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Brambles Industries (BI.)

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Tuesday 18 November, 2003

Brambles Industries

Chairmans AGM address

Brambles Industries PLC
18 November 2003

Brambles Industries plc
Company number: 4134697

                          BRAMBLES INDUSTRIES LIMITED
                             ANNUAL GENERAL MEETING
                                 18 NOVEMBER 2003


Chairman's address - Part I

Good afternoon, ladies and gentlemen.

As you may be aware, Sir John Parker retired from the Board at the end of the
Brambles Industries plc meeting held in London on the 21st of October. Sir John
had an intimate knowledge of Brambles and his insightful contributions around
the Board table will be missed. All of us wish him well for the future.

As you no doubt are also aware, Sir CK Chow has chosen to resign as Chief
Executive Officer and as a Director. He resigned to take up a new position in
Hong Kong. While this was unexpected, it had been a long term goal of CK's to
return to Hong Kong and we wish him every success there.

In considering who should take over from CK, the Board took into account four
critical factors. They were:

   • the complexity of our business,
   • the restructuring programmes that are well underway,
   • the need for strong financial discipline, and
   • the need to ensure continuity in the important work going on.

After considering these and other issues, the Board unanimously agreed that
David Turner was the right person to take over from CK.

David is a top quality international executive. He knows the industries we
compete in and he has an in-depth knowledge of Brambles' global businesses.

I will ask David to talk to you in a few minutes to give you some insights into
how he is managing the turnaround.

But first, let me move on to today's agenda.

As you may know, the Annual General Meeting of Brambles Industries plc was held
in London a few weeks ago and I intend to follow a similar format today.

I will start off by giving you an overview of Brambles' performance, the issues
we are dealing with and how we see the year ahead.

David will then report in some detail on each of our businesses and, in
particular, our progress in CHEP USA and Europe.

Then we will move on to the formal part of the meeting.

As you can see from the notice of meeting, we have 19 resolutions to consider,
including three special resolutions, so I intend to spend a little time taking
you through the more complex items.

When we move to vote, you will have the opportunity to ask questions or make
comments on any of the resolutions or any other matter related to Brambles'

At the end of the meeting, the Directors would like you to join them for a cup
of tea or coffee in the foyer.


Let me move on to Brambles' performance.

At the start, let me make it very clear that all of us on the Board and all of
the management team know that Brambles' performance and returns are simply not
good enough.

We are all absolutely focused on making Brambles generate the returns that will
restore long term value for all shareholders.

When I spoke to you this time last year, I laid out the strategy we had put in
place to turn around CHEP in the USA and CHEP in Europe. I said we were
embarking on a 30 month plan to restore value to shareholders, and that we would
have to face up to some very difficult issues during that 30 month period.

The key components of that plan are:

   • getting the right people in the right jobs,
   • cutting capital expenditure on pallets through better controls over
    pallet usage,
   • ensuring that pallet usage is more effectively tracked and measured,
   • ensuring we are pricing correctly across the supply chain in our chosen
    market segments, by making sure pallet users pay a price that reflects the
    value of the service we provide,
   • making sure we remain competitive by reducing the costs to serve our
    customers, and
   • investing in profitable growth initiatives as opposed to growth for
    growth's sake.

Before I talk about our progress on the turnaround, let me make some comments on
the group overall.

Nearly all of our businesses compete in growth industries. They each provide
essential and important services to companies around the world. They are all
well placed to take advantage of the growing pressure on companies by
governments, investors and communities to be sustainable.
The barriers to entry for competitors are high, and it is not easy to duplicate
what we do.

Our major businesses have been created through years of capital investment,
innovation and experience.

But from time to time, because of the diverse nature of our operations, the
geographic spread, and the rapid change in every industry today, it is only
prudent to review the economic proposition behind our businesses.

This study on CHEP has not yet been completed, but it has already confirmed the
unique franchise of this business and it will allow us to better prioritise our
investments in market segments and countries that will generate superior growth
in profit and cash flow over the medium to long term.

That said, Brambles is already a profitable company.

Despite our issues in CHEP and a very volatile economic environment, our
continuing businesses increased revenue by 6 per cent to A$7.9 billion and
recorded earnings before interest, tax, exceptional items and amortisation of
goodwill of A$976 million.

