Introduction

Brambles Limited is a supply-chain logistics company and specializes in provision of Pooling

Solutions and associated activities for more than 50 countries. From the 2013 annual report, there
is a change in accounting policy due to revised of AASB 101 relating to presentation disclosure
and does not impact any amounts in the financial statements. Unqualified opinion has been
issued by PwC for the past three years, which illustrate the report is true and fair and data is
trustworthy for doing our analysis. In this report, it mainly consists of two parts: Part A: analysis
on current Brambless performance and positions. Part B: Comprehensive ratio analysis for 2011
to 2013 including: activity ratio, liquidity, solvency, cash, coverage, profitability ratios and
DuPont analysis. Based on the ratio analysis, we have identified the specific accounts
movement that related to the change, and analyze the possible reasons behind.
Part A: 2013 Brambles financial performance and position analysis
In terms of analyzing Brambles current year financial performance and position, vertical
common size statement analysis has been used for both income statement and balance sheet.
Under assets class, trade and other receivables (14.14%), PPE (55.43%) and goodwill (21.84%)
accounts for the 91.41% of the portion with other line items less than 5% such as intangible
assets, cash, etc. On the other hand, borrowings (33.78%) and other payables (15.76%), takes up
49.55% out of the liability class and with deferred tax liability accounts for 6.86% and remaining
items are less than 1%. The composition for assets, liability and equity in Brambles Balance
Sheet is quite stable, indicating there is no substantial change in its operation cycle.
For Income statement, the overall composition for income and costs are stable except finance
cost in 2013 has decreased to 2.22% as compared to 2012 (3.08%) and 2011(3.1%). Besides,
under DuPont analysis for 2013, the drop in ROA is due to fall in asset turnover, while the
increase in net profit margin is mainly contributed by higher interest burden. Additionally,
through the ratio analyses performed in the below section, we conclude that the liquidity in 2013
is deteriorated; however, the companys ability to meet long term debt is improved. Brambles
profitability witnessed a progress, indicated by the growth in both sales revenue and operating
profit. In respect to the cash flow in 2013, with the steady improvement in coverage ratios,
indicating there is a stable growth in operating cash flow during the year. The overall operational
effectiveness in 2013 is performing well, indicated by the higher inventory turnover and accounts
receivable turnover.
Part B: 1) Activity Ratio analysis
Activity ratios are used to measure the operational effectiveness and how well Bramble managed
its assets. Over the past three years, Bramble has an effective and efficient working capital
management.
Bramble has a higher inventory turnover of Bramble to 96.4 in 2013 (2012: 92.3; 2011: 89) and
reduced number of days inventory held on hand to 3.79 days (2012: 3.95; 2011: 4.1), which
indicates Bramble is managing its inventories more efficiently and effectively.
Besides, receivables turnover has decreased by 5.36% from 2011 to 2012, causing a slight
increase in DSO of 2.6 days. Yet, the receivables turnover has improved by 1.89% and reduced
the DSO by 0.78 days to 67.52 days in 2013. With improved receivables turnover ratio, it
indicates Bramble has a more effective credit policies management and collection procedures
from its debtors, thus, shortening the average period to collect cash. Furthermore, both the
revenue and average account receivables have been increasing over the past three years, the
growth percentage of revenue is approximately equal or slightly higher than the account
receivables, thus, higher turnover ratios reflects that Bramble has a better inventory management
efficiency.
The payable turnover remains constant over the past three years with 10.9, 9.4 and 9.2 for 2013,
2012 and 2011 respectively. Additionally, the days payable were 33.6, 38.9 and 39.7 for 2013,
2012 and 2011 respectively. This implies Bramble has been paying on time and consistent with
the credit terms of 30-90 days stated in the annual report.
2) Liquidity ratio analysis
Liquidity analysis is to focus on the companys ability to meet on short term obligations.
Brambles liquidity position has witnessed a great leap from 2011 to 2012 and then subsequently
slightly weakened in 2013. In terms of Current, Quick, Cash, and Current assets to total, we
could see an obvious favorable change, which are 38%, 39%, and 62% respectively from 2011 to
2012. However, the liquidity position deteriorated in 2013, proved by an unfavorable percentage
change of 9.9%, 10.45%, and 29% respectively for the above ratios. Nevertheless, there is a
consequential negative change with respect to defensive interval from 125 in 2011 to 106 in
2012, 105 in 2013.
