Annual Report 2019
Shaping
our future
brambles.com
Contents
Letter from the Chairman
Letter from the CEO
Operating & Financial Review
Board & Executive Leadership Team
Directors’ Report – Remuneration Report
Directors’ Report – Additional Information
Shareholder Information
Consolidated Financial Report
Independent Auditor’s Report
Auditor’s Independence Declaration
Five-year Financial Performance Summary
Glossary
4
5
8
23
29
49
55
57
118
125
126
127
To review the Group’s online
annual review for 2019, go to:
BRAMBLES.COM
Unless otherwise specified, page references are to pages in this report. All acronyms and terminology referred to in this report are
defined in the Glossary on page 127.
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 report. The forward‑looking
statements made in this report 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
report, 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
Brambles at a Glance
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.
What Brambles does:
As a pioneer of the sharing economy,
Brambles is 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 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.
As at 30 June 2019, Brambles:
Operated in…
~60
countries
Employed...
~11,000
people
Owned...
~330 million
pallets, crates and containers
Through a network of…
750+
service centres
1
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 9.
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 10.
For employees, Brambles provides development and exciting
career opportunities in approximately 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,
addressing food waste and promoting sustainable use of the
world’s forests.
In this way, Brambles creates a circular economy, on a
global scale.
Brambles has used the Integrated Reporting ‘capitals’
framework1 to illustrate the interaction and interdependencies
between its sources of value, business model and ability to
create value over time.
INPUTS
VALUE CREATION
OUTPUTS
Natural Capital
99.7% wood from certified sources
which regenerates stocks of raw
materials and drives demand for
sustainable forest products
Manufactured Capital
330 million assets shared and reused
throughout the world’s supply chains
Human and Intellectual Capital
Attracting talent, ideas and innovation
Financial Capital
Attracting long-term investment
Social and Relationship Capital
Fostering positive stakeholder
relationships in communities
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
60% of electricity was from
renewable energy sources
Scale-related
operational efficiencies
Network scale density
and expertise
Growth, innovation
and people
By sharing and reusing Brambles’ products versus single use alternatives,
value is created for its customers, the environment and society.
Natural Capital
Social and Relationship Capital
Customer-driven
environmental savings:
2m tonnes of CO2
2,600 megalitres of water
1.7m cubic meters of wood
1.7m trees
1.3m tonnes of waste
Customer value:
• Enhance operational efficiency
• Free up cash and resources
• Lower overall supply-chain costs
• Sustainable packaging objectives
Building our social licence through
advocacy for a circular economy
2
Human Capital
Intellectual Capital
Developing, engaging
and remunerating our people
Network advantage
and digital solutions
are creating the supply
chains of the future
Financial Capital
Economic
Value3 Retained
US$1b
Economic
Value Generated
US$5b
Economic
Value Distributed
US$4b
2
1 The International Integrated Reporting Framework. Integrated Reporting highlights the key resources and relationships used and affected by an organisation.
2 United Nations Sustainable Development Goal 12 aligns with Brambles’ circular business model. For more information see brambles.com/sustainability.
3 Economic value is a measure of the broader financial benefit provided by an organisation.
3
Letter from the Chairman
2019 was a year of transition for Brambles as it
positioned itself to deliver enhanced value for
customers, employees and shareholders.
Following the sale of the IFCO RPC business in May this year,
Brambles is now one streamlined business. This provides
a significant opportunity to leverage our core pallet and
container logistics expertise, lead industry initiatives and be
more responsive to customers’ needs and global supply chain
challenges. As an organisation, this evolution is critical to the
sustainability and competitiveness of our business, particularly
as we look to a future characterised by rapid change and
increasing customer demands for innovative, sustainable and
cost-effective solutions.
It is within this context that the Board and management team
are taking active steps to reshape Brambles for success into the
2020s and beyond. In addition to our ongoing commitment to the
five core strategic priorities outlined on page 6, we are focused
on becoming more customer-centric and deploying new physical
and digital technologies to transform our service offerings and
how we operate.
IFCO RPC sale and use of proceeds
On 31 May 2019, we completed the sale of our IFCO RPC
business for an enterprise value of US$2.5 billion.
As previously communicated, we intend to return US$1.95 billion
of the IFCO RPC sale proceeds to you, our shareholders, through
two mechanisms. The first is an on-market share buy-back of
up to US$1.65 billion which commenced on 4 June 2019 and is
outlined in more detail on page 10.
The second is a pro-rata cash return of 29 AU cents per share.
The cash return has two components: a capital return of 12 AU
cents per share, which is subject to shareholder approval at this
year’s Annual General Meeting (AGM), and a special dividend of
17 AU cents per share. The tax treatment of the pro-rata cash
return will be summarised in the explanatory notes set out in the
Notice of Meeting for the 2019 AGM.
The residual net proceeds were used to pay down debt to
maintain our strong balance sheet.
Dividend policy and capital structure
Following the completion of the IFCO RPC sale, the Board
undertook a review of Brambles’ dividend policy and capital
structure.
In line with the outcomes of this review, Brambles will move to
a payout ratio based dividend policy commencing with the 2020
interim dividend. Brambles’ dividend policy is to target a payout
ratio of 45-60% of Underlying Profit after finance costs and tax,
subject to Brambles’ cash requirements, with the dividend per
share declared in US cents and converted and paid in AU cents.
The Board believes this dividend policy, while potentially creating
increased volatility in Australian dollar terms, is appropriate to
support future growth opportunities and the maintenance of
a strong investment grade credit profile. Brambles intends to
retain its current investment grade credit rating of BBB+ from
Standard & Poor’s and Baa1 from Moody’s Investor Services.
As communicated at the time of our 1H19 result, Brambles’
current progressive dividend policy will be maintained for the
2019 financial year, with a final dividend of 14.5 AU cents per
share, franked at 30%. This will bring the total dividends for the
Year to 29.0 AU cents per share. The Board has also determined
to suspend the Dividend Reinvestment Plan at this time in view
of the ongoing share buy-back programme.
Board Renewal
In light of my previously announced intention to step down as
Chairman at the end of my current term, a Sub-Committee of the
Nominations Committee, chaired by Tony Froggatt, was formed to
conduct the process for the Board. This process remains on track
to appoint a successor in advance of my retirement in 2020.
In addition to the Chairman succession process and in keeping
with the Board’s renewal plan, changes to the composition of the
Board this year saw the retirement of Carolyn Kay at the 2018
AGM after 12 years of service and the recent appointment of Jim
Miller as a Non-Executive Director in March 2019. With a career
spanning senior executive roles at companies such as Amazon,
Google, IBM and Cisco, Jim has extensive experience and detailed
knowledge of digital technology and data analytics, and the value
these can add to supply chains. His expertise will enhance the
Board’s skill matrix, particularly as we respond to the growth of
e-commerce and continue to invest in digital innovation. Jim will
stand for election at this year’s AGM.
One of our long-standing Non-Executive Directors, David Gosnell,
has decided not to stand for re-election at this year’s AGM and will
therefore retire at the conclusion of the meeting.
On behalf of the Board, I would like to welcome Jim and thank
both David and Carolyn for their valuable contributions.
Tony Froggatt, who has been on the Board for 13 years has agreed
to stand for re-election at this year’s AGM to facilitate a smooth
transition for the new Chairman and provide continuity and
stability for the Board. If re-elected, he has indicated that he will
retire within his three year term.
Non-Executive Director, George El-Zoghbi, who joined the Board
in 2016, will also stand for re-election at this year’s AGM.
Safety
Our people are our greatest asset and their safety is our most
important responsibility. So, it is with great sadness that I inform
you of a fatality at our Bellpuig plant in Spain in July 2019. The
Board and management team are resolute in taking actions to turn
our Zero Harm Charter into a reality so that all our people return
home to their family and friends as healthy as when they started
the day.
Looking Ahead
As we look to the future, Brambles is a focused business with
scale unmatched by our competitors and a clear strategic
direction. With actions in place to offset inflationary pressures
which we have experienced in our major markets in recent years,
continued investment in platform quality and a differentiated,
value-enhancing service offering, Brambles remains well
positioned to support its customers into the future, grow its
business and strengthen its industry-leading position.
On behalf of the Board, I would like to thank our management
team and staff for their efforts this year. It is their vision, expertise
and commitment that make Brambles the global leader it is today.
Stephen Johns, Chairman
Sales Revenue4
Underlying Profit4
Total Dividends
US$4,595.3m
US$803.7m
29.0 AU cents per share
Up 7% at constant currency
Up 2% at constant currency
Final dividend of 14.5 AU cents per share
4
4 Continuing operations
Letter from the CEO
The sale of our IFCO RPC business allows us
to set a new ambitious direction for Brambles
into the 2020s and beyond.
Over the past two years, we have worked on the fundamentals
of our businesses to make sure they remain robust and
sustainable. We have simplified our operating structure,
refreshed our leadership talent and focused the company on our
core high performing businesses.
Operationally, we have taken actions to address the cost
performance of our core business, refocused the Group on asset
control and efficiency as well as scaled up our efforts in digital
and platform innovation.
With solid foundations in place, we have the opportunity to set a
new ambitious direction for Brambles.
We are passionate about bringing more value to our customers,
delivering innovative service offerings to meet more of their
supply chain needs, and transforming the customer experience
of doing business with Brambles. During the Year, we launched
‘Zero Waste World’, a new working collaboration for leading
companies committed to creating smarter and more sustainable
supply chains. Using our network capabilities and the power
of our logistics platform, we are working with our customers
to find new ways to address three critical industry challenges:
eliminating waste; eradicating empty transport miles; and
cutting out inefficiency.
Within our own operations, we are exploring new ways to deliver
higher levels of efficiency in our service center network. We
also continue our path towards a digital supply chain to deliver
benefits for customers and Brambles.
Strategic Priorities
Our five strategic priorities continue to drive decision making
across the Group and we are making good progress towards our
financial objectives. Our market positions strengthened during
the Year, with meaningful volume growth in both developed
and emerging markets. We continued to invest in First and Last
Mile Solutions, particularly in Europe, and have accelerated our
efforts in material science and platform innovation, including
plastic and hybrid pallets.
Operationally, we have successfully rolled out best-in-class
automation and procurement initiatives in the US and facilitated
best practice and expertise sharing across the Group. While we
are yet to see the level of asset efficiency improvement we are
seeking, we remain confident that the heightened focus on asset
productivity across the Group will deliver cash flow benefits over
the medium term.
Operating Environment
The operating environment in FY19 was characterised by
macro-economic uncertainty and ongoing inflationary pressures.
The ongoing uncertainty surrounding Brexit and how it would
be implemented impacted inventory levels across retail supply
chains in the UK. We also experienced slower organic growth,
particularly in Western Europe. Input cost inflation remained high
by historical standards, although the rate of transport and lumber
inflation started to moderate during the Year.
Competition in all markets was strong, but rational, while our
customer base continues to adapt to changes in the retail landscape.
These include omni-channel proliferation, the ongoing growth of
e-commerce and increasing automation in the supply chain.
FY19 Results
In this operating context we delivered a solid FY19 result. Sales
revenue growth was strong at 7%, reflecting ongoing customer
conversions in all markets and increased price realisation in
response to the high-inflation environment.
Underlying Profit growth of 2% was modest as ongoing cost
pressures in CHEP Americas were only partly offset by price
and supply chain initiatives in the region. We are making good
progress with our US margin improvement initiatives and other
initiatives in the Americas regions. We remain confident these
actions will improve profitability over the medium-term.
Sustainability
Sustainability is integral to what we do and to the value we
offer supply chains around the world. Our circular business
model defines not just how we do things but who we are. It also
provides our customers a proven circular foundation as they
adapt to changing consumer expectations around the provision
of more sustainable products.
As part of this endeavour, we have committed to responding
to the recommendations of the Task Force on Climate-related
Financial Disclosure (TCFD), commencing in FY19. In doing
so, we seek to enable our shareholders to have a clear
understanding of how Brambles will manage the financial risks
and opportunities of climate change and provide confidence
that we will continue to prosper over the long term.
We continued to make good progress towards our
2020 Sustainability Goals and have once again delivered
year-on-year improvements in sustainable lumber procurement,
and the adoption of more renewable energy takes us closer to
our 2020 carbon emissions goals.
We are also proud to see increasing recognition of our
sustainability credentials from industry, employees and investors
during the Year, which are outlined on page 12.
Safety
Brambles is committed to Zero Harm, for our people and those
we work with, for our customers and the communities we serve,
and for the environment upon which we all depend. As such,
the the loss of our colleague, José Luis Segura, in July 2019
has impacted us greatly and we are doing everything we can for
his family and colleagues affected. A thorough investigation is
underway, and we are determined to learn as much as we can to
avoid such a tragedy in the future. This incident reminds us how
important it is for us to drive a further step change in our safety
performance to achieve a Zero Harm work environment. During
the Year we launched the next phase of our Zero Harm strategy,
‘Safety Differently’. This initiative seeks to address the residual
risk present in our operations.
Outlook
Longer term, we continue to expect sales revenue growth to be
in the mid-single digits at constant currency, as we continue to
convert customers to our sustainable share and reuse solutions.
Our strategic focus on operational, organisation and capital
efficiencies is expected to deliver Underlying Profit leverage
through the cycle and sufficient cash flow to fully fund dividends
and reinvestment for growth, innovation and the development
of our people.
Graham Chipchase, Chief Executive Officer
Cash Flow from Operations4
Return on Capital Invested4
Brambles Injury Frequency Rate (BIFR)
US$431.8m
Down US$293.0m
19.5%
Down 0.6 percentage points at
constant currency
5.9
Up from 5.0 in FY18
5
Strategic Priorities
Brambles is committed to being the global leader in platform pooling
solutions and insight-based solutions to fast-moving supply chains.
Brambles seeks to:
• Achieve and maintain number one positions in each region of operation;
• Lead the industry in customer service, innovation and sustainability; and
• Be an employer of choice through best-in-class safety, diversity and
talent development programmes.
Grow and Strengthen
Network Advantage
Deliver Operational and
Organisational Efficiencies
Brambles seeks to offset the impact
of cost inflation and competitive price
pressures through efficiencies in areas
such as procurement, plant automation
and transport optimisation.
With a more focused portfolio there
are increased opportunities to share
best practices and simplify processes
across the Group to build a leaner, more
collaborative and effective organisation.
Brambles’ network advantage,
comprising the scale and density
of its customer and service centre
network and its industry-leading
asset management expertise, is a
critical element of the Group’s value
proposition for both customers
and investors.
Brambles continues to deepen its
network advantage by growing in core
businesses and rapidly scaling in newer
markets. The increasing importance
of sustainability in end-to-end supply
chains further increases the value
of Brambles’ service offering to
its customers.
Brambles is committed to improving the
customer experience further through
simpler processes, additional services
and enhanced platform quality.
Brambles’ five strategic
priorities guide decision
making across the
Group and are integral to
the delivery of superior
value for customers,
shareholders and
employees over the
long term.
6
Disciplined Allocation of
Capital and Improved Cash
Flow Generation
Brambles allocates capital in a
disciplined manner to maintain and
grow its existing businesses, to drive
innovation and to manage its portfolio
of products and services. The Group
pursues a 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.
Innovate to
Create New Value
Develop World-Class
Talent
Successfully attracting and retaining
high calibre people is integral to
Brambles’ ongoing success and will
become increasingly important as new
skills are required in areas such as
digital services and automated supply
chains. Brambles’ key priorities for its
employees are safety, engagement
and capability-building. The Group
is committed to fostering a culture
of agility, innovation and continuous
improvement.
Brambles is committed to developing
and maintaining an innovative portfolio
of products and services to meet the
evolving needs of current and future
customers.
Brambles is constantly innovating
in new materials and platforms that
enable its customers to increase
sales, gain greater market insights and
improve operational efficiencies in a
changing retail landscape.
Alongside innovation in physical
products, Brambles is investing to
transform information and digital
insights into new sources of value for
itself and for its customers. Brambles
sees data and technology as core
strengths and sources of future
competitive advantage.
7
Operating Model
Brambles manages the world’s largest pool of reusable pallets 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 industry expertise, Brambles leads the market in smarter and more sustainable
supply chains.
Share and reuse: How it works
Share and reuse: How it works
1
1
PRODUCER
GROWER
CONTAINERS
RPCs
2
3
3
2
1
3
MANUFACTURER
PALLETS
RETAILER
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.
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.
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 approximately 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 sustainability framework identifies input sourcing,
particularly lumber, and safety as the Group’s key material
sustainability risks. Details of the Group’s FY19 safety
performance and material sourcing are detailed on
pages 14 and 15, respectively. A full review of Brambles’
sustainability risks and performance will be included in
the 2019 Sustainability Review, which will be available
on Brambles’ website in September 2019.
The Group’s 2020 Sustainability 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.
Brambles is currently undertaking a materiality process
to develop its 2025 sustainability programme with the
intention of announcing the new commitments in FY20.
This preparatory work involves consultation with its key
stakeholders including customers, investors, non-government
organisations, thought leaders, industry bodies, management
and employees.
8
Operating & Financial Review Customer Value Proposition
Brambles’ pallets and containers form the invisible backbone of the global
supply chain. This gives Brambles key 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.
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 involvement, Brambles has clear 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.
Platform Solutions
Brambles offers customers the widest range of supply chain platforms including: pallets (timber, plastic and display), Reusable
Plastic Crates (RPCs), bins and specialised containers as well as unit-load containment and safe handling equipment.
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.
System-Wide Solutions
Brambles conducts in-depth studies of customers’ supply
chains to map the flow of goods, information and platforms
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.
Retail Store Solutions
Brambles works closely with customers to develop retail 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.
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.
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.
Sustainability Solutions
Brambles creates value for customers by providing a
sustainable alternative to single-use packaging, saving
customers money and significantly reducing the environmental
impact of their operations. In this way, Brambles presents
a working circular model for customers to reference as they
adapt to growing consumer awareness around sustainability
issues in supply chains.
In FY19, Brambles launched its Zero Waste World initiative
in North America and Europe to reinforce its commitment
to collaborate with customers to create smarter and more
sustainable supply chains – creating more value and using
fewer resources. Through this initiative, Brambles seeks to use
its unique position in the supply chain to help customers address
three key industry challenges:
Eliminating waste
by using its circular economy expertise to convert
customers to more sustainable share and reuse solutions
which save resources and reduce costs;
Eradicating empty transport miles
by using its network scale and visibility to facilitate
collaborative transport solutions, bringing manufacturers
and retailers together to reduce the environmental impact
of their operations and save money; and
Reducing inefficiencies
by using its end-to-end supply chain solutions and
BXB Digital technology to enhance customers’ visibility
of their supply chains so they can make better decisions.
9
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.
First mover
advantage
Scale-related
operational
efficiencies
Shareholders
Network scale, density
and expertise
Cash flow
generation
Reinvest in growth,
innovation and people
Long-Term Value Creation and Sustainable 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 approximately 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 sustainable
shareholder returns over the long term. By focusing on its core drivers of value, Brambles expects to deliver :
Sustainable growth at returns well in excess of the
cost of capital
• Sales revenue growth5 in the mid-single digits;
• Underlying Profit growth5 in excess of sales
revenue growth through the cycle; and
• Strong Return on Capital Invested.
Dividend Policy and Payment
The Board has declared a final dividend for 2019 of 14.5 AU cents
per share, in line with the previous interim and final dividends.
The 2019 final dividend will be 30% franked and is payable
on 10 October 2019 to shareholders on the Brambles register
at 5.00pm on 12 September 2019. The ex-dividend date is
11 September 2019.
Total dividends for the Year were 29.0 AU cents per share, in line
with the prior year. Brambles paid a 65% franked 2019 interim
dividend of 14.5 AU cents per share on 11 April 2019.
Following the sale of its IFCO RPC business, the Brambles
Board has reviewed Brambles’ current progressive dividend
policy. Under this policy, the Group seeks to maintain or increase
dividends per share each year, in Australian cents, subject to its
financial performance and cash requirements. From the FY20
interim dividend, Brambles will move to a payout ratio based
dividend policy, targeting a payout ratio of 45-60% of Underlying
Profit after finance costs and tax, subject to Brambles’ cash
requirements, with the dividend per share declared in US cents
and converted and paid in Australian cents.
Cash generation to fund growth, innovation and
shareholder returns
• Free Cash Flow sufficient to fully fund capital expenditure
and dividends.
Capital Management Programme
On 25 February 2019, Brambles announced that it intended to
use the proceeds from the sale of its IFCO RPC business to fund
an on-market share buy-back of up to US$1.65 billion, a pro-rata
return of cash of 29.0 AU cents per share and to pay down debt.
Completion of the sale of IFCO RPC was announced on
3 June 2019 and the on-market share buy-back commenced
on 4 June 2019. Between that date and 21 June 2019, when it
was paused for Brambles’ scheduled trading blackout period,
6,039,299 ordinary shares were bought back and cancelled for
a total consideration of US$54.1 million. The on-market buy-back
is scheduled to recommence on 22 August 2019.
The pro-rata cash return compromises two components:
a capital return of 12 AU cents per share which is subject
to shareholder approval, which Brambles will seek at its
2019 AGM on 10 October 2019, and a special dividend of
17 AU cents per share.
On 5 July 2019, Brambles repaid the US$500 million April 2020
144A bond issue using the IFCO RPC sales proceeds.
Dividend Reinvestment Plan
Given the on-market share buy-back programme will continue
into FY20, the Brambles’ Board has decided to suspend the
Dividend Reinvestment Plan.
5 At constant‑currency
10
Operating & Financial Review The Broader Benefits of Brambles
Through its circular business model, network advantage and industry
expertise, Brambles creates broader economic benefits for the communities
in which it operates.
Economic
Value Retained
US$1b
Economic
Value Generated
US$5b
Economic
Value Distributed
US$4b
$0.3b Dividends paid to shareholders
$0.7b Employee costs including taxes
$0.2b Income taxes paid
$0.1b Interest paid on loans
$2.7b Payments to suppliers
Brambles generates both direct and indirect economic value
and delivers significant environmental benefits through its
sustainable ‘share and reuse’ model. Direct economic benefits
include: employment opportunities and associated financial and
non-financial benefits for Brambles’ ~11,000 employees; taxes
paid to governments6; payments to local suppliers; and financial
donations to community groups.
Indirectly, Brambles’ requirement for sustainable forestry
certification supports communities connected to forestry
operations while conserving the ecological functions of the
forest7. In addition, Brambles has strategic partnerships with
organisations such as the Arbor Day Foundation in the US
and Landcare Australia, whose objectives are to restore and
regenerate degraded natural habitats at scale, while also providing
opportunities for Brambles’ employees to volunteer.
Brambles’ long standing partnership with the Global Foodbanking
Network and over 300 Foodbanks around the world makes it a
critical partner in the battle against food waste and providing
meals for those in need. Brambles’ in-kind equipment donations
facilitate extensive food rescue and food donation services as well
as encouraging employees to participate in local Foodbanking
volunteering initiatives.
Brambles and Foodbank Partnership
In 2016, Brambles signed a three-year agreement with
the Global Foodbanking Network (GFN), an international
non-profit organisation that fights world hunger by
creating, supporting and strengthening Foodbanks
in more than 30 countries.
In North America, Foodbanks Canada is now part of the
CHEP Canada network. “This collaboration is a natural
one; both CHEP and Foodbanks Canada are working to
create a seamless supply chain from the manufacturer
and retailer to Foodbanks Canada that will help us
get more of the available surplus food to more people
in need,” said Chris Hatch, chief executive officer,
Foodbanks Canada.
Brambles’ environmental restoration volunteering events
Globally, Brambles employees volunteer to participate
in environmental restoration programmes.
In July 2019, 80 Australian employees participated in
Landcare Australia volunteering events. They worked
on a range of activities such as planting and weeding
to help protect the natural resources and support a
sustainable environment.
“The volunteer day was fantastic; it was great being
outdoors and getting to know colleagues from other
parts of our business.” Sharon, Brambles employee.
6 See Brambles’ Tax Report on brambles.com.
7 More information on Brambles’ approach to sustainable forestry including certification is available in the 2019 Sustainability Review, which will be available in September 2019.
11
Operating & Financial Review Brambles’ Approach to Climate Change
Brambles’ sustainable ‘share and reuse’ model places the business
in a strong position to face the challenges of climate change.
Brambles’ business model enables its customers’ access to the
circular economy by enabling a virtuous cycle of sharing and
reusing its platforms, allowing them to deliver life’s essentials
more sustainably. In this way, Brambles helps customers
optimise transport, reduce waste and demand on natural
resources while reducing carbon emissions.
Brambles recognises that climate change poses risks and
presents opportunities for its operating model that could have
financial implications on the business.
Within this context, the Brambles Board and management team
have committed to responding to the recommendations of the
Task Force for Climate-related Financial Disclosures (TCFD),
commencing in FY19. The TCFD asks organisations to assess
and disclose both the risks and opportunities of climate change,
so that capital can be effectively allocated to achieve long-term
value creation.
In responding to the recommendations, Brambles is seeking
to enable shareholders to have a clear understanding of how
the business will manage the financial risks and opportunities
of climate change while providing confidence that Brambles
will continue to prosper over the long term.
Climate-related risks and opportunities could be both physical
and transitional. Physical risks to the business could include
severe weather events and long-term changes in regional
climatic conditions. Transitional risks include those arising
from shifts in policy, regulation, technology or public perception
of Brambles’ business due to climate change. Opportunities
include society facilitating a faster zero carbon future, which
may encourage supporting new businesses to move towards
Brambles’ share and reuse circular model and away from
single-use pallets.
The severity of climate-related risks and opportunities is linked
to different trajectories of global average temperature increases
referred to as climate-change scenarios.
