Brambles Industries PLC
01 November 2006
Brambles Industries plc
Company Number: 4134697
Brambles Industries plc 2006 Annual General Meeting
Addresses delivered by
Mr Don Argus AO and Mr David Turner, Chief Executive Officer
1 November 2006
Good morning, ladies and gentlemen
My name is Don Argus and, as your Chairman, it is my pleasure to welcome you to
the 2006 Annual General Meeting of Brambles Industries plc.
Let me now run through today's agenda.
There are three separate meetings to be held today.
The first meeting is the Annual General Meeting. We have 26 resolutions to
consider at that meeting.
At the second meeting, shareholders will be asked to approve the scheme of
arrangement to unify Brambles' dual listed companies structure, or DLC, under a
new single holding company called Brambles Limited. There is only one resolution
to be considered at that meeting, which is referred to as the Scheme Meeting.
The third meeting is an Extraordinary General Meeting at which we will be
considering nine resolutions. The first five of these resolutions are required
to effect the Unification of the DLC. The last four relate to the adoption of a
new performance share plan that will take effect if Unification proceeds.
For the Unification to proceed, the resolutions to approve the Scheme and the
first five of the EGM resolutions must be approved by you at these meetings
today - and also at meetings of shareholders of Brambles Industries Limited in
Australia next week.
The results of the voting of the meetings of both the BIP and BIL shareholders
will be announced to the London and Australian markets on 9 November 2006 and
will be available on our website.
I am very conscious of the amount of business we have to get through today, so
you will be pleased to know that we will have a 15 minute break after the Annual
After the break, we will hold the Scheme Meeting and then move straight on to
the Extraordinary General Meeting.
At the conclusion of that final meeting, the Directors and the management team
would like you to join us outside for a light lunch - which I'm sure we will all
need by then!
Let me assure you that before we move on to the voting at these meetings, I will
take some time to explain the voting arrangements and we will show you some
slides to help you through the process.
So let's move on to the first meeting of the day.
I now open the Annual General Meeting of shareholders of Brambles Industries
I propose to take the Notice as read. There are copies of the Notice and Minutes
of our last meeting outside in the registration area.
Let me introduce your Directors.
On your far left is Tony Froggatt, one of our new Directors; next to him is
David Gosnell, another new Director; then we have Roy Brown; Stephen Johns; Mark
Burrows, the Joint Deputy Chairman; Mike Ihlein, our Chief Financial Officer;
and David Turner, our Chief Executive Officer.
On your far right is Graham Kraehe, who rejoined the Board during the year; then
Carolyn Kay, another new Director; Hans-Olaf Henkel; Jac Nasser; Luke Mayhew;
and Sir David Lees, who is also Joint Deputy Chairman.
Also on the stage, on my left, is our Company Secretary, Craig van der Laan. And
in the audience are representatives from the Group's external auditors,
As you will have seen in the Notice of Meeting, Roy Brown, Mark Burrows and Sir
David Lees will retire from the Board on 31 December 2006. Roy, Mark and Sir
David have made a huge contribution to Brambles over the years. They have
experienced the lows and have worked tirelessly to create the organisation we
I know that their decision to retire on 31 December has been assisted by the
knowledge that they will leave us in a very healthy state and with a very
focussed strategy for the future.
On your behalf, I thank Roy, Mark and Sir David for their tireless efforts and
commitment to Brambles.
I would now like to give you an overview of the major changes at Brambles over
the past year, our performance during 2006 and how we see the year ahead.
I will then ask David Turner to give you more detail about the performance of
each of our major businesses.
After David's presentation, I will open up the meeting for questions before we
move on to the formal items of business.
Ladies and gentlemen, in late 2005 we announced a strategic reorganisation of
Following a detailed review of all our businesses, the Board decided to
streamline the Brambles Group and unify its dual listed companies structure by
creating a new, single holding company focused on our two premium growth
businesses - CHEP and Recall - which the Board believes are capable of
delivering significant long term value for all shareholders.
To achieve our strategy, we announced that we would sell our other businesses -
Cleanaway, Brambles Industrial Services and the Regional Businesses - and we set
ourselves a target of 12 months to complete this process.
Eleven months later, we are firmly on track to achieve all our objectives.