The primary reason for improvement in liquidity in 2012 compared to 2011 is the incremental
increase in Cash and Cash equivalents (35.7, 25.77%) in current assets and the reduction of in
Trade and other payables, Borrowings, Tax payable and Provisions in current liabilities. These
unfavorable changes in liquidity measures from 2012 to 2013 are mainly due to the 26%
decrease in Brambles cash & cash equivalents and increase in almost all items in current
liabilities, especially in trade and trade payables and borrowings. As for borrowings, the huge
rise in bank overdraft, current bank loans and current loan notes are mainly contributed to the
70.5, 81.59% build up in current liabilities.
3) Solvency ratio analysis
Solvency analysis concentrates on how the corporate perform in terms of meeting long term
obligations. Brambles ability to meet long term obligations such as interest and principal debt
repayments and similar obligations can be analyzed using debt to asset, debt to equity, financial
leverage and interest coverage ratios. During the past three years, debt to equity, debt to assets
ratios and financial leverage decreased gradually, indicating an improvement in Brambles
capital structure and lowering its long-term risk of insolvency. The gain in interest coverage ratio
in the above period can also approve this point.
4) Cash ratio analysis
Based on the cash performance, increase in ratios for cash flow to revenue, cash return to asset
and cash return to equity and cash to income. Generally, Bramble's performance in relation to
cash flow is steadily improving in 2013.
5) Coverage ratio analysis
Generally, the coverage ratios have been steadily increasing from 2011 to 2013 due to stable
growth in operating cash flow, indicating that Bramble has enhanced its ability to meet its debt
obligations. Moreover, there is a large increase in interest coverage ratio by 47% from 5.7 in
2012 to 8.4 in 2013 due to less finance costs paid as there is a decrease of $43m in its total
borrowing in 2013 as compared with 2012 and higher EBIT of $72m as compared with 2012.
This indicates Bramble has further improved its ability to meet its interest obligations through its
earnings. One the other hand, there are improvements in debt coverage ratio, debt payment ratio
and reinvestment ratio from 0.3 to 0.5 (67%), 0.4 to 0.8(125%) and 0.6 to 1.3(117%) from 2011
to 2013 respectively. Yet, the ratios for debt coverage and debt payment are still below 1,
implying that Bramble may still need to borrow externally as the Company has not generate
sufficient operating cash flow to meet these obligations. For investing and financing ratio, they
are quite stable throughout the past three years.
6) Profitability ratios
The profitability ratio is assessing a business's ability to generate earnings as compared to its
expenses and other relevant costs incurred during a specific period of time.
Bramble is a supply-chain Logistics Company, their revenue majorly comes from the service,
therefore there is no COGS, and COGS is basically the operating expense. Its sales revenue for
the year ended 30 June 2013 is US$5,889.9 million, up 4.7% compared with the prior year.
There major revenue components are pallets, RPCs and containers, which increase
correspondingly 5%, 7% and 18% compared with year 2012. As for the operating profit for
Brambles Group, it is US$1,011.2 million, up 8%, which indicates better control in operating
expenses overall. Given above increase, operating profit ratio has a favorable change, 2.8%
higher than 2012. Due to less financial cost and other exchange cost in 2013, the pretax profit
ratio and net profit ratio also meet favorable changes, which correspondingly increase 9.2% and
49.7% than 2012.
ROA of Brambles has increased significantly in 2013, which is 8.3%, 9.8% higher than 2012 ,as
the average asset has only increased 1.2% but net profit has increased 11.2% over 12 months.