Brambles’ dependency on natural resources, in particular wood,
and its presence in approximately 60 countries requires diligent
planning across different climate-change scenarios in each
region, as well as assessment of and responses to potential
outcomes, to ensure the business and its value chain remain
resilient over the long term.
Brambles is undertaking climate-related scenario analysis in line
with the recommendations of the TCFD across its main regions
of operation, with the Asia-Pacific region assessed in FY19.
The rapid low carbon transition scenario presents substantial
opportunities for Brambles and its customers that have
exposures to carbon pricing. In a climate-related scenario where
the planet continues to warm due to sustained releases of
greenhouse emissions into the atmosphere, Brambles and its
customers, are likely to face increasing physical risks. These
could be severe, impacting the availability of wood supply or
decreasing the yield from the agricultural sectors, for example.
Brambles is well placed to mitigate the disruption caused by
climate change, using comprehensive logistics knowledge to
rebalance the pool of assets ensuring customers always have
pallets to support their supply chain requirements.
The ability to adapt is inherent in Brambles’ network advantage,
including the extensive pool of reusable platforms geographically
distributed amongst many supply chain participants.
Brambles’ TCFD roadmap is provided below, outlining the key
actions for each business quarter. Brambles has engaged the
services of KPMG to assist in responding to the recommendations
of the TCFD.
Brambles’ TCFD Roadmap
1
2
3
4
5
Q4, FY19
Q1, FY20
Q2 - Q3, FY20
Q4, FY20
Q4, FY20
Starting
the journey
• TCFD roadmap
• Scenario analysis
workshop #1
Asia-Pacific
Scenario
analysis
• FY19 Annual Report
Aggregate
and integrate
• Scenario analysis
disclosure
• Process gap
analysis
workshops
(Europe, IMETA
and Americas)
• Aggregate / verify
regional climate
risks & opportunities
Disclose
and deliver
• Climate change
action plan
• FY20 - Full TCFD
disclosure
Brambles’
climate strategy
• Review metrics
and targets
• Climate-related risks
and opportunities
integrated into
financial processes
and strategy
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 2019, Brambles continues to be placed amongst
the leading companies in the global industrial services sector by the following ESG research firms:
12
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 FY19, 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.
On 31 May 2019, Brambles divested its IFCO RPC business, generating cash proceeds of US$2,480 million before transaction costs.
The ‘Capital Management’ section on page 10 and the ‘Funding and Liquidity’ section below outlines the capital management
programme in relation to those proceeds.
Treasury Policies
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.
During FY19, Brambles entered into various foreign exchange products to hedge foreign exchange exposure arising from the
IFCO RPC sale.
Funding and Liquidity
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 2024. Borrowings under the facilities are floating-rate, unsecured obligations
with covenants and undertakings typical for these types of arrangements. Borrowings are also raised from debt capital markets by the
issue of unsecured fixed interest notes, with interest paid either annually or semi-annually. At balance date, loan notes on issue totalled
US$2,168 million and had maturities out to October 2027.
During June 2019, Brambles used the IFCO RPC sale proceeds to repay bank debt and place funds into short term deposits and cash
management accounts with its banks. Redemption notices were also issued in respect of the US$500 million 144A 5.35% April 2020
bond, which was repaid on 5 July 2019.
Net Debt and Key Ratios
US$m
Current debt
Non-current debt
Gross debt
June 2019
June 2018
Change
556.8
91.2
465.6
1,643.4
2,397.1
(753.7)
2,200.2
2,488.3
(288.1)
Less: cash and cash equivalents
(1,691.3)
(180.2)
(1,511.1)
Less: term deposits
(411.2)
-
(411.2)
Net debt
Key ratios8
Net debt to EBITDA
EBITDA interest cover
97.7
FY19
0.08x
14.6x
2,308.1
(2,210.4)
FY18
1.46x
15.0x
Brambles’ financial policy is to target a net debt to EBITDA ratio
less than 1.75 times. Brambles proposes to align this financial
policy with the financial reporting requirements under the new
lease accounting standard (AASB 16), which became effective
from 1 July 2019. See Note 1G to the Financial Statements
on page 63.
30 June 2019 key financial ratios reflect the cash proceeds from
the IFCO RPC sale. The ratios 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)
US$b
1.25
1.0
0.75
0.5
0.25
0
28%
24%
17%
13%
13%
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 2019, Brambles’ total committed credit facilities
were US$3.8 billion.
The average term to maturity of Brambles’ committed credit
facilities as at 30 June 2019 was 4.0 years (2018: 4.5 years).
In addition to these facilities, Brambles has entered into
operating leases for office and operational locations and certain
plant and equipment to achieve flexibility in the use of its assets.
The estimated value of these leases to be recognised as a lease
liability on Brambles’ balance sheet as at 1 July 2019 is between
US$740 - US$760 million. The rental periods vary according to
business requirements.
8 FY19 based on Continuing operations. FY18 based on reported financials.
13
Operating & Financial Review Key Performance Drivers and Metrics–Continuing Operations
4,018
Brambles monitors its performance and value creation through
a number of financial and non-financial metrics. These include:
4,006
Sales Revenue Growth9
Key Drivers
• Like-for-like volume growth in line with economic/industry trend
Sales revenue growth
4,006
4,006
4,018
4,018
4,133
4,133
4,470
4,595
4,133
4,470
4,470
4,595
4,595
• Expansion with new and existing customers
• Movements in pricing and changes in product/customer mix
Sales revenue growth
Sales revenue growth
5-Year Performance
Sales revenue of US$4,595.3 million in FY19 reflected a five-year compound annual
growth rate of 6% at fixed 30 June 2018 FX rates. Growth reflects continued
expansion with both new and existing customers, new market entry, expansion of
the core product offering and price realisation in both mature and emerging markets
in response to increased inflation and a higher cost-to-serve.
Underlying Profit9
Key Drivers
• Transport, logistics and asset management costs (including external factors such
as third-party logistics and fuel prices)
• Plant operating costs in relation to management of service centre networks and
the inspection, cleaning and repair of assets (including labour costs and raw
material costs)
• Other operational expenses (primarily overheads such as selling, general and
Underlying Profit
administrative expenses)
• Depreciation as well as provisioning for irrecoverable pooling equipment
5-Year Performance
Underlying Profit of US$803.7 million in FY19 reflected a five-year compound annual
growth rate of 1% at fixed 30 June 2018 FX rates. While sales growth was a strong
contributor to profit growth, Underlying Profit growth was below the rate of sales
growth due to continued direct cost pressures in the CHEP business, and increased
investment in BXB Digital.
Underlying Profit
Underlying Profit
Safety
Brambles’ Zero Harm Charter states that everyone has the right to be safe at work and
to return home as healthy as they started the day.
5-Year Performance
Brambles gauges its safety performance through the Brambles Injury Frequency Rate
(BIFR), which measures work-related incidents resulting in fatalities, lost time, modified
duty or medical treatment per million hours worked.
In FY19, Brambles missed its year-on-year improvement target, recording a BIFR of
5.9 with no work-related fatalities. This increase in BIFR is the result of a renewed
emphasis on full reporting and more accurate incident classification, as opposed to
an indication of greater risk.
Safety
To drive a step change in its safety performance, Brambles has launched an updated
strategy called “Safety Differently”, which seeks to address the residual risks across
its operations.
In July 2019, Brambles recorded a fatality at its Bellpuig plant in Spain. A thorough
investigation is being undertaken and key findings will be used to enhance Brambles’
safety processes and procedures.
Safety
Safety
Brambles’ Zero Harm Charter and safety targets align with SDG 3: Good Health
and Wellbeing.
FY15
FY16
FY17
FY18
FY19
(US$m)
FY15
FY15
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
(US$m)
(US$m)
838
879
823
826
804
838
838
879
879
823
823
826
826
804
804
FY15
FY16
FY17
FY18
FY19
(US$m)
FY15
FY15
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
(US$m)
(US$m)
14.2
14.2
14.2
FY15
10.3
10.3
10.3
FY16
7.1
5.0
5.9
FY17
7.1
7.1
FY18
5.0
5.0
FY19
5.9
5.9
FY15
FY15
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
9 Note - Corporate costs for all years have been adjusted to reflect the impact of the IFCO divestment. FY15-FY17 exclude the impact of new accounting standards AASB 9 Financial
Instruments and AASB 15 Revenue from Contacts with Customers.
14
Return on capital Invested (ROCI) and Brambles Value Add
Return on capital Invested (ROCI) and Brambles Value Add
Return on capital Invested (ROCI) and Brambles Value Add
Cashflow from Operations
Sustainability - Material sourcing
Sustainability - Material sourcing
Sustainability - Material sourcing
23.6
24.6
23.6
23.6
24.6
24.6
20.3
20.1
19.5
20.3
20.3
20.1
20.1
19.5
19.5
FY15
FY16
FY17
FY18
FY19
FY15
FY15
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
(%)
(%)
(%)
667
667
667
484
520
484
484
520
520
725
725
725
432
432
432
(US$m)
(US$m)
(US$m)
FY15
FY15
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
97%
97.3% 99.1%
99.4%
99.7%
97%
97%
43%
97.3% 99.1%
97.3% 99.1%
48%
56%
99.4%
99.4%
67%
62%
99.7%
99.7%
67%
67%
62%
62%
43%
43%
48%
48%
56%
56%
FY15
FY16
FY17
FY18
FY19
% of certified sources
% of chain of custody
FY15
FY15
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
% of certified sources
% of certified sources
% of chain of custody
% of chain of custody
Cashflow from Operations
Cashflow from Operations
FY15
FY16
FY17
FY18
FY19
Operating & Financial Review 4,006
4,006
4,018
4,018
4,133
4,133
4,470
4,470
4,595
4,595
Sales revenue growth
Sales revenue growth
4,006
4,018
4,133
4,470
4,595
Sales revenue growth
FY15
FY15
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
FY15
FY16
FY17
FY18
FY19
838
838
879
879
823
823
826
826
804
804
838
879
823
826
804
FY15
FY15
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
FY15
FY16
FY17
FY18
FY19
(US$m)
(US$m)
(US$m)
(US$m)
(US$m)
(US$m)
14.2
14.2
14.2
10.3
10.3
FY15
FY15
10.3
FY16
FY16
7.1
7.1
FY17
FY17
7.1
5.0
5.0
5.9
5.9
FY18
FY18
FY19
FY19
5.0
5.9
FY15
FY16
FY17
FY18
FY19
Underlying Profit
Underlying Profit
Underlying Profit
Safety
Safety
Safety
Return on Capital Invested (ROCI)9
Key Drivers
• Underlying Profit performance
• Capital expenditure on pooling equipment to support growth in the business,
which is primarily dependent on the rate of sales growth. Brambles’ main
capital cost exposures are raw materials, primarily wood
• Asset control factors i.e the amount of pooling equipment not recoverable or
Return on capital Invested (ROCI) and Brambles Value Add
Return on capital Invested (ROCI) and Brambles Value Add
repairable each year (and therefore requiring replacement)
• Frequency with which customers return or exchange pooling equipment
5-Year Performance
The trend in Brambles’ ROCI metric over the five-year period reflects the
Underlying Profit performance and increased Average Capital Invested,
largely to support growth and supply chain efficiency initiatives including
the US accelerated automation and lumber procurement programmes.
Return on capital Invested (ROCI) and Brambles Value Add
Cash Flow from Operations9
Key Drivers
• Profitability
• Capital expenditure
• Movements in working capital
Cashflow from Operations
Cashflow from Operations
5-Year Performance
The five years to FY19 was a period of solid overall EBITDA growth, supported by
significant investment in capital expenditure to support growth, as well as improved
working capital management and increased collections of asset compensations.
FY16 performance was impacted by a one-time change to payment processes that
increased working capital, as well as increased capital expenditure to support high
levels of growth in that year. The strong FY18 performance included strong working
capital management initiatives and US$150 million cash inflow related to the repayment
of the HFG joint venture shareholder loan. FY19 cash flow includes increased capital
investment to support strong top line growth and to deliver on a number of efficiency
programmes – including the US automation and procurement programmes with over
US$70 million of cash outflows.
Cashflow from Operations
Material Sourcing
Ongoing secure supply of materials for the production and repair of pooling equipment,
in particular wood used for pallets, is critical to Brambles.
Sustainability - Material sourcing
Sustainability - Material sourcing
5-Year Performance
Brambles aims to source 100% of timber from certified sources by 2020. For the FY19
period, 99.7% of wood purchased was from third-party certified sources, representing
a small but important 0.3% improvement towards its goal compared to FY18 results.
The remaining 0.3% of lumber purchases were subject to Brambles’ stringent 24-step
due diligence process confirming that harvesting operations did not contribute to
deforestation or that lumber was not purchased from controversial regions or sources.
Sustainability - Material sourcing
23.6
23.6
24.6
24.6
23.6
24.6
20.3
20.3
20.1
20.1
19.5
19.5
20.3
20.1
19.5
FY15
FY15
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
(%)
(%)
FY15
FY16
FY17
FY18
FY19
667
667
667
(%)
484
484
520
520
484
520
725
725
725
432
432
432
FY15
FY15
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
(US$m)
(US$m)
FY15
FY16
FY17
FY18
FY19
(US$m)
97%
97%
97.3% 99.1%
97.3% 99.1%
99.4%
99.4%
99.7%
99.7%
56%
56%
48%
97.3% 99.1%
48%
99.4%
99.7%
67%
67%
62%
62%
67%
62%
56%
48%
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
97%
43%
43%
43%
FY15
FY15
Brambles believes that increasing the volume of wood purchased under the Chain of
Custody (CoC) certification helps improve the transparency of forestry supply chains.
Currently CoC is not available in all regions; therefore Brambles’ aim is to increase
CoC volumes each year as the programme expands. In FY19, CoC result dropped
from 67% in FY18 to 62.3%, due to a supplier in LATAM whose CoC certificate lapsed.
The supplier’s certificate has been reinstated ensuring that FY20 volumes meet
CoC requirements.
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.
% of certified sources
% of certified sources
% of chain of custody
% of chain of custody
FY15
FY16
FY17
FY18
FY19
% of certified sources
% of chain of custody
15
Operating & Financial Review Strategic and Operating Risks
Brambles’ risk management framework 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, targeted
diversification in opportunities with attractive long-term
characteristics and the adoption of plant and automation
project in CHEP Americas
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
• Adoption of pricing and cost-recovery strategies to mitigate
the impact of cost inflation
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
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
• Dedicated asset control teams across all business units and
the 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
• 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
16
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
• Implementation of programmes to facilitate manufacturer
advocacy of Brambles’ pooled solutions
• Brambles has implemented an IT security strategy 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 and internet filtering, anti-virus software,
multi-factor authentication, dedicated security architect
personnel, security awareness and training, as well as the
use of penetration testing across its network
• Brambles uses the National Institute of Standards and
Technologies Cyber Security Framework to monitor, track,
and report progress to senior management
• During the Year, Brambles adopted a Data Classification and
Handling Policy supported by mandatory training. The policy
includes guidelines on the types of data and protection
protocols for each type
• Preventative controls are also 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
• In FY18, Brambles established a Brexit Taskforce reporting
to a Brexit Steering Group to identify risks associated
with Brexit and steps which should be taken to mitigate
those risks
• Mitigation plans have been put in place and, where
necessary, budgeted for, to manage those risks
• Adoption of regional and global dedicated timber
procurement teams to manage timber procurement and to
mitigate timber supply risks
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
IT data
governance
Hard Brexit
Timber Supply
Brambles relies on its IT systems, and the
data stored on those systems, to operate its
business. The identification and classification
of Brambles’ key data assets is a key component
of its capacity to effectively carry on its
businesses and to its cyber security strategy.
The proper identification and classification
of data assets allows Brambles to prioritise
security technology implementations that offer
targeted and appropriate protection. Incomplete
or unsuitable identification and classification
of key data assets could result in the misuse,
loss of or unauthorised access to sensitive
data due to incorrect storage, processing or
disposal procedures. This, in turn, could result
in financial loss, operational disruption and/or
reputational damage
During the Year, the risk of the United Kingdom
exiting the European Union (EU) without reaching
an agreement with the EU on the terms of that
exit (known as a “Hard Brexit”) has increased.
A Hard Brexit could result in Brambles incurring
increased capital and operating expenses
relating to asset efficiency, heat treatment of
pallets, raw materials, transport and customers’
clearance costs as well as disruption to
both Brambles’ and its customers’ businesses
in Europe
Access to sustainably certified sources of
timber is essential for Brambles to carry on its
businesses. A concentration of timber suppliers
in any region, or a shortage of available certified
sources of timber, could adversely impact
Brambles’ ability to maintain its timber pallet
pool at levels that will enable it to meet customer
demand for those products. This could result
in loss of customers and/or market penetration
and adversely impact Brambles’ financial
performance
17
Operating & Financial Review Strategic and Operating Risks continued
Risk
Implication
Mitigating actions
Regulatory
compliance
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
• A 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
• Adoption of development programmes for management,
Digital
disruption
Safety
The development of cost effective digital supply
chain solutions has the potential to materially
change supply chain dynamics. If a third party
were to develop such solutions before Brambles,
it could adversely impact Brambles’ business
models. This could result in loss of customers
and/or market penetration and adversely impact
Brambles’ financial performance
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
leadership and functional expertise through all
employment levels
• Formal mentoring programmes offered to all employees
• Brambles is innovating, developing, testing and refining
digital solutions which have the potential to provide
commercial digital services to its customers and to assist
its businesses to more effectively and efficiently manage
equipment losses and asset efficiency
• A Zero Harm Charter, which states that everyone has the
right to 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
Managing climate-related risks at Brambles
Brambles recognises its external operating context has and is changing in response to climate-related issues.
During 2019, Brambles commenced the process of assessing its exposure to climate-change risks by reference to the
recommendations of the Financial Stability Board’s TCFD. Subsequent to commencing this work, the 4th Edition of the
ASX Corporate Governance Principles and Recommendations was issued and included new commentary on Recommendation
7.4 suggesting that listed entities should consider reporting their exposure to climate-change risk by reference to the TCFD.
As part of this process, climate-related risk has been identified as a stand-alone risk and will be reassessed using Brambles’ risk
management framework and approach. In addition, Brambles is evaluating existing strategic and operating risks in the context
of climate-related risk in its external operating environment. Further details on Brambles’ approach to climate-related risks are
set out on page 12.
18
Operating & Financial Review Operating & Financial Review
1. Financial Review
1.1 Group Overview
1.1.1 Summary of 2019 Financial Results
US$m
(Continuing operations)
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Sales revenue
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Corporate
Underlying Profit
Significant Items
Operating profit
Net finance costs
Tax expense
Profit after tax from continuing operations
Profit 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)
FY19
2,287.8
1,849.1
458.4
4,595.3
298.4
441.8
118.3
(54.8)
803.7
(62.8)
740.9
(88.5)
(198.3)
454.1
1,013.6
1,467.7
4,130.6
19.5%
1,593.4
92.1
28.5
FY18
2,179.3
1,815.9
475.1
4,470.3
334.6
445.6
111.7
(65.8)
826.1
(47.4)
778.7
(103.4)
(121.8)
553.5
139.2
692.7
4,115.4
20.1%
1,591.2
43.5
34.8
Change
Actual FX
5%
Constant FX
7%
2%
(4)%
3%
(11)%
(1)%
6%
17%
(3)%
(5)%
14%
(63)%
(18)%
112%
0%
8%
3%
7%
(9)%
5%
14%
13%
2%
0%
10%
(68)%
(13)%
120%
5%
(0.6)pp
(0.6)pp
112%
(18)%
119%
(13)%
Note on FX: The variance between actual and constant FX
performance reflects the strengthening of Brambles' reporting
currency, the US dollar, relative to other operating currencies,
particularly the Euro, British pound and Australian dollar.
IFCO divestment: In May 2019, Brambles completed the
US$2.5 billion sale of its IFCO RPC business. The post-tax gain
on sale of US$945.7 million and IFCO's FY19 and FY18 results
have been recognised in discontinued operations.
Sales revenue from continuing operations of
US$4,595.3 million, increased 7% at constant currency and
exceeded the Group's stated objective of annual revenue
growth in the mid-single digits, with strong volume growth
being achieved despite higher pricing across the Group.
input-cost inflation, particularly third-party transport, and
cost-to-serve increases.
Underlying Profit of US$803.7 million increased 2% at
constant currency as the sales contribution to profit and
productivity gains were partially offset by Group-wide
inflationary pressures and higher costs in CHEP Americas.
Transport costs increased in both Europe and the US, in FY19,
with the rate of increase moderating in the second half of the
Year following high levels of inflation in the second half
of FY18.
In addition to inflationary cost pressures across the Group, the
CHEP Americas segment continued to be impacted by
broader cost challenges in each major business:
Expansion with new and existing customers delivered volume
growth of 4%, with strong contributions from net new
business wins in Europe and the US pallets business. Like-for-
like volume growth moderated in the second half of the Year,
with the slowdown particularly evident in the European pallet
and automotive businesses.
-
Price realisation delivered 3% revenue growth across the
Group driven by pricing initiatives in response to high levels of
-
In the US, the business experienced higher transport and
pallet repair costs associated with changes in retailer and
customer behaviour, inefficiencies related to network
capacity constraints and US pallet quality investment.
The US accelerated automation and lumber procurement
programmes remain on track to deliver progressive
efficiency benefits over FY20, FY21 and FY22;
In Canada, the conversion to a mixed stringer and block
pallet pool resulted in additional pallet repair and
19
Operating & Financial Review
Operating & Financial Review – continued
-
transport costs as well as higher ongoing operating
costs; and
In Latin America, profitability was impacted by increased
costs to recognise a higher risk of loss in the region,
notwithstanding improved asset management and a
reduction in the capital intensity of the business during
the Year. To address this higher cost-to-serve, the
business has implemented pricing initiatives and invested
in resources to support a new asset management
framework focused on increased collections, improved
asset controls and the active reduction in flows to high-
risk areas of the supply chain.
Operating profit from continuing operations of
US$740.9 million was in line with the prior year as growth in
Underlying Profit was offset by a US$15.4 million increase in
pre-tax Significant Items expense.
Current-Year Significant Items of US$62.8 million included
US$42 million of IFCO-related restructuring and other costs,
and a US$21 million expense associated with asset write-offs
in Latin America, reflecting assets transferred to higher-risk
supply chains in prior years which are now considered at risk
of being irrecoverable.
IFCO-related items included restructuring costs of
US$30 million and early debt repayment costs of
US$12 million related to the US$500 million 144A April 2020
bond, which was repaid with IFCO sale proceeds in July 2019.
The interest expense benefits and cash outflows associated
with this early repayment will be recognised in FY20.
Profit after tax from continuing operations of
US$454.1 million decreased 13% at constant FX as higher tax
expense more than offset a reduction in net finance costs,
largely driven by 2018 debt refinancing at lower interest rates.
Tax expense of US$198.3 million increased 68% at constant
currency, reflecting the cycling of a US$65.2 million one-off
credit in the prior year relating to US tax reform which was
reported as a Significant Item. FY19 tax expense includes
higher charges related to the introduction of the
US Base Erosion and Anti-Abuse Tax (BEAT), which was also a
key driver of the increase in the Group's effective tax rate on
Underlying Profit from 27.4% in FY18 to 29.0% in FY19.
Net finance costs of US$88.5 million decreased by
US$14.9 million, reflecting the lower coupon rate on the
€500m European medium-term note (EMTN) issued in 1H18
and lower debt balances following the divestments of HFG,
CHEP Recycled and IFCO. These decreases were partly offset
by lower interest income following the repayment of the HFG
shareholder loan in 2H18.
Basic earnings per share from continuing operations was
US28.5 cents, down 18%, or 6 cents at actual FX rates,
reflecting the US$65.2 million Significant Items tax credit in
the prior year which accounted for 4 cents of the decline. The
balance of the decrease largely related to foreign exchange
movements. In constant currency terms, the decline was 13%
as higher Significant Items expenses offset earnings growth in
the current fiscal year.
20
Average Capital Invested (ACI) of US$4,130.6 million
increased 5% at constant currency, largely due to capital
expenditure in the year to support: volume growth in pallets
and the European automotive business; Brexit-related
increases in retailer inventory levels; and ongoing investment
in supply chain programmes including the US automation and
lumber projects funded by FY18 asset actions.
These increases in capital expenditure were partially offset by
a reduction in ACI following the exit of the HFG JV and
repayment of the HFG shareholder loan in 2H18.
Return on Capital Invested was 19.5%, a reduction of
0.6 percentage points at constant currency, reflecting the
Underlying Profit performance and ACI balance increases in
the current Year.
Cash Flow Reconciliation
FY19
803.7
484.3
FY18
Change
826.1
464.3
(22.4)
20.0
US$m
Underlying Profit
Depreciation and
amortisation
EBITDA
1,288.0 1,290.4
Capital expenditure
(989.4)
(935.6)
US supply chain investment
(73.0)
(17.0)
(2.4)
(53.8)
(56.0)
Proceeds from HFG joint
venture loan
Proceeds from sale of PP&E
Working capital movement
IPEP expense
Other
-
150.0
(150.0)
102.5
(13.2)
127.1
(10.2)
103.7
(1.2)
46.1
(59.3)
101.9
(14.7)
25.2
4.5
Cash Flow from Operations
431.8
724.8
(293.0)
Significant Items
Discontinued operations
(10.8)
135.4
(22.2)
11.4
164.0
(28.6)
Financing costs and tax
(317.9)
(312.2)
(5.7)
Free Cash Flow
Dividends paid
Free Cash Flow after
dividends
238.5
554.4
(315.9)
(328.1)
(352.0)
23.9
(89.6)
202.4
(292.0)
Free Cash Flow after dividends was a deficit of
US$89.6 million, reflecting a US$73 million investment in
US supply chain efficiency programmes (including accelerated
automation and lumber procurement initiatives) which was
funded by FY18 asset actions and the impact of only 11
months of IFCO cash flows.