Every one of our core operations showed solid revenue growth and remained
profitable throughout the financial year.

Looking at the 2003 results compared to 2002, the principal reason for the drop
in profits in CHEP was the lower profit in CHEP Europe. We set out the issues we
were facing in Europe for you last year.

To give you a clearer insight into the recovery programme, let's look at how the
new Brambles came together.

As you can see from this slide, before the formation of the dual listed
companies structure, revenue in the 'old Brambles' effectively came from three

   • 23% of the revenue came from the businesses which were going to be sold
    - they were to be sold because they were not core activities or did not
    provide adequate returns;
   • a third of the revenue came from businesses which were wholly owned and
    therefore subject to the same kind of financial and other disciplines as any
    large company; and
   • notably, nearly 50 per cent of our revenue came from investments in CHEP
    and Cleanaway. Because these two businesses were principally joint ventures,
    they operated without many of the disciplines that the transparency of a
    public company structure provides.

Along with this, and very importantly, the debt of the joint ventures was off
balance sheet.

When capital disciplines are not robust, the result is often that the culture in
a company becomes focused on growth for growth's sake, rather than profitable

It is profitable growth that creates sustainable value for shareholders.

Creating long term value for shareholders depends not simply on making a profit,
but on generating returns above the cost of capital.

So, before the merger, the situation was this:

   • almost a quarter of the businesses were to be sold, and
   • nearly 50 per cent were joint ventures.

The extent of change for Brambles, following the creation of the DLC and
assuming full ownership of the joint ventures, cannot be overstated.

It meant there had to be a radical change in the way Brambles was going to be

More importantly, the new management team had to change CHEP and Cleanaway from
a joint venture to a wholly owned structure.

At the time of the DLC, the revenue picture looked like this.

So the immediate priorities were to:

   • change from a culture of growth for growth's sake to one of profitable,
    sustainable growth,
   • sell the non-core businesses,
   • put in place appropriate operating systems and controls, particularly
    strong corporate governance, and
   • enhance the economic viability of the CHEP business model.

Since we started the restructuring programme, we have:

   • maintained the strong revenue growth,
   • sold off more than A$1.4 billion of non-core or under-performing
    businesses, and
   • changed the culture of growth for growth's sake by the introduction of
    Brambles Value Added. This initiative was introduced into the business by
    David Turner.

Put simply, Brambles Value Added aims to ensure our people think and act like
It ensures that they have to produce a return that at least covers the cost of
In Brambles today, cutting excess capital is just as important as cutting costs.
As a result, there has been significant cash flow improvement and substantial
reduction in capital expenditure.

Capital expenditure has been cut by almost three quarters of a billion
Australian dollars over the last two years.

As you would understand from what I've just said, it is absolutely essential
that we remain focussed on the turnaround programme.

Stability of management and strategy is critical.

That is one of the major reasons why the Board decided to appoint David as Chief
Executive Officer.

David officially assumed the role of CEO on the 21st of October. I know he is
committed to the need to generate the kinds of consistent, sustainable returns
you have the right to expect.

In the next few months, David will be setting out for shareholders some
objectives and milestones against which Brambles' progress can be judged.


At this point, let me talk about how we see the outlook for the year ahead.

Brambles is confirming its outlook statement for the group which we issued on 2
September, and which said:

'In summary, although trading for the first half in constant currency will be
weaker than last year, we expect a better performance in the second half,
leading to improved cash flow and good progress for the year as a whole.'

In terms of trading for the first four months of this year, CHEP USA is
incurring significant short term costs, which should be eliminated by the end of
the current half.

These are principally related to the reduction of excess pallet inventory which
arose following the implementation of the new service centre network.

The first major reduction in this inventory was achieved in September. It
continued in October and should be completed by the end of December 2003.

As a consequence, and as explained in our annual results announcement, CHEP
Americas' profits in the first half of the current year will be lower than those
of the second half of last year. They should, however, rebound in the second
half of this year, driven by lower costs and continuing revenue growth, which is
currently running at 10% in constant currency terms.