Return on total capital is also with a favorable trend, which increases 2.9% in 2013, composing
5.7% up in short and long term debt, and 8.7% in EBIT. Brambles ROE is 22.2%, which is
0.1% higher than 2012, largely impacted from rise in net income. Company has no preference
shares, and in 2013, common equity shrieked by 37%. With the impact of increase NI and
decrease in common equity, its return on common equity increases to 149.5% in 2012. (2013:
8.6%)
However, in 2012 company has performed poorly in general. Compared with 2011, most of the
ratios, such as ROA, ROE and net profit margin are affected. In order to prevent Brambles
trying to big bath in 2012, we compare the ratio between 2013 and 2011 as well. We notice
that only ROE and operating profit margin are on unfavorable trend, however, other ratios show
that the companys profitability is stable. In conclusion, despite of some unfavorable changes,
Brambles has performed stable in profitability when comparing with year 2011 and 2012.
7) DuPont analysis
Brambles has the same ROE for 2013 to 2012, both are 22%. Although the there is a decrease of
11.1% in ROA (from 9.3% to 8.3%), Leverage is 12% higher than 2012 (from 2.4 to 2.69). The
leverage is primarily increased by higher total equity of the company, which is 11.1% higher
than 2012. The ROA is composed of asset turnover and net profit margin. ROA drops 11.1%
during the year, which is mainly due to the 15.8% decrease in asset turnover. This indicates that
the companys asset management is poor, and too many assets are capitalized in the book.
Furthermore, the net profit margin can be broke to tax burden, interest burden and EBIT margin.
Net profit margin is 6.2% higher than 2012, where tax burdens increase offset by EBIT margin
by 2.8%. The overall increase is driven from higher interest burden 6.2%. This indicates that in
2013, there is more interest savings resulting in higher net margin profitability.
Despite the stable changes in ratio in 2013, Brambles ROE position is still below its position in
2011 where the ROE is at 23.3%. In both 2013 and 2012, the ROE is mainly driven by increase
in net income, which leads to higher ROA. The 13.4% drop in leverage between 2010 and 2013,
and drop of 22.7% between 2012 and 2011, is the result from higher change in the growth rate in
total asset compare to total equity.
In conclusion, Brambles is performing fairly well compared with the last two years. Its
profitability has increased, especially in the Net income. Higher activity ratio as the inventory
management is more efficient and the Company is able to collect their receivables in shorter
period. Debt coverage and debt payment ratio still need to further improvement as it does not
fully covered by operating cash flows with ratios less than 1. Furthermore, both solvency and
liquidity ratio shows that the debt increase faster than the assets increase, which increase the risk
to pay off debt when they fall in due. Generally, Brambles has improved in its overall
performance and position, and we could predict that the Company will grow further in next year.
Appendix


Income Statement
Continuing operations 2013 2012 2011
Sales revenue 100% 100% 100%
Other income 2.46% 2.54% 2.89%
Operating expenses -85.40% -85.94% -85.71%
Share of results of joint ventures 0.11% 0.10% 0.14%
Operating profit 17.17% 16.70% 17.32%
Finance revenue 0.34% 0.38% 0.37%
Finance costs -2.23% -3.08% -3.10%
Net finance costs -1.88% -2.70% -2.73%