Compared to the prior year, FY19 cash flow decreased
US$292.0 million. US$206 million of this decrease reflected
proceeds from the HFG shareholder loan repayment of
US$150 million included in the FY18 cash flow, and an
incremental investment in US supply chain efficiency
programmes of US$56 million. An additional US$60 million of
the year-on-year decline relates to the reversal of FY18
working capital timing benefits as previously advised to the
market at the FY18 result.
Operating & Financial Review
Operating & Financial Review – continued
Capital expenditure (cash basis and including US supply chain
investment) of US$1,062.4 million increased US$109.8 million,
partly driven by the timing of capital payments.
Canada pallets sales revenue of US$265.0 million increased
5% at constant currency, reflecting both strong price
realisation and expansion with new and existing customers.
On an accruals basis, capital expenditure increased
US$91.2 million at constant currency, notwithstanding
US$34 million of benefits from improved asset efficiency.
The increase reflects:
-
-
-
-
US$63 million of additional capital expenditure to
support volume growth, particularly in the EMEA
automotive business;
US$18 million of additional capital expenditure to
support Brexit-related retailer stocking;
US$37 million increase in non-pooling capex driven by
accelerated investment in the US automation and lumber
procurement projects, partly offset by lower spend across
the Group; and
US$8 million increase in unit pallet costs due to lumber
inflation.
The US$23.9 million decrease in dividend payments, driven by
a weaker Australian dollar, and the US$11.4 million decrease
in Significant Items outflows collectively offset:
-
-
A US$28.6 million decrease in cash inflows from
discontinued operations reflecting 11 months of IFCO
trading results in the current year compared to a 12-
month contribution in FY18; and
A US$5.7 million increase in financing and tax outflows as
a higher Australian tax instalment rate and the loss of
interest income following the repayment of HFG
shareholder loan in FY18 offset interest expense savings
following favourable debt refinancing in FY18.
Segment Analysis
1.1.2 CHEP Americas
US$m
Sales revenue
FY19
FY18
2,287.8 2,179.3
Change
Actual
FX
5%
Constant
FX
7%
Underlying Profit
298.4
334.6
(11)%
1,942.6
1,897.0
2%
(9)%
5%
Latin America pallets sales revenue of US$312.8 million
increased 17% at constant currency, driven by volume growth
across the region and pricing actions taken primarily in the
fourth quarter of the Year to cover a higher cost-to-serve,
particularly in Mexico.
Containers sales revenue was US$58.9 million, up 10% at
constant currency, driven by continued growth in the
North American IBC and automotive businesses.
Profit
Underlying Profit of US$298.4 million declined 9% at constant
currency as the US$88 million sales contribution to profit was
more than offset by:
- Net transport cost increases of US$30 million, largely
driven by inflation and additional transport miles
associated with changes in customer and retailer
behaviour and increased relocations driven by network
capacity constraints;
- Net plant cost increases of US$34 million, reflecting
higher pallet repair and handling costs due to inflation,
investments in US pallet quality and the impact of the
stringer-to-block pallet transition in Canada, which
reflects a higher damage rate on the block pallet pool;
- Depreciation cost increases of US$16 million, in line with
growth of the pallet pool and investments in US supply
chain programmes; and
- Other cost increases of US$37 million, mainly reflecting
IPEP increases of US$18 million predominantly in
Latin America and investment in additional resources
across the region to support growth, network efficiencies
and improved commercial and asset management
outcomes.
Return on Capital Invested
Return on Capital Invested of 15.4% decreased
2.2 percentage points at constant currency due to lower
profitability in the region and increased capital investments to
support volume growth and US supply chain programmes.
Average Capital
Invested
Return on
Capital Invested
15.4%
17.6%
(2.2)pp
(2.2)pp
1.1.3 CHEP EMEA
US$m
Sales revenue
Pallets sales revenue of US$2,228.9 million increased 7% at
constant currency, reflecting strong volume and pricing
growth across the region.
US pallets sales revenue of US$1,651.1 million increased 5%:
-
-
Pricing growth of 3% was driven by pricing actions to
recover higher costs-to-serve. Effective price, which
includes transport and lumber surcharges that are
recognised as an offset to costs, increased by 4%;
Like-for-like volume growth of 1% was driven by the
grocery and beverage sectors and reflected a moderation
in growth during the second half of the Year; and
- Net new business growth of 1% was primarily driven by
new customer contracts won in the second half of FY19.
Sales revenue
FY19
FY18
1,849.1 1,815.9
Underlying Profit
441.8
445.6
(1)%
1,776.4
1,689.7
5%
Change
Actual
FX
2%
Constant
FX
8%
5%
12%
24.9%
26.4%
(1.5)pp
(1.7)pp
Average Capital
Invested
Return on Capital
Invested
Sales revenue
Pallets sales revenue of US$1,558.9 million increased 7% at
constant currency, reflecting the impact of prior and current
year customer wins in Europe and inflation-related pricing
actions across the region.
21
Operating & Financial Review
Change
Actual
FX
(4)%
Constant
FX
3%
6%
(3)%
14%
3%
Sales revenue
FY19
458.4
FY18
475.1
Underlying Profit
118.3
111.7
424.5
437.8
Average Capital
Invested
Return on Capital
Invested
27.9% 25.5%
2.4pp
2.8pp
Sales revenue
Pallets sales revenue was US$343.2 million, up 4% at constant
currency, reflecting solid pricing and like-for-like volume
growth in the Australian pallet business.
RPC and Containers contributed US$115.2 million to sales
revenue, up 2% at constant currency. Growth was driven by
the Australian and New Zealand RPC business, which delivered
solid price and volume growth.
Profit
Underlying Profit of US$118.3 million increased 14% at
constant currency driven by sales mix benefits, effective cost
control, and a number of one-off items including a
government infrastructure grant in Asia of US$1 million and
the benefits of asset recovery outcomes more than offset
transport and wage inflation across the region.
Return on Capital Invested
Return on Capital Invested was 27.9% up 2.8 percentage
points at constant currency, reflecting the improvement in the
Underlying Profit margin.
Operating & Financial Review – continued
Europe pallets sales revenue of US$1,353.2 million increased
5% at constant currency:
1.1.4 CHEP Asia-Pacific
US$m
- Net new business growth of 4% reflected strong
-
-
contributions of current and prior year wins particularly in
Southern Europe and Central and Eastern Europe;
Price growth of 1% was driven by annual contract
indexation across the region and an out-of-cycle
surcharge in the second half of the Year to recover
ongoing transport cost increases; and
Like-for-like volumes were in line with prior year,
reflecting a slowdown in macroeconomic conditions
across the region in the second half of the Year.
India, Middle East, Turkey and Africa (IMETA) pallets sales
revenue of US$205.7 million, an increase of 14%, reflecting
strong price and volume growth in the region.
RPC and Containers contributed US$290.2 million to sales
revenue, up 13% at constant currency, largely due to strong
volume growth in the automotive and Kegstar businesses
driven by new business wins. Like-for-like volume growth in
the automotive business moderated in the second half of the
Year in line with broader automotive industry trends.
Profit
Underlying Profit was US$441.8 million, up 5% at constant
currency, as the strong contribution from revenue growth to
profit of US$73 million was partially offset by:
- Net transport cost increases of US$12 million, reflecting
third-party transport inflation and additional relocation
costs due to Brexit-related pallet pool inefficiencies;
- Net plant cost increases of US$9 million as higher pallet
repair and handling costs were only partly offset by
efficiency savings;
- Depreciation increases of US$18 million to support
volume growth and Brexit-related retailer stocking; and
- Other indirect cost increases of US$14 million due to
higher IPEP charges, reflecting higher unit pallet costs
and increased losses in the IMETA region.
Return on Capital Invested
Return on Capital Invested was 24.9%, down 1.7 percentage
points at constant currency, largely reflecting the impact of
macroeconomic conditions on operating costs and increased
investment to support growth and Brexit-related retailer
stocking.
22
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, 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.
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, chair of its Remuneration
Committee and its Senior Independent Director. He holds an MA (Hons) Chemistry from Oriel
College, Oxford, and is a Fellow of the Institute of Chartered Accountants in England and Wales.
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 and a Strategic Advisor to
Altimetrika, a US based digital and IT solutions 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
Programme at MC London Business School in the United Kingdom.
Elizabeth Fagan Non-Executive Director (Independent)
Member of the Audit Committee
Joined Brambles as a Non-Executive Director in June 2018. Elizabeth has extensive experience in the
international retail sector. She is currently Non-Executive Chairman of Boots UK & Ireland. Previously,
she was Senior Vice President and Managing Director of Boots, leading all Boots businesses across
the UK and the Republic of Ireland. Prior to that, Elizabeth was Senior Vice President, Managing
Director, International Retail for Walgreens Boots Alliance, from the Company’s creation in December
2014 to 2016, Marketing Director of Boots and Managing Director of Boots Opticians, and 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.
23
Board & Executive Leadership Team
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.
David Gosnell Non-Executive Director (Independent)
Member of the Audit and Nominations Committees
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 H.J. 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.
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.
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
OneMarket Limited. Previously, Brian was a Non-Executive Director of Commonwealth Bank of
Australia, at which he was Chairman of its Audit Committee. 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.
24
Board & Executive Leadership Team
Board & Executive Leadership Team – continued
Jim Miller Non-Executive Director (Independent)
Member of the Remuneration Committee
Joined Brambles as a Non-Executive Director in March 2019. Jim has extensive operational and cross
functional supply-chain experience in digital technology. He is currently a Non-Executive Director of
Wayfair Inc. He has taken a role as interim Chief Technology Officer with Wayfair pending the
appointment of a full-time person in that role, which is expected to take place in four to six months'
time. In addition, Jim is currently a Non-Executive Director of The RealReal, Inc., also a US e-
commerce company. Jim has held a number of senior executive roles including Vice President,
Worldwide Operations for Google Inc from 2010 to 2018, where he was responsible for global
operations, planning, supply chain and new product introduction for Google’s IT infrastructure and
Google Fiber. Previously, he was Executive Vice President, Industrial, Automotive and Multi-Media for
Sanmina Corporation from 2009 to 2010, where he was responsible for its industrial, clean tech,
multimedia and automotive businesses. Prior to that, he held various executive roles for Cisco
Systems, Vice President Global Supply Chain for Amazon where he was responsible for the inception
of its supply-chain organisation. He has also held various executive roles at IBM and Intel. Jim holds a
Bachelor of Science, Aerospace Engineering from Purdue University and a Master of Science and
Engineering and a Master of Science and Management from the Massachusetts Institute of
Technology.
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.
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.
25
Board & Executive Leadership Team
Board & Executive Leadership Team – continued
Executive Leadership Team
Graham Chipchase Chief Executive Officer
Chairman of the Executive Leadership Team
(See biography on page 23.)
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; Senior Vice President Supply Chain Europe and 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,
Madridm and a Diploma of Manufacturing and Production Management.
Phillip Austin President, CHEP 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.
Patrick Bradley Group Senior Vice President, Human Resources
Joined Brambles in 2018 as Group Senior Vice President, Human Resources. Before joining Brambles,
Patrick was the Human Resources Director at BT Group, the UK’s largest fixed communications
network, responsible globally for employee relations, reward, pensions, organisational design and
efficiency. Prior to that, he was the Chief Human Resources Officer at EE, the UK mobile
telecommunications operator, when it was acquired by BT. He has also held human resources
leadership roles at Lloyds Banking Group and Atos Origin. He has led multiple workforce and human
resources programmes to improve customer service capabilities, organisational culture and employee
engagement. He holds a Bachelor of Law from the University of Leeds.
David Cuenca President, CHEP Latin America
Joined Brambles in 2000 and was appointed President, CHEP Latin America in 2018. At Brambles,
David has held several leadership roles, ranging from Country General Manager of CHEP in Central
Europe; Vice President and Country General Manager in CHEP Spain and Portugal; Vice President of
CHEP Southern Europe; and his current role in Latin America. David is a Spanish citizen, and holds a
Business Studies degree from the University of Barcelona (UB). He has also completed a General
Management Programme at the IESE Business School.
26
Board & Executive Leadership Team
Board & Executive Leadership Team – continued
Robert Gerrard Group Vice President, Legal and Secretariat
Joined Brambles in 2003 as Senior Counsel, Brambles Group, was appointed Group Company
Secretary in February 2008 and Group Vice President, Legal and Secretariat in February 2017. 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.
Alasdair Hamblin Senior Vice President, Strategy and Innovation
Joined Brambles in March 2018 as Senior Vice President, Group Strategy and became Senior Vice
President, Strategy & Innovation in February 2019. Prior to Brambles, Alasdair held a number of
leadership roles at General Electric from 2011 to 2018, including Strategic Marketing Director for GE
Oil & Gas and leading revenue synergies for its merger with Baker Hughes to form BHGE. He was
previously an Associate Partner at McKinsey & Company and began his career in systems engineering
with Accenture. He holds an MA in Modern History from Balliol College, Oxford, and a Master of
Business Administration from INSEAD.
Rodney Hefford Chief Information Officer
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.
Craig Jones President, CHEP India, Middle East, Turkey and Africa
Joined Brambles in December 2017 as Vice President, EMEA Emerging Markets and was appointed to
his current position of President CHEP IMETA (India, Middle East, Turkey and Africa) in February 2019.
Before joining Brambles, Craig worked for Rexam plc, a UK listed consumer packaging company.
Craig led the Africa, Middle East & Asia region for Rexam and also spent time leading their Russian
business. Craig joined Rexam in 2001 and held a number of senior finance roles across a variety of
geographies. Craig holds a BA (Hons) Business Studies from Cardiff University and is a Fellow (FCMA)
of the Chartered Institute of Management Accountants.
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.
27
Board & Executive Leadership Team
Board & Executive Leadership Team – continued
Nessa O'Sullivan Chief Financial Officer
(See biography on page 25.)
Sarah Pellegrini Vice President, Internal Communications
Joined Brambles in 2018 to lead Group-wide internal communications, and was appointed to the
Executive Leadership Team in 2019. Before joining Brambles, Sarah oversaw employee
communications for Qantas’ global operations, and has held corporate communications roles in
international businesses including Arrium and Foster’s Group in Australia and Rexam plc, SABMiller
and BBC Worldwide in the UK. Sarah began her career as a journalist for News Limited after gaining a
Bachelor of Arts (Journalism) from RMIT University.
Michael Pooley President, CHEP Europe
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 re-joining Brambles in 2016, 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.
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.
28
Board & Executive Leadership Team
Directors’ Report – Remuneration Report
Executive Summary
Business Performance
Remuneration for senior executives for the financial year ended 30 June 2019 (Year) reflected Brambles' results and continued
execution of Brambles' business strategy, as detailed in the Operating & Financial Review on pages 6 to 22.
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 23.8% to 59.6% 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) share awards granted during September 2016 had a three-year performance period ending 30 June
2019. 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 0.0% vesting for this
component; and
Brambles' sales revenue compound annual growth rate (CAGR) was over 5.0% but Brambles Value Added (BVA) was below the
US$950 million threshold, resulting in 0.0% vesting for this component.
Accordingly, 0.0% of total LTI awards granted in FY17 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 Executive Directors was 2.5%. The average increase for ELT members for
the Year was 3.1%, ranging from 2.4% to 4.8%. As a part of retention arrangements for IFCO executives as a result of the IFCO
separation, a separate increase was provided to Mr Orgeldinger. The average increase across the broader employee population was
3.0%. Details of the salaries of key management personnel are set out in Section 6.
Non-Executive Directors' Fees
There has been no increase in Chairman and Non-Executive Director fees since 1 July 2016. There will not be any increase in base fees
for the Chairman or Non-Executive Directors for FY20.
The annual review of Non-Executive Directors' fees carried out during the Year did, however, indicate that supplementary fees for
Committee membership had fallen below the Australian market.
Accordingly, the review recommended an increase in the fee supplement for members of the Audit and Remuneration Committee
from A$10,000 to A$25,000. The increase was effective from 1 July 2019 and brings the payment in line with the Australian market.
Non-Executive Director fees are detailed in Section 7.1. The next fee review will be carried out during FY20. Any fee increase arising
from that review will take effect from 1 July 2020.
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 that the current approach continues to strongly align
executives' interests with those of the Company and its shareholders. A key focus of the annual review is to provide confirmation that
the Company's remuneration structure and policy continue to provide alignment with the Company's strategic and business
objectives.
Two remuneration policy changes have been identified and, although not required, these will be submitted for shareholder approval
at the 2019 AGM. The changes will, subject to that approval, take effect for STI and LTI share awards granted after the AGM and are
detailed in Section 2.1 of this report. They include:
-
The introduction of a one-year holding lock on the LTI share awards commencing from the date such awards vest. As these
awards have a three-year performance period, the effect of the holding lock is that executives will not receive the full benefit of
those awards for a four-year period from the date they are granted; and
- Holders of STI share awards will receive the equivalent of dividends, which would otherwise accrue to the underlying shares,
subject to those awards vesting.
Contents
1. Background
2. Remuneration Policy and Framework
3. Remuneration Structure
4. Performance of Brambles and At Risk Remuneration
5. Employee Share Plan
6. Executive Directors and Disclosable Executives
7. Non-Executive Directors’ Disclosures
8. Remuneration Governance
29
Directors’ Report – Remuneration Report Directors’ Report – Remuneration Report
1. Background
This Remuneration Report provides information on Brambles’
Remuneration Policy, the link between that policy and the
Group's business strategy and performance. 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 fall within this definition are those set
out in Section 6.
In this report, executives falling 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
the 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.
1.1 Basis of Valuation of STI and LTI Share Awards
Unless otherwise specified, the fair values of the STI and LTI
share awards included in the tables in this report have been
estimated by EY 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 20 on pages 96 and 97 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 five-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.
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 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 FY19, a number of changes are
proposed to the remuneration structure. These changes are
detailed below and will be presented for shareholder approval
at Brambles' 2019 Annual General Meeting and implemented
for FY20.
2.1 Proposed Changes to Remuneration Policy
2.1.1 LTI Plan
Brambles' LTI share awards have a three-year Performance
Period, with performance hurdles as defined in Section 3.3.
Currently, subject to the satisfaction of those hurdles, the
awards vest three years from the date of grant and the holders
of those awards can then exercise and sell the underlying
shares that are the subject of those awards.
As a result of the remuneration strategy review, Brambles has
decided to implement a one-year holding lock on any vested
LTI share awards. The holding lock will commence on the
vesting date. LTI share awards will continue to be subject to the
performance hurdles defined in Section 3.3.2. If LTI share
awards vest, they will become available for executives to
exercise and receive dividends. However, they will not be able
to sell the underlying shares (other than to pay any tax which is
levied due to LTI share awards vesting or being exercised) until
one year after vesting. The practical effect of the introduction of
the one-year holding lock is that executives will not receive the
full benefit of their LTI share awards for a period up to four
years, which brings the LTI plan in line with general practices in
the UK and some major Australian companies.
In accordance with Brambles' Performance Share Plan (PSP)
provisions, unvested STI and LTI share awards are subject to
clawback in certain circumstances. Clawback will apply to any
vested LTI share awards post vesting during the holding lock
period.
Financial and strategic personal objectives are agreed at the
start of the financial year and approved by the Board
Remuneration Committee (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.
2.1.2 Dividends on Deferred STI Share Awards
The Committee supports the concept of deferral of part of STI
share awards to create continuing alignment of executive and
shareholder interests.
To facilitate this alignment, executives are required to hold half
of their annual STI award by way of STI share awards which vest
two years from the date of grant. The effect of these “deferred”
STI share awards is that executives do not receive the benefits
which would otherwise accrue to underlying shares (e.g. the
receipt of dividends), notwithstanding that they have, in effect,
earned those shares.
30
Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
Consequently, subject to shareholder approval, Brambles is
proposing to provide the equivalent of dividends for deferred
STI share awards granted after the 2019 AGM. This will be
achieved through a top-up of STI share awards at the end of
the two-year vesting period to the value of the dividends which
would have accrued during that period on the underlying
shares. Where securities law prevents the use of share awards in
this manner, the value of the dividends will be provided
through a cash equivalent.
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 1.1) 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 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.
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 Committee 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 FY19 STI cash award
are set out in Table 3.3.3 and the achievement of those
objectives for FY19 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 1.1) 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). The service and
performance conditions are measured at the end of the three-
year Performance Period.
3.3.1 LTI Share Awards to 2017
LTI share awards granted for FY17-19 Performance Period
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. The matrix for this Performance
Period was set out in the 2017 Remuneration Report.
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.
The use of an international comparator index, the MSCI World
Industrials, reflects the global nature of Brambles' business. The
Company operates in approximately 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 indices is based on the standard ranking approach,
with vesting commencing at the 50th percentile and progressing
to full vesting at the 75th percentile as per the table below.
TSR percentile
% Vesting of shares
Below Threshold
Threshold
Between Threshold
and Maximum
Below 50th
50th
Between 50th and
75th
No vesting
50%
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 FY19-21 and
FY20-22 sales revenue CAGR/ROCI matrices are set out in
Section 4.3.2.
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Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
The reasons why these metrics are used for the LTI share awards performance conditions are set out in Table 3.3.3.
The LTI share award structure is 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
constituents
25% based on Brambles' TSR against ASX100
constituents
25% based on Brambles' TSR against MSCI World
Industrials Index constituents
Internal metric
50% based on
sales revenue CAGR/BVA matrix
50% based on
sales revenue CAGR/ROCI matrix
Performance
conditions
Table 3.3.3 – Remuneration Structure 2019 − 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
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.
Underlying Profit provides a focus on
profitable growth.
Cash Flow from Operations 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 set at the beginning of the
financial year, are approved by the Remuneration
Committee and performance against objective is
assessed by the Remuneration Committee at year
end.
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.
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. two-year deferral).
At Risk Remuneration
STI cash award
financial
objectives
(comprising 80%
of the STI cash
award)
- Underlying Profit
- Cash Flow from
Operations
- Asset efficiency
STI cash award
personal
objectives
(comprising 20%
of the STI cash
award)
STI share award
(deferred equity)
- Safety
- Business strategy
and growth
objectives
- Customer
satisfaction and
retention
- Employee
engagement
As per STI cash
award
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Directors’ Report – Remuneration Report
Performance
conditions
Relative TSR
(comprising half of
the LTI share award)
over the
Performance Period
Remuneration
element
LTI share award
(3-year
Performance
Period)
LTI share awards
granted post
30 June 2019
will have a
three-year
Performance
Period with a
one-year
holding lock
Rationale
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 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.
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.
Performance level required for payment
- Performance will be measured over three years
against constituents of both the ASX100 and
the MSCI World Industrials indices, with each
component measured separately and
comprising 25% of the total LTI award;
- Half of LTI share awards will vest if the
Company's TSR performance over the three-
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 three-year Performance Period; and
- If Brambles’ TSR performance is between these
two levels, vesting will be on a pro-rata
straight-line basis.
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. This allows the Remuneration
Committee to set targets for each LTI share
award that reward strong performance in light of
the prevailing and forecast economic and trading
conditions.
The sales revenue CAGR/ROCI matrix provides
performance focus over a three-year period.
3.4 Remuneration and the Link to Business Strategy
Brambles’ business strategy is set out in the Operating & Financial Review on pages 6 to 22. 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 Underlying Profit as a performance condition for STI cash awards and the use of sales
revenue CAGR 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 outcomes, creation of
shareholder value and the delivery of the Group’s strategy are set out in Section 4.
Definitions of Underlying Profit, ROCI, TSR and CAGR measurements and the methods by which they are calculated are included in
the Glossary.
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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 FY19;
STI cash: the STI cash award received in respect of FY19 performance (see Section 4.2);
STI shares: the STI share award received in respect of FY19 performance, the vesting of which is deferred until 2021 (see
Section 4.2); and
LTI shares: the proportion of the FY17-FY19 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.
Chart 3.5.1- Remuneration Mix
32%
22%
22%
13%
13%
15%
15%
16%
27%
27%
0%
15%
15%
29%
21%
21%
0%
8%
8%
7%
7%
24%
24%
24%
30%
30%
29%
29%
29%
Max Rem
Mix:
CEO; CFO
Actual:
CEO
Actual:
CFO
Max Rem
Mix: Group
President
RPCs
(11 months)
Actual:
Group
President
RPCs
(11 months)
Actual:
President
North
America
Actual:
President
Europe
Max Rem
Mix:
President
North
America
and Europe
EXECUTIVES
Base Salary
STI Cash
STI Shares
LTI
N
O
I
T
A
R
E
N
U
M
E
R
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
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3.6 Clawback of STI and LTI Share Awards
The PSP has included clawback provisions for STI and LTI share 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.
The clawback provisions will also apply to LTI share awards, for grants commencing FY20 that have vested but are subject to a
holding lock as outlined in Section 2.1.1.
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 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.
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4. Performance of Brambles & At Risk
Remuneration
As outlined in the Operating & Financial Review on pages 6 to
22, FY19 financial results for continuing operations were as
shown below:
Financial measure
Sales revenue
Operating profit
Profit after tax
Underlying Profit
Change from
FY18
(constant
currency)
7%
-
(13)%
2%
FY19 result
(US$m)
4,595.3
740.9
454.1
803.7
Brambles' TSR for the three years to 30 June 2019 was 6.94%.
