Brambles Limited 2007 Annual Report Brambles Has Its Headquarters in Australia and Operates in Over 45 Countries Around the World
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Brambles Limited 2007 Annual Report Brambles has its headquarters in Australia and operates in over 45 countries around the world. CHEP issues, collects, repairs and reissues about 285 million pallets and containers to assist manufacturers, distributors and retailers to transport their products safely and effi ciently. Recall manages the secure storage, retrieval and destruction of physical and digital information for nearly 80,000 customers worldwide. Brambles Limited ABN 89 118 896 021 10 Financial Performance 28 Board of Directors 90 Financial Statements 12 Chairman’s Review 32 Corporate Social Responsibility Report 162 Independent Auditors’ Report 16 Chief Executive Officer’s Report 44 Financial Review 164 Five Year Financial Performance Summary 19 Executive Leadership Team 48 Corporate Governance Report 165 Glossary 20 CHEP 58 Directors’ Report – Remuneration Report 168 Directory, Annual General Meeting and Dividend details 24 Recall 81 Directors’ Report – Other Information 87 Shareholder Information Brambles Limited 2007 Annual Report 1 THE CHEP PALLET POOLING SYSTEM BENEFITS THE FAST MOVING CONSUMER GOODS INDUSTRY BY REDUCING COSTS, WASTE AND PRODUCT DAMAGE, INCREASING PRODUCTIVITY AND EFFICIENCY AND IMPROVING SAFETY. Fast Moving Consumer Goods (FMCG) A signifi cant proportion of the grocery volume in North America and Europe, and nearly all the grocery volume in Australia and New Zealand, is shipped on pooled pallets. CHEP’s customers include some of the leading companies in the FMCG sector, including Heinz, Coca-Cola, Nestlé, Kellogg’s, Kraft and Procter & Gamble. 2 Brambles Limited 2007 Annual Report THE CHEP PALLET POOLING SYSTEM PROVIDES AN EFFICIENT AND HASSLE-FREE SOLUTION THAT ALLOWS BEVERAGE INDUSTRY MANUFACTURERS AND BOTTLERS TO FOCUS ON THEIR CORE COMPETENCIES. Beverage Industry Every day, CHEP manages the movement of more than 235 million pallets through its global network of more than 450 service centres in 44 countries. Beverage manufacturers, bottlers, distributors and retailers benefi t from reduced product damage, lower transportation costs, improved handling effi ciencies and safety and the elimination of pallet purchases and repairs. Brambles Limited 2007 Annual Report 3 CHEP’S REUSABLE PLASTIC CONTAINERS PROVIDE A ONE-TOUCH MERCHANDISING SOLUTION FOR THE FRESH FRUIT AND VEGETABLE INDUSTRY THAT REDUCES PRODUCT DAMAGE AND WASTE, INCREASES THE SHELF LIFE OF FRUIT AND VEGETABLES AND IMPROVES HANDLING EFFICIENCY. Fresh Fruit and Vegetable Industry Every day, CHEP manages the movement of nearly half a million Reusable Plastic Containers (RPCs) to over 1,600 customers around the world. Fruit and vegetables are loaded from the fi eld or processing facility directly into the RPC – a durable, reusable, high quality container that can be shipped through the supply chain and displayed in a retail environment with minimal handling. 4 Brambles Limited 2007 Annual Report CHEP’S EXPERTISE ENSURES THAT THE RIGHT AUTOMOTIVE CONTAINERS GET TO THE RIGHT SUPPLIERS IN THE AUTOMOTIVE INDUSTRY AT THE RIGHT TIME AND IN THE RIGHT CONDITION. Automotive Industry Every year, CHEP issues 49 million automotive containers that are designed specifi cally to improve ergonomics and manufacturing effi ciencies. CHEP automotive containers improve supply chain effi ciency and reduce expenditure by integrating container control with ordering systems so that containers are allocated according to demand. Brambles Limited 2007 Annual Report 5 CHEP INTERMEDIATE BULK CONTAINERS ARE USED TO TRANSPORT AND STORE BULK LIQUID ITEMS FOR THE GROCERY INDUSTRY INCLUDING HONEY, WINE, FRUIT JUICE AND DAIRY PRODUCTS. Bulk Materials Every year, CHEP issues more than 1.1 million Intermediate Bulk Containers to transport hundreds of different types of liquid and dry ingredients to production facilities. The specifi c benefi ts vary with each business, but all enjoy improved effi ciency through reduced costs, decreased product damage and better handling effi ciencies. 6 Brambles Limited 2007 Annual Report THE SECURE AND EFFICIENT MANAGEMENT OF INFORMATION, PARTICULARLY PAPER DOCUMENTS, REMAINS CRITICAL TO BUSINESSES AND OTHER ORGANISATIONS AROUND THE WORLD DUE TO LEGAL AND OTHER REQUIREMENTS. Information Management Recall operates in 22 countries, managing physical and digital documents through their entire life cycle. Recall is a global leader in its three service lines: Document Management Solutions, Secure Destruction Services and Data Protection Services. Brambles Limited 2007 Annual Report 7 RECALL’S EXCLUSIVE CLOSED-LOOP DESTRUCTION PROCESS ALLOWS CUSTOMERS TO DISPOSE OF SENSITIVE BUSINESS INFORMATION IN A SECURE, CONFIDENTIAL ENVIRONMENT. Document Destruction Recall’s Secure Destruction Services ensure the total destruction of sensitive material, including paper documents, disks, tapes, CDs and DVDs. 8 Brambles Limited 2007 Annual Report BRAMBLES’ 12,000 EMPLOYEES PROVIDE HIGH QUALITY SERVICES FROM