We have sold Cleanaway Germany, Brambles Industrial Services in the Northern
Hemisphere, Cleanaway Australia, Industrial Services Australia, Cleanaway UK and
our remaining regional businesses for a total of just over US$3.6 billion. In
the process we generated a profit on sale of over US$1.8 billion. This
significantly exceeded our initial estimates.
The divestment programme has been a great success for Brambles' shareholders
and, on your behalf, I would like to thank David Turner and his team and
congratulate everyone involved for their commitment and contribution.
This includes the people from the businesses that were sold. Their ongoing
professionalism was critical to the effective implementation of the sale
This year saw not only a successful divestment programme, but also improved
performance from our continuing businesses - CHEP and Recall.
Sales for CHEP and Recall grew by 8% and comparable operating profit by 29%.
This strong financial performance, together with the better-than-expected
results from the sale of our businesses, allowed the Board to declare dividends
totalling 19.364 pence.
• a second interim dividend of 5.446 pence, up from 4.815 pence; and
• a special dividend of 13.918 pence.
The special dividend included 8.472 pence in recognition of the success of the
divestment programme plus 5.446 pence in lieu of the 2007 interim dividend,
which would normally be paid in April next year.
We brought forward the payment of the 2007 interim dividend because Brambles
Limited, which will be the new holding company of the Group if the proposed
Unification is approved, will only be able to declare dividends out of profits
generated subsequent to the proposed Unification.
Effective management of our capital is a key imperative at Brambles. We have
been able to maintain our dividend during the darker moments of our history and
the initiatives undertaken with our dividends and capital this year are an
indication of our commitment to this area of our business.
Sustainability, however, is not only about the year's financial results. To be
genuinely sustainable, and to create the best possible environment to allow our
businesses to grow and to attract and retain the best people, a company needs to
deliver on its commitments to corporate social responsibility and corporate
On the screen behind me you can see some of our achievements. These included our
listing in both the Dow Jones Sustainability Index and FTSE4Good Index, two of
the most authoritative international guides for socially responsible investors.
The management team significantly improved safety across Brambles during the
year. For CHEP, Recall and Brambles Corporate, the Lost Time Injury Frequency
Rate and the Lost Time Injury Severity Rate - the two key industry measures of
safety - improved by more than 40 per cent on the prior year.
While this is a good result, there is only one acceptable bottom line when it
comes to safety - and that is Zero Harm. All of us at Brambles are working hard
to achieve this goal.
Brambles also continued to put something back into the communities in which it
operates by supporting a broad range of organisations around the world through
the Brambles Community Reach programme.
Here in the UK, for example, we supported a number of medical research projects,
a group restoring and managing a nature reserve and several community programmes
for the underprivileged.
I also note that CHEP received the 2005 Logistics Donor of the Year award from
America's Second Harvest - the largest charitable hunger-relief organisation in
the USA - in recognition of its relief efforts following the devastating impact
of Hurricane Katrina. CHEP waived over US$100,000 in fees on loads of disaster
relief that were shipped to various locations by America's Second Harvest.
Brambles is also now a major supporter of Clean Up The World, an organisation
that mobilises 35 million people in more than 100 countries 'to clean up, fix up
and conserve their environment'.
We are proud of the way our people have not only driven the performance of
Brambles this year, but also the way in which they continue to support their
Now before asking David to speak to you in more detail about the performance of
the Group's businesses during the year, let me give you a view on how we see the
In the three months to the end of September, Brambles' sales and profits from
the continuing businesses of CHEP and Recall were well ahead of the comparative
period in the prior year.
CHEP had like for like sales growth of 6% in the three months to the end of
September, led by CHEP Americas where sales were 10% higher. In CHEP Europe
sales growth was 2%, with performance impacted by strong Reusable Plastic
Container (RPC) sales in the first quarter of the prior year. CHEP in the rest
of the world saw sales growth of 9%.
Overall CHEP is expected to deliver another year of good performance in 2007,
with continued operational improvements across the regions.
In the three months to the end of September, Recall continued the improvements
seen in the second half of 2006. Sales were 18% higher, including the benefit of
the AUSDOC business acquired in December 2005.
The outlook for Brambles remains positive. Overall, we are continuing our
disciplined focus on value creation, building on the momentum of recent years.
In 2007, we expect further good progress in both CHEP and Recall together with
solid cash generation for the group.
I will now hand over to David Turner to speak to you in more detail about the
performance of the Group's businesses during the year.