4.1 FY19 STI Awards
The following table summarises the components and weighting
of objectives for the FY19 STI cash awards for Disclosable
Executives:
Disclosable
Executive
Financial objectives
Personal
objectives
Group
Underlying
Profit
Segment
Underlying
Profit
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. Asset efficiency is measured on the basis of
pooling capex to sales percentage for each Business Unit. 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 10%.
4.2 STI Performance Against Financial Objectives
Actual performance against the FY19 STI cash awards' financial
objectives and asset efficiency metrics are summarised in the
following table.
Performance condition1
Level of performance achieved
during the Year2
Brambles Underlying Profit
Achieved Target
Brambles Cash Flow from
Operations
Achieved Target
Brambles Asset Efficiency
Achieved Target
Pallets EMEA Underlying Profit
Between Threshold and Target
Pallets EMEA Cash Flow from
Operations
Did not meet full-year Target;
Met half year target
Pallets EMEA Asset Efficiency
Did not meet Target
Pallets Europe Underlying Profit
Between Threshold and Target
Pallets Europe Cash Flow from
Operations
Did not meet full-year Target;
Met half year target
Pallets Europe Asset Efficiency
Did not meet Target
Pallets North America Underlying
Profit
Below Threshold
Pallets North America Cash Flow from
Operations
Did not meet full-year Target;
Met half year Target
Pallets North America Asset Efficiency Did not meet Target
IFCO RPC Underlying Profit
Between Threshold and Target
IFCO RPC Cash Flow from Operations Did not achieve full-year
Target; Met half year Target
IFCO RPC Asset Efficiency
Achieved Stretch
Note: IFCO RPC performance condition reflect 11-months performance.
4.2.1 Actual STI Cash Payable and Forfeited for FY19
Details of the FY19 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
101%
N O’Sullivan
101%
L Nador
M Pooley
42%
49%
50%
94%
73%
73%
Former Disclosable Executive
90%
90%
75%
75%
60%
66%
32%
36%
40%
34%
68%
64%
W Orgeldinger 83%
76%
90%
54%
46%
Brambles is committed to Zero Harm for its people. During
July 2019, there was a fatality at a Brambles service centre in
Spain. As a consequence of this, the health and safety related
personal objectives for the CEO and the Group President,
Europe were each assessed at 0%. Although the fatality took
place in FY20, it was felt that action was appropriate in respect
to FY19 outcomes.
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 Committee. The
1 Definitions of Underlying Profit and Cash Flow from Operations measurements and the methods by which they are calculated are included in the Glossary.
2 "Achieved Target" reflects performance within +/- 1% of Target.
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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
Customer
satisfaction
Employee
engagement
Measurement
The CEO and 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.
Customer satisfaction is measured through Net
Promoter Score (NPS).
Brambles has recently implemented the latest
technology and a new approach to seeking feedback
from our people. The newly named global employee
survey, The Brambles Pulse, was implemented in April
2019 and will be run twice per year. It allows the
Company to seek feedback from employees, focusing
on easily accessible, real-time insight and powerful
analysis of all our peoples’ experiences and level of
engagement.
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,
IFCO RPC is 50% of his base salary due to his prior contract
arrangements. The maximum value of LTI share awards for the
Group Presidents, Pallets, Europe and North America is 100% of
their respective base salaries.
In all cases, the face value (see Section 1.1) 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
FY19-FY213 and FY20-22
The FY19-21 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 FY19-21.
FY19-21 Sales Revenue CAGR/ROCI LTI Performance Matrix
Vesting %
Sales revenue
CAGR4
3%
4%
5%
6%
7%
16%
-
20%
40%
60%
80%
ROCI
17.5%
20%
40%
60%
80%
100%
19%
60%
80%
100%
100%
100%
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.
Under the FY19-21 LTI Matrix, a sales revenue CAGR of 5.0%
and a ROCI outcome of 17.5% would provide vesting of 60%. A
half point vesting scale applies between the respective sales
revenue and ROCI hurdles. For example, a sales revenue CAGR
of 5.0% and a ROCI outcome of 17.0% would provide vesting
of 50%.
The ROCI outcome will be the average ROCI over the three
years taking into account each year's ROCI result, adding the
three results together and dividing by three to obtain the ROCI
average over the three-year Performance Period.
The FY20-22 sales revenue CAGR/ROCI matrix for LTI share
awards that will be made in October 2019 is set out below. The
matrix encompasses the Group and the applicable Performance
Period is FY20-22. The targets for both the FY19-21 LTI Matrix
and the FY20-22 LTI Matrix exclude the impact of
AASB 16 Leases, which became effective for financial reporting
on 1 July 2019. This has been done to provide a consistent
approach for comparative purposes.
The sales revenue CAGR and ROCI targets in the FY20-22 LTI
Matrix were set by the Committee, having regard to the
Company's Remuneration Policy outlined in section 2 (and,
particularly, aligning executive rewards with the creation of
shareholder value and setting challenging performance targets),
as well as Brambles' three-year plan for its strategic priorities
and financial objectives. The vesting schedule is not intended to
be, and should not be relied on by current or potential
Brambles' shareholders, as a forecast of future performance.
The matrix continues to provide an appropriate balance
between growth and returns well in excess of the cost of
capital.
FY20-22 Sales Revenue CAGR/ROCI LTI Performance Matrix
Vesting %
ROCI
Sales revenue CAGR
16.5%
18.0%
2%
3%
4%
5%
6%
-
20%
40%
60%
80%
20%
40%
60%
80%
100%
19.5%
60%
80%
100%
100%
100%
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.
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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 2019
FY15
FY16
FY17
Relative TSR
Relative TSR
Relative TSR
1 July 2014
16.81 percentage points 0.0% LTI TSR award
1 July 2015
(7.53) percentage points 0.0% LTI TSR award
1 July 2016
6.94 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 2019: vesting if current
performance is maintained until earliest
testing date (% of original award)
FY18
FY18
FY19
FY19
Relative TSR (ASX100)
1 July 2017
Relative TSR (MSCI)
1 July 2017
Relative TSR (ASX100)
1 July 2018
Relative TSR (MSCI)
1 July 2018
N/A6
N/A6
N/A6
N/A6
91.41% LTI TSR awards
96.0% LTI TSR awards
100.0% LTI TSR awards
100.0% 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 2019
FY15
FY16
FY17
Sales revenue
CAGR/BVA
Sales revenue
CAGR/BVA
Sales revenue
CAGR/BVA
1 July 2014
40.0% of LTI sales revenue CAGR/BVA awards
1 July 2015
50.0% of LTI sales revenue CAGR/BVA awards
1 July 2016
0.0% of LTI sales revenue CAGR/BVA awards
The following table provides similar details for LTI share awards for the Performance Period which has not yet expired:
Awards made
during
FY18
FY19
Performance condition
Start of Performance Period
Period to 30 June 2019: vesting if
current performance is maintained until
earliest testing date (% of original award)
Sales revenue CAGR/ROCI
1 July 2017
85.0% LTI sales revenue ROCI awards
Sales revenue CAGR/ROCI
1 July 2018
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 2015, 2016 and 2017 is shown below.
Awards made
during
FY15
FY16
FY17
Start of Performance Period
End of Performance Period
Total vesting (TSR and sales revenue CAGR/BVA combined)
1 July 2014
1 July 2015
1 July 2016
30 June 2017
30 June 2018
30 June 2019
20.0%
25.0%
0.0%
5 Percentage out-performance of the median company’s TSR against the ASX100 Index.
6 Performance against both the ASX100 and MSCI World Industrials indices 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.
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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. STI and LTI share awards do not have
an exercise price and carry no dividend or voting rights. 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.
Details pertaining to Brambles' employee share plan, MyShare, are in Section 5.
Performance share plan awards
Vesting condition
STI awards
LTI TSR 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
FY16-FY18 LTI BVA 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 LTI BVA 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 LTI ROCI 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
FY19-21 LTI ROCI award
20% vesting occurs if CAGR is 4% and ROCI is 16% over three-year period
100% vesting occurs if CAGR is 6% and ROCI is 19% 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 A$8.83 (BVA) /
40% (BVA) 0% (TSR) vested on
STI/LTI TSR/LTI 16-18 BVA 25 September 2015 25 September 2021 A$9.17 (STI) /
STI - 100% vested on
A$5.00 (TSR)
25 September 2017
A$8.91 (BVA) /
25 September 2017
A$4.07 (TSR)
LTI - 25 September 2018
STI (Sign-on)
2 November 2015
2 November 2021 A$10.31 (STI)
STI - 100% vested on 2 January 2018
STI/LTI TSR/LTI 17-19 BVA 2 September 2016
2 September 2022 A$11.50 (STI) /
STI - 2 September 2018
10 October 2016
6 March 2017
A$11.20 (BVA )/
LTI - 2 September 2019
A$4.91 (TSR)
STI/LTI TSR/LTI 18-20 ROCI 23 October 2017
23 October 2023
A$8.77 (STI) /
STI - 23 October 2019
A$8.51 (ROCI) /
LTI - 23 October 2020
A$3.44 (TSR-ASX)
A$3.50 (TSR - MSCI)
STI/LTI TSR/LTI 19-21 ROCI 2 September 2018
2 September 2024 A$10.33 (STI) /
STI - 2 September 2020
A$10.02 (ROCI) /
LTI - 2 September 2021
A$6.74 (TSR-ASX) /
A$7.32 (TSR-MSCI)
39
Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
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. In FY20, the maximum contribution will be increased to A$6,000
to support increased employee share ownership and encourage higher levels of employee engagement. The A$5,000 maximum
contribution had been in place since the inception of the plan in 2009.
In 2020, MyShare will be offered to an additional 19 countries. Together with the 41 countries that Brambles currently offers
MyShare, these additional countries makes MyShare a global all-employee share plan. For the 2020 MyShare plan onwards, all
permanent employees of Brambles, in any country of the world, will be eligible to join the plan.
Under the MyShare programme, Brambles has over 4,445 participants who held 3,904,866 Brambles shares in total at 30 June 2019.
Disclosable Executives are eligible to participate in MyShare. Shares obtained by Disclosable Executives through MyShare are
included in Section 6.7. Matching Shares allocated but not yet vested are shown in Sections 6.6 and 6.8.
During the Year, 898,318 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$11.15 per share. The accounting share value at grant ranged from
A$11.36 to A$12.26 (up to 30 June 2019) based on the monthly share price value. For further details of the share grant values, refer
to Note 20 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 20177
MyShare 20188
MyShare 20199
Each month from
31 March 2017 to
28 February 2018
Each month from
31 March 2018 to
28 February 2019
Each month from
31 March 2019 to
31 July 2019
1 April 2019
Values range per month
from A$8.58 to A$9.97
100% vested on 1 April 2019
1 April 2020
Values range per month
from A$8.47 to A$11.18
31 March 2020
1 April 2021
Values range per month
from A$11.36 to A$12.44
31 March 2021
7 The Matching Shares granted under MyShare vest on 1 April 2019 (as 31 March 2019 is a non-trading day), subject to continuing employment and the retention of the
associated Acquired Shares. On vesting they are automatically exercised.
8 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.
9 The plan "2018 MyShare" ends on 29 February 2020. For FY19 reporting purposes, data is only available up to 31 July 2019. The remaining information will be reported
in the 2020 Annual Report. The Matching Shares granted under MyShare vest on 31 March 2021, subject to continuing employment and the retention of the
associated Acquired Shares. On vesting they are automatically exercised.
40
Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
6.4 Mr Orgeldinger's Arrangements Relating to the IFCO Sale
In 2018, when the Board announced its decision to separate the
IFCO RPC business by way of a sale or demerger, retention
incentive arrangements were agreed with Mr Orgeldinger to
provide business leadership throughout the sale or demerger
process and continuity for a period after the process
completed. Part of those retention incentives included an
increase in Mr Orgeldinger's salary, which took effect on
1 June 2019, after he left Brambles' employment.
The retention incentive arrangements comprised two
components, a fixed component and a variable component,
each to the value of €1,000,000.
The fixed component was only payable if Mr Orgeldinger
remained an employee of the Group and a sale or demerger
took place during the 2019 calendar year. The variable
component was based 70% on IFCO's financial performance
against Underlying Profit and cash flow targets; 10% on finding
a suitable successor to his role; and 20% based on
Mr Orgeldinger's performance through the sale or demerger
process.
In addition, Mr Orgeldinger was provided with a retention
payment of €1,350,000, which was contingent on him remaining
as CEO of IFCO for a minimum of 12 months after the
completion date of the sale or demerger. His retention was
regarded as critical to providing the best sale offering to a
potential new owner. As part of the IFCO sale, Mr Orgeldinger's
base salary was increased in June 2019 to €900,000 at the time
of completion of the sale.
All of the above payments are payable by IFCO Systems
Management GmbH.
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; and
-
- Michael Pooley, President, CHEP Pallets, Europe.
There have been no changes to the Key Management Personnel
after the reporting date and before the date of signing this
report. Wolfgang Orgeldinger, Group President, RPCs was a
Key Management Personnel during the period 1 July 2018 to
31 May 2019, when he left Brambles due to the sale of the IFCO
RPC business.
6.3 Service Contracts
Graham Chipchase and Nessa O’Sullivan 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.
Details of Disclosable Executives' 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
Officer
L Nador, President,
CHEP Pallets, North America
M Pooley, President,
CHEP Pallets, Europe
Former Disclosable Executive
W Orgeldinger,
Group President, RPCs
Base salary at
30 June 2018
Base salary at
30 June 2019
£1,133,000
£1,163,000
£635,000
£650,000
US$415,000
US$435,000
£317,000
£360,000
€670,000
€750,00010
Mr Pooley's salary increase included an adjustment to his salary
that eliminated a contractually agreed allowance.
10 Wolfgang Orgeldinger's base salary reflects his salary at the IFCO sale date of 31 May 2019.
41
Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
6.5 Total Remuneration & Benefits for the Year
The purpose of the table below is to enable shareholders to understand the actual remuneration received by Disclosable
Executives. The table provides a summary of the actual remuneration, before equity, received or receivable by the Disclosable
Executives for the Year, together with prior year comparatives. Income derived from the vesting of shares during the Year has been
included below as “Actual share income”. The value shown is the market value at the time the income became available to the
executive. These awards were granted in prior financial years and vested in September 2018.
Theoretical accounting values for unvested share awards are shown in Section 8.4; those values are a statutory disclosure
requirement. Unvested share awards may result in “Actual share income” in future years and, if so, the income will be reported in
the table below in the Remuneration Report for the relevant year.
Please note that the FY18 amounts shown for Laura Nador reflect part-year amounts relating to the dates of her commencement as
a Disclosable Executive.
US$'000
Short-term employee benefits
Post-
employment
benefits
Cash /
salary /
fees
Non-
monetary
benefits11
Cash
bonus
Year
Super-
annuation
Name
Executive Directors
G Chipchase13
N O'Sullivan13
FY19 1,732
817
FY18
1,753
674
FY19
980
501
FY18
1,064
389
Current Disclosable Executives
L Nador13
FY19
M Pooley13
FY18
FY19
FY18
448
216
482
104
40
126
495
159
Former Disclosable Executive
W Orgeldinger13,14
FY19
769
460
Totals
FY18
801
492
FY19 4,411 2,008
FY18
4,329
1,754
12
19
4
41
8
1
17
14
31
40
72
115
-
-
-
20
57
10
66
63
7
9
130
102
-
-
-
-
-
-
-
-
-
-
-
-
10
2,571
14
2,460
1
-
1,486
1,514
5
-
1
1
Total
2,576
2,460
1,487
1,515
18
8
2
2
4
6
35
30
635
275
693
109
43
120
744
318
813
733
57
790
1,271
1,348
6,656
6,330
596
1,867
487
1,835
831
588
7,487
6,918
Other
Termination
/ sign-on
payments
/ retirement
benefits Other12
Actual
share
income
Total
before
equity
STI/LTI
MyShare
awards
11 Non-monetary benefits include annual medical assessment and tax support.
12 Other 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$0.7726, €1=US$1.1950 and £1=US$1.3465 for FY18 and
A$1=US$0.7145, €1=US$1.1404 and £1=US$1.2943 for FY19.
14 For Wolfgang Orgeldinger, FY19 reflects a partial year up to the IFCO sale on 31 May 2019. The cash bonus column contains the pro-rated STI amount reflecting the
11 months up to 31 May 2019.
42
Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
6.6 Equity-Based Awards
The following table shows details of equity-based awards made to Disclosable Executives during the Year. STI and LTI share awards
were made under the PSP, the terms and conditions of which are set out in Section 3. MyShare Matching Shares were made under
MyShare, the terms and conditions of which are set out in Section 5. Approval for the issue of the STI and LTI share awards granted
to Graham Chipchase and Nessa O'Sullivan was obtained under ASX Listing Rule 10.14.
Name
Executive Directors
G Chipchase
N O'Sullivan
Current Disclosable Executives
L Nador
M Pooley
Former Disclosable Executive
W Orgeldinger
Type of award
Number
Value at grant US$'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
83,481
245,565
465
329,511
48,121
137,629
465
186,215
10,486
53,733
475
64,694
19,735
52,849
465
73,049
61,912
50,381
328
112,621
645
1,897
4
2,546
372
1,063
4
1,439
81
415
4
500
152
408
4
564
478
389
3
870
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 1.1. The minimum possible future value of all
awards yet to vest is zero and is based on the performance/service conditions not being met. The maximum possible future value of awards yet to vest is equal to the
value at grant.
43
Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
6.7 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
M Pooley
Former Disclosable Executive
W Orgeldinger
Balance at the start of the Year
Changes during the Year
Balance at the end of the Year
31,945
378
5,728
1,298
2,162
777
502
8,887
794
953
32,722
880
14,615
2,092
3,115
6.8 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 23 September 2013, 25 September 2014, 25 September 2015, 2 November 2015,
2 September 2016, 10 October 2016, 6 March 2017, 23 October 2017 and 2 September 2018 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
N O'Sullivan
454,789
273,597
329,511
186,215
(546)
(44)
Current Disclosable Executives
L Nador
83,656
64,694
(14,076)
M Pooley
108,080
73,049
(548)
Former Disclosable Executive
-
-
-
-
783,754
459,768
134,274
180,581
-
-
-
14,927
5
-
109
5
W Orgeldinger
431,222
112,621
(231,047)
(96,073)
216,723
3,703
1,918
16 On 31 July 2019, the following Disclosable Executives acquired ordinary shares under MyShare, which are held by Sargon CT Pty Ltd:
G Chipchase (31), N O'Sullivan (31), L Nador (30) and M Pooley (31).
On 31 July 2019, the following Disclosable Executives received Matching Awards under MyShare: G Chipchase (31), N O'Sullivan (31), L Nador (30) and M Pooley (31).
17 L Nador, N O'Sullivan, W Orgeldinger and M Pooley: All of their shares are held by Sargon CT Pty Ltd.
G Chipchase: Of which 17,200 shares are held by Rathbones Nominees Ltd, 14,000 shares are held by Rathbones Investment Management Ltd and 777 shares are held
by Sargon CT Pty Ltd.
18 Of the awards detailed in Section 4.3 and Section 5, the following plans' items are relevant to Disclosable Executives: G Chipchase, N O'Sullivan, L Nador, W
Orgeldinger, M Pooley (STI, LTI TSR, LTI 17-19 BVA, LTI 18-20 ROCI, LTI 19-21 ROCI, MyShare 2017 and 2018); G Chipchase, N O'Sullivan, L Nador, M Pooley (MyShare
2019); W Orgeldinger (LTI 14-16 BVA, LTI 15-17 BVA, LTI 16-18 BVA); and M Pooley (STI sign-on awards).
Lapses occurred for: W Orgeldinger (LTI TSR / LTI 15-17 BVA / LTI 16-18 BVA / LTI 17-19 BVA / LTI 18-20 ROCI / LTI 19-21 ROCI).
Exercises occurred for: G Chipchase, N O'Sullivan, L Nador, W Orgeldinger, M Pooley (MyShare 2017); and W Orgeldinger (MyShare 2018).
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, 2,397,324 equity-settled performance share rights were granted under the PSP, of which 329,046 were granted to G Chipchase and 185,750 were
granted to N O’Sullivan. 898,318 Matching Awards were granted under MyShare during the Year, of which 465 were granted to G Chipchase and 465 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.
44
Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
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.
There has been no increase in Chairman and Non-Executive
Director fees since 1 July 2016. There will not be any increase
in base fees for the Chairman or Non-Executive Directors
for FY20.
The annual review of Non-Executive Directors' fees carried
out during the Year, did, however, indicate that Committee
member fees should be increased to provide continuing
market competitiveness and to retain and attract top level
directors.
The review recommended an increase in the supplement for
Audit and Remuneration Committee members from A$10,000
to A$25,000. The increase was effective from 1 July 2019 and
brings the payment in line with the Australian market.
The fees for the Chairman and Non-Executive Directors are as
follows:
Chairman: A$627,000; and
-
- Non-Executive Directors: A$209,000.
The following travel allowances and Committee member fees
were also not increased during the Year:
-
-
Supplement for Audit Committee Chairman: A$50,000;
Supplement for Remuneration Committee Chairman:
A$40,000; and
-
Travel allowance per long-haul flight: A$5,000.
As indicated above, the Supplement for Audit and
Remuneration Committee members was increased from
A$10,000 to A$25,000 with effect from 1 July 2019.
(The above supplemental Committee fees do not apply to the
Board Chairman.)
The next fee review will take effect from 1 July 2020.
In 2019, the Board also determined that a fee supplement be
paid to Non-Executive Director members of the IFCO Due
Diligence Committee (IFCO DDC) of A$10,000 for the Chair of
the IFCO DDC (Brian Long) and A$5,000 for Non-Executive
Director member (Scott Perkins) of the IFCO DDC.
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
35,000
G El-Zoghbi
-
-
20,000
E Fagan
A G Froggatt
D P Gosnell
T Hassan
S P Johns
B J Long
J R Miller
S R Perkins
Former Non-Executive Director
18,877
S C H Kay
14,890
22,910
15,000
59,721
24,000
-
20,000
-
-
-
1,328
-
-
-
-
35,000
20,000
14,890
22,910
15,000
61,049
24,000
-
20,000
18,877
22 G El-Zoghbi: Held by The George El-Zoghbi Trust Agreement on behalf of George El-Zoghbi. E Fagan: Held by LG Vestra, Bank of New York Mellon on behalf of
Elizabeth Fagan.
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 38,713 ordinary shares held by Canzak Pty Ltd and 22,336 ordinary shares held by Caran Pty Limited.
B J Long: Held by BJ and VG Long Investments Pty Limited ATF BJ Long Super Fund A/C.
S R Perkins: Held by Perkins Family Super Pty Ltd ATF Perkins Family S/F A/C.
S C H Kay: Of which 13,977 ordinary shares held by Sarah Carolyn Kay & Simon Swaney and 4,900 ordinary shares held by
Sarah Carolyn Hailes Kay.
45
Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
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 – Additional Information on page 49. 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
Current Non-Executive Directors
G El-Zoghbi25
FY19
E Fagan25
A G Froggatt25
D P Gosnell25
T Hassan25
S P Johns25
B J Long25
J R Miller25,26
S R Perkins25
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
Former Non-Executive Director
S C H Kay25,27
FY19
Totals
FY18
FY19
FY18
Directors’ fees
Superannuation
Other23
Total24
163
169
159
13
172
186
156
173
156
169
419
453
185
193
45
-
156
165
45
165
1,656
1,686
8
8
8
1
16
18
7
8
7
8
40
43
18
18
2
-
15
16
5
16
125
136
2
12
-
-
-
12
2
3
2
-
10
29
-
12
-
-
-
-
2
11
18
79
173
189
167
14
188
216
165
184
165
177
469
525
203
223
47
-
171
181
52
192
1,800
1,901
23 Other includes car parking, tax services 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$0.7726, €1=US$1.1950 and £1=US$1.3465 for FY18 and
A$1=US$0.7145, €1=US$1.1404 and £1=US$1.2943 for FY19.
26 J R Miller commenced on 15 March 2019.
27 S C H Kay retired on 23 October 2018.
46
Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
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;
Recommending to the Board the overall remuneration for
the CEO;
Approving the remuneration arrangements for the other
Disclosable Executives; 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
and George El-Zoghbi. Jim Miller joined the Committee on
1 July 2019. 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 five 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.
47
Directors’ Report – Remuneration Report
Directors’ Report – Remuneration Report
8.4 Share-Based Payments – Future Potential
The table below provides annual accounting values for shares granted during years 2017-2019, 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
M Pooley
Former Disclosable Executive
W Orgeldinger
Totals
Year
Total before equity
Awards
Share of
total remuneration
Share-based payment
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
2,571
2,460
1,486
1,514
635
275
693
733
1,271
1,348
6,656
6,330
1,310
529
710
227
219
118
284
175
1,000
687
3,523
1,736
34%
18%
32%
13%
26%
30%
29%
19%
44%
34%
Total
3,881
2,989
2,196
1,741
854
393
977
908
2,271
2,035
10,179
8,066
48
Directors’ Report – Remuneration Report
Directors’ Report – Additional 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 2019 (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 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 pages 6 to 22.
Notwithstanding the sale of the IFCO RPC business (see
below), 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 22.
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 126.
Significant Changes in State of Affairs
On 24 August 2018, Brambles announced its intention to
pursue a separation of its IFCO RPC business by way of a
demerger or a sale. The separation of IFCO RPC was
completed by way of a sale on 31 May 2019 for an enterprise
value of US$2.5 billion. Further details about the sale of IFCO
RPC is in the Letter from the Chairman on page 4.