In CHEP Europe, revenue is growing by approximately 9% in constant currency,
although this has been boosted to some extent by the hot summer in Europe and
the resulting increased demand for soft drinks, which is part of the fast-moving
consumer goods segment that CHEP services. Profits in Europe are on track and
the pan-European reorganisation is also on track. To date, the net reduction in
headcount in CHEP Europe is 186, with 350 targeted for June 2004.

CHEP in the rest of the world is continuing to perform strongly.

Cleanaway in the UK is facing a difficult market.

This is particularly true in technical waste, where the early months of this
year have been impacted by lower volumes, notably from the chemical and
pharmaceutical industries.
I am pleased to say there is now evidence of some pick up in these volumes.

In Germany, Cleanaway is trading to plan, although at a lower level than last
year. I am pleased to say that the outcome of the DSD re-tendering is now known
and, on a positive note, is broadly as we anticipated, reinforcing the strength
of Cleanaway's franchise in Germany. David will make further comment on the DSD
re-tendering in his remarks.

Both Recall and Brambles Industrial Services are performing satisfactorily.

Before I ask David to talk to you, I would like to thank on your behalf the
30,000 people who make up the Brambles team in over 50 countries around the
world. They continue to make an outstanding contribution in very difficult
times. Their loyalty and dedication is very much appreciated.

I would also like to pay tribute to my Board colleagues who have demonstrated
extraordinary commitment and professionalism in addressing the difficult issues
which we have had to confront as we work towards re-establishing value in

At this point, let me now introduce your new Chief Executive Officer, David
Turner, to give you some insights into where he sees the business heading.


Chief Executive Officer's presentation

Thank you, Don, and good afternoon, ladies and gentlemen.

I am delighted to have been appointed CEO of Brambles. The job will be a
challenge, and I am totally committed to turning this group around and creating
shareholder value.

Our focus is on the future - but we cannot look forward without acknowledging
and learning from the hard lessons of the last two years.


Much of the negative comment and disappointment has related to CHEP.

Many of you will therefore be wondering what happened in CHEP and I want to
spend a few minutes talking about it.

One of the issues we had to face was balancing the rate of revenue growth in
CHEP with its cash flow.

The negative cash flow associated with fast revenue growth was not an option we
were willing to pursue and we have addressed it.

Similarly, in the US and Europe, CHEP was outgrowing its operating bases, which
were becoming increasingly inefficient and costs were growing.
Two major reorganisations were embarked upon.

The first major reorganisation was in the US where over a period of time CHEP
has reduced some 230 service centres down to about 75 locations.

With the new service centre network, there has been a major change in the way
CHEP operates: distributors now return pallets rather than CHEP collecting them;
unit transport costs have dropped; and pallet delivery costs have also fallen.

This change has not been without its difficulties. There have been
inefficiencies in execution and costs have risen, albeit some of a temporary
nature in 2003. The goal, however, is to have a model which will result in lower
costs and will be more suited to underpin the future growth of the business,
while improving pallet quality for our customers.

The introduction of a surcharge for non-participating distributors, otherwise
known as channel pricing, was also an important change, as was the greater
control of pallets moving through this circuit. Both of our objectives in this
regard have been achieved, as shown on the slide.

In terms of people and skills, there has been, and will continue to be, an
upgrade of talent in CHEP USA as the business changes and the reorganisation
moves towards completion. My final point in relation to the CHEP USA
reorganisation is that the business is still incurring costs associated with
this project, although we expect these to be eliminated by the end of this
current half year.

In CHEP Europe, a 30-month reorganisation programme was announced in November
last year. The expected total cost was A$238 million. The programme is on track,
with A$125 million charged so far, and cash expenditure of A$65 million.

In the restructuring of the CHEP Europe organisation, the objectives have been,
first, to create a pan-European management structure, second, to enhance the
quality of the management 'bench strength' and, third, to save costs through
closing numerous country-based administration systems and re-focus on two: one
in the UK and the other in Spain. This will reduce net headcount by at least
350, a target we expect to achieve by mid next year. As you have heard, we have
already achieved a net reduction of 186.

A further objective is to optimise service centre operations through adding
capability to existing service centres.

As in the US, pricing is also being introduced to reflect the higher cost of
collecting pallets from the numerous small distribution points. It is essential
that CHEP's pricing relates closely to its cost to serve a particular customer.

