flow after dividends
Net debt ratios
Net debt to EBITDA (times)
EBITDA interest cover (times)
Average employees1,2,3
Dividend declared per share (Australian cents)
5,470.1
2,308.1
3,162.0
6,172.7
892.4
554.4
352.0
202.4
1.5
15.0
11,663
29.0
5,419.4
2,572.7
2,846.7
5,646.4
591.5
224.2
348.0
(123.8)
1.7
15.2
5,576.9
2,621.8
2,955.1
5,096.4
5,330.0
2,688.9
2,641.1
6,251.5
5,112.7
2,361.7
2,751.0
5,889.6
518.8
171.7
205.1
(33.4)
1.7
13.5
729.5
404.1
359.3
44.8
1.7
13.7
828.2
430.9
394.2
36.7
1.6
13.2
13,882
13,816
13,854
14,086
29.0
29.0
28.0
27.0
1 CHEP Recycled is presented within discontinued operations in 2018, 2017 and 2016. Oil & Gas and Aerospace businesses are presented within discontinued
operations in 2017 and 2016. Periods prior to 2016 include the CHEP Recycled, Oil & Gas and Aerospace businesses within continuing operations and are
consistent with previously published data.
2 LeanLogistics is presented within discontinued operations in 2016 and 2015. Periods prior to 2015 include LeanLogistics within continuing operations and are
consistent with previously published data.
3 Recall is presented within discontinued operations in 2014.
4 Average Capital Invested (ACI) prior to 2016 is based on the previous ACI definition which reflects adjustments for accumulated pre-tax Significant Items and is
consistent with previously published data. The ACI definition was amended in December 2016 to exclude adjustments for accumulated pre-tax Significant Items
(refer Glossary).
118 Five-Year Financial Performance Summary
Glossary
Acquired Shares
actual currency/FX
Brambles Limited shares purchased by Brambles' employees under MyShare
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 pension plan
actuarial gains or losses and net equity adjustments for equity-settled share-based
payments
BIFR (Brambles Injury Frequency Rate) Safety performance indicator that measures the combined number of fatalities, lost-
BIL
BIP
Board
BVA (Brambles Value Added)
CAGR (Compound Annual
Growth Rate)
Cash Flow from Operations
Circular economy
CGPR
Company
Constant currency/constant FX
Continuing operations
Disclosable Executives
time injuries, modified duties and medical treatments per million hours worked
Brambles Industries Limited, which was one of the two listed entities in the previous
dual-listed companies structure
Brambles Industries plc, which was one of the two listed entities in the previous dual-
listed companies structure
The Board of Directors of Brambles Limited
The value generated over and above the cost of the capital used to generate that
value. It is calculated using fixed June 2017 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 outside
the ordinary course of business, multiplied by 12%
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 generated after net capital expenditure but excluding Significant Items that
are outside the ordinary course of business
A circular economy regenerates and circulates key resources ensuring products,
components and materials are at their highest utility and value, at all times
The Australian Securities Exchange Corporate Governance Council Corporate
Governance Principles & Recommendations, Third Edition
Brambles Limited (ACN 118 896 021)
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 refers to CHEP Americas, CHEP EMEA, CHEP Asia-Pacific (each
primarily comprising pallet and container pooling businesses in that region operating
under the CHEP brand), IFCO (RPCs pooling businesses operating under the IFCO
brand) and Corporate (corporate centre including BXB Digital)
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
DRP (Dividend Reinvestment Plan)
DLC
EPS (Earnings Per Share)
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 Limited instead of receiving cash
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
Profit after finance costs, tax, minority interests and Significant Items, divided by the
weighted average number of shares on issue during the period
EBITDA (Earnings before Interest, Tax,
Depreciation and Amortisation)
Operating profit from continuing operations after adding back depreciation and
amortisation
Glossary
119
Glossary continued
ELT
Free Cash Flow
FY (Financial Year)
Brambles’ Executive Leadership Team, details of which are on pages 22 and 23
Cash flow generated after net capital expenditure, finance costs and tax, but excluding
the net cost of acquisitions and proceeds from business disposals
Brambles’ financial year is 1 July to 30 June; FY18 indicates the financial year ended
30 June 2018
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
Matching Awards
Matching Shares
MyShare
Operating profit
Performance Period
Key Performance Indicator(s)
Long-Term Incentive
Matching share rights over Brambles Limited shares allocated to employees when
they purchase Acquired Shares under MyShare; when an employee’s Matching
Awards vest, Matching Shares are allocated
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
Performance Share Plan or PSP
The Brambles Limited Performance Share Plan (as amended)
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
ROCI (Return on Capital Invested)
Underlying Profit divided by Average Capital Invested
Sharing economy
Significant Items
An economic system in which assets or services are shared between different agents,
either free or for a fee
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
Short-Term Incentive
TSR (Total Shareholder Return)
Underlying EPS
120 Glossary
Measures the returns that a company has provided for its shareholders, reflecting
share price movements and reinvestment of dividends over a specified performance
period
Profit after finance costs, tax and minority interests but before Significant Items,
divided by the weighted average number of shares on issue during the period
Glossary continued
ULP (Underlying Profit)
Profit from continuing operations before finance costs, tax and Significant Items
Unification
Unit-load equipment
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
Year
Brambles’ 2018 financial year
Glossary
121
Notes
122 Notes
Notes
Notes
123
Notes
124
Notes
Contact Information
Registered Office
Level 10, Angel Place 123 Pitt Street
Sydney NSW 2000 Australia
ACN 118 896 021
Telephone: +61 (0) 2 9256 5222
Email: investorrelations@brambles.com
Website: www.brambles.com
London Office
Nova South
160 Victoria Street
London SW1E 5LB
United Kingdom
Telephone: +44 (0)20 38809400
CHEP Americas
7501 Greenbriar Parkway
Orlando FL 32819
USA
Telephone: +1 (407) 370 2437
5897 Windward Parkway
Alpharetta GA 30005
USA
Telephone: +1 (770) 668 8100
CHEP Europe, Middle East & Africa
400 Dashwood Lang Road
Bourne Business Park
Addlestone, Surrey KT15 2HJ
United Kingdom
Telephone: +44 (0) 1932 850085
Facsimile: +44 (0) 1932 850144
CHEP Asia-Pacific
Level 6, Building C 11 Talavera Road
North Ryde NSW 2113 Australia
Telephone: +61 13 CHEP (2437)
Facsimile: +61 (0) 2 9856 2404
IFCO
Zugspitzstraße 7
82049 Pullach Germany
Telephone: +49 (0) 89 744 91 300
Facsimile: +49 (0) 89 744 91 290
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:
Website: www.linkmarketservices.com.au
registrars@linkmarketservices.com.au
Share Rights Registry
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
American Depository Receipts Registry
Deutsche Bank Shareholder Services
American Stock Transfer & Trust Company
Operations Centre
6201 15th Avenue
Brooklyn NY 11219
USA
Telephone: +1 866 706 0509 (toll free)
+1 718 921 8124
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