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 5 July 2019, Brambles repaid the US$500 million April 2020
144A bond issue using the proceeds of the sale of the IFCO
RPC business. Other than that, the Directors are not aware of
any matter or circumstance that has arisen since 30 June 2019
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 22.
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 10 October 2019 to shareholders on
the register on 12 September 2019.
On 11 April 2019, an interim dividend for the Year was paid,
which was 14.5 Australian cents per share and 65% franked.
On 11 October 2018, a final dividend for the year ended
30 June 2018 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 23 to 25.
Graham Andrew Chipchase 1 July 2018 to date
George El-Zoghbi
1 July 2018 to date
Elizabeth Fagan
1 July 2018 to date
Anthony Grant Froggatt
1 July 2018 to date
David Peter Gosnell
1 July 2018 to date
Tahira Hassan
1 July 2018 to date
Stephen Paul Johns
1 July 2018 to date
Sarah Carolyn Hailes Kay
1 July 2018 to 23 October 2018
Brian James Long
1 July 2018 to date
James Richard Miller
15 March 2019 to date
Nessa O'Sullivan
1 July 2018 to date
Scott Redvers Perkins
1 July 2018 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 27.
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 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
49
Directors’ Report – Additional Information Directors’ Report – Additional 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
-
-
-
-
-
-
50
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 2019 Sustainability Review, which will be available on
Brambles’ website in September 2019, 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’ 2019
Sustainability Review, which will be available on the Brambles
website in September 2019. 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 14 sets out the
performance of the Group against its principal performance
indicator, the Brambles Injury Frequency Rate and provides
details of a fatality at a plant in Spain. More detailed reporting
on health and safety performance will be shown in the 2019
Sustainability Review, which will be available on Brambles’
website in September 2019.
Directors’ Report – Additional Information Directors’ Report – Additional Information – continued
Directors’ Meetings
Details of Board Committee memberships are given in the Directors' biographies on pages 23 to 25. The following table
shows the actual Board and Committee meetings held during the Year and the number attended by each Director or
Committee member.
Board meetings
Regular
Special
Committees
Audit Committee
meetings
Remuneration
Committee
meetings
Nominations
Committee
meetings
Nominations
Committee Chair
Sub-Committee
meetings
Directors
G A Chipchase
G El-Zoghbi
E Fagan
(a)
14
14
14
A G Froggatt(c) 12
D P Gosnell(d)
T Hassan(d)
S P Johns
B J Long
J R Miller
N O'Sullivan
S R Perkins
Former Director
13
13
14
14
4
14
14
(b)
14
14
14
14
14
14
14
14
4
14
14
S C H Kay
5
5
(a)
(b)
(a)
(b)
(a)
(b)
(a)
(b)
(a)
(b)
4
-
-
-
1
-
3
2
4
1
-
4
-
-
-
1
-
3
2
4
1
-
-
-
5
-
5
-
-
6
-
6
2
-
-
5
-
6
-
-
6
-
6
2
-
5
-
5
-
5
5
-
-
-
-
-
5
-
5
-
5
5
-
-
-
-
-
7
-
7
7
-
7
-
-
-
-
-
7
-
7
7
-
7
-
-
-
-
-
8
-
8
8
-
8
-
-
-
-
-
-
8
-
8
8
-
8
-
-
-
-
-
a) The number of meetings attended during the period the Director was a member of the Board or relevant Committee which
the Director was eligible to attend.
b) The number of meetings held while the Director was a member of the Board or relevant Committee which the Director was
eligible to attend.
c) Mr Froggatt missed two unscheduled teleconference meetings which were convened at short notice.
d) Mr Gosnell missed one scheduled meeting due to illness and Ms Hassan missed a re-scheduled teleconference meeting,
also due to illness.
51
Directors’ Report – Additional Information
Directors’ Report – Additional 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 2016.
Director
G A Chipchase
G El-Zoghbi
E Fagan
A G Froggatt
D P Gosnell
T Hassan
S P Johns
Listed company
AstraZeneca plc
The Kraft Heinz Company
None
Coca-Cola Amatil Limited
Coats Group plc
None
Goodman Group:
Goodman Limited
Period directorship held
2012 to current
2018 to current
-
2010 to May 2017
2015 to current
-
2017 to current
B J Long
Commonwealth Bank of Australia
2010 to December 2018
Goodman Funds Management Limited
2017 to current
J R Miller
N O'Sullivan
S R Perkins
OneMarket Limited
Ten Network Holdings Limited
The RealReal, Inc.
Wayfair, Inc.
None
Woolworths Limited
Origin Energy Limited
2018 to current
2010 to July 2016
May 2019 to current
2016 to current
-
2014 to current
2015 to current
52
Directors’ Report – Additional Information
Directors’ Report – Additional 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'
2019 Corporate Governance Statement is on Brambles'
website at brambles.com/corporate-governance-overview.
Interests in Securities
Pages 44 and 45 of the Directors’ Report – Remuneration
Report include details of the relevant interests of Directors,
and other Group executives whose details are required to be
disclosed, in shares and other securities of Brambles Limited.
Share Capital, Options and Share Rights
Details of the changes in the issued share capital of Brambles
Limited and share rights and MyShare matching share rights
outstanding over Brambles Limited ordinary shares at the Year
end are given in Notes 19 and 20 of the Financial Report on
pages 95 to 97.
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:
-
-
61,607 grants under the 2019 MyShare plan offer;
35,852 exercises resulting in the issue of fully paid
ordinary shares: 2,424 under the 2018 MyShare plan;
-
846 under the 2019 MyShare plan; 31,135 under the
PSP STI awards; 1,447 under the PSP LTI BVA award; and
52,632 lapses: 14,740 under the 2018 MyShare plan;
7,805 under the 2019 MyShare plan; 30,087 under
PSP STI awards.
Share Buy-Backs
On 25 February 2019, Brambles announced that, subject to
completion of the sale of the IFCO RPC business, it intended
to buy-back up to 159,115,225 of its ordinary shares on -
market, being 10% of its lowest issued share capital in the
previous 12 months. The sale of IFCO RPC completed on
31 May 2019 and Brambles commenced the on-market buy-
back on 4 June 2019. Between that date and 21 June 2019,
6,039,299 ordinary shares were bought-back and cancelled for
a total consideration of A$77,238,951 (US$54.1 million). The
on-market buy-back was paused on 24 June 2019 as Brambles
entered into a blackout period, and it will recommence on
22 August 2019.
Risk Management
A discussion of Brambles’ risk profile, management and
mitigation of risks can be found on pages 16 to 18 in the
Operating & Financial Review and in Principle 7 of Brambles'
2019 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 13 in the
Operating & Financial Review.
Non-Audit Services and Auditor Independence
The amount of US$2.369 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 due diligence and
other financial reporting procedures associated with the dual-
track separation of IFCO RPCs through a demerger or sale of
that business.
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
16 August 2019 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
53
Directors’ Report – Additional Information Directors’ Report – Additional Information – continued
the applicable provisions of the Act. On the same basis, they
also confirmed that the objectivity of the audit engagement
partners and the audit staff is not impaired.
Auditor's Independence Declaration
A copy of the auditor’s independence declaration as required
under section 307C of the Act is set out on page 125.
Annual General Meeting
The AGM will be held at 2.00pm (AEDT) on 10 October 2019
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
21 August 2019
54
Directors’ Report – Additional 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; and
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.
Dividend
Shareholders may elect to receive dividend payments in
Australian dollars or pounds sterling by contacting Boardroom
at the address set out in Contact Information on the inside
back cover of this Annual Report.
Annual General Meeting
The Brambles Limited 2019 AGM will be held at
2.00pm (AEDT) on 10 October 2019 at Ballroom 1,
The Westin Sydney, 1 Martin Place, Sydney, NSW 2000.
Financial Calendar
Final Dividend 2019
Ex-dividend date – Wednesday, 11 September 2019
Record date – Thursday, 12 September 2019
Payment date – Thursday, 10 October 2019
2020 (Provisional)
Announcement of interim results – mid-February 2020
Interim dividend – mid-April 2020
Announcement of final results – mid-August 2020
Final dividend – mid-October 2020
AGM – October 2020
Company Secretaries
R N Gerrard
C Thuaux
Analysis of Holders of Equity Securities as at 31 July 2019
Substantial Shareholders
Brambles has been notified of the following substantial shareholdings:
Holder
Blackrock Group
Commonwealth Bank of Australia
The Vanguard Group, Inc.
Number of ordinary shares
79,734,871
116,350,779
103,785,640
% of issued ordinary share
capital1
5.01
7.30
6.51
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
The number of members holding less than a marketable parcel of 38 ordinary shares (based on a market price of A$13.12 on
31 July 2019) is 1,620 and they hold a total of 17,029 ordinary shares. The voting rights of ordinary shares are described on
page 56.
Holders
33,226
30,310
4,989
2,917
Shares
15,303,834
69,469,156
35,138,218
60,625,538
107 1,408,252,879
71,549 1,588,789,625
1 Percentages are as disclosed in substantial holding notices given to Brambles Limited.
55
Shareholder Information
Shareholder Information – continued
Number of Share Rights on Issue and Distribution of Holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Holders
3,023
45
52
67
10
3,197
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 PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
ARGO INVESTMENTS LIMITED
UBS NOMINEES PTY LTD
AMP LIFE LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
SARGON CT PTY LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
CUSTODIAL SERVICES LIMITED
BNP PARIBAS NOMS (NZ) LTD
NETWEALTH INVESTMENTS LIMITED
Number of
ordinary shares
687,014,139
309,655,461
106,791,531
98,353,687
36,540,301
30,780,773
30,179,456
12,138,658
10,501,918
7,807,280
6,001,109
4,592,590
4,200,582
3,881,739
3,425,051
2,777,310
2,677,737
2,655,996
2,211,231
2,208,277
Share rights
1,029,482
128,493
370,026
2,196,518
2,561,928
6,286,447
% of issued
ordinary
share capital
43.24
19.49
6.72
6.19
2.30
1.94
1.90
0.76
0.66
0.49
0.38
0.29
0.26
0.24
0.22
0.18
0.17
0.17
0.14
0.14
Total holdings of 20 largest holders
1,364,394,826
85.88
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 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.
56
Shareholder Information
Consolidated Financial Report
for the year ended 30 June 2019
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 – Continuing Operations
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 Discontinued Operations
10 Trade and Other Receivables
11 Inventories
12 Other Assets
13 Property, Plant and Equipment
14 Goodwill and Intangible Assets
15 Trade and Other Payables
16 Provisions
17 Borrowings
18 Retirement Benefit Obligations
19 Contributed Equity
20 Share-Based Payments
21 Reserves and Retained Earnings
22 Financial Risk Management
23 Cash Flow Statement – Additional Information
24 Commitments
25 Contingencies
26 Auditor’s Remuneration
27 Key Management Personnel
28 Related Party Information
29 Events After Balance Sheet Date
30 Net Assets Per Share
31 Parent Entity Financial Information
Directors' Declaration
Independent Auditor's Report
Auditor's Independence Declaration
58
59
60
61
62
67
72
73
74
75
79
81
82
85
86
86
87
89
92
92
93
93
95
96
98
100
108
110
111
112
113
113
114
115
115
117
118
125
57
Consolidated Financial Report
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2019
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 expense2
Profit from continuing operations
Profit 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 (loss)/gain on defined benefit pension plans
Note
2
3
2
5
6A
9B
Tax benefit/(expense) on items that will not be reclassified to profit or loss
6A
Items that may be reclassified to profit or loss:
Exchange differences on translation of continuing business foreign subsidiaries
Exchange differences released to profit3
Other comprehensive expense for the year
Total comprehensive income for the year attributable to members of the
parent entity
Earnings per share (EPS) - US cents
21A
9C
7
Total
- basic
- diluted
Continuing operations4
- basic
- diluted
2019
US$m
4,595.3
150.4
(4,004.8)
-
740.9
15.3
(103.8)
(88.5)
652.4
(198.3)
454.1
1,013.6
1,467.7
(10.8)
2.7
(8.1)
(85.0)
32.2
(52.8)
(60.9)
2018
US$m1
4,470.3
133.0
(3,812.8)
(11.8)
778.7
28.3
(131.7)
(103.4)
675.3
(121.8)
553.5
139.2
692.7
17.8
(4.7)
13.1
(98.5)
-
(98.5)
(85.4)
1,406.8
607.3
92.1
91.8
28.5
28.4
43.5
43.4
34.8
34.7
1
2
3
4
Comparatives have been restated for the IFCO divestment (refer Note 9) and changes to accounting standards (refer Note 1H).
2018 included the US$65.2 million tax benefit recognised within Significant Items relating to the US tax reform (refer Note 4).
The cumulative foreign exchange loss of US$32.2 million relating to IFCO was released to profit upon divestment, and is
included within the gain recognised on divestment.
2019 EPS from continuing operations declined 6.3 cents, of which 4.1 cents was due to the one-off tax benefit in 2018, 1.6 cents
was due to adverse foreign exchange movements in 2019, and 1.1 cents was due to a higher 2019 Significant Items expense.
The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
58
Consolidated Financial Report Consolidated Balance Sheet
as at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Inventories
Other assets
Total current assets
Non-current assets
Other receivables
Property, plant and equipment
Goodwill and intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Retirement benefit obligations
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Note
2019
US$m
2018
US$m1
23
2
10
11
12
10
13
14
6C
12
15
17
16
17
16
18
6C
15
19
21
21
1,691.3
411.2
768.9
59.8
61.5
180.2
-
1,247.0
60.3
70.9
2,992.7
1,558.4
52.8
4,313.2
286.2
73.6
11.8
4,737.6
7,730.3
1,208.5
556.8
31.7
75.5
50.4
5,139.7
1,022.8
38.2
18.1
6,269.2
7,827.6
1,954.3
91.2
61.8
65.9
1,872.5
2,173.2
1,643.4
2,397.1
14.8
37.3
353.1
1.0
2,049.6
3,922.1
3,808.2
6,187.4
(7,322.5)
4,943.3
3,808.2
12.6
29.7
434.9
1.7
2,876.0
5,049.2
2,778.4
6,218.5
(7,253.7)
3,813.6
2,778.4
1
Refer Note 1H for details regarding restatement as a result of changes to accounting standards. The comparative period has
not been restated for the divestment of IFCO.
The consolidated balance sheet should be read in conjunction with the accompanying notes.
59
Consolidated Financial Report
Consolidated Cash Flow Statement
for the year ended 30 June 2019
Note
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Interest received
Interest paid
Income taxes paid on operating activities
Net cash inflow from operating activities
23B
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment1
Payments for intangible assets
Proceeds from disposal of businesses, net of costs to sell and cash disposed2
9D
Proceeds from joint venture loan receivable
Acquisition of subsidiaries, net of cash acquired
2019
US$m
6,332.2
(4,675.9)
1,656.3
5.3
(92.7)
(230.5)
1,338.4
2018
US$m
6,582.4
(4,847.2)
1,735.2
14.9
(115.2)
(211.9)
1,423.0
(1,208.4)
(1,138.3)
130.0
(21.6)
2,366.2
-
-
139.4
(19.6)
102.2
150.0
(3.9)
Net cash inflow/(outflow) from investing activities
1,266.2
(770.2)
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Net (outflow)/inflow from derivative financial instruments
Payment for term deposits
Proceeds from issues of ordinary shares
Payments for share buy-back, net of transaction costs
Dividends paid
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
2
8
1,060.9
(1,316.4)
(34.8)
(411.2)
0.2
(54.1)
(328.1)
(1,083.5)
1,521.1
171.3
(2.0)
Cash and deposits, net of overdrafts, at end of the year3
23A
1,690.4
2,786.1
(3,027.0)
26.6
-
-
-
(352.0)
(566.3)
86.5
112.7
(27.9)
171.3
1
2
3
Includes compensation for lost pooling equipment of US$127.0 million in 2019 (2018: US$139.2 million).
Proceeds from disposal includes US$2,480.4 million from the sale of IFCO, with cash received on 31 May 2019.
Cash and deposits of US$1,690.4 million at 30 June 2019, include cash and cash equivalents of US$1,691.3 million and are
net of overdrafts of US$0.9 million.
Cash flows for IFCO have been included up to the date of its divestment in 2019. The comparative cash flows remain
unchanged.
The consolidated cash flow statement should be read in conjunction with the accompanying notes.
60
Consolidated Financial Report
Consolidated Statement of Changes in Equity
for the year ended 30 June 2019
Contributed
Retained
equity
Reserves
earnings
Note
US$m
US$m
US$m
Total
US$m
Year ended 30 June 2018
Closing balance as at 30 June 2017 as previously reported
6,201.1
(7,152.8)
3,798.4
2,846.7
Opening balance adjustment on application of AASB 15 & 9
-
-
(331.3)
(331.3)
Revised opening balance as at 1 July 2017
6,201.1
(7,152.8)
3,467.1
2,515.4
Profit for the year
Other comprehensive (expense)/income
Total comprehensive (expense)/income
Share-based payments:
- expense recognised
- shares issued
- equity component of related tax
- transfer to retained earnings on disposal of CHEP Recycled
Transactions with owners in their capacity as owners:
-
-
-
-
-
-
-
20
- dividends declared
- issues of ordinary shares, net of transaction costs
8
19
-
17.4
-
(98.5)
(98.5)
15.9
(17.4)
(0.5)
(0.4)
-
-
692.7
13.1
705.8
-
-
-
0.4
692.7
(85.4)
607.3
15.9
(17.4)
(0.5)
-
(359.7)
(359.7)
-
17.4
Closing balance as at 30 June 2018
6,218.5
(7,253.7)
3,813.6
2,778.4
Year ended 30 June 2019
Closing balance as at 30 June 2018 as previously reported
6,218.5
(7,255.8)
4,199.3
3,162.0
Opening balance adjustment on application of AASB 15 & 9
1H
-
2.1
(385.7)
(383.6)
Revised opening balance as at 1 July 2018
6,218.5
(7,253.7)
3,813.6
2,778.4
Profit for the year
Other comprehensive expense - continuing business
FCTR released to profit on divestment of IFCO
Total comprehensive income
Share-based payments:
- expense recognised
- shares issued
- equity component of related tax
- transfer to retained earnings on disposal of IFCO
- other
Transactions with owners in their capacity as owners:
- dividends declared
- issues of ordinary shares, net of transaction costs
- share buy-back, net of transaction costs
-
-
-
-
-
-
-
-
-
-
23.0
(54.1)
20
8
19
19
-
1,467.7
1,467.7
(85.0)
32.2
(8.1)
-
(93.1)
32.2
(52.8)
1,459.6
1,406.8
17.1
(23.0)
1.6
(0.1)
(11.6)
-
-
-
-
-
-
0.1
-
17.1
(23.0)
1.6
-
(11.6)
(330.0)
(330.0)
-
-
23.0
(54.1)
Closing balance as at 30 June 2019
6,187.4
(7,322.5)
4,943.3
3,808.2
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
61
Consolidated Financial Report Notes to and Forming Part of the Financial Statements
for the year ended 30 June 2019
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 2019. These financial statements have been authorised for
issue in accordance with a resolution of the Directors on 21 August 2019.
References to 2019 and 2018 are to the financial years ended 30 June 2019 and 30 June 2018, 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 except for revenue and financial instruments which have been
impacted by the application of the new accounting standards (refer Note 1H).
On 25 February 2019, Brambles entered into an agreement to sell its IFCO reusable plastic containers (RPC) business, with the
completion of the sale occurring on 31 May 2019. IFCO is classified as a discontinued operation. Comparative information has
been reclassified, where appropriate, to enhance comparability, and has been restated for the new accounting standards
(refer Note 1H).
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.
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. Changes for new accounting
standards (refer Note 1H) are incorporated in the financial statements of subsidiaries.
The results of subsidiaries acquired or disposed during the year are included in the consolidated statement of comprehensive
income 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 are disclosed separately as discontinued operations in the
consolidated statement of comprehensive income. The amount disclosed includes 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 where they are
attributable to part of the net investment in foreign subsidiaries.
The results and cash flows of Brambles Limited and its subsidiaries 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 and its
subsidiaries are translated into US dollars at the exchange rate ruling at the balance sheet date.
62
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 1. About This Report – continued
D) Foreign Currency – continued
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.
The principal exchange rates affecting Brambles were:
A$:US$
€:US$
£:US$
Average
2019
0.7145
1.1404
1.2943
2018
0.7726
1.1950
1.3465
Year end
30 June 2019
0.7005
1.1372
1.2673
30 June 2018
0.7348
1.1564
1.3076
E) 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.
F) 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 13D)
Impairment of goodwill (Note 14D)
G) New Accounting Standards and Interpretations Not Yet Adopted
AASB 16 Leases is applicable to Brambles from 1 July 2019. It requires a lessee to recognise all qualifying leases on the
balance sheet in the form of a lease liability and right-of-use asset, adjusted for deferred tax. The new standard mainly impacts
property and equipment leases located at offices and service centres where Brambles is the lessee. The straight-lined
operating lease expense under AASB 117 Leases will be replaced by depreciation of the right-of-use asset and interest on the
lease liability. The Group’s activities as a lessor are not material hence no significant impact is expected.
The Group will adopt the following approach and practical expedients:
-
-
-
-
-
-
-
the modified retrospective approach will be used on transition to AASB 16;
the comparative period will not be restated and will continue to reflect accounting policies under AASB 117 Leases;
on transition land and buildings right-of-use assets will be valued as if AASB 16 had always been applied but using the
incremental borrowing rate on transition, while all remaining assets will equal the lease liability, adjusted for any prepaid
or accrued lease payments recognised immediately before the date of initial application;
on transition right-of-use assets will exclude initial direct costs and will be reduced by any existing onerous lease
provisions;
the use of hindsight will be applied when reviewing lease terms under the retrospective option;
optional exemptions for short-term and low-value assets will be applied; and
a country-specific discount rate will be applied to a portfolio of leases with reasonably similar characteristics.
New software has been implemented to calculate the AASB 16 adjustments. The preliminary estimate of the opening
adjustment at 1 July 2019 is a lease liability between US$740 – US$760 million and a right-of-use asset between US$640 –
US$660 million with the balance going through equity. Upon application of AASB 16, key balance sheet metrics such as
gearing and finance ratios, as well as profit or loss metrics including earnings before interest, tax, depreciation and
amortisation (EBITDA) will be impacted. The consolidated cash flow statement will also be impacted as payments for the
principal portion of the lease liability will be presented within financing activities.
During 2019, Brambles entered into amendments with lenders of its major borrowing facilities to continue to apply AASB 117
for the calculation of the financial covenants post 30 June 2019. Brambles will review its financial policy during 2020 in order to
align the policy with the financial reporting requirements under AASB 16.
63
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 1. About This Report – continued
H) New Accounting Standards
New and amended accounting standards relevant to Brambles effective from 1 July 2018 are:
AASB 9 Financial Instruments addresses the recognition, classification and measurement of financial assets and liabilities;
derecognition of financial instruments; introduces a new expected credit loss model for impairment of financial assets; and
establishes new rules for hedge accounting.
For all eligible trade and other receivables, Brambles has applied the simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance. To measure the expected credit losses, trade and other receivables are grouped
based on region and aging. Customers with heightened credit risk are provided for specifically based on historical default rates
and forward-looking information. Customers with normal credit risk are provided for in line with a provision matrix based on
aging and their associated risk. A lifecycle allowance is calculated on the remaining trade and other receivables balance based
on historical bad debt levels. Where there is no reasonable expectation of recovery, balances are written off. This has increased
the allowance for doubtful debts only marginally due to historically low levels of bad debt.
There has been no change to the recognition and measurement of other financial assets or liabilities, or the accounting for
hedging relationships as a result of the adoption of AASB 9. The Group’s financial assets are either valued at amortised cost or
fair value through profit or loss (refer Note 22). The AASB 9 general hedge accounting model has been adopted which applies
a forward-looking and qualitative approach to assessing hedge effectiveness and requires the Group to ensure that hedge
accounting relationships are aligned with its strategy and risk management objectives.
AASB 15 Revenue from Contracts with Customers establishes a framework for revenue recognition. It is based on the
principle that revenue is recognised when control of a good or service transfers to a customer, either over time or at a point in
time, depending on when performance obligations are satisfied.
Brambles has one revenue stream, which is the provision of pooling equipment to customers for a period of time. Several fees
are charged to customers including issue, transfer, transport and daily hire. The predominant billing structure for these fees is
either a bundled upfront fee upon issue of pooling equipment to customers, or a daily hire fee based on the number of days
the pooling equipment is used in the field by a customer. Other fees, such as transport and transfer fees, are billed when the
activity occurs.
Under the previous accounting standard AASB 118 Revenue, revenue was recognised when the risks and rewards of ownership
transferred to the customer. Thus, bundled upfront fees were recognised on issue of pooling equipment to customers, daily
hire fees were recognised over time and other fees were recognised when the activity occurred. Upon application of AASB 15,
the services provided by Brambles are deemed a single performance obligation relating to the provision of an end-to-end
pooling solution and the performance obligation is satisfied over time. The issue and daily hire activities are not considered
distinct services. Revenue previously recognised on issue is deferred and recognised over the estimated period that the
pooling equipment is utilised by customers, referred to as the cycle time, which is an output method. Revenue based on the
daily hire model continues to be recognised over time. Consideration that is fixed or highly probable is included in the
transaction price allocated to the performance obligation. This includes issue fees, daily hire fees and bundled upfront fees.
Consideration that is variable or uncertain continues to be recognised when the activity occurs.
Brambles has adopted the full retrospective approach to implement AASB 15 and AASB 9. The comparative period is restated
and the cumulative effect on initial application has been adjusted through opening retained earnings at 1 July 2017. AASB 15
and AASB 9 do not have any impact on the consolidated cash flow statement. The impact on the consolidated balance sheet
and consolidated statement of comprehensive income is disclosed on pages 65 and 66.