Initiatives to improve asset productivity are also underway, with intensified
audits, both of customers and distributors. More than 60% of this special audit
programme has been completed.

This reorganisation is complex and clearly carries with it some risk in
execution. We are only one year into the process but the pay-off will be
significant and we expect the major part of the costs to have been incurred by
the end of this financial year.

The fundamentals of the CHEP business model are sound as demonstrated by the
strong performance in Latin America, Australia, Canada and South Africa. When
the reorganisation programmes in Europe and the US are completed, we are
confident that strong profit growth will be restored in CHEP Europe and CHEP

The creation of the dual-listed companies structure in 2001, bringing full
ownership of all the CHEP businesses, has allowed specific issues within CHEP to
be identified, with subsequent corrective actions put in place.

The CHEP team is working extremely hard and the programmes are on track. We are
12 months into our 30-month plan in Europe and, while complex, both the
timeframe and costs indicated to you remain valid.


Briefly recapping our final results for 2003 - which were released in September
and which you have received in your annual reports - profit before tax, goodwill
amortisation and significant items was A$775 million, which was 8% lower than
last year, although in line with our guidance to the market. In terms of the
bottom line, net operating profit - that is, profit after tax, goodwill and
significant items - was A$330 million, a 39% decline on the previous year.

There was a significant improvement in operating cash flow after capital
expenditure. It was A$283 million higher at A$585 million for the year. The 19%
reduction in group capital expenditure supported this strong result.

As Don said, revenue from continuing businesses was up 6%.

CHEP revenue was up 10% although profit was down by 11% as anticipated, with
capital expenditure 16% lower.

Cleanaway performed well. It generated excellent cash flow in a difficult

Recall grew both sales and profits by 17% and 30%, respectively.

Brambles Industrial Services was strong in Australia and made good progress

In the last year, capital expenditure for continuing businesses again reduced,
principally in CHEP but also in other businesses as a tighter capital
expenditure regime became the norm. For CHEP, the implication is that the
efficiency of the pallet pool is beginning to improve.

Within the group, there is the ever-present need to balance prudent capital
expenditure with ensuring all our businesses have sufficient capital to prosper.
We are careful to ensure that we achieve that balance.

Value-based management is a big focus of the group, and improving cash flow is
the first evidence of its success.

Cash flow after capital expenditure has improved from a deficit of A$9 million
in 2001 to a surplus of A$302 million in 2002 and was A$585 million in the year
to June 2003. Generating further cash will be an ongoing objective of the
Brambles group as we look into 2004 and beyond.

Cleanaway's performance was solid. In Europe, Cleanaway had a good year in a
most difficult economic environment when many of its competitors were performing
poorly. Cleanaway performed well in Australia.

In terms of segments, there was strong growth in municipal waste in both the UK
and Australia, though the full year results from Cleanaway for 2003 were
adversely affected by the impact of legislation in the UK in technical waste and
in Germany in bottle recycling.

In Germany, this is the year of the re-tendering of the national packaging
recycling scheme, the DSD.

Our position on this is well known: due to the three year contract periods, we
took a decision that it was not in our shareholders' interest to significantly
increase the level of contracts sought.

As Don mentioned earlier, the outcome of this stage of the tender is now known.
We are pleased with the result, which was rather better than our expectations.
Some of the contracts for which Cleanaway tendered were awarded to us for a
three year period. The balance were awarded to us for one year and these will be
retendered next year. Overall, we had a modest gain in market share. For the
current year, revenue from the DSD in the second half is expected to be similar
to the same period last year, with the anticipated contraction in margins
largely offset by the restructuring and cost-saving actions already in place.

Overall, Cleanaway is well positioned for future development, although, in the
short term, there will be some pressure on profits.
Recall did very well indeed with both strong revenue and profit growth,
particularly in the second half of the year. It is also beginning to derive
tangible benefits from its global quality programme, known as Perfect Order,
which focuses on positioning Recall as a quality service provider for our
customers and also on delivering internal productivity benefits.

Recall continues to have underlying organic growth of some 6-8%. This was more
than underpinned by the second half performance and bodes well for the future
development of this business.

