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Breville Group Ltd 2013 - 2016

Annual report 2014 Celebrating the 40th Anniversary of the scissor action jaffle maker Breville Group Limited Annual report 2014 Contents: Chairman's review 1 CEO's review 3 Strategy and brands 5 Financial report 11 Shareholder information 86 Company information 88 Annual general meeting Wednesday 12 November 2014 at 10am Building 1, Port Air Industrial Estate 1A Hale Street, Botany NSW 2019. Chairman's review \"A balanced result for the year demonstrating the value of diversifying into new categories and geographies under the consumer focused \"Food Thinking\" strategy\" During the 2014 financial year, the Breville Group delivered a result which largely filled the gap of the previously foreshadowed decrease in Keurig commission income created by the ending of the majority of the Keurig distribution arrangement in Canada in June 2013. Net profit after tax for the year decreased by 1.9% to $48.8m. The Group's full year revenue growth of 15.0% (excluding Keurig commission income) was driven by the strength of new product launches across all geographies. Following a very strong first half increase of 23.2%, second half revenues were impacted by softer trading in North America which was more than offset by revenue in the Rest of World segment. The Board has increased the level of dividends in the financial year demonstrating its continued confidence in Breville's growth potential and commitment to providing strong returns to shareholders. The Group has delivered constant strong shareholder returns since 2009, with earnings per share increasing at a compound annual growth rate of 32.8% and dividends per share increasing by 37.5% over the same period. long standing Chief Financial Officer, has been appointed Interim CEO. The Group's focus on its \"Food Thinking\" strategy and commitment to investment in product development and marketing continues. With its strong balance sheet, the Group is well placed for future growth from both its existing business and future opportunities. During the year we welcomed Tim Antonie, who joined the Board on 19 December 2013 as a non-executive director. I, together with my Board and management colleagues, encourage all shareholders to attend the Annual General Meeting in November and join us in formally welcoming Tim. Finally, I would like to thank my Board colleagues, our dedicated management and staff, shareholders, customers and suppliers for their continued support. Steven Fisher Non-executive chairman Reported EBIT Earnings and dividends per share 80,000 45.00 70,000 40.00 60,000 35.00 cents per share $000's As previously announced, Jack Lord stepped down from his role as Chief Executive Officer ('CEO') effective 21 August 2014. A global search for a new CEO is well underway and Mervyn Cohen, our 50,000 40,000 30,000 20,000 10,000 - 30.00 25.00 20.00 15.00 10.00 5.00 FY09 FY10 FY11 FY12 FY13 FY14 0.00 FY09 FY10 FY11 FY12 FY13 FY14 Earnings per share (reported) - basic Dividends per share Breville Group Limited annual report 2014 1 the Boss easy to use high velocity superblender One touch functions. Minimum intervention. Total control. 2 Breville Group Limited annual report 2014 CEO's review Financial summary $ Millions except where indicated 30 June 2014 30 June 2013 541.6 486.5 70.4 71.6 Revenue EBIT Net profit after tax Earnings per share (cents) Return on equity (%) The Breville Group is committed to its core \"Food Thinking\" strategy by continuing to invest in product development and innovation, with regular new flagship product launches and the expansion of its geographic reach. The year's trading performance reflected the resilient nature of the business which is well diversified by product, category and geography. The Group's revenue and EBIT for the year was impacted by the loss of Keurig commission income, following the cessation of the majority of the Keurig distribution arrangement in Canada on 30 June 2013. Whilst full year revenue growth was higher by 11.3% to $541.6m, driven by Breville product revenue increases, EBIT decreased to $70.4m or by 1.6%. The ANZ business performed well, despite difficult trading conditions gaining market share during the year. Revenue showed pleasing growth of 8.6% to $261.6m driven by new product launches, including the Breville co-branded Nespresso range launched in June 2013. Despite the higher revenues, a stronger USD placed increased pressure on the landed costs of products resulting in a 9.1% fall in EBIT to $24.9m. In the 2015 financial year, the ANZ segment is expected to benefit from selective price increases and a cost efficiency program to be implemented. In the North American segment, full year revenues from the sale of Breville products were 13.2% higher at $198.5m. Whilst the revenues from this segment were strong in the first half (higher by 29.9%), the second half revenues finished 8.4% lower than the second half of the prior year. Second half revenues were adversely affected by strong purchasing by retailers late in the first half, adverse weather conditions which affected many retailers and lower sales from the juicing category which had experienced substantial growth over the past two and a half years. The decrease in the high margin Keurig commission income caused EBIT in North America to decline. 