APPROXIMATELY 750 FACILITIES TO CUSTOMERS IN MORE THAN 45 COUNTRIES AROUND THE WORLD. Brambles is committed to working safely and applying industry best practice to the health, safety and well-being of employees, contractors, suppliers, customers and communities in which it operates. Brambles’ objective is Zero Harm, meaning no injuries and no environmental damage. Brambles Limited 2007 Annual Report 9 SUSTAINABILITY AND PROTECTION OF THE ENVIRONMENT ARE FUNDAMENTAL TO THE WAY BRAMBLES DOES BUSINESS. OVERALL, ON A LIFE CYCLE BASIS, BRAMBLES HAS A POSITIVE NET IMPACT ON THE ENVIRONMENT. CHEP pallet pooling reduces the use of wood and CHEP also minimises the impact of its internal waste generation by ensuring that scrap pallets, containers and crates are recycled for animal bedding, mulch or fuel. Recall collects, shreds and sends for recycling about 200,000 tonnes of paper each year – the equivalent of three million trees. 10 Brambles Limited 2007 Annual Report FINANCIAL PERFORMANCE Brambles delivered another year of excellent results in 2007 Comparable operating profi t for continuing operations increased by 21% (17% higher in constant currency) to US$932.8 million. Profi t after tax before special items for continuing operations grew by 36% (32% in constant currency) to US$585.7 million. Cash fl ow from continuing operations increased from US$762.6 million to US$838.3 million. % change at constant US$ millions 2007 2006 % change currency Continuing operations Sales 3,868.8 3,522.1 10% 6% Comparable operating profit1 932.8 771.3 21% 17% Profit before tax and special items2 872.9 659.5 32% 28% Profit after tax before special items 585.7 430.1 36% 32% Profit after tax and special items 433.7 362.6 20% Profit from discontinued operations, before special items 27.7 217.0 Profit for the year, before special items 613.4 647.1 Special items after tax 677.9 817.3 Profit for the year 1,291.3 1,464.4 (12)% Earnings per share (continuing operations, before special items) (US cents) 37.8 25.5 48% Earnings per share (US cents) 83.4 86.7 (4)% Cash flow from operations 875.5 939.6 Net capital expenditure on property, plant and equipment 539.1 608.3 Free cash flow3 490.2 559.7 Net debt 1,996.9 1,690.1 Gearing (net debt/net debt + equity) 58.4% 36.4% Interest cover 22.9x 13.9x Notes: 1 Comparable operating profit is profit before special items, finance costs and tax. 2 Special items comprise impairments, exceptional items, fair value adjustments and amortisation of acquired non-goodwill intangible assets (other than software). 3 Free cash flow is cash flow generated after net capital expenditure, finance costs and tax but excluding the net cost of acquisitions and proceeds from business disposals. To show underlying performance, constant currency comparisons are used throughout this Report. Constant currency relative performance is calculated by translating both current period and comparable period results into US$ at the actual monthly exchange rates applicable for the comparable period. Its purpose is to show relative performance between periods before the translation impact of currency fluctuations. Brambles Limited 2007 Annual Report 11 Sales (continuing operations) Sales by region (continuing operations) 3,869 3,869 3% 3,522 3,522 17% 3% 12% 3,275 3,275 16% 3% 11% 2,893 16% 2,893 11% 3% 2,436 16% 2,436 10% 3% 40% 40% 16% 9% 42% 83% 42% 84% 41% 84% 84% 84% Rest of World 46% 45% 44% Australia/NZ 45% Recall 47% Europe CHEP Americas US$ millions US$ millions 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Sales % UP 10 Comparable operating 1,2 1,2 Comparable operating profit (continuing operations) profit by region (continuing operations) 964 964 4% 12% 801 801 14% 6% 12% 13% 619 619 34% 6% 14% 16% 472 472 36% 6% 395 16% 88% 395 17% 5% 20% 88% 39% 14% 86% 40% 40% 84% 48% Rest of World 80% 45% Australia/NZ Recall 39% Europe 41% 37% CHEP Americas US$ millions US$ millions 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Comparable operating profit % UP 20 1–3 1 Cash flow from operations (continuing operations) Earnings per share (continuing operations, before special items) 37.8 867 10% 752 698 11% 13% 25.5 475 18.3 13% 90% 89% 12.8 87% 9.5 220 87% 26% Recall 74% CHEP US$ millions US cents 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Cash flow from operations% Earnings per share % UP 15 UP 48 Notes: 1 Years 2003-2004 are under UK GAAP and exclude goodwill amortisation. 2005-2007 are under AIFRS. 2 Excludes unallocated Brambles Headquarters costs. 3 Years 2003-2004 include the cash flow effect of exceptional items. 12 Brambles Limited 2007 Annual Report Brambles again delivered strong fi nancial results in the 2007 fi nancial year, while also successfully completing its divestment program and Unifi cation. David Turner has retired after four extremely successful years as Chief Executive Offi cer and the company has a bright future under the new Chief Executive Offi cer, Mike Ihlein. Don Argus AO Chairman Brambles Limited 2007 Annual Report 13 CHAIRMAN’S REVIEW The Board is very pleased that the strategy announced in late The 2007 final dividend will be franked to 20%.