In our other businesses, Brambles Industrial Services performed soundly with an
excellent cash flow. The Regional Businesses, which are a very small part of
Brambles, had a tough time.


We have a comprehensive strategy in place which has been endorsed by the Board
as the right way in which to return Brambles to sustainable, profitable growth.
This strategy is to generate shareholder wealth through achieving three key
goals: first, sustainable cash flow; second, profitable growth; and third, the
efficient use of capital which you will appreciate is tied in to profitable

The means to do this is by taking a disciplined approach to growing our

We strive to maximise organic growth in CHEP, to continue to pursue organic
growth and selected acquisitions in Recall and Cleanaway, and to ensure the
continuing robustness of Brambles Industrial Services.

Importantly, the introduction of Brambles Value Added - which we know as BVA -
is helping to change the culture within the business. Businesses and short term
rewards are measured on the basis of improvement in value added, after charging
an appropriate cost of capital. This process was introduced in 2002, has now
been running for over a year and is beginning to show results.

In each of our business units, quality programmes are underway and they are
strategically critical.

Each of CHEP, Recall and Cleanaway now has universal quality improvement
programmes to transfer best practice globally to develop robust business models
to underpin future growth. Brambles Industrial Services is currently
implementing such a programme in Australia. These programmes are focused on
achieving measurable improvements in two specific areas - service quality and
internal productivity - and each programme engages our employees directly in
this process.

With our people we must continue to upgrade the talent pool - both by raising
the bar when we recruit as well as providing development opportunities for the
people who are already part of our team.

In the year ahead, our energy will be channelled into a number of key

In CHEP, we have a strong global business with good market positions. We have a
complex European reorganisation now underway and on track. Although there are
still 18 months to go to completion, benefits should begin to show through in
the second half.

CHEP USA is progressing with operational and cost control being focal points. In
particular, in the current half CHEP USA is incurring significant cost
associated principally with eliminating a pallet inventory overhang from last

We will continue to implement these programmes to return this business to
profitable and sustainable growth.

Cleanaway has traded well in a difficult economic environment with pressures
remaining in the UK and Germany. The status of retendering of the DSD contracts
in Germany removes an element of uncertainty for the current financial year,
although there will be a further retendering of the one-year DSD contracts which
will come into effect in January 2005. Our objective overall is to maintain a
good return on invested capital and to expand as attractive opportunities arise.

We will continue to grow Recall through sensible investments and selective
acquisition. Recall is growing extremely well and looks set to continue to do
so, albeit not at the exceptional margins of the last year.

For Brambles Industrial Services, we intend to maintain the steady progress the
company achieved this year.

Finally, we will continue to improve the effective application of capital and
improve cash flow generation.

Again, our focus is on creating value in Brambles through sustainable cash flow,
profitable growth and the efficient use of capital. The efficiency of the pallet
pool is improving. We have introduced capital expenditure disciplines across the
group, working capital is reducing and cash flow is improving. The ongoing
change in the group cannot be underestimated and we are determined to make it
work for the benefit of our shareholders and the businesses themselves.

Thank you, ladies and gentlemen, and now I'd like to hand back to Don.


Chairman's address - Part II

Thanks, David.

Before moving to the formal part of the meeting, I would like to cover three
important broader issues.


The first is Board succession planning.

All of us are very conscious of the need to ensure that proper processes are in
place to deal with succession issues at Board level and to keep the Board vital.

The Board will be seeking to appoint new members to succeed existing Directors
as they retire, ensuring an appropriate balance of skills and experience. To
this end, we have engaged an international firm of search consultants to produce
candidates for consideration for appointment to the Board. We expect to appoint
two new Non-executive Directors to the Board over the next 12 months.


The second issue I would like to address is our Remuneration Policy, and in
particular executive remuneration.

As you will recall, at the last Annual General Meeting we asked you to vote on
and approve the Group Remuneration Policy. We did this to try to bring the whole
issue of executive remuneration closer to shareholders.

As we did last year, we have spelt out our remuneration policy in significant
detail in this year's Annual Report.

Because executive remuneration is such an important issue for all public
companies, I want to spend some time outlining the approach we take.