48.8 49.7 37.48 38.23 22.9 24.7 Pleasingly, North American sales in core categories in both halves, excluding juicing, continued to show good growth. The impact of new products launched in the second half of the 2014 financial year, along with the pipeline of new products to be launched in FY15, should assist future North American revenues. Shortly after the end of the financial year, the Group acquired the culinary division of the USA based business PolyScience. PolyScience is considered one of the market leaders in the sous-vide category in the commercial and professional markets, with a product range including sous-vide, vacuum sealers and other complementary products. As part of the Group's strategy of expanding its geographic reach, during the prior year the Group established a new business in the United Kingdom. This business, which launched in May 2013, distributes Breville premium designed and developed products under a new company-owned brand, Sage , which is endorsed by internationally acclaimed chef Heston Blumenthal. In its first full year of trading the business delivered a positive earnings result. The rest of world distribution business supplied from Hong Kong experienced a strong performance in the 2014 financial year driven by growth from European strategic partners and from the Middle East and Asia. This business is expected to benefit in the second quarter of the 2015 calendar year following an agreement entered into for the marketing and distribution of Breville designed premium products in Brazil on a co-branded basis by leading Latin American homewares brand, Tramontina. We continue to demonstrate that not only can we adapt to the environment, but lead the market with our \"Food Thinking\" strategy and aspire to bring the best new products and experiences to our customers. Food Thinking is about creating those simple moments of brilliance in the home and using innovation to make day to day food related processes that little bit better. Breville Group Limited annual report 2014 3 CEO's review continued We have also taken the initiative to invest in efficiency and cost improvement projects to better support our growing global business. The Group's core strategy of delivering sustainable growth through product innovation, brand management and distribution capabilities and leveraging these across multiple geographies, includes a number of initiatives that will assist the Group to address challenges that are expected in the 2015 financial year: \u0001 Acquisition of the culinary division of PolyScience; In addition, an organisation-wide cost efficiency strategic review has commenced. On a personal note, I would like to thank the Board and the entire Breville Group team for their ongoing support and assistance. Mervyn Cohen Interim chief executive officer \u0001 Grow the Rest of World segment including the launch in Brazil; \u0001 A strong pipeline of new products in FY15 and beyond; and \u0001 Continue to collaborate with Group ambassador Heston Blumenthal. the Oracle the Dual Boiler with automatic grinding, tamping and milk texturing. The world's first automatic manual coffee machine. 4 Strategy and brands Breville Group's core strategy is the design and development of the world's best kitchen appliances together with the effective marketing of their performance benefits globally. The Breville brand makes up the majority of the Group's revenues and marketing activities, however, there are a number of other company owned brands and brand partners that are financially and strategically important to the Group. Australia and New Zealand In Australia and New Zealand, the Group trades under its company owned brands, Breville, Kambrook and Ronson and also distributes a range of Philips products in the garment and personal care categories under a licence agreement. The Breville brand includes a range of Breville cobranded Nespresso coffee machines as one of Nespresso's machine partners in Australia and New Zealand. In line with its global strategy, the Breville brand is focused on the premium kitchen segment of the market but still enjoys reasonably broad distribution in Australia and New Zealand. The Kambrook and Ronson brands extend to categories beyond the kitchen offering not just a full range of kitchen appliances, but also irons, vacuums, heating and cooling products, all at an affordable price without any compromise on quality or performance. North America In North America, the Group distributes the Breville range of internally designed and developed premium kitchen products through high end retail channels and its own online retailing platform. Shortly after the end of the 2014 financial year, the Group acquired the USA based