Profit before tax 15.29% 13.99% 14.59%
Tax expense -4.42% -3.77% -4.49%
Profit from continuing operations 10.86% 10.22% 10.10%
Profit from discontinued operations 0.01% 0.02% 0.08%
Profit for the year 10.88% 10.25% 10.18%
Part A Vertical Common size statement analysis
Balance Sheet
Current assets 2013 2012 2011 Non-current liabilities 2013 2012 2011
Cash and cash equivalents 1.62% 2.31% 1.78% Borrowings 33.78% 36.81% 36.20%
Trade and other receivables 14.14% 13.98% 13.52% Derivative financial instruments 0.00% 0.01% 0.04%
Inventories 0.71% 0.64% 0.73% Provisions 0.32% 0.40% 0.26%
Derivative financial instruments 0.14% 0.12% 0.15% Retirement benefit obligations 0.64% 0.78% 0.48%
Other assets 0.76% 0.88% 0.73% Deferred tax liabilities 6.86% 6.70% 6.81%
Total current assets 17.37% 17.92% 16.91% Other liabilities 0.31% 0.36% 0.35%
Total non-current liabilities 41.91% 45.07% 44.13%
Non-current assets
Other receivables 0.12% 0.11% 0.12% Total liabilities 61.95% 63.68% 68.44%
Investments 0.25% 0.23% 0.22%
Property, plant and equipment 55.43% 54.85% 55.08% Net assets 38.05% 36.32% 31.56%
Goodwill 21.84% 21.30% 21.81%
Intangible assets 4.23% 4.80% 5.20% EQUITY
Deferred tax assets 0.61% 0.50% 0.47% Contributed equity 83.23% 85.93% 184.99%
Derivative financial instruments 0.12% 0.25% 0.18% Reserves -84.86% -88.65% -189.45%
Other assets 0.03% 0.04% 0.01% Retained earnings 39.68% 39.03% 36.01%
Total non-current assets 82.63% 82.08% 83.09% Non controlling interest 0.00% 0.00% 0.01%
Total equity 38.05% 36.32% 31.56%
Total assets 100.00% 100.00% 100.00%
Current liabilities
Trade and other payables 15.76% 15.60% 16.28%
Borrowings 1.97% 1.15% 4.19%
Derivative financial instruments 0.12% 0.07% 0.08%
Tax payable 0.79% 0.62% 1.32%
Provisions 1.39% 1.19% 2.44%
Total current liabilities 20.04% 18.62% 24.31%
Part A Vertical Common size statement analysis




Part B
1) Activity Ratio (In $'m)
2013 2012 2011 2013 2012 2011 2013 2012 2011
Inventory turnover COGS 5,030.2 4,833.9 4,004.4 Average inventory 52.2 52.4 45 96.4 92.3 89.0
Days inventory on hand
(DOH)
No. of days in
period 365.0 365.0 365.0 Inventory turnover 96.4 92.3 89.0 3.79 3.95 4.10
Receivables turnover Revenue 5,889.9 5,625.0 4,672.2 Average receivables 1089.5 1052.6 841.0 5.4 5.3 5.6
Days sales outstanding
(DSO)
No. of days in
period 365.0 365.0 365.0 Receivables turnover 5.41 5.34 5.56 67.52 68.30 65.70
Payables turnover Purchases 5,038.2 4,825.6 4,027.4 Average trade payable 463.8 514.2 437.8 10.9 9.4 9.2
Days payable (DP)
No. of days in
period 365.0 365.0 365.0 Payable turnover 10.9 9.4 9.2 33.6 38.9 39.7
Total asset turnover Revenue 5,889.9 5,625.0 4,672.2 Average total aasets 7,748.8 7,656.9 6,339.2 0.8 0.7 0.7
Note 1 2013 2012 2011 Note 4 2013 2012 2011
Beginning Inventory 48.2 56.5 33.5 a Beginning Trade payable 458.5 569.8 305.7 a
Ending Inventory 56.2 48.2 56.5 b Ending Trade payable 469 458.5 569.8 b
Average Inventory 52.2 52.4 45 c=(a+b)/2 Average Trade payable 463.8 514.2 437.8 c=(a+b)/2
Note 2 2013 2012 2011 Note 5 2013 2012 2011
Beginning A/R 1,054.8 1,050.3 631.6 a Beginning total assets 7,545.7 7,768.0 4,910.3 a
Ending A/R 1,124.2 1,054.8 1,050.3 b Ending total assets 7,951.9 7,545.7 7,768.0 b
Average A/R 1089.5 1052.6 841.0 c=(a+b)/2 Average total assets 7,748.8 7,656.9 6,339.2 c=(a+b)/2
4% 25%
Note 3 2013 2012 2011
COGS 5,030.2 4,833.9 4,004.4 a
Ending Inventory 56.2 48.2 56.5 b
Beginning Inventory 48.2 56.5 33.5 c
Purchase 5,038.2 4,825.6 4,027.4 d=a+b-c