Brambles' Remuneration Policy consists of the following principles:

The first is to provide competitive rewards to attract and retain the most
talented international executives. It also aims to align rewards with the
creation of shareholder value. I think it is particularly important to
understand that it places a significant part of an executive's compensation
package 'at risk', and it applies demanding performance criteria to that part of
the remuneration which is 'at risk'.

The policy also does two other important things:

   • it ensures equity between executives, and
   • it limits the severance payments on termination to pre-determined
    contractual arrangements.

Our executive remuneration structure consists of three components:

These are:

   • base pay,

   • other benefits, including pension contributions, and

   • incentive arrangements. These are provided under a Short Term Incentive
    Plan, and a Long Term Incentive Plan.

In Australia, the first two elements may be combined in the form of Total Fixed
Remuneration', which gives executives some flexibility as to the precise mix of
salary and other benefits.

Let me now walk you through an explanation of how we package remuneration.

I will use David Turner's recently announced salary structure as an example.

The reward structure is made up of a base salary plus other benefits such as
pension contributions which form David's Total Fixed Remuneration. This
represents 47% of his possible remuneration for the year if he were to meet his
target level of performance.

The base salary or Total Fixed Remuneration is set by reference to the scope and
nature of his experience, performance, span of control, and comparative market
data provided by external consultants.

As I mentioned earlier, Brambles operates a Short Term Incentive Plan and a Long
Term Incentive Plan. These are the 'at risk' components of his package and
represent 53% of his potential remuneration for the year at on-target

At the beginning of every financial year, the Remuneration Committee and the
Board set performance hurdles for the Chief Executive.

The performance hurdles are divided into two categories: financial objectives
and personal objectives.

At the end of the financial year, the Remuneration Committee will assess David's
performance against the performance hurdles set, and make a decision on what
incentive payments will be made.

The Short Term Incentive Plan offers the opportunity to receive an annual cash
bonus for the achievement of specific, pre-determined performance targets as
mentioned earlier.

As indicated on the slide, on-target performance payments will be 55% of Total
Fixed Remuneration. He would only achieve a maximum of 100% of Total Fixed
Remuneration for outstanding performance.

The provision of performance-based Long Term Incentives is also an important
part of the overall approach to executive remuneration.

There are two awards for an executive to consider.

Under the Executive Share Option Plan, senior executives may be granted annual
awards of options to acquire shares in Brambles Industries Limited and/or
Brambles Industries plc at a future date for an exercise price fixed at the time
of the grant.

The Remuneration Committee sets a performance hurdle on the exercise of options
under the Options Plan. The performance hurdle which has been applied to all
options granted under the Option Plan to date is based on relative Total
Shareholder Return against a peer group of companies, consisting of the top 50
Australian companies by market value and the FTSE 100 companies.

The other award that an executive may consider is the Executive Performance
Share Plan.

Under this Plan, Executives may be granted a right to acquire shares in Brambles
Industries Limited and/or Brambles Industries plc at a future date for no

The vesting of awards under the Share Plan is based on compound earnings per
share growth of both Brambles Industries Limited and Brambles Industries plc
over a performance period from the end of the financial year before the date of
the award to the third anniversary of that date.

The important thing to remember is that, if an executive does not meet the
performance hurdles, the awards in the relevant Plan will not vest.

This slide gives you an indication of how the remuneration structure works in
David Turner's case if he meets target performance levels.

Let me also give you the details of Sir CK Chow's exit arrangements.

As you will observe, his options lapsed upon his resignation and he chose to
surrender his performance shares and his sign-on award.


Another issue that has been raised by shareholders in recent times is the dual
listed companies structure under which the new Brambles was formed and now
operates. It's what we call 'the DLC'.

Specifically, some commentators have criticised the structure, suggested that it
limits shareholder rights and that it stops any chance of a takeover. These
criticisms ignore three key points:

Let me start with the reasons we originally recommended the DLC structure.

First, shareholders in both companies Brambles Industries Limited (the
Australian end) and Brambles Industries plc (the UK end) continue to receive
dividends from the company in which they hold shares.

The amount of the dividend per share is the same but the holders of shares in
the Australian company can continue to receive their dividends in a franked
form. I believe this is important to the majority of shareholders in Australia.