culinary division of PolyScience, one of the world's market leaders in premier sous vide cooking products for the commercial sector. Europe In Europe and the United Kingdom, the Breville brand is not owned or operated by the Breville Group. Within Europe, the Group has a number of partners who market Breville's premium designed and developed products under their own brands. In the United Kingdom, the group markets and distributes its premium designed and developed kitchen products under the new company owned brand Sage which is endorsed by Heston Blumenthal. The internationally acclaimed chef, Heston Blumenthal, in addition to endorsing the Sage brand is also Breville's global brand ambassador. Rest of the World In the Asia Pacific region and the Middle East, the Group markets several of its premium designed and developed kitchen products under the Breville brand as well as selected products under the Kambrook brand in parts of Asia and Africa. Distribution in these regions is managed using local third party distributors supplied via the Group's Hong Kong office. In the second quarter of the 2015 calendar year, a range of Breville premium designed products will be marketed and distributed in Brazil by leading Latin American homewares brand, Tramontina on a co-branded basis. Breville - Thought for Food On Melbourne Cup day 1932, two Australian entrepreneurs, Bill O'Brien and Harry Norville, combined their surnames to form the name 'Breville' and founded a company that manufactured radios in Sydney. During the 1960's, Bill's son John focused the organisation to solve common kitchen problems and established the Breville small appliance research and development centre, which led to the invention of the now iconic Breville toasted sandwich maker. The toasted sandwich maker kick-started a long list of innovative Breville products developed in Australia. From the original Kitchen Wizz food processor and High-Wall Wok to the launch of the world's first wide feed chute Juicer, Breville has become synonymous with innovation in the kitchen. In 2000, Breville embarked on a project to expand its design and innovation capabilities, building a much larger internal team that has today become one of Australia's premier product development teams. This investment culminated in the 2003 launch of its premium range of products into the United States and other international markets. In 2009, Breville combined its design and development capabilities with a more focused marketing, recruitment and cultural initiative entitled \"Food Thinking\". As a part of this strategy, a new global brand identity was developed and rolled out including packaging, point of sale and all other consumer marketing touch points. Breville Group Limited annual report 2014 5 6 Breville Group Limited annual report 2014 Strategy and brands continued Breville - Thought for Food continued Breville's strategy of \"Food Thinking\" and creativity continues to gain momentum. The strategy is based on: \u0001 Deeper understanding of food and the challenges consumers face; \u0001 Protectable innovation; \u0001 Superior quality and design; and \u0001 Increased marketing communication. Breville's growing appreciation for food science and culinary trends has led to a fostering of relationships with several high profile food thinkers including well known baristas and chefs, some of whom have helped the Group in a product development capacity. In his ambassadorial role, world renowned chef Heston Blumenthal works closely with Breville's product development teams, providing invaluable insights into the food science necessary for the Group to continue developing \"best in class\" products. Sage by Heston Blumenthal In May 2013, the Group launched a range of its premium designed and developed products into the United Kingdom under a new Group owned brand, Sage, which is endorsed by Heston Blumenthal. The brand identity and positioning of Sage by Heston Blumenthal is aligned closely to the global Breville brand identity and \"Food Thinking\" strategy. The Sage by Heston Blumenthal distribution strategy is also very similar to that of the company's operations in North America, with distribution limited to premium retailers. The Group has committed to marketing activity for Sage by Heston Blumenthal and plans to continue investing in marketing activity to solidify its presence in the premium channel in the United Kingdom. Kambrook - The Smarter Choice Kambrook has become known for quality, durable products at an affordable price. The ever-expanding product range includes appliances for the kitchen, living room, laundry and bedroom. Kambrook continues to highlight the durability of its appliances and the rigorous testing process that each new product undergoes. Products are subjected to extensive laboratory and quality testing before receiving the Kambrook seal of approval. The Group conducts product marketing to build the Kambrook brand, and has negotiated a celebrity endorsement for its personal blender with renowned athlete and