64
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 1. About This Report – continued
H) New Accounting Standards – continued
Consolidated Balance Sheet impact on application
Assets
Current assets
Trade and other receivables1
Other current assets
Total current assets
Non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables2
Other current liabilities
Total current liabilities
Non-current liabilities
Deferred tax liabilities3
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
As reported
AASB 15 & 9
Restated
2018
US$m
Adjustments
US$m
2018
US$m
1,257.9
311.4
1,569.3
6,269.2
7,838.5
1,465.6
218.9
1,684.5
550.9
2,441.1
2,992.0
4,676.5
3,162.0
6,218.5
(7,255.8)
4,199.3
3,162.0
(10.9)
-
(10.9)
-
(10.9)
488.7
-
488.7
(116.0)
-
(116.0)
372.7
(383.6)
-
2.1
(385.7)
(383.6)
1,247.0
311.4
1,558.4
6,269.2
7,827.6
1,954.3
218.9
2,173.2
434.9
2,441.1
2,876.0
5,049.2
2,778.4
6,218.5
(7,253.7)
3,813.6
2,778.4
1
2
3
Adjustment to the allowance for doubtful debts as a result of the impact of AASB 9 Financial Instruments.
Adjustment to deferred revenue as a result of the impact of AASB 15 Revenue from Contracts with Customers.
Adjustment to deferred tax as a result of the impact of AASB 9 and AASB 15.
65
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 1. About This Report – continued
H) New Accounting Standards – continued
Consolidated Statement of Comprehensive Income impact on application
Continuing operations
Sales revenue5
Other income and expenses
Operating profit
Net finance costs
Profit before tax
Tax expense6
Profit from continuing operations
Profit from discontinued operations
Profit for the year attributable to members of the parent entity
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
Pre-AASB 154
AASB 15
Restated
2018
US$m
Adjustments
US$m
2018
US$m
4,495.5
(3,691.6)
803.9
(103.4)
700.5
(100.4)
600.1
147.0
747.1
(87.5)
659.6
47.0
46.8
37.7
37.6
(25.2)
-
(25.2)
-
(25.2)
(21.4)
(46.6)
(7.8)
(54.4)
2.1
(52.3)
(3.5)
(3.4)
(2.9)
(2.9)
4,470.3
(3,691.6)
778.7
(103.4)
675.3
(121.8)
553.5
139.2
692.7
(85.4)
607.3
43.5
43.4
34.8
34.7
4
5
6
Balances have been restated for the divestment of IFCO.
In 2019, the equivalent impact of AASB 15 is a US$10.8 million reduction to sales revenue.
Tax expense of US$(21.4) million has been recognised to reflect a US$3.1 million tax benefit on reduced profit, offset by tax
expense of US$(24.5) million being the impact of the USA tax rate change on deferred tax assets relating to AASB 15 deferred
revenue. The impact of the US tax reform change has been offset against the previously reported US$127.9 million one-time
non-cash tax benefit recognised within 2018 Significant Items (refer Note 4).
66
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 2. Segment Information – Continuing Operations
Brambles' segment information is provided on the same basis as internal management reporting to the CEO.
Brambles has four 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); and
Corporate – corporate centre including BXB Digital. Hoover Ferguson Group (HFG) was included in the 2018 results for the
corporate segment until its 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 69.
Segment sales revenue is measured on the same basis as the statement of comprehensive income and in line with the new
accounting standard AASB 15 Revenue from Contracts with Customers effective for Brambles from 1 July 2018 (refer Note 1H).
Under the new accounting policy, revenue generated from the provision of pooling equipment to customers is recognised over
the cycle time. Revenue is measured based on the amount of consideration Brambles expects to be entitled to, in exchange for
transferring promised goods or services to a customer, net of consideration payable to customers or third parties, duties and
taxes paid.
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.
67
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 2. Segment Information – Continuing Operations – continued
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Corporate2
Sales
revenue
2019
US$m
2018
US$m
2,287.8
1,849.1
458.4
-
2,179.3
1,815.9
475.1
-
Continuing operations
4,595.3
4,470.3
By geographic origin
Americas
Europe
Australia
Other
Total
2,287.8
1,599.7
350.8
357.0
2,179.3
1,574.4
366.4
350.2
4,595.3
4,470.3
Cash Flow from
Operations1
2019
US$m
170.4
228.0
101.1
(67.7)
431.8
2018
US$m
219.1
310.7
110.8
84.2
724.8
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 included the receipt of the US$150.0 million HFG loan.
1
2
68
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 2. Segment Information – Continuing Operations – continued
Operating
profit3
Significant Items
before tax4
Underlying
Profit4
2019
US$m
261.3
431.1
118.3
(69.8)
740.9
2018
US$m
294.3
442.8
111.4
(69.8)
778.7
2019
US$m
(37.1)
(10.7)
-
(15.0)
(62.8)
2018
US$m
(40.3)
(2.8)
(0.3)
(4.0)
(47.4)
2019
US$m
298.4
441.8
118.3
(54.8)
803.7
2018
US$m
334.6
445.6
111.7
(65.8)
826.1
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Corporate
Continuing operations
3
4
Operating profit is segment revenue less segment expense and excludes net finance costs.
Underlying Profit is a non-statutory profit measure and represents profit from continuing operations before finance costs,
tax and Significant Items (refer Note 4). It is presented to assist users of the financial statements to better understand
Brambles' business results.
Underlying Profit for the Corporate segment includes the following:
Corporate costs
BXB Digital
HFG joint venture results
2019
US$m
(40.0)
(14.8)
-
(54.8)
2018
US$m
(42.4)
(11.6)
(11.8)
(65.8)
69
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 2. Segment Information – Continuing Operations – continued
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Corporate7
Return on
Capital Invested5
2019
2018
US$m
US$m
Average Capital
Invested6
2019
US$m
2018
US$m
15.4%
24.9%
27.9%
17.6%
26.4%
25.5%
1,942.6
1,776.4
424.5
(12.9)
1,897.0
1,689.7
437.8
90.9
Continuing operations
19.5%
20.1%
4,130.6
4,115.4
5
6
7
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.
HFG was divested on 12 April 2018 and the Corporate segment in 2018 included nine months' impact of HFG ACI balances.
Excluding HFG, the Corporate and continuing operations ACI would have been US$124.2 million lower in 2018.
Capital
expenditure8
Depreciation
and amortisation
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Corporate
2019
US$m
551.1
443.5
65.1
0.7
2018
US$m
512.7
428.6
70.9
0.3
2019
US$m
257.2
176.0
48.7
2.4
Continuing operations
1,060.4
1,012.5
484.3
8 Capital expenditure on property, plant and equipment is on an accruals basis.
2018
US$m
244.8
166.6
52.2
0.7
464.3
70
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 2. Segment Information – Continuing Operations – continued
By operating segment
CHEP Americas
CHEP EMEA
CHEP Asia-Pacific
Corporate9
Continuing operations
Discontinued operations10
Segment assets
Segment liabilities
2019
US$m
2018
US$m
2,690.6
2,257.4
513.2
84.3
2,505.5
2,114.9
518.1
76.2
2019
US$m
737.1
466.1
79.3
37.7
2018
US$m
655.3
470.3
86.2
46.6
5,545.5
5,214.7
1,320.2
1,258.4
-
2,375.7
16.9
Total segment assets and liabilities
5,545.5
7,590.4
1,337.1
Cash and borrowings
Term deposits11
Current tax balances
Deferred tax balances
1,691.3
180.2
2,200.2
411.2
8.7
73.6
-
18.8
38.2
-
31.7
353.1
805.8
2,064.2
2,488.3
-
61.8
434.9
Total assets and liabilities
7,730.3
7,827.6
3,922.1
5,049.2
Non-current assets by geographic origin12
Americas
Europe
Australia
Other
Total
2,322.3
1,614.4
309.6
405.9
2,889.1
2,571.7
304.2
457.9
4,652.2
6,222.9
9
10
11
Segment assets for Corporate as at 30 June 2019 include US$44.5 million deferred consideration receivable from First
Reserve, relating to the former HFG investment (2018: US$41.8 million).
Discontinued operations' assets and liabilities exclude cash and borrowings, term deposits and tax balances, which are not
allocated by segment, and differ to amounts disclosed in Note 9A.
Term deposits relate to cash deposits held with financial institutions comprising the proceeds from the divestment of IFCO.
The cash deposits cannot be used for short-term liquidity purposes, have terms less than 12 months and are measured at
amortised cost.
12 Non-current assets exclude financial instruments of US$11.8 million (June 2018: US$8.1 million) and deferred tax assets of
US$73.6 million (June 2018: US$38.2 million).
71
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 3. Operating Expenses – Continuing Operations
Employment costs
Service suppliers:
- transport
- repairs and maintenance
- subcontractors and other service suppliers
Raw materials and consumables1
Occupancy
Depreciation of property, plant and equipment
Irrecoverable pooling equipment provision expense
Amortisation of intangible assets
Net foreign exchange gains
Early debt repayment costs2
Other3
Note
2019
US$m
683.3
2018
US$m
666.1
1,118.1
1,049.4
778.9
309.0
213.1
137.1
467.8
127.1
16.5
(1.1)
11.6
758.5
302.5
202.1
137.7
450.6
101.9
13.7
(4.8)
-
143.4
135.1
4,004.8
3,812.8
4
1
2
Used primarily for the repair of pooling equipment.
Early debt repayment costs of US$11.6 million relate to the US$500.0 million 144A bond, which was repaid on 5 July 2019
using the IFCO sale proceeds (refer Note 4).
3 In 2019, other expenses include net losses on disposal of assets of US$21.0 million relating to asset write-offs in Latin
America and US$22.0 million of asset write-offs following the divestment of IFCO. These items have been recognised within
Significant Items (refer Note 4).
72
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 4. Significant Items – Continuing Operations
Significant Items are items of income or expense which are, either individually or in aggregate, material to Brambles or to the
relevant business segment and:
- outside the ordinary course of business (e.g. gains or losses on the sale or termination of operations, the cost of significant
reorganisations or restructuring); or
- part of the ordinary activities of the business but unusual due to their size and nature.
Significant Items are disclosed to assist users of the financial statements to better understand Brambles’ business results.
2019
US$m
2018
US$m
Before tax
Tax
After tax
Before tax
Tax
After tax
Items outside the ordinary course of business:
- restructuring costs1
- early debt repayment costs2
3
- changes in accounting estimates
- risk assessment related to asset
losses in Latin America4
- USA tax reform5
Significant Items from continuing
operations
(30.2)
(11.6)
-
(21.0)
6.5
-
-
2.5
(23.7)
(11.6)
-
(18.5)
(12.1)
-
(35.3)
-
2.7
-
8.5
-
(9.4)
-
(26.8)
-
-
-
-
-
65.2
65.2
(62.8)
9.0
(53.8)
(47.4)
76.4
29.0
1
2
3
4
5
Restructuring costs in 2019 relate to organisational changes of US$8.2 million and asset write-offs of US$22.0 million
following and as a result of the IFCO divestment. Restructuring costs for 2018 primarily relate to the completion of the One
Better Program.
Early debt repayment costs of US$11.6 million relate to the US$500.0 million 144A bond which was repaid on 5 July 2019
using the IFCO sale proceeds, with associated interest savings expected to be realised in financial year 2020.
Following a review of accounting estimations and methodologies in CHEP Americas, a charge of US$8.0 million was
reflected in FY18 Underlying Profit and a US$35.3 million charge relating to prior year costs was reflected in Significant
Items. The charges mainly relate to a change in methodology used to estimate the cost to serve in Latin America as well as
the migration of the pallet format in Canada to the US standard pallet in response to customer demand.
In 2019, a detailed review of people, processes and pricing was undertaken in Latin America. Following this review,
customer pricing has been increased and asset recovery and asset control processes have been improved.
The improvements made have also provided additional market insights into the challenges of asset recovery in higher risk
supply chains and a charge of US$21.0 million is included in Significant Items in 2019 (refer Note 3) to provide for assets
transferred to these supply chains in prior years which are now recognised to be at risk of being irrecoverable. The 2019
underlying earnings reflects the increased revenue from higher pricing and increased costs due to the higher transport
costs incurred in increasing asset recoveries, higher overhead investment in asset control, and increased IPEP expense to
cover asset losses in higher risk supply chains. In 2019, in addition to improving asset efficiency and increasing pricing,
actions have also been taken to reduce pallet flows into higher risk areas.
In January 2018, the USA Government passed the Tax Cuts and Jobs Act, which contained significant tax reform measures
including a decrease in the USA federal corporate tax rate from 35% to 21%. Consequently, Brambles recognised a
one-time non-cash net benefit of US$65.2 million to income tax expense during 2018, representing the estimated reduction
in Brambles USA's net deferred tax liability. The amount disclosed in the prior year financial statements of US$127.9 million
has been reduced by US$(24.5) million due to the impact of AASB 15 (refer Note 1H), as well as US$(38.2) million
transferred to discontinued operations relating to IFCO.
73
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 5. Net Finance Costs – Continuing Operations
Finance revenue
Bank accounts and short-term deposits
Derivative financial instruments
Other1
Finance costs
Interest expense on bank loans and borrowings
Derivative financial instruments
Other
2
Net finance costs
2019
US$m
6.1
6.5
2.7
15.3
2018
US$m
3.3
10.8
14.2
28.3
(95.3)
(115.5)
(7.0)
(1.5)
(103.8)
(88.5)
(16.1)
(0.1)
(131.7)
(103.4)
1
2
Other finance revenue comprises accrued interest on deferred consideration receivable from First Reserve. In 2018, other
finance revenue also included interest revenue on the US$150.0 million HFG shareholder loan.
The IFCO disposal proceeds of US$2,480.4 million were received on 31 May 2019 and did not have a material impact on net
finance costs during the year.
Finance revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the
financial asset.
Finance costs are recognised as expenses in the year in which they are incurred.
74
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 6. Income Tax
A) Components of Tax Expense
Amounts recognised in the statement of comprehensive income
Current income tax – continuing operations:
- income tax charge
- prior year adjustments
Deferred tax – continuing operations:
- origination and reversal of temporary differences
- previously unrecognised tax losses
- tax rate change1
- prior year adjustments
Tax expense – continuing operations2
Tax expense – discontinued operations (Note 9)
Tax expense recognised in profit or loss
Amounts recognised in other comprehensive income
- on actuarial (losses)/gains on defined benefit pension plans
Tax (benefit)/expense recognised directly in other comprehensive income
2019
US$m
2018
US$m
270.6
(1.6)
269.0
(60.2)
(6.4)
1.0
(5.1)
(70.7)
198.3
58.0
256.3
(2.7)
(2.7)
168.8
(5.4)
163.4
30.9
(7.6)
(76.8)
11.9
(41.6)
121.8
14.3
136.1
4.7
4.7
1
2
2018 includes US$65.2 million relating to the US tax reform (refer Note 4).
2018 included the six month impact of the lower US tax rate. The 2019 tax expense includes the full year impact of the
lower US tax rate offset by the impact of Base Erosion Anti-Abuse Tax (BEAT), which is effective for Brambles' US operations
from 1 July 2018, and relates to foreign related party payments.
The income tax expense or benefit for the year is the tax payable or receivable on the current year’s taxable income based on
the national income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements,
and to unused tax losses.
Current and deferred tax attributable to other comprehensive income are recognised in equity.
75
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 6. Income Tax – continued
B) Reconciliation Between Tax Expense and Accounting Profit Before Tax
Profit before tax – continuing operations
Tax at standard Australian rate of 30% (2018: 30%)
3
Effect of tax rates in other jurisdictions
Equity-accounted results of joint ventures
Prior year adjustments
Prior year tax losses written-off
Current year tax losses not recognised
Foreign withholding tax unrecoverable
1
Change in tax rates
Non-deductible expenses
Other taxable items
Prior year tax losses recouped/recognised
Other
Tax expense – continuing operations
Tax expense – discontinued operations (refer Note 9)
Total income tax expense
2019
US$m
652.4
195.7
(10.5)
-
(7.8)
1.1
4.1
9.2
1.0
12.6
0.6
(6.4)
(1.3)
198.3
58.0
256.3
2018
US$m
675.3
202.6
(30.9)
2.2
5.3
1.2
5.1
10.1
(76.8)
9.5
1.7
(7.6)
(0.6)
121.8
14.3
136.1
3
Includes the impact of BEAT in the US, relating to foreign payments effective 1 July 2018.
2019
US$m
2018
US$m
Assets
Liabilities
Assets
Liabilities
C) Components of Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities in the balance sheet are represented by cumulative temporary differences attributable to:
Items recognised through the statement of comprehensive income
Employee benefits
Provisions and accruals
Losses available against future taxable income
Accelerated depreciation for tax purposes
Deferred revenue
Other
Items recognised in other comprehensive income
Actuarial losses/(gains) on defined benefit pension plans
Share-based payments
18.7
37.4
122.1
-
98.6
73.5
350.3
7.9
7.2
15.1
-
-
-
(531.2)
-
(113.4)
(644.6)
(0.3)
-
(0.3)
Set-off against deferred tax (liabilities)/assets
(291.8)
291.8
Net deferred tax assets/(liabilities)
73.6
(353.1)
76
14.2
39.6
161.3
-
-
-
-
(729.7)
112.7
111.0
438.8
7.3
7.3
14.6
(415.2)
38.2
-
(119.4)
(849.1)
(1.0)
-
(1.0)
415.2
(434.9)
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 6. Income Tax – continued
D) Movements in Deferred Tax Assets and Liabilities
At 1 July
Charged to profit or loss
(Charged)/credited directly to equity
Divestment of subsidiaries
Adoption of new accounting standards
Offset against deferred tax (liabilities)/assets
Foreign exchange differences
At 30 June
2019
US$m
2018
US$m
Assets
Liabilities
Assets
Liabilities
38.2
22.9
2.9
28.2
-
(17.7)
(0.9)
73.6
(434.9)
28.3
0.7
29.3
-
17.7
5.8
(353.1)
42.6
6.0
(5.7)
-
-
(4.6)
(0.1)
38.2
(639.7)
79.0
(0.1)
(0.4)
116.0
4.6
5.7
(434.9)
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$652.5 million (2018: US$904.3 million) available for offset against
future profits. A deferred tax asset has been recognised in respect of US$492.4 million (2018: US$672.2 million) of such losses.
The benefit for tax losses will only be obtained if:
-
Brambles derives future assessable income of a nature and of an amount sufficient to enable the benefit from the
deductions for the losses to be realised;
-
-
Brambles continues to comply with the conditions for deductibility imposed by tax legislation; and
no changes in tax legislation adversely affect Brambles in realising the benefit from the deductions for the losses.
No deferred tax asset has been recognised in respect of the remaining unused tax losses of US$160.1 million
(2018: US$232.1 million) due to the unpredictability of future profit streams in the relevant jurisdictions. Tax losses of
US$434.2 million (2018: US$518.9 million), which have been recognised in the balance sheet, have an expiry date between
2022 and 2038 (2018: between 2019 and 2038), however it is expected that these losses will be recouped prior to expiry. The
remaining tax losses of US$58.2 million (2018: US$153.3 million), which have been recognised in the balance sheet, can be
carried forward indefinitely.
77
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
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$944.4 million (2018: US$2,090.9 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 2019 Tax Report is
scheduled for publication in the second half of calendar year 2019 and will be posted on Brambles’ website.
78
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 7. Earnings Per Share
Earnings Per Share (EPS)
- basic
- diluted
From continuing operations
- basic
- diluted
- basic, on Underlying Profit after finance costs and tax
From discontinued operations
- basic
- diluted
2019
US cents
2018
US cents
92.1
91.8
28.5
28.4
31.9
63.6
63.4
43.5
43.4
34.8
34.7
33.0
8.7
8.7
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 revenue 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
considered to be 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.
79
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
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
Profit 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
2019
Million
1,593.4
5.1
1,598.5
2019
US$m
454.1
1,013.6
1,467.7
803.7
(88.5)
715.2
(207.3)
507.9
507.9
(53.8)
454.1
2018
Million
1,591.2
5.1
1,596.3
2018
US$m
553.5
139.2
692.7
826.1
(103.4)
722.7
(198.2)
524.5
524.5
29.0
553.5
80
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 8. Dividends
A) Dividends Paid During the Period
Dividend per share (in Australian cents)
Cost (in US$ million)
Payment date
Interim
2019
14.5
161.7
Final
2018
14.5
166.4
11 April 2019
11 October 2018
Dividends paid during the year of US$328.1 million (2018: US$352.0 million) per the cash flow statement differ from the
amount recognised in the statement of changes in equity of US$330.0 million (2018: US$359.7 million) due to the impact of
foreign exchange movements between the dividend record and payment dates.
The impact of the Dividend Reinvestment Plan (DRP) for the dividend payments made in 2019 and 2018 was neutralised by on-
market share buy-backs.
B) Dividend Declared after 30 June 2019
Dividend per share (in Australian cents)
Cost (in US$ million)
Payment date
Dividend record date
Final
2019
14.5
156.3
10 October 2019
12 September 2019
As this dividend had not been declared at 30 June 2019, 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%
2019
US$m1
30.7
2018
US$m
62.7
1
The decline in franking credits available in 2019 reflects the increased franking percentage of 65% for the 2019 interim
dividend compared to the 30% franking of the 2018 final dividend.
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 2019 dividend will be franked at 30%.
81
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 9. Discontinued Operations
A) Divested Entities
IFCO RPC
On 25 February 2019, Brambles entered into an agreement to sell its IFCO RPC business with the completion of the sale occurring
on 31 May 2019. The carrying amount of assets and liabilities relating to IFCO 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
Deferred tax liabilities
Other liabilities
Total liabilities
Net assets
At date of
divestment
US$m
58.6
574.3
June
2018
US$m
20.4
526.1
1,083.1
1,101.3
700.5
43.9
732.5
80.4
2,460.4
2,460.7
843.3
158.0
42.7
800.8
74.4
40.2
1,044.0
915.4
1,416.4
1,545.3
The results up until the date of divestment and in the comparative reporting period have been included within discontinued
operations in the consolidated statement of comprehensive income and all related note disclosures.
Segment assets and liabilities in 2018, as disclosed in Note 2, include IFCO within discontinued operations.
82
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 9. Discontinued Operations – continued
B) Results of Discontinued Operations
Financial information for discontinued operations is summarised below:
Sales revenue1
Other income1
Operating expenses2,3
Operating results (excluding profit or loss on divestments) relate to:
- IFCO
- other discontinued operations
Gain on divestment of IFCO before tax
9C
Loss on divestment of CHEP Recycled before tax
Loss on divestment of HFG before tax
Total operating profit for the year, including gains/(losses) on divestment
Finance costs
Profit before tax
Tax expense4
Profit for the year from discontinued operations
Net cash inflow from operating activities
Net cash outflow from investing activities5
Net cash outflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Note
2019
US$m
2018
US$m
1,010.7
1,344.4
1.2
1.3
(898.8)
(1,175.1)
115.2
(2.1)
113.1
959.3
-
-
1,072.4
(0.8)
1,071.6
(58.0)
1,013.6
241.1
178.8
(8.2)
170.6
-
(8.3)
(7.3)
155.0
(1.5)
153.5
(14.3)
139.2
289.7
(191.4)
(304.0)
(10.4)
39.3
(4.3)
(18.6)
1
2
3
4
5
Sales revenue and other income in 2018 includes US$246.6 million and US$0.2 million respectively, in relation to CHEP
Recycled which was divested on 14 February 2018.
Operating expenses in 2018 include US$255.0 million in relation to CHEP Recycled and other discontinued operations,
primarily comprising HFG which was divested on 12 April 2018.
Operating expenses in 2019 include US$105.7 million of depreciation and amortisation expense (2018: US$115.2 million) in
relation to IFCO. Operating expenses in 2018 include US$5.4 million of depreciation and amortisation in relation to CHEP
Recycled.
Tax expense in 2019 includes US$13.6 million tax expense in relation to the gain on divestment of IFCO and a US$44.3 million
tax expense on IFCO's operating activities (2018: US$6.3 million).
Net cash outflow from investing activities includes intercompany cash flows related to discontinued operations. Intercompany
cash flows eliminate on consolidation in Brambles' cash flow statement.
83
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 9. Discontinued Operations – continued
C) Gain on Divestment of IFCO
Proceeds from sale
Less: carrying value of net assets divested
Less: foreign exchange loss released to profit
Less: transaction and separation costs6
Gain on divestment before tax
Tax expense
Gain on divestment after tax
2019
US$m
2,480.4
(1,416.4)
(32.2)
(72.5)
959.3
(13.6)
945.7
6
Includes costs associated with foreign exchange instruments used to hedge foreign exchange exposure arising from the IFCO
sale transaction.
D) Proceeds From Disposal of Businesses, Net of Costs to Sell and Cash Disposed
Proceeds from sale of IFCO
Less: transaction and separation costs
Less: cash held by IFCO at date of disposal
Add: accrued costs not paid
Proceeds from disposal of CHEP Recycled, net of costs to sell and cash disposed
2019
US$m
2,480.4
(72.5)
(58.6)
16.9
-
Proceeds from disposal of businesses, net of cash disposed and transaction costs
2,366.2
2018
US$m
-
-
-
-
102.2
102.2
E) Significant Items – Discontinued Operations
Significant Items related to discontinued operations include:
Items outside the ordinary course of business:
- gains/(losses) on divestment7
- USA tax reform8
- change to accounting estimates and
methodology9
Significant Items from discontinued
operations
2019
US$m
2018
US$m
Before tax
Tax
After tax
Before tax
Tax
After tax
959.3
(13.6)
945.7
-
-
-
-
-
-
(16.2)
-
(4.5)
35.7
36.7
(10.7)
(20.7)
35.7
26.0
959.3
(13.6)
945.7
20.5
20.5
41.0
Gains on divestment in 2019 relate to the sale of IFCO. Losses on divestment in 2018 relate to CHEP Recycled and HFG.