Second, keeping the companies separate meant each company could be primarily
listed on their home exchange. In practical terms, that means that holders of
shares in the Australian company - that is almost certainly most of you -
continue to have your shares listed on the Australian Stock Exchange while
holders in the UK company have their shares listed in London.

Now, on the issue of shareholder rights, the reality is that Brambles operates
as a single economic entity - a single company - in essentially the same way as
it would, had a merger been implemented in some other way.

The voting rules at Brambles were created to ensure voting is on the basis that
Brambles is a single company.

Post merger, it is not a matter of the interests of one group of shareholders
versus another group of shareholders, but rather the interests of all

Finally, on the issue of takeovers. While DLCs cause some additional
complexities in that there are two companies involved and any takeover or merger
would need to comply with the laws of Australia and the UK, the DLC doesn't
present a barrier to them taking place.
Let me make the point clearly that at Brambles we adopt the better practice of
Corporate Governance in the markets where we operate.

Clearly, shareholders' interests are not compromised by the DLC structure - in
fact, as you can see from the examples I just gave, they are enhanced.

CHEP Europe

Finally, and before we move on to questions and then the formal items of
business, I would like to spend a couple of minutes addressing a particular
issue relating to the restructure of CHEP Europe. I know there are some
misconceptions about pallets in CHEP Europe and I think it is important that I
clarify the situation.

The total of all the pallets we have in a country or a region is called the
pallet pool.

What we found in CHEP Europe was that our business was not being run as
efficiently as the successful Australian model. Put simply, there were more
pallets in the pool than was necessary for its efficient operation.

One of the central tasks of the new management team in Europe - headed by Mark
Luby - was to improve the efficiency of the pool. It was estimated at the time,
based on theoretical modelling, that there might have been more pallets in the
pool than was optimal.

While it made good headlines to say these pallets were lost, the reality was a
large number of pallets:

   • had gone into slower moving channels, or
   • were incorrectly located within CHEP Europe, or
   • were in new growth markets.

One of the reasons for the inefficiencies in the pool was that CHEP Europe was
not pricing its services correctly to some customers who were sending pallets
down these slower moving channels.

The steps we announced last year are addressing these inefficiencies.

In fact, in the 12 months since we started the 30-month programme to improve the
productivity of CHEP Europe:

   • we have identified and relocated more than two million pallets from our
    own service centres, predominantly in the UK, back to Europe,

   • we have audited 60% of pallet holdings with principal distributors and
    67% with manufacturers and found that they had over one million pallets that
    they were not paying for - they are now,

   • approximately a further one million pallets have been lost by our
    customers. We have entered negotiations with them and we will be compensated
    for their loss, and

   • we have written off a further four million pallets. All of this is
    within the exceptional costs range we indicated last year and we expect any
    further costs and pallet write offs to be covered within that range.

I should mention that, in the normal course of business across CHEP's operations
globally, we take a provision for pallet losses. The provision depends on the
loss experience in each country or region.

We are currently providing within a range of 1-2% of pallet issues. We are
accounting and budgeting for those possible losses against our ordinary profits.

In CHEP Europe, over the remaining 18 months of the 30-month programme, we will:

   • continue these intensified audits, particularly at our smaller customers
    and distributors,

   • further improve our collection efforts, and

   • introduce pricing initiatives that better reflect the cost of the
    services being provided.

At the risk of repeating myself, the costs of the efforts to deal with these
matters - including any further pallet write offs identified by this exercise -
will be covered by the exceptional costs announced last year.

These changes will all improve the efficiency of the pool.

Ladies and gentlemen, having addressed a number of issues which shareholders
have expressed interest in, let me now introduce the formal business of the


The slides referred to in this presentation are available on the Brambles

For further information, contact:

Investor    Sue Scholes, Head of Investor Relations         +44 (0) 20 7659 6012
Media       Richard Mountain, Financial Dynamics            +44 (0) 20 7269 7291

Investor    John Hobson, Head of Investor Relations         +61 (0) 2 9256 5222
Media       Jeannette McLoughlin, Group General Manager,    Mobile 
            Corporate Communications                        +61 (0) 401 990 425

Brambles is globally headquartered in Australia

                      This information is provided by RNS
            The company news service from the London Stock Exchange