television host, Hayley Lewis. The partnership has proven a resounding success, driving strong sales and raising the profile of Kambrook. Philips Breville Group is the exclusive distributor for Philips' personal care and garment care appliances in Australia and New Zealand. The relationship with Philips is now in its 14th year and both parties work collaboratively to grow sales and market share. Philips sets the benchmark for innovation and performance with its flagship shaver range and it also offers a compelling range of high performance garment care products. PolyScience Breville Group acquired the PolyScience culinary division shortly after the end of the 2014 financial year. PolyScience was founded in Illinois, USA in 1963, predominantly as a supplier of specialised medical and laboratory equipment that could uniquely control temperatures with great precision. Throughout the last decade, PolyScience expanded into culinary products, employing its temperature control technologies to launch the world's premier immersion cooking circulators (for sous vide cooking) as well as various specialty cooking accessories such as the Smoking Gun (for rapid food smoking), vacuum sealers, cold plates, ultrasonic and vacuum evaporation systems. Breville Group Limited annual report 2014 7 Strategy and brands continued Innovation and product development The Group's growth is based on investment in product development with a focus on design and innovation. Breville has deepened its understanding of food, and how consumers interact with it, applying this to solving problems in ways that are both valuable to people, and differentiated from competitors. Breville actively protects this customer value through increased investment in intellectual property protection, with a portfolio of patented innovative products for future sustainable growth. People - creativity and food thinkers Breville enjoys the benefits of a highly experienced and talented team across all departments and in all markets. Integrated throughout its food thinking culture, the passion, creativity and insight of staff has helped to consistently deliver world-class innovative products to the Company's customers. The team has received accolades both domestically the Crispy Crust 12\" stone baked pizza oven 8 Breville Group Limited annual report 2014 and internationally, with multiple design awards, and recognition through mainstream media. Breville's innovative \"the Oracle\" coffee machine that automates grinding, tamping and milk frothing with the precision of a barista, became the latest Breville product to be formerly recognised, having recently been the recipient of a 2014 Australian design award. Breville Group invests in the training and education of its team, building strong, collaborative links with world experts in food thinking and technology. Breville was a major sponsor of the award winning Margaret River Gourmet Escape event in Western Australia for the second year running in November 2013. As well as being involved in several consumer facing and chef liaison activities, Breville hosted 'Food for Thought' discussions and presentations for consumers about food science and trends with guest presenters including Heston Blumenthal, Alex Atala, Adriano Zumbo, Harold McGee, Sat Bains, Terry Durack and Jill Dupleix. To further develop its culture of food thinking, Breville also maintains a quarterly guest speaker program to provide all staff with insights from leading minds within the food industry. Corey Costelloe, the head chef of Neil Perry's Rockpool Bar & Grill in Sydney, was the most recent speaker, making time to visit Breville's global head office in Sydney in June 2014. Toby Smith from Toby's Estate, Dietician Susie Burrell, and Food Writer Grant Jones also helped share knowledge and provide food thinking inspiration at Breville's head office during the 2014 fiscal year. Each visiting speaker receives a tour of Breville headquarters, including a behind the scenes look at the extensive design facility. The speaker program builds valuable relationships between the brand and the wider food community, both in Australia and abroad. Strongly committed to its core values of creativity, simplicity, insight and excellence in all departments, Breville recruits, trains, assesses and rewards employees on this basis. With a team anchored by these common values, the business is able to foster a workplace that stimulates idea generation, a passion for learning, and the continuous search for new and better solutions. Breville advocates for diversity in its workforce, recognising the insight and creativity that it brings to the business. Ensuring a safe workplace is another business commitment, with employees participating in regular work health and safety audits. The organisation promotes and encourages a proactive safety culture. Sustainability and social responsibility The Breville Group is committed to ethical, responsible and sustainable conduct across the entire business. It is determined to build a culture, through