Letter from the Chairman
Stephen Johns

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, 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.

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

US$4,595.3m

Up 7% at constant currency

Underlying Profit4

US$803.7m

Up 2% at constant currency

Total Dividends

29.0 AU cents per share

Final dividend of 14.5 AU cents per share

4 Continuing operations