Thank you, Don, and good morning ladies and gentlemen.
I would like to provide you with some details of the financial performance of
CHEP and Recall before handing you back to the Chairman for questions.
I am pleased to report to you that 2006 has been an excellent year for Brambles.
For our continuing operations, CHEP and Recall:
• sales revenue increased by 8% to US$3.5 billion;
• comparable operating profit rose strongly, by 29%, to US$771 million; and
• profit after tax and before special items was up 40% to US$430 million.
The businesses we sold during the year also performed well, notably Cleanaway
UK, and this was a key factor in us achieving better-than-expected prices for
the sale of those businesses.
CHEP performed extremely well once again, with sales rising 8% to US$3 billion
and comparable operating profit up by 32% to US$704 million.
CHEP contributed 84% of sales and 88% of comparable operating profit for the
All of the CHEP regions had a good year, but the results achieved by CHEP
Americas were excellent, with comparable operating profit increasing by 56%.
CHEP Americas sales rose by 10% and the Americas now generate more sales than
any other CHEP region. Within the Americas, Latin America, still a relatively
young region, continues to perform very well with sales growth exceeding 25%.
In CHEP Europe, the activity based pricing architecture introduced in recent
years to better align customers' use of pallets with the fees charged to them,
helped lift comparable operating profit by 20%.
CHEP's businesses in the rest of the world - principally Australia, New Zealand
and South Africa - continued to show solid improvement, with sales up 9% and
comparable operating profit up 12%.
Looking forward, we are excited about the growth opportunities for CHEP.
These opportunities will include:
• growing with our existing customers,
•gaining new customers as we increase our penetration in the fast moving
consumer goods sector,
• increasing our presence in sectors such as beverages, and
• expanding into new geographical regions, such as Central Europe and, in the
longer term, China.
Furthermore, CHEP will continue to develop and grow its other container
We will also continue to innovate, re-engineering our existing wooden pallets,
staying 'in front of the game' when it comes to plastic pallets and further
refining our use of radio frequency identification technology.
At the same time, we will reduce our costs through continuous improvement.
Our other continuing operation, Recall, increased sales by 10% to US$566 million
and comparable operating profit by 15% to US$98 million.
The growth in sales revenue benefited from the acquisition in November 2005 of
AUSDOC, an Australia-based information management group. The underlying organic
growth rate for Recall was 5%.
Importantly, Recall achieved a much stronger performance in the second half of
the year - and this improvement is continuing this year.
For Recall, like CHEP, the future is about growth and opportunity.
This growth will be underpinned by increases in regulation. In the USA, for
example, Sarbanes-Oxley and a range of other legislation has forced existing and
potential customers to look more closely at their document management and
document disposal procedures.
In addition, increased incidences of identity and intellectual property theft
have led many organisations to review their document security procedures.
These developments confirm that we are still a long way from the paperless
office. Our customers expect paper based document holdings to continue to
increase between 4 and 8% per year.
While some customers may convert to digital processes, those who do not
regularly retrieve their documents will remain paper based.
Recall, of course, does have a complementary digital document offering and so
digital will continue to be an opportunity for Recall as well.
This year's excellent results were achieved through rigorous, value-based
management, strong operational discipline and good control over capital.
We have a philosophy of continuous improvement at Brambles and we always have a
large number of such programmes in place to achieve our goals.
I would like to stress, however, that it is not much use having policies and
programmes if you don't have the right people in the right place to implement
It is clear that it has been the excellence of our people that has driven our
success over the past year.
I would like to thank all of my management team and all of our people for their
support and commitment in what has been a year of extraordinary change for
This includes thousands of people in the businesses sold during the year. Their
performance and commitment during a time of major change and their portrayal of
their businesses to potential purchasers was a credit to them. They did a really
This year's excellent financial results, together with the successful
implementation of the divestment programme, have provided a very firm foundation
for us to build a stronger future for Brambles.
We are entering an exciting period of sustainable growth.
Thank you very much and let me now pass you back to the Chairman.
(The Chairman then moved to the formal items of business.)
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 5216
+61 (0)407 436 711
Media Michael Sharp, Vice President Corporate +61 (0)2 9256 5255
+61 (0)439 470 145
Brambles is globally headquartered in Australia
This information is provided by RNS
The company news service from the London Stock Exchange