the commitment of its employees, to reduce the organisation's impact on the environment and increase its contribution to society. Breville is a committed signatory to the Australian Packaging Covenant in the reduction of the potential impact of its products, packaging and warehouse operations. It has also implemented improved waste reduction and recycling practices in its global test kitchen. We are proud to integrate actions and goals into existing business systems so that sustainable packaging considerations become 'just how we do business'. Success is being achieved via cross functional teams working together to implement the Group's Sustainable Packaging Policy. Breville purchases, when possible, products that contain recycled content to help sustain local markets for waste packaging and other materials diverted from landfill. Ethical sourcing Breville Group is committed to conducting business in a socially responsible manner and managing its business to reflect high ethical and moral values. We expect our vendors to respect and adhere to the same philosophy in the operation and management of their businesses and reserve the right not to do business with vendors that do not share and demonstrate our commitment to compliance with local and internationally accepted labour and employment laws. The Group has an ethical sourcing requirements code ('code') which sets out the minimum requirements and expectations that all vendors, including sub-contractors engaged by vendors, must comply with. The code specifies compliance in areas such as wages and benefit policies, child labour, working hours, discrimination, health and safety and environmental practices. The Group monitors the vendors' compliance with the code, which may include a visit by the Group or its representatives to their factories. Breville Group in the community Breville Group continues to contribute to a variety of charitable activities as a sponsor, product partner and fundraiser. In the 2014 fiscal year, the charity committee donated both cash and products to various charitable organisations. Breville Group Limited annual report 2014 9 Accolades Australian Design Award Powerhouse Museum Selection Housewares Design Award New York 2014 BES980 The Oracle Espresso 2007 BBL600 ikon Blender 2013 BSG1974 the Original '74 2006 800ES Espresso Machine 2008 BBL800 Professional Series Blender 2012 BDC600 You Brew Drip Coffee Machine 2005 800CP Citrus Press 2006 800ES Professional Series Espresso Machine 2011 BFP800 Food Processor 2002 JE90 Juice Fountain Juicer 2010 BGR820 Smart Grill 1993 'Roll-a-wave' - Hair Curler 2007 BES400 Espresso Machine 1984 'The Breville' - Washing Machine 2006 BJE200 Juice Fountain 1981 K488 - 'Super Steam and Spray' Iron 2005 2001 Best In Category Best In Industry 2008 BBL800 Professional Series Blender Shortlisted 2008 BKC600XL Single Cup Brewer 800CP Citrus Press 2006 800GR Grill Engineering JE90 Juicer 2004 SG820 Grill Red Dot Design Award Australian Design Mark 2014 BBL910 The Boss Superblender 2013 BRC600 The Multi Chef 2013 BEF100 The Thermal Pro Grill 2012 BCI600 Smart Scoop Ice Cream Maker 2012 BES900 Dual Boiler Espresso Machine 2014 BES980 The Oracle Espresso 2014 BMO734 The Quick Touch 2014 BTA720 + 730 The Lift and Look Pro 2014 BWM640 The Smart Waffle 2013 BEF100 The Thermal Grill Pro 2013 BRC600 The Multi Chef 2014 Bronze BES980 The Oracle Espresso 2012 BDC600XL You Brew 2014 Finalist BWM640 The Smart Waffle 2012 BFP800 Kitchen Wizz Pro 2014 Finalist BTA720 + 730 The Lift and Look Pro 2008 BTA820/840 Toaster 2013 Bronze BES900 Dual Boiler Espresso 2008 BES400 Espresso Machine 2013 Finalist BFP800 Kitchen Wizz Food Processor 2011 BCG800 Smart Grinder 2011 BTM800 Tea Maker 2010 BEM800 Wizz Planetary Mixer 2010 BOV800 Smart Oven 2010 BES820 Variable Temperature Kettle 2010 BES860 Fresca Espresso Machine 2013 BBL605 Kinetix Control Blender 2008 BKT500 ikon Toaster & Kettle 2011 BKE820 Kettle 2008 BTA800 Professional Series Toaster 2008 BBL800 Professional Series Blender 2007 BJE510 ikon Juicer 2007 BBL600 ikon Blender 2006 BKE450 Moda Kettle 2005 CT70 Toaster 2005 SK500 & 550 ikon Kettles 2005 800ES Professional Series Espresso Machine Honourable Mention IDEA International Design Excellence Awards 2013 Finalist BBL 605 Kinetix Control Blender 2013 Finalist BDC600 You-Brew Drip Coffee Machine 2007 Bronze BBL600 Blender Design Korea 'Worlds Best Design Show' Special Selected Product from Australia Home Beautiful Awards 2005 WC15 Wine Chiller 2010 Breville Smart Oven Finalist 2005 800CP Citrus Press 2007 Snack 'n' Sandwich Toaster Design Icon 2004 800JE Juicer 2004 WC15 Wine Chiller 2007 BES400 Espresso Machine Winner 2003 CBL25/30 Moda Bar Blenders 2006 BKE450 Kettle Winner 2003 SG Series Sandwich Presses 2003 EW40 Ultimate Wok Finalist 2003 EW40 Ultimate Wok 2002 2001 AV4 Hairdryer JE90 Juice Fountain Highly Commended Good Design Award Chicago Anthenaeum 2012 BOV800 Smart Oven 2012 BFP800 Kitchen Wizz Pro 2012 BTM800 Tea Maker 2012 BCG800 Smart Grinder 2006 BES400 Espresso