A tax benefit of US$35.7 million was recognised in 2018, comprising US$38.2 million related to the impact of the USA tax rate
change (refer Note 4), offset by US$(2.5) million relating to the impact of AASB 15 on the US tax rate change.
Reflects a change in accounting treatment identified in 2018 to align the IFCO recognition of logistics costs with the
methodology used across the Group.
7
8
9
84
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 10. Trade and Other Receivables
Current
Trade receivables
Allowance for doubtful receivables
Net trade receivables
Other debtors
Unbilled revenue
Total trade and other receivables1
Non-current
Other receivables2
2019
US$m
604.2
(14.7)
589.5
77.1
102.3
768.9
52.8
52.8
2018
US$m
1,067.0
(26.5)
1,040.5
106.5
100.0
1,247.0
50.4
50.4
1
2
Total trade and other receivables of US$1,247.0 million in 2018, includes US$526.1 million relating to IFCO.
Other receivables in 2019 primarily comprises deferred consideration of US$44.5 million due from First Reserve
(2018: US$41.8 million).
Trade receivables with no significant financing component 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.
Other receivables are initially recognised at fair value plus any directly attributable transaction costs and subsequently
measured at amortised cost.
The allowance for doubtful receivables has been established based on the new accounting standard, AASB 9 Financial
Instruments, effective to Brambles from 1 July 2018. Refer to Note 1H for an overview of the Brambles accounting policy
applied as well as restatement of the comparative period by US$10.9 million. An allowance of US$2.0 million
(2018: US$6.4 million) has been recognised as an expense in the current year for trade and other receivables in line with the
Group accounting policy. When a trade receivable for which an allowance had been recognised becomes uncollectible in a
subsequent period, it is written off against the allowance account.
Bad debts are written off when identified. Subsequent recovery of amounts previously written off are credited against other
expenses in profit or loss.
Other debtors primarily comprise GST/VAT recoverable and loss compensation receivables.
85
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 10. Trade and Other Receivables – continued
At 30 June, the ageing analysis of trade receivables and other debtors by reference to due dates was as follows:
Trade receivables
Other debtors
2019
US$m
2018
US$m3
2019
US$m
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
516.7
40.4
13.6
6.6
12.2
14.7
868.7
123.2
23.6
9.7
15.3
26.5
604.2
1,067.0
50.0
6.8
4.9
1.8
13.6
-
77.1
3
Includes US$505.1 million of trade receivables and US$26.1 million of other debtors in relation to IFCO.
Refer to Note 22 for other financial instruments' disclosures.
Note 11. Inventories
Raw materials and consumables
Finished goods
50.0
9.8
59.8
2018
US$m3
73.2
10.3
6.6
1.0
15.4
-
106.5
50.2
10.1
60.3
Inventories on hand are valued at the lower of cost and net realisable value and, where appropriate, a provision is made for
possible obsolescence.
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 12. Other Assets
Current
Prepayments
Current tax receivable
Derivative financial instruments
Non-current
Prepayments
Derivative financial instruments
Refer to Note 22 for other financial instruments' disclosures.
86
46.8
8.7
6.0
61.5
-
11.8
11.8
46.4
18.8
5.7
70.9
10.0
8.1
18.1
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 13. Property, Plant and Equipment
A) Net Carrying Amounts and Movements During the Year
2019
US$m
2018
US$m
Land and
Plant and
Land and
Plant and
buildings
equipment
Total
buildings
equipment
Total
Opening net carrying amount
48.9
5,090.8
5,139.7
Opening assets held for sale
Additions1
Acquisition of subsidiaries
-
8.2
-
-
-
1,208.2
1,216.4
-
-
Divestment of subsidiaries
(7.4)
(1,075.7)
(1,083.1)
Disposals
Depreciation charge2
IPEP expense3
Foreign exchange differences
Closing net carrying amount
At 30 June
Cost
-
(5.1)
-
(1.3)
43.3
(182.7)
(555.2)
(141.2)
(74.3)
(182.7)
(560.3)
(141.2)
(75.6)
4,269.9
4,313.2
85.8
6,371.1
6,456.9
Accumulated depreciation4
(42.5)
(2,101.2)
(2,143.7)
Net carrying amount
43.3
4,269.9
4,313.2
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)
5,090.8
5,139.7
99.8
(50.9)
48.9
7,659.8
7,759.6
(2,569.0)
(2,619.9)
5,090.8
5,139.7
1 Includes capital expenditure related to discontinued operations of US$156.0 million (2018: US$182.5 million).
2 Includes depreciation charge related to discontinued operations of US$92.5 million (2018: US$104.1 million).
3 Includes IPEP expense related to discontinued operations of US$14.1 million (2018: US$7.5 million).
4 Includes the IPEP provision of US$83.0 million (2018: US$71.5 million).
The net carrying amounts above include leasehold improvements of US$20.2 million (2018: US$17.4 million), capital work in
progress of US$85.9 million (2018: US$57.9 million) and plant and equipment held under finance lease of nil in 2019
(2018: US$31.8 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. The lease
liability is valued at amortised cost and is recognised in Note 17. Refer to Note 24B for operating leases.
87
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 13. 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; and
- 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 Note 14D). 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.
88
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 14. Goodwill and Intangible Assets
A) Net Carrying Amounts and Movements During the Year
Opening carrying amount
911.7
38.1
73.0
1,022.8
907.5
41.7
78.9
1,028.1
Goodwill
Software
Other1
Total
Goodwill
Software
Other1
Total
2019
US$m
2018
US$m
Opening assets held for
sale
Additions
Disposals
Acquisition of subsidiaries
-
-
-
-
-
14.1
(1.8)
-
-
7.5
-
-
-
33.7
-
11.4
45.1
21.6
(1.8)
-
-
-
2.0
6.6
(0.2)
-
-
12.1
(0.1)
0.3
(9.6)
18.7
(0.3)
2.3
(43.3)
(30.2)
Amortisation charge2
Foreign exchange
differences
Divestment of subsidiaries
(667.1)
(3.4)
(30.0)
(700.5)
(33.7)
-
(10.7)
(19.0)
(29.7)
-
(9.8)
(20.4)
(23.8)
(0.3)
(2.1)
(26.2)
2.2
(0.1)
0.3
2.4
Closing carrying amount
220.8
36.0
29.4
286.2
911.7
38.2
72.9
1,022.8
At 30 June
Gross carrying amount
220.8
165.1
68.2
454.1
911.7
169.6
230.3
1,311.6
Accumulated amortisation
-
(129.1)
(38.8)
(167.9)
-
(131.4)
(157.4)
(288.8)
Net carrying amount
220.8
36.0
29.4
286.2
911.7
38.2
72.9
1,022.8
1
2
Other intangible assets primarily comprise acquired customer relationships, customer lists and agreements, and BXB Digital
capitalised costs.
Includes amortisation charge related to discontinued operations of US$13.2 million (2018: US$16.5 million).
89
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 14. Goodwill and Intangible Assets – continued
B) Summary of Carrying Value of Goodwill
Goodwill is disclosed at the lowest CGU level at which it is assessed for impairment.
CHEP Europe
CHEP Asia-Pacific
IFCO
Other3
Total goodwill
2019
US$m
131.4
54.7
-
34.7
220.8
2018
US$m
134.1
56.4
685.2
36.0
911.7
3
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.
90
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 14. 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 were 4.5% and 5.6% for
CHEP Asia-Pacific and CHEP Europe CGUs respectively. Sensitivity testing was performed on these CGUs and a reasonably possible
decline in these rates would not cause the carrying value of the CGUs to exceed its recoverable amount.
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 terminal growth rate used in the
financial projections was 2.5% and 2.1% for CHEP Asia-Pacific and CHEP Europe respectively.
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 8.7% (pre-tax rates: CHEP Europe 7.9% and CHEP Asia-Pacific 11.7%). Average pre-tax WACC
rates used for 2018 impairment reviews were 8.8% for continuing businesses.
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.
91
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 15. Trade and Other Payables
Current
Trade payables
GST/VAT, refundable deposits and other payables
Deferred revenue
Accruals
Derivative financial instruments
Total trade and other payables1
Non-current
Other liabilities
2019
US$m
420.7
147.4
410.8
228.1
1.5
2018
US$m
526.9
579.4
494.5
340.0
13.5
1,208.5
1,954.3
1.0
1.0
1.7
1.7
1
Total trade and other payables of US$1,954.3 million in 2018 includes US$800.8 million in relation to IFCO.
Trade payables represent liabilities for goods and services provided to Brambles prior to the end of the financial year that
remain unpaid at the reporting date. The amounts are unsecured, non-interest bearing and are paid within normal credit terms
of 30–120 days.
Other payables (excluding derivatives) are initially measured at fair value, net of transaction costs incurred, and subsequently
measured at amortised cost.
Deferred revenue primarily relates to revenue that is billed on issue of pooling equipment to customers. It is recognised in the
statement of comprehensive income over the cycle time (refer Note 1H). As the cycle time is less than one year, all deferred
revenue from 2018 was recognised in 2019. Deferred revenue in 2019 relates to the transaction price allocated to performance
obligations that remain unsatisfied and will be satisfied in 2020.
Refer to Note 22 for other financial instruments' disclosures.
Note 16. Provisions
Employee entitlements
Other
2019
US$m
2018
US$m
Current
Non-current
Current
Non-current
61.3
14.2
75.5
3.5
11.3
14.8
55.6
10.3
65.9
3.6
9.0
12.6
Provisions for liabilities are made on the basis that, due to a past event, the business has a constructive or legal obligation to
transfer economic benefits that are of uncertain timing or amount. Provisions are measured at the present value of
management’s best estimate at the balance sheet date of the expenditure required to settle the obligation. The discount rate
used is a pre-tax rate that reflects current market assessments of the time value of money and the risks appropriate to the
liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost in profit or
loss.
Employee entitlements are provided by Brambles in accordance with the legal and social requirements of the country of
employment. Principal entitlements are for annual leave, sick leave, long service leave, bonuses and contract entitlements.
Annual leave and sick leave entitlements are presented within other payables.
92
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 16. Provisions – continued
Liabilities for annual leave, as well as those employee entitlements that are expected to be settled within one year, are measured
at the amounts expected to be paid when they are settled. All other employee entitlement liabilities are measured at the
estimated present value of the future cash outflows to be made in respect of services provided by employees up to the
reporting date.
Employee entitlements are classified as current liabilities unless Brambles has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Note 17. Borrowings
Unsecured
Bank overdrafts
Bank loans
Loan notes1
Finance lease liabilities
2019
US$m
2018
US$m
Current
Non-current
Current
Non-current
0.9
28.8
-
2.6
527.1
1,640.8
-
-
556.8
1,643.4
8.9
42.0
35.2
5.1
91.2
-
226.7
2,154.1
16.3
2,397.1
1
Following the divestment of IFCO, an irrevocable early redemption notice was issued in June 2019 to the US$500.0 million
144A April 2020 bond holders. The bond was subsequently measured to its payout value, inclusive of accrued interest and
early exit fees.
Borrowings are primarily 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 22.
Note 18. 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.
93
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 18. Retirement Benefit Obligations – continued
A) Defined Contribution Plans – continued
US$20.5 million (2018: US$18.5 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 2019 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 2019. 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$6.2 million has been recognised in profit in respect of defined benefit plans (2018: US$2.3 million), of which
US$5.6 million net expense relates to continuing operations (2018: US$1.7 million). Included within the total expense recognised
during the year is a one-off Guaranteed Minimum Pension (GMP) equalisation adjustment of US$3.8 million and a net interest
cost of US$0.3 million (2018: US$0.9 million).
The amounts recognised in the balance sheet are as follows:
Present value of defined benefit obligations
Fair value of plan assets
Net liability recognised in the balance sheet
2019
US$m
286.7
(249.4)
37.3
2018
US$m
271.6
(241.9)
29.7
Currency variations, a decrease in the discount rate and a one-off GMP equalisation adjustment 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$7.7 million (2018: US$11.8 million). The principal assumption used in the actuarial valuations of the defined benefit
obligation was the discount rate of 2.4% (2018: 2.8%) for the plans operating in the United Kingdom and 9.3% (2018: 8.9%) 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$6.3 million (2018: US$6.5 million) are being paid to
remove the identified deficits over a period of up to nine years (2018: five years).
94
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 19. Contributed Equity
Total ordinary shares, of no par value, issued and fully paid:
At 1 July 2017
Issued during the year1
At 30 June 2018
At 1 July 2018
Issued during the year1
Share buy-back2
At 30 June 2019
Shares
US$m
1,589,421,794
2,479,529
1,591,901,323
6,201.1
17.4
6,218.5
1,591,901,323
6,218.5
2,900,351
(6,039,299)
23.0
(54.1)
1,588,762,375
6,187.4
1
2
Includes shares issued on excerise of share plans and shares issued as part of the MyShare Dividend Reinvestment Plan.
As announced on 25 February 2019, Brambles will perform an on-market share buy-back of up to US$1.65 billion using the
proceeds from the IFCO divestment. As at 30 June 2019, US$54.1 million of shares have been repurchased as part of the
on-market share buy-back.
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.
95
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 20. Share-Based Payments
The Remuneration Report sets out details relating to the Brambles share plans (pages 39 to 40), together with details of
performance share rights and MyShare matching conditional rights issued to the Executive Directors and other Key Management
Personnel (pages 43 to 44). 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
2019
Performance share rights
Awards granted in prior periods
5,978,267
-
(1,962,515)
(990,628)
3,025,124
27 Aug 2018
27 Aug 2024
02 Sep 2018
02 Sep 2024
03 Sep 2018
03 Sep 2024
24 Sep 2018
24 Sep 2024
MyShare matching conditional rights
2017 Plan Year
31 Mar 2019
2018 Plan Year
31 Mar 2020
2019 Plan Year
31 Mar 2021
-
-
-
-
1,880
-
-
1,880
2,339,823
(10,974)
(140,381)
2,188,468
38,208
22,409
-
(12,805)
-
-
821,885
337,849
-
-
(764,817)
(57,068)
627,616
270,702
(76,398)
(105,083)
(930)
(7,443)
38,208
9,604
-
783,984
262,329
Total rights
7,138,001
3,300,638
(2,828,439)
(1,300,603)
6,309,597
2018 (summarised comparative)
Total rights
7,688,535
3,350,974
(2,380,350)
(1,521,158)
7,138,001
Of the above grants, 193,582 were exercisable at 30 June 2019.
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
2019
2018
A$
A$
years
9.71
11.29
4.0
7.84
9.36
4.2
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).
96
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 20. 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 date 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
2019
Grants
A$11.01
20%
2018
Grants
A$9.34
20%
2 – 3 years
2 – 3 years
1.94 – 2.00%
1.94 – 2.09%
3.00%
3.00%
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$17.1 million (2018: US$15.9 million) relating to equity-settled share-based payments
and US$1.6 million (2018: US$0.7 million) relating to cash-settled share-based payments. Of these amounts, US$2.1 million
(2018: US$1.6 million) related to discontinued operations.
97
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 21. Reserves and Retained Earnings
A) Movements in Reserves and Retained Earnings
Reserves
Share-
based
Foreign
currency
payments
translation
Unification
US$m
US$m
US$m
Other
US$m
Total
US$m
Retained
earnings
US$m
Year ended 30 June 2018
Opening balance as previously reported
82.7
(234.9)
(7,162.4)
161.8
(7,152.8)
3,798.4
Opening balance adjustment on application
of AASB 15 & 9
-
-
-
-
-
(331.3)
Revised opening balance
82.7
(234.9)
(7,162.4)
161.8
(7,152.8)
3,467.1
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
-
-
15.9
(17.4)
(0.5)
(0.4)
-
-
-
(98.5)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(98.5)
15.9
(17.4)
(0.5)
(0.4)
-
-
13.1
-
-
-
-
0.4
(359.7)
692.7
Closing balance as at 30 June 2018
80.3
(333.4)
(7,162.4)
161.8
(7,253.7)
3,813.6
Year ended 30 June 2019
Opening balance as previously reported
80.3
(335.5)
(7,162.4)
161.8
(7,255.8)
4,199.3
Opening balance adjustment on application
of AASB 15 & 9
-
2.1
-
-
2.1
(385.7)
Revised opening balance
80.3
(333.4)
(7,162.4)
161.8
(7,253.7)
3,813.6
Actuarial loss on defined benefit plans
Foreign exchange differences
FCTR released to profit on divestment of
IFCO
Share-based payments:
- expense recognised during the year
- shares issued
- equity component of related tax
- transfer to retained earnings on
divestment of IFCO
- other
Dividends declared
Profit for the year
-
-
-
17.1
(23.0)
1.6
(0.1)
(11.6)
-
-
-
(85.0)
32.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(8.1)
(85.0)
32.2
17.1
(23.0)
1.6
(0.1)
(11.6)
-
-
-
-
-
-
-
0.1
-
(330.0)
1,467.7
Closing balance as at 30 June 2019
64.3
(386.2)
(7,162.4)
161.8
(7,322.5)
4,943.3
98
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 21. Reserves and Retained Earnings – continued
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 20 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.
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.
99
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 22. 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 amortised cost, as disclosed in the
respective notes.
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 17 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 2019 equal the carrying amount, with
the exception of loan notes, which have an estimated fair value of US$2,264.7 million (2018: US$2,241.9 million) compared to a
carrying value of US$2,167.9 million (2018: US$2,189.3 million). Financial assets and liabilities held at fair value (other than loan
notes) 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 using Level 1 valuation
techniques, which uses directly observable unadjusted quoted prices in active markets for identical assets or liabilities.
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.
There was no change to the measurement or the carrying value of Brambles’ hedging instruments resulting from the change in
accounting standard from AASB 139 to AASB 9.
100
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 22. 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, is predominantly in euros and US dollars on borrowings. This 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. As at 30 June 2019, Brambles also has exposure to
variability in finance revenue through its holdings of cash and term deposits in Australian dollars.
The following table sets out the financial instruments exposed to interest rate risk at reporting date:
Financial assets (floating rate)
Cash at bank
Short-term deposits
Weighted average effective interest rate at 30 June
Financial assets (fixed rate)
Short term deposits
Term deposit
Other receivables
Weighted average effective interest rate at 30 June
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 at 30 June
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 at 30 June
Note
2
10
2019
US$m
357.7
836.5
1,194.2
1.7%
497.1
411.2
52.8
961.1
2.3%
0.9
28.8
170.6
200.3
2.2%
2018
US$m
179.4
0.8
180.2
1.3%
-
-
50.4
50.4
6.0%
8.9
253.7
173.5
436.1
2.8%
2,167.9
2,189.3
2.6
-
(170.6)
1,999.9
3.3%
15.0
21.4
(173.5)
2,052.2
3.4%
101
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 22. 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. The interest rate swaps and debt have been designated in a
hedging relationship at a hedge ratio of 1:1. The fair value of the interest rate swaps are adjusted for credit risk, measured by
reference to credit default swaps for the interest rate swap counterparties, which is a source of ineffectiveness. Movement in
credit risk does not dominate the hedge relationship. The credit valuation adjustment to the swaps at 30 June 2019 is
US$0.1 million (2018: US$0.2 million).
In accordance with AASB 9, the carrying value of the loan notes has been adjusted to increase debt by US$15.1 million (2018:
US$11.5 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$14.8 million (2018: US$11.1 million).
The terms of the swaps match the terms of the fixed-rate bond issue for the amounts and durations being hedged.
Fair value hedge
Description
Nominal amount (US$m)
Carrying amount (US$m)
Change in fair value (US$m)
Hedge ineffectiveness (US$m)
Balance sheet account impacted
Hedged item
Hedging instrument
€150m of the €500m EMTN
€150m interest rate swaps
170.6
173.8
15.1
Nil
170.6
14.8
15.1
Nil
Non-current borrowings
Other assets
Statement of comprehensive income account impacted
Finance revenue /finance costs
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 2019, all interest rate swaps were effective
hedging instruments.
Sensitivity analysis
Based on the Australian dollar floating rate financial assets and floating rate financial liabilities outstanding at 30 June 2019, if
Australian interest rates were to increase or decrease by 50 basis points with all other variables held constant, profit after tax for
the year would have been US$5.3 million higher/lower (2018: US$0.1 million higher/lower). Based on the US dollar floating rate
financial assets and floating rate financial liabilities outstanding at 30 June 2019, if US interest rates were to increase or decrease
by 50 basis points with all other variables held constant, profit after tax for the year would have been US$1.3 million
higher/lower (2018: US$0.7 million lower/higher).
Foreign exchange risk
Exposure to foreign exchange risk generally arises in either the value of transactions translated back to the functional currency of
a subsidiary or the value of assets and liabilities of overseas subsidiaries when translated back to the Group’s reporting currency.
Foreign exchange hedging is used when a transaction exposure exceeds certain thresholds and as soon as a defined exposure
arises. Within Brambles, exposures may arise with external parties or, alternatively, by way of cross-border intercompany
transactions. Forward foreign exchange contracts are primarily used to manage exposures from normal commercial transactions
such as the purchase and sale of equipment and services, intercompany interest and royalties. Given that Brambles both
generates income and incurs expenses in its local currencies of operation, these exposures are not significant.
Brambles generally mitigates translation exposures by raising debt in currencies where there are matching assets.
102
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 22. Financial Risk Management – continued
C) Market Risk – continued
Foreign exchange risk – continued
Currency profile
The following table sets out the currency mix profile of Brambles’ financial instruments at reporting date. Financial assets
include cash, term deposits, trade receivables and derivative assets. Financial liabilities include trade payables, borrowings and
derivative liabilities:
2019
Financial assets
Financial liabilities
2018
Financial assets
Financial liabilities
US
dollar
US$m
Aust.
dollar
US$m
712.3
1,538.8
1,159.5
14.0
270.3
1,356.3
60.0
25.3
Sterling
US$m
Euro
US$m
Other
US$m
Total
US$m
43.9
31.6
65.8
40.0
201.8
1,256.2
265.8
161.1
2,762.6
2,622.4
601.1
1,403.9
287.7
203.2
1,284.9
3,028.7
Forward foreign exchange contracts – cash flow hedges
During 2019, Brambles entered into forward foreign exchange transactions with various banks in a variety of cross-currencies
for terms ranging up to ten months.
For 2019 and 2018, all foreign exchange contracts were effective hedging instruments. The fair value of these contracts at
reporting date was nil (2018: 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 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$1.5 million (2018: liability of US$10.8 million).
Hedge of net investment in foreign entity
At 30 June 2019, €350.5 million (US$398.6 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 2019 and 2018, 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 2019, 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$28.3 million lower/higher (2018: US$28.9 million
lower/higher) as a result of the incremental movement through the foreign currency translation reserve relating to the
effective portion of a net investment hedge.
103
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 22. Financial Risk Management – continued
D) Liquidity Risk
Brambles’ objective is to maintain adequate liquidity to meet its financial obligations as and when they fall due. Brambles
funds its operations through existing equity, retained cash flow and borrowings. Funding is generally sourced from
relationship banks and debt capital market investors on a medium-to-long-term basis.
Bank credit facilities are generally structured on a committed multi-currency revolving basis and at balance date had
maturities ranging out to January 2024. Borrowings under the bank credit facilities are floating-rate, unsecured obligations
with covenants and undertakings typical for these types of arrangements.
Borrowings are raised from debt capital markets by the issue of unsecured fixed-interest notes, with interest payable
semi-annually or annually. At balance date, loan notes had maturities out to October 2027.
Brambles also has access to further funding through overdrafts, uncommitted and standby lines of credit, principally to
manage day-to-day liquidity.
The average term to maturity of the committed borrowing facilities and the loan notes is equivalent to 4.0 years
(2018: 4.5 years). These facilities are unsecured and are guaranteed as described in Note 31B.
Borrowing facilities maturity profile
2019
Total facilities
Facilities used1
Facilities available
2018
Total facilities
Facilities used1
Facilities available
Year 1
US$m
765.0
(530.7)
234.3
414.7
(75.9)
338.8
Year 2
US$m
637.6
(5.6)
632.0
1,055.6
(508.7)
546.9
Year 3
US$m
Year 4
US$m
>4 years
US$m
Total
US$m
475.7
183.7
1,983.5
4,045.5
-
(2.1)
(1,638.4)
(2,176.8)
475.7
181.6
345.1
1,868.7
703.0
(219.1)
483.9
252.8
1,865.4
4,291.5
(6.4)
(1,666.2)
(2,476.3)
246.4
199.2
1,815.2
1
Facilities used represent the principal value of loan notes and borrowings of US$2,171.2 million and letters of credit of
US$5.6 million drawn against the relevant facilities to reflect the correct amount of funding headroom. The loan note and
borrowings amount differs by US$29.0 million (2018: US$12.0 million) from loan notes and borrowings as shown in the
balance sheet, which are measured on the basis of amortised cost as determined under the effective interest method and
include accrued interest, transaction costs and fair value adjustments on certain hedging instruments.
104
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 22. Financial Risk Management – continued
D) Liquidity Risk – continued
Maturities of financial liabilities
The maturities of Brambles’ contractual cash flows on non-derivative financial liabilities (for principal and interest) and
contractual cash flows on net and gross settled derivative financial instruments, based on the remaining period to contractual
maturity date, are presented below. Cash flows on interest rate swaps and forward foreign exchange contracts are valued
based on forward interest and exchange rates applicable at reporting date.
