Annual Report 2020 Connecting people with life’s essentials, every day brambles.com Contents Brambles at a Glance 1 Letter from the Chairman and CEO 2 Operating & Financial Review 4 Board & Executive Leadership Team 26 Directors’ Report – Remuneration Report 33 Directors’ Report – Additional Information 53 Shareholder Information 59 To view the Group’s online Consolidated Financial Report 61 Independent Auditor’s Report 119 annual review for 2020, go to: Auditor’s Independence Declaration 126 Five-year Financial Performance Summary 127 brambles.com Glossary 128 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 pages 128 to 130. 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 at 30 June 2020, Brambles: As a pioneer of the sharing economy, Operated in… Brambles is one of the world’s most sustainable logistics businesses. ~60 countries Its circular business model facilitates the ‘share and reuse’ of the world’s largest pool of reusable pallets and containers. Owned... This enables Brambles to serve its customers ~330 million while minimising the impact on the environment pallets, crates and containers and improving the efficiency and safety of supply chains around the world. Employed... Brambles’ platforms form the invisible ~12,000 backbone of global supply chains, primarily people serving the fast-moving consumer goods, fresh produce, beverage, retail and general Through a network of… manufacturing industries. The world’s largest brands trust Brambles to help 750+ service centres them transport life’s essentials more efficiently, safely and sustainably. Financial Highlights US$4,733.6m US$743.9m Sales Revenue Cash Flow from Operations1 Up 6% at constant currency Up US$312.1m US$795.0m 16.7% Underlying Profit1 Return on Capital Invested1 Up 4% at constant currency Down -2.5 percentage points at constant currency Excluding the impact of AASB 16 Underlying Profit Excluding the impact of AASB 16 ROCI decreased increased 1 percentage point 0.9 percentage points 18.0 US cents per share 5.5 Total Dividends Brambles Injury Frequency Rate (BIFR) Final dividend of 9.0 US cents per share Down from 5.9 in FY19 1 Continuing operations. 1 Letter from the Chairman & CEO Strategic Priorities The Covid-19 pandemic has reinforced the importance of our long-term strategic goals. We are committed to being the global leader in platform pooling solutions and insight-based solutions to fast-moving supply chains, delivered through our circular ‘share and reuse’ model. We have refined our focus across four strategic themes to ensure we are agile and responsive to changing needs driven by increasing uncertainty and volatility. These strategic themes guide decision making across the Group and are integral to delivering superior and sustained value for customers, shareholders and employees. We are committed to delivering customer value that enhances the sustainability and efficiency of end-to-end supply chains. The past year has been particularly We continue to invest in digital transformation, including challenging for Brambles, as it has through the Group’s in-house technology hub, BXB Digital, to create distinctive new capabilities. We are constantly seeking been for the whole world. Never has our to improve asset and network productivity, with ongoing programmes of automation and process standardisation to purpose as a company – “to connect enhance the efficiency and resilience of our operations. In people with life’s essentials, every day” our quest for business excellence, we are re-inventing our organisation, technology and processes to be simpler, more – been so important. effective and more efficient. We are confident that the heightened Faced with a global pandemic, our people rose to the challenge focus on these strategic themes will deliver benefits to of delivering our essential services, enabling regional and global shareholders over the long-term. supply chains to remain open and ensuring the continued flow FY20 Results of life’s essentials to communities around the world. Our FY20 result reflects the resilience of our pallet businesses During this time of increased volatility and uncertainty, our teams and our ability to effectively manage costs and capital overcame significant challenges to provide our customers with expenditure across our entire portfolio. At constant currency, uninterrupted service and supply of pallets, crates and containers sales revenue increased 6% as strong volume growth and price across our markets. Our success is testament to the strength realisation in our global pallet businesses more than offset of our people, the agility of our network and resilience of our declines in our Automotive container and Kegstar businesses, ‘share and reuse’ business model, all of which have been critical which were particularly impacted by Covid-19-related lockdown in positioning Brambles as a trusted supply chain partner for measures. Underlying Profit increased 4% at constant currency 2 customers around the world. (including the impact of AASB 16 ), reflecting a one percentage point improvement in US margins and ongoing progress in Throughout this period and as we look ahead, our highest priority addressing cost pressures in Canada and Latin America. is the health and safety of our employees and ensuring our Cash generation was strong during the Year, with Free Cash Flow facilities are well protected and managed to best support the after ordinary dividends of US$171.5 million driven by disciplined needs of our customers and local communities. capital allocation and effective working capital management. We were swift in deploying additional hygiene and safety Capital Management Programme procedures across our global service centre network, sharing best practice and insights across more than 60 countries. For At the time of the sale of its IFCO RPC business, Brambles our office-based staff we quickly transitioned to working from announced that it intended to return A$2.8 billion home arrangements, providing our workforce with the necessary (US$1.95 billion) of the sale proceeds to you, our shareholders, tools and support to successfully adapt to completely new through two mechanisms. ways of working. The first was an on-market share buy-back of up to A$2.4 billion While many countries are starting to ease out of lockdowns (US$1.65 billion). The share buy-back commenced on and are showing signs of recovery, the global Covid-19 pandemic 4 June 2019 and has continued during FY20. At 30 June 2020, continues to have a serious impact on people’s health and a total of 91,697,878 ordinary shares had been bought back and livelihoods around the world. We therefore remain vigilant in our cancelled for a total consideration of A$1,049.7 million. The share approach and practices in relation to the health and safety of our buy-back is outlined in more detail on page 9. employees, customers and the communities in which we operate. The second was a 29.0 AU cents per share pro-rata cash return paid to shareholders on 22 October 2019. The cash return had two components: a capital return of 12.0 AU cents per share and a special unfranked dividend of 17.0 AU cents per share. The total cash payment for the pro-rata return was A$453.8 million. At 30 June 2020, Brambles had completed A$1.5 billion, that is 53%, of the A$2.8 billion capital management programme. 2 AASB 16 ‑ New leasing standard effective for Brambles from 1 July 2019. 2 Dividend Policy and Capital Structure Annual General Meeting As previously communicated, during the Year Brambles moved Having regard to our health and safety priorities and associated to a payout ratio-based dividend policy, targeting a payout ratio restrictions on public gatherings relating to the Covid-19 of 45-60% of Underlying Profit after finance costs and tax, subject pandemic, the Board has decided to conduct this year’s Annual to Brambles’ cash requirements, with the dividend per share General Meeting as a virtual meeting. We will be sending a declared in US cents and converted and paid in Australian cents. communication to shareholders in the near term, providing Following the introduction of the new lease accounting standard, details of the meeting, including how to participate, submit which means operating leases are now recorded as an asset and questions and how to vote.