Ratios Numerator Denominator
2) Liquidity ratios (In $'m)
2013 2012 2011 2013 2012 2011 2013 2012 2011
Current Current assets 1,380.9 1,352.3 1,313.5 Current liabilities 1,593.6 1,404.8 1,888.2 0.9 1.0 0.7
Quick Cash+ ST marketable investments+ receivables 1,324.7 1,304.1 1,257.0 Current liabilities 1,593.6 1,404.8 1,888.2 0.8 0.9 0.7 Note 1
Cash Cash+ STmarketable investments 200.5 249.3 206.7 Current liabilities 1,593.6 1,404.8 1,888.2 0.1 0.2 0.1 Note 2
Defensive interval Cash+ ST marketable investments+ receivables 1,324.7 1,304.1 1,257.0 Daily cash expenditiures 12.61 12.21 10.05 105.1 106.8 125.1 Note 3
Note 1
Cash+ Short term marketable investments+ receivables=current asset-inventory
Note 2
Cash+ Short term marketable investments=current asset-inventory- receivable-other receivables
Note 3
Daily cash expenditure= (operating expense+finance cost-depreciation-amortisation)/365
Numerator Denominator Ratios
3) Solvency ratios (In $'m)
Debt to asset ratio Total debt 4,926.5 4,805.3 5,316.6 Total assets 7,951.9 7,545.7 7,768.0 0.6 0.6 0.7
Debt to equity ratio Total debt 4,926.5 4,805.3 5,316.6 Total shareholder's equity 3,025.4 2,740.4 2,451.4 1.6 1.8 2.2
Financial leverage ratio Average total assets 7,748.8 7,656.9 6,339.2 Average total equity 2,882.9 2,595.9 2,042.0 2.7 2.9 3.1 Note 4
Interest leverage EBIT 1,011.20 939.2 809.2 Interest payments 119.8 164.2 169.6 8.4 5.7 4.8 Note 5
Note 4
Average total assets=(Asset at the beginning of the year + Asset at the end of the year)/2
Average total equity=(Equity at the beginning of the year + Equity at the end of the year)/2
Note 5
EBIT =Profit before tax+ finance cost
Numerator Denominator Ratios
4) Cash Ratio (In $'m)
Cash flow to revenue CFO 1,339.9 1,089.2 1,013.5 Net revenue 640.6 576.3 475.4 2.1 1.9 2.1 Note 6
Cash return to assets CFO 1,339.9 1,089.2 1,013.5 Average total assets 7,748.8 7,656.9 6,339.2 0.2 0.1 0.2
Cash return to equity CFO 1,339.9 1,089.2 1,013.5 Average shareholder's equity2,882.9 2,595.9 2,042.0 0.5 0.4 0.5
Cash to income CFO 1,339.9 1,089.2 1,013.5 Operating income 1,011.2 939.2 809.2 1.3 1.2 1.3
Note 6
Net Revenue=profit for the year
Numerator Denominator Ratios



5) Coverage Ratio (In $'m)
2013 2012 2011 2013 2012 2011 2013 2012 2011
Debt coverage CFO 1,339.9 1,089.2 1,013.5 Total Debt 2,843.3 2,864.1 3,137.3 0.5 0.4 0.3 Note 6
Interest coverage EBIT 1,011.2 939.2 809.2 Interest paid 119.8 164.2 169.6 8.4 5.7 4.8 Note 7
Reinvestment CFO 1,339.9 1,089.2 1,013.5 Cash paid for LT assets 1,010.3 932.8 1,762.5 1.3 1.2 0.6 Note 8
Debt payment CFO 1,339.9 1,089.2 1,013.5
Cash paid for LT debt
repayment 1,679.6 1,710.0 2,487.7 0.8 0.6 0.4 Note 9
Dividend payment CFO 1,339.9 1,089.2 1,013.5 Dividend paid 425.5 397.7 224.0 3.1 2.7 4.5 Note 10
Investing and Financing CFO 1,339.9 1,089.2 1,013.5
Cash outflows for
investing and financing 1,405.7 987.8 1,068.3 1.0 1.1 0.9 Note 11
Note 6 2013 2012 2011 Note 10
ST borrowing 156.9 86.4 325.6 a Dividend paid is extracted from cashflow from financing activities.
Lt borrowing 2,686.4 2,777.7 2,811.7 b
Total Debt 2,843.3 2,864.1 3,137.3 c=a+b Note 11 2013 2012 2011 Net cash outflow from
investing activities (1,010.3) (932.8) (1,762.5) a
Note 7
Net cash
(outflow)/inflow from
financing activities (395.4) (55.0) 694.2 b
Interest expense paid figures are extracted from CF statements. Total (1,405.7) (987.8) (1,068.3) c=a+b
Note 8
Cash paid for LT assets represents net cash outflow from investing activities.