Year 1
US$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
2019
Non-derivative financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
420.7
0.9
30.6
560.9
1,013.1
Financial guarantees2
28.9
1,042.0
-
-
0.3
42.7
43.0
-
43.0
Derivative financial (assets)/liabilities
Net settled interest rate swaps
-
-
0.3
42.7
43.0
-
43.0
-
-
2.3
42.7
45.0
-
-
-
1.4
420.7
420.7
0.9
34.9
0.9
31.4
1,744.9
2,433.9
2,167.9
1,746.3
2,890.4
2,620.9
-
28.9
-
45.0
1,746.3
2,919.3
2,620.9
- fair value hedges
(3.0)
(3.5)
(3.1)
(3.0)
(2.6)
(15.2)
(14.8)
Gross settled forward foreign exchange contracts
- (inflow)
- outflow
(673.2)
671.7
(4.5)
-
-
-
-
-
-
-
-
(3.5)
(3.1)
(3.0)
(2.6)
(673.2)
671.7
(16.7)
-
(1.5)
(16.3)
105
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 22. 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
2018
Non-derivative financial liabilities
Trade payables
Bank overdrafts
Bank loans
Loan notes
Finance lease
liabilities
Financial guarantees2
526.9
8.9
50.7
103.3
-
-
10.8
559.5
-
-
217.7
37.7
5.5
5.4
4.2
695.3
36.6
731.9
575.7
259.6
-
-
575.7
259.6
Derivative financial (assets)/liabilities
Net settled interest rate swaps
-
-
3.7
-
-
5.6
526.9
8.9
288.5
526.9
8.9
268.7
37.7
1,797.2
2,535.4
2,189.3
3.4
44.8
-
44.8
4.4
22.9
21.4
1,807.2
3,382.6
3,015.2
-
36.6
-
1,807.2
3,419.2
3,015.2
- 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
7.8
-
-
(3.0)
-
-
(2.2)
-
-
(1.8)
-
-
(1.6)
(1,124.1)
1,134.9
(0.8)
-
10.8
(0.3)
2
Refer to Note 25a) 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.
106
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 22. Financial Risk Management – continued
E) Credit Risk Exposure
Brambles is exposed to credit risk on its financial assets, which comprise cash and cash equivalents, term deposits, 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, including the mark-to market of hedging instruments where they represent an asset in the balance
sheet. Brambles has short-term deposits with maturities between one to nine months totalling US$1,507.3 million. A total of
US$1,227.3 million is deposited with banks rated AA- by Standard & Poor's, US$200.0 million is deposited with banks rated A
by Standard & Poor's and US$80.0 million is deposited with banks rated A- by Standard & Poor's. Other than the term
deposits described above and non-current receivables due from First Reserve totalling US$44.5 million, there is no
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 rating. At 30 June 2019,
Brambles held investment-grade credit ratings of BBB+ from Standard and Poor’s and Baa1 from Moody’s Investors Service.
Initiatives available to Brambles to achieve its desired capital structure include adjusting the amount of dividends paid to
shareholders, returning capital to shareholders, buying-back share capital, issuing new shares, selling assets to reduce debt,
varying the maturity profile of its borrowings and managing discretionary expenses.
Brambles considers its capital to comprise:
Total borrowings
Less: cash and cash equivalents
Less: term deposits
Net debt
Total equity
Total capital
2019
US$m
2018
US$m
2,200.2
2,488.3
(1,691.3)
(180.2)
(411.2)
-
97.7
2,308.1
3,808.2
3,905.9
2,778.4
5,086.5
Under the terms of its major borrowing facilities, Brambles is required to comply with the following financial covenants:
-
-
the ratio of net debt (excluding term deposits) to EBITDA is to be no more than 3.5 to 1; and
the ratio of EBITDA to net finance costs is to be no less than 3.5 to 1.
Brambles has complied with these financial covenants for 2019 and prior years.
107
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 23. Cash Flow Statement – Additional Information
A) Reconciliation of Cash
For the purpose of the cash flow statement, cash comprises:
Cash at bank and in hand
Short-term deposits1
Cash and cash equivalents
Bank overdraft (Note 17)
2019
US$m
357.7
1,333.6
1,691.3
(0.9)
1,690.4
2018
US$m
179.4
0.8
180.2
(8.9)
171.3
1 Short-term deposits recognised within cash and cash equivalents have maturities of three months or less and are measured
at amortised cost.
Cash and cash equivalents include deposits 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 (2018: US$0.2 million) used as security for various contingent
liabilities and are not readily accessible.
Cash includes US$1.6 million of cash in Zimbabwe (2018: US$11.5 million) which is subject to government currency controls
which currently restrict the ability to repatriate funds. In 2019, the Zimbabwe government issued a monetary policy introducing a
new base currency, Zimbabwe dollars (ZWL), to replace the US dollar denominated currency. The introduction of the new
currency has resulted in the significant devaluation of the existing cash and other monetary balances. The loss on retranslation
has been charged to the foreign currency translation reserve reflecting the impact of the change in the exchange rate.
Brambles has various master netting and set-off arrangements covering cash pooling. An amount of US$1.2 million has been
reduced from cash at bank and overdraft at 30 June 2019 (2018: US$11.3 million).
108
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 23. Cash Flow Statement – Additional Information – continued
B) Reconciliation of Profit After Tax to Net Cash Flow from Operating Activities
Profit after tax
Adjustments for:
- depreciation and amortisation
- IPEP expense
- net (gain)/loss on divestments
- net losses on disposals of property, plant and equipment
- other valuation adjustments
- joint ventures and associates
- equity-settled share-based payments
- finance revenues and costs
Movements in operating assets and liabilities, net of acquisitions and disposals:
- increase in trade and other receivables
- (increase)/decrease in prepayments
- increase in inventories
- decrease in deferred taxes
- increase in trade and other payables
- increase/(decrease) in tax payables
- increase/(decrease) in provisions
- other
2019
US$m
1,467.7
590.0
141.2
(959.3)
56.3
(4.1)
-
17.1
1.9
(132.6)
(8.6)
(1.0)
(36.1)
122.7
61.9
18.8
2.5
2018
US$m
692.7
584.9
109.4
15.6
27.3
2.0
11.8
15.9
4.5
(97.5)
1.8
(3.2)
(61.0)
163.2
(14.8)
(24.5)
(5.1)
Net cash inflow from operating activities
1,338.4
1,423.0
109
Consolidated Financial Report
Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 23. Cash Flow Statement – Additional Information – continued
C) Reconciliation of Movement in Net Debt
Net debt at beginning of the year
Net cash inflow from operating activities
Net cash outflow from investing activities
Proceeds from disposal of businesses, net of cash disposed
Payments for share buy-backs less proceeds from share issues
Dividends paid
Net outflow/(inflow) from derivative financial instruments
Interest accruals, finance leases and other
Foreign exchange differences
Net debt at end of the year
Being:
Current borrowings
Non-current borrowings
Cash and cash equivalents
Term deposits
Net debt at end of the year
2019
US$m
2,308.1
(1,338.4)
1,100.0
(2,366.2)
53.9
328.1
34.8
13.5
(36.1)
97.7
556.8
1,643.4
(1,691.3)
(411.2)
97.7
2018
US$m
2,572.7
(1,423.0)
872.4
(102.2)
-
352.0
(26.6)
(1.9)
64.7
2,308.1
91.2
2,397.1
(180.2)
-
2,308.1
D) Non-Cash Financing or Investing Activities
Apart from the Dividend Reinvestment Plan, there were no financing or investing transactions during the year which had a
material effect on the assets and liabilities of Brambles that did not involve cash flows.
Note 24. Commitments
A) Capital Expenditure Commitments
Capital expenditure, principally relating to property, plant and equipment, contracted for but not recognised as liabilities at
reporting date was as follows:
Within one year
Between one and five years
110
2019
US$m
106.8
-
106.8
2018
US$m
192.1
146.1
338.2
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 24. Commitments – continued
B) Operating Lease Commitments
Brambles has taken out operating leases for offices, operational locations and plant and equipment. The leases have varying
terms, escalation clauses and renewal rights. Escalation clauses are rare and any impact is considered immaterial.
The minimum lease payments under operating leases, where the lessor effectively retains substantially all of the risks and
benefits of ownership of the leased item, are recognised as an expense on a straight-line basis over the term of the lease. The
future minimum lease payments under such non-cancellable operating leases are as follows:
Within one year
Between one and five years
After five years
Minimum lease payments
Plant
Occupancy
2018
US$m
28.7
51.5
6.8
87.0
2019
US$m
103.0
299.2
149.5
551.7
2018
US$m
102.3
267.0
126.3
495.6
2019
US$m
25.8
44.8
3.7
74.3
During the year, operating lease expense of US$150.6 million (2018: US$146.7 million) was recognised in the statement of
comprehensive income.
Note 25. Contingencies
a)
Subsidiaries have contingent unsecured liabilities in respect of guarantees given relating to performance under contracts
entered into totalling US$28.9 million (2018: US$36.6 million), of which US$22.5 million (2018: US$27.7 million) is also
guaranteed by Brambles Limited. US$5.6 million (2018: US$8.2 million) is also guaranteed by Brambles Limited and certain of
its subsidiaries under a deed of cross-guarantee and is included in Note 31B.
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)
At 30 June 2019, Brambles Limited had a guarantee in place for finance leases for an IFCO subsidiary totalling US$6.3 million
(2018: US$8.0 million). This guarantee was released in early July 2019.
d)
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.
e)
During 2018, Brambles was served with class action proceedings filed in the Federal Court by Slater & Gordon and Maurice
Blackburn. In May 2019, the Federal Court ordered that the two actions be consolidated. The consolidated action is brought
on behalf of certain shareholders who acquired shares during the period between 18 August 2016 and 20 February 2017.
Brambles has filed its defence in the consolidated action. It is not possible to determine the ultimate impact, if any, of the
action upon Brambles, and it continues to vigorously defend the proceedings.
111
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 25. Contingencies – continued
In the ordinary course of business, Brambles becomes involved in litigation. Provisions have 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 any potential amounts payable.
Note 26. Auditor’s Remuneration
Audit and review services:
- PwC Australia
- Other PwC network firms
Total audit and review services1
Other assurance services:
- PwC Australia
- Other PwC network firms
Total other assurance services
2019
US$’000
2018
US$’000
2,521
3,773
6,294
-
9
9
2,230
3,435
5,665
159
34
193
Total remuneration for audit, review and other assurance services
6,303
5,858
Other services:
- IFCO divestment related - PwC Australia
- IFCO divestment related - other PwC network firms
- Tax advisory services - other PwC network firms
- Other - PwC Australia
- Other - other PwC network firms
Total other services2
Total auditor’s remuneration
188
2,099
37
9
36
2,369
8,672
-
-
22
8
52
82
5,940
1
2
During 2019, US$961,000 was spent on the audit and review of IFCO financial statements relating to the divestment process, of
which US$244,000 was paid to PwC Australia and US$717,000 was paid to other PwC network firms.
Other services during 2019 primarily related to due diligence and other financial reporting procedures associated with the dual-
track separation of IFCO through a demerger or sale of the business. Other services during 2018 primarily related to
compliance projects and tax consulting advice.
From time to time, Brambles employs PwC on assignments additional to its statutory audit duties where PwC, through its detailed
knowledge of the Group, is best placed to perform the services from an efficiency, effectiveness and cost perspective. The
performance of such non-audit related services is always balanced with the fundamental objective of ensuring PwC’s objectivity
and independence as auditors. To ensure this balance, Brambles’ Charter of Audit Independence outlines the services that can be
undertaken by the auditors and requires that the Audit Committee approves any management recommendation that PwC
undertakes non-audit work (with approval being delegated to the Chief Financial Officer within specified monetary limits).
112
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 27. Key Management Personnel
A) Key Management Personnel Compensation
Short-term employee benefits
Post-employment benefits
Other benefits
Share-based payment expense1
2019
US$’000
6,491
130
35
3,523
10,179
2018
US$’000
6,198
102
30
1,736
8,066
1
2019 includes US$1.0 million related to Key Management Personnel who were designated good leaver status following the
divestment of IFCO.
B) Other Transactions with Key Management Personnel
Other transactions with Key Management Personnel are set out in Note 28A.
Further remuneration disclosures are set out in the Directors’ Report on pages 29 to 48 of the Annual Report.
Note 28. 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 in nature.
B) Other Related Parties
A subsidiary has a non-interest bearing advance outstanding as at 30 June 2019 of US$999,860 (2018: US$1,048,818) 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.
113
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 28. 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 Mexico SA de CV
IFCO Systems US LLC
IFCO Systems GmbH
Brambles USA Inc.
Brambles Finance plc
Brambles Finance Limited
Australia
Mexico
USA
Germany
USA
UK
Australia
% interest held at
reporting date
2019
100
100
100
100
100
100
100
100
-
-
100
100
100
2018
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, with the exception of CHEP Mexico de CV,
which reports a 31 December balance date.
Note 29. Events After Balance Sheet Date
On 5 July 2019, Brambles repaid the US$500.0 million April 2020 144A bond using the IFCO sale proceeds.
Other than those outlined in the Directors’ Report or elsewhere in these financial statements, no other events have occurred
subsequent to 30 June 2019 and up to the date of this report that have had a material impact on Brambles’ financial performance
or position.
114
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 30. Net Assets Per Share
Based on 1,588.8 million shares (2018: 1,591.9 million shares):
- Net tangible assets per share
- Net assets per share
1
2018 balances include IFCO operations (refer Note 9).
2019
20181
US cents
US cents
221.7
239.7
110.3
174.5
Net tangible assets per share is calculated by dividing total equity attributable to the members of the parent entity, less
goodwill and intangible assets, by the number of shares on issue at year end.
Net assets per share is calculated by dividing total equity attributable to the members of the parent entity by the number of
shares on issue at year end.
Note 31. Parent Entity Financial Information
A) Summarised Financial Data of Brambles Limited
Parent entity
Profit for the year
Other comprehensive expense for the year1
Total comprehensive income
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Share-based payment reserve
Foreign currency translation reserve
Retained earnings
Total equity
1
Comprises foreign currency translation movements.
2019
US$m
1,428.8
(281.7)
1,147.1
3.0
7,662.3
7,665.3
-
921.9
921.9
6,743.4
6,187.4
46.3
(785.2)
1,294.9
6,743.4
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
6,218.5
52.5
(503.5)
196.1
5,963.6
115
Consolidated Financial Report Notes to and Forming Part of the Financial Statements – continued
for the year ended 30 June 2019
Note 31. Parent Entity Financial Information – continued
A) Summarised Financial Data of Brambles Limited – continued
The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements
except for investments and receivables from subsidiaries. In the parent entity financial information, investments in subsidiaries
are accounted for at cost and receivables from subsidiaries are held at amortised cost. Where appropriate, receivables from
subsidiaries have been adjusted for expected credit losses. Dividends received from investments in subsidiaries are recognised
as revenue.
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$1,613.7 million (2018: US$1,712.7 million), of
which US$5.6 million (2018: US$195.6 million) has been drawn.
Brambles Limited and certain of its subsidiaries are parties to a guarantee which supports notes of US$1,000.0 million
(2018: 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
(2018: €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$464.8 million (2018: US$514.3 million), of
which US$57.1 million (2018: US$129.2 million) has been drawn.
At 30 June 2019, Brambles Limited had a guarantee in place for finance leases for an IFCO subsidiary totalling US$6.3 million
(2018: US$8.0 million). This guarantee was released in early July 2019.
Brambles Limited was served with class action proceedings in 2018 which has been recognised as a contingent liability
(refer Note 25e).
C) Contractual Commitments
Brambles Limited did not have any contractual commitments for the acquisition of property, plant and equipment at 30 June
2019 or 30 June 2018.
116
Consolidated Financial Report Directors’ Declaration
In the opinion of the Directors of Brambles Limited:
(a)
the financial statements and notes set out on pages 57 to 116 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 2019 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
21 August 2019
Directors’ Declaration
117
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 2019 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 2019
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, 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.
118
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.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the
financial report as a whole, taking into account the geographic and management structure of the Group, its
accounting processes and controls and the industry in which it operates.
Materiality
For the purpose of our audit we used overall Group materiality of $33 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 Group 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 and it is a generally accepted benchmark.
We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable
thresholds.
Audit Scope
Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates
involving assumptions and inherently uncertain future events.
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 provide 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.
Audit of 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 fifteen 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, whilst others are included on a rotational basis.
In addition, local PwC audit firms performed risk focused targeted audit or specified procedures on selected transactions
and balances for a further nineteen 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.
119
Independent Auditor’s Report
Independent Auditor’s Report - continued
to the Members of Brambles Limited
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 the impairment assessment of goodwill, share based
payments, retirement benefit obligations, 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 the two largest locations (which are visited twice 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 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 Committee.
Key audit matter
How our audit addressed the key audit matter
Accounting for pooling equipment assets
(Refer to Note 13)
We performed the following procedures:
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 13 of the financial report, there 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. The largest category of pooling
equipment is 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
Evaluated the design effectiveness and tested a selection
of key asset management controls including attending
pallet audits 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.
To challenge the IPEP provision calculation
methodology and assumptions we:
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.
120
Independent Auditor’s Report
Independent Auditor’s Report - continued
to the Members of Brambles Limited
Key audit matter
How our audit addressed the key audit matter
flows analysis as reported through the asset management
system.
Obtained an understanding of useful economic life and
residual value assumptions and assessed continued
appropriateness based on an understanding of the
business.
Impairment assessment of goodwill
(Refer to Note 14)
We performed the following procedures:
The Group recognised goodwill of $220.8m as at 30 June
2019. Australian Accounting Standards require an annual
impairment assessment.
In order to assess the recoverability of goodwill, the Group
prepared financial models at 3o June 2019 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”).
Assessed whether the division of the Group’s goodwill
and 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
The assessment of impairment was a key audit matter due to
the financial size of the goodwill balance as well as the
judgements and assumptions applied in estimating
forecasted cash flows, growth rates and discount rates.
were reasonable and based on supportable assumptions
by comparing actual cash flows for previous years to
forecast cash flows and evaluating the evidence available
for significant 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.
Assessed the reasonableness of the discount rate
assumption by comparing it to market data, comparable
companies and industry research, with the assistance of
our valuation specialists.
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.
Calculation of current and deferred taxation
balances
(Refer to Note 6)
We performed the following procedures:
Assessed the rationale on which current tax was
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.
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.
121
Independent Auditor’s Report
Independent Auditor’s Report - continued
to the Members of Brambles Limited
Key audit matter
How our audit addressed the key audit matter
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.
Disclosure of discontinued operations
(Refer to Note 9)
During the financial year the Group entered into and
completed an agreement to sell its IFCO RPC business. The
carrying value of the assets sold was $1,416.4m and profit
from discontinued operations of $1,013.6m has been
recognised.
We considered the presentation of the IFCO RPC businesses
as discontinued operations to be a key audit matter due to
the financial size of the assets sold and gain after tax
recognised.
Challenged whether the Group had sufficient taxable
temporary differences to recognise tax losses by
considering when these temporary differences will
become taxable income compared to the expiry of the
losses. 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.
We read the associated sale agreement to develop an
understanding of the terms of the transaction and performed
the following procedures:
Evaluated if the profit and loss information disclosed as
discontinued operations was accurate and related only to
the IFCO RPC business that was sold.
Together with PwC tax specialists and experts, tested the
accuracy of the tax expense recorded related to this
transaction.
Evaluated the calculation of the total gain recognised on
the sale including:
agreeing the purchase price and associated working
capital adjustments to the sale agreement;
agreeing the value of the assets and liabilities
derecognised as a result of the sale to the
completion balance sheet for the transaction; and
agreeing transaction costs and separation costs to
supporting documentation.
Other information
The directors are responsible for the other information. The other information comprises the information included
in the annual report for the year ended 30 June 2019, 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.
In connection with our audit of the financial report, our responsibility is to read the other information 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 on the other information that we obtained prior to the date of this
auditor’s report, 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.
122
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to the Members of Brambles Limited
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 the 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 29 to 48 of the directors’ report for the year ended
30 June 2019.
In our opinion, the remuneration report of Brambles Limited for the year ended 30 June 2019 complies with
section 300A of the Corporations Act 2001.
123
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to the Members of Brambles Limited
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.
Sydney
21 August 2019
Sydney
21 August 2019
PricewaterhouseCoopers
Susan Horlin
Partner
Eliza Penny
Partner
124
Independent Auditor’s Report
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Brambles Limited for the year ended 30 June 2019, 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
21 August 2019
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, 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
125
Five-Year Financial Performance Summary
US$m
Continuing operations1,2,3,4
Sales revenue1,2,3,4
EBITDA1,2,3,4
Depreciation and amortisation1,2,3,4
Operating profit1,2,3,4
Net finance costs1,2,3,4
Profit before tax1,2,3,4
Tax expense1,2,3,4
Profit from continuing operations1,2,3,4
Profit from discontinued operations1,2,3,4
Profit for the year1,2,3,4
Underlying Profit1,2,3,4
Significant Items1,2,3,4
Operating profit1,2,3,4
2019
2018
2017
2016
2015
4,595.3
1,225.2
(484.3)
740.9
(88.5)
652.4
(198.3)
454.1
1,013.6
1,467.7
803.7
(62.8)
740.9
4,470.3
1,243.0
(464.3)
778.7
(103.4)
675.3
(121.8)
553.5
139.2
692.7
826.1
(47.4)
778.7
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
Weighted average number of shares (millions)
1,593.4
1,591.2
1,588.3
1,577.6
1,566.0
Earnings per share (US cents)
Basic
From continuing operations1,2,3,4
On Underlying Profit after finance costs and tax1,2,3,4
ROCI1,2,3,4
92.1
28.5
31.9
19%
43.5
34.8
33.0
20%
11.5
28.0
38.5
17%
37.3
37.5
39.2
19%
37.3
37.5
39.7
16%
Capex on property, plant and equipment1,2,3,4
1,060.4
1,012.5
1,023.5
1,060.8
1,035.4
Balance sheet
Capital employed
Net debt
Equity
Average Capital Invested1,2,3,4,5
Cash flow
Cash Flow from Operations1,2,3,4
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 employees1,2,3,4
3,905.9
97.7
3,808.2
4,130.6
5,086.5
2,308.1
2,778.4
4,115.4
431.8
238.5
328.1
(89.6)
0.1
14.6
724.8
554.4
352.0
202.4
1.5
15.0
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
518.8
171.7
205.1
(33.4)
1.7
13.5
729.5
404.1
359.3
44.8
1.7
13.7
10,896
10,441
13,882
13,816
13,854
Dividend declared per share (Australian cents)
29.0
29.0
29.0
29.0
28.0
1 IFCO is presented within discontinued operations in 2019 and 2018. Periods prior to 2018 include IFCO within continuing operations and are consistent with
previously published data.
2 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 CHEP Recycled, Oil & Gas and Aerospace businesses within continuing operations and are consistent
with previously published data.
3 Periods prior to 2018 have not been restated for impact of the new accounting standards AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with
Customers.
4 LeanLogistics is presented within discontinued operations in 2016 and 2015.
5 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).
126 Five-Year Financial Performance Summary
Glossary
Acquired Shares
Brambles Limited shares purchased by Brambles' employees under MyShare
actual currency/actual FX
Results translated into US dollars at the applicable actual monthly exchange rates
ruling in each period
AGM
Annual General Meeting
ACI (Average Capital Invested)
A 12-month average of capital invested; capital invested is calculated as net assets
before tax balances, cash and borrowings, but after adjustment for pension plan
actuarial gains or losses and net equity adjustments for equity-settled share-based
payments
AU cents
Australian cents
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, details of which are on pages 23 to 25
The value generated over and above the cost of the capital used to generate that
value. It is calculated using fixed June 2018 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 and CHEP Asia-Pacific
(each primarily comprising pallet and container pooling businesses in that region
operating under the CHEP 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
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
Economic value
A measure of the broader financial benefit provided by an organisation
127
Glossary Glossary continued
EPS (Earnings Per Share)
Profit after finance costs, tax, minority interests and Significant Items, divided by the
weighted average number of shares on issue during the period
EBITDA (Earnings before Interest, Tax,
Depreciation and Amortisation)
Operating profit from continuing operations after adding back depreciation and
amortisation
ELT
Free Cash Flow
FY (Financial Year)
Brambles’ Executive Leadership Team, details of which are on pages 26 to 28
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; FY19 indicates the financial year ended
30 June 2019
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
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
Short-Term Incentive
Sharing economy
Significant Items
STI
128
Glossary Glossary continued
TSR (Total Shareholder Return)
Underlying EPS
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
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’ 2019 financial year
129
Glossary
Notes
Notes
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, India & 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
Investor & Analyst Queries
Telephone: +61 (0) 2 9256 5238
Email:
investorrelations@brambles.com
Share Registry
Access to shareholding information is available to investors
through Boardroom Pty Limited
Boardroom Pty Limited
GPO Box 3993, Sydney NSW 2001, Australia
Telephone: 1300 883 073 (within Australia)
+61 (0) 2 9290 9600 (from outside Australia)
Facsimile:
+61 (0) 2 9279 0664
Email:
bramblesesp@boardroomlimited.com.au
Website:
www.boardroomlimited.com.au
Share Rights Registry
Employees or former employees of Brambles who have queries
about the following interests:
Performance share rights under the performance share plans;
Matching share rights under MyShare; or
Shares acquired under MyShare or other share interests held
through Sargon CT Pty Ltd, may contact Boardroom Pty Limited,
whose contact details are set out above.
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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