Note 9
Cash paid for LT debt represents repayment of borrowings and is extracted
from cashflow from financing activities.
Numerator Denominator Ratios
6) Profitability ratios (In $'m)
Numerator Denominator 2013 2013 vs 2012 2012 2012 vs 2011 2011 2013 vs 2011
Operating profit margin Operating income Revenue 17.2% 2.8% 16.7% -3.6% 17.3% -0.9%
Pretax margin EBT Revenue 15.3% 9.2% 14.0% -4.1% 14.6% 4.8%
Net profit margin Net income Revenue 10.9% 6.2% 10.2% 0.7% 10.2% 6.9%
ROA Net income Average total assets 8.3% 9.8% 7.5% 0.4% 7.5% 10.2%
Return on total capital EBIT
Short- and long-term
debt and equity 17.9% 2.9% 17.4% 16.0% 15.0% 19.3%
ROE Net income Average total equity 22.2% 0.1% 22.2% -4.7% 23.3% -4.6%
Return on common equity
Net income -
preferred dividends
Average common
equity 8.6% 149.5% 3.4% -36.5% 5.4% 58.3%
2013 2012 2011 2010 2013 2012 2011
Revnue 5,889.90 5,625.00 4,672.20 4,146.80 4.7% 20.4% 12.7%
Operating income 1,011.20 939.20 809.20 724.50 7.7% 16.1% 11.7%
EBT 900.30 787.20 681.70 614.90 14.4% 15.5% 10.9%
Net income 640.60 576.30 475.40 448.80 11.2% 21.2% 5.9%
Interest expense on bank loans and
borrowings 125.60 156.30 134.70 101.90 -19.6% 16.0% 32.2%
EBIT 1,025.90 943.50 816.40 716.80 8.7% 15.6% 13.9%
Short- and long-term debt and
equity 5,739.80 5,430.30 5,450.20 3,391.90 5.7% -0.4% 60.7%
Total equity 3,025.40 2,740.40 2,451.40 1,632.20 10.4% 11.8% 50.2%
Average total equity 2,882.90 2,595.90 2,041.80 11.1% 27.1%
Common equity 6,618.50 6,484.10 14,370.20 13,979.60 2.1% -54.9% 2.8%
Average common equity 6,551.30 10,427.15 14,174.90 6,989.81 -37.2% -26.4% 102.8%
Preferred dividends 0.00 0.00 0.00
Net income - preferred dividends 562.30 358.70 768.50 373.90 56.8% -53.3% 105.5%
Total asset 7,951.90 7,545.70 7,768.00 4,910.30 5.4% -2.9% 58.2%
Average total asset 7,748.80 7,656.85 6,339.15 1.2% 20.8%
TE 3,025.40 2,740.40 2,451.40 1,632.60 10.4% 11.8%
Average TE 2,882.90 2,595.90 2,042.00 11.1% 27.1%
Variance as compared with
prior year
7) Dupont analysis
Numerator Denominator 2013 2013 vs 2012 2012 2012 vs 2011 2011 2013 vs 2011
ROA Net income Average total assets 8.3% -11.1% 9.3% 24.0% 7.5% 10.2%
Leverage Average total assets Average shareholder's equity 2.69 12.0% 2.40 -22.7% 3.10 -13.4%
Asset turnover Revenue Average total assets 76.0% -15.8% 90.3% 22.5% 73.7% 3.1%
Net profit margin Net income Revenue 10.9% 6.2% 10.2% 0.7% 10.2% 6.9%
EBIT margin EBIT Revenue 17.2% 2.8% 16.7% -3.6% 17.3% -0.9%
Tax burden Net income EBT 71.2% -2.8% 73.2% 5.0% 69.7% 2.0%
Interest burden EBT EBIT 89.0% 6.2% 83.8% -0.5% 84.2% 5.7%
ROE 22.2% 0.1% 22.2% -4.6% 23.3% -4.6%