Machine Consumer reports 2012 #1 BFP800 Sous Chef 2011 iF Design Award 2008 BES820 Espresso Machine 2008 BTA820&840 Professional Toasters 2007 BES820 Espresso Machine 2006 800CP Citrus Press Gold iF Design Selection 2008 10 BES820 Espresso Machine Breville Group Limited annual report 2014 Food Processors Immersion Blender Review #1 BSB510 Control Grip Shopsmart Award BOV800 Best Toaster Oven BOV650 Best Toaster Oven Williams Sonoma Vendor Appreciation 2013 Most Innovative 2010 Toaster Ovens Review #1 BOV800 #2 BOV650 House & Garden Style Awards 2010 Tea Maker - Winner Kitchen Breville Group Limited Financial report 2014 Contents: Directors' report 12 Corporate governance statement 31 Income statement 36 Statement of comprehensive income 37 Statement of financial position 38 Statement of changes in equity 39 Cash flow statement 40 Notes to the financial statements 41 Directors' declaration 82 Independent audit report 83 Auditor's independence declaration 85 Breville Group Limited annual report 2014 11 Directors' report The board of directors of Breville Group Limited (company) has pleasure in submitting its report in respect of the group for the year ended 30 June 2014. During the last three years she has served as a non-executive director of the following other listed companies: Board of directors The names and details of the company's directors in office during the year and until the date of this report are as below. Unless indicated otherwise, directors were in office for this entire period. Steven Fisher Non-executive chairman B.ACC, CA(SA) Mr Fisher has more than 25 years' experience in general management positions in the wholesale consumer goods industry and is currently chief executive of the Voyager Group. Prior to entering into the consumer goods industry Mr Fisher was a practicing chartered accountant having qualified in South Africa with a Bachelor of Accounting degree. In addition, Mr Fisher serves on various private company boards. Mr Fisher was non-executive director until his appointment as non-executive chairman on 28 May 2013. During the last three years he has not served as a director of any other listed company. Tim Antonie Non-executive director - appointed 18 December 2013, effective 19 December 2013 BEcon Mr Antonie has 20 years' experience in investment banking and formerly held positions of Managing Director from 2004 to 2008 and Senior Advisor in 2009 at UBS Investment Banking, with particular focus on large scale mergers and acquisitions and capital raisings in the Australian retail, consumer, media and entertainment sectors. He holds a Bachelor of Economics degree from Monash University and qualified as a Chartered Accountant with Price Waterhouse. Mr Antonie is the non-executive chairman of Interactive Pty Limited. During the last three years he has served as a non-executive director of the following other listed companies: Premier Investments Ltd # Village Roadshow Limited # # denotes current directorship Dean Howell Non-executive director FCA, FTIA Mr Howell has had an extensive career in accounting, spanning some 40 years, and accordingly has a wealth of commercial and advisory experience. He was the former senior partner of a Melbourne firm of chartered accountants and also served on that firm's national and international boards. He is currently a consultant with Grant Thornton. He is also a director of Peter MacCallum Cancer Foundation Ltd. During the last three years he has not served as a director of any other listed company. Steven Klein Non-executive director LLB, B.Com Mr Klein is a Principal of SBA Law. He has had over 25 years experience acting on behalf of both public and private companies in merger and acquisition transactions. During the last three years he has not served as a director of any other listed company. Lawrence Myers Non-executive director - appointed 19 August 2013, effective 1 September 2013 B.Acct, CA, CTA Mr Myers has over 20 years' experience as a practising Chartered Accountant. He is the Managing Director and founder of MBP Advisory Pty Limited, a high end Sydney firm of Chartered Accountants. Mr Myers sits on numerous private company and not-for-profit boards and acts as a trusted advisor and mentor on business and financial matters. He is a registered auditor and his specialist areas of practice include business and corporate advisory as well as mergers and acquisitions. Mr Myers is chairman of the audit and risk committee (A&RC). # denotes current directorship Effective 20 August 2014, Mr Myers was appointed the company's lead independent director. Sally Herman During the last three years he has not served as a director of any other listed company. Non-executive director BA, GAICD Ms Herman has had a long career in financial services in both Australia and the United States, including 16 years with the Westpac Group, running business units in most operating divisions of the Group. Ms Herman is now a full-time Sydney based non-executive director on both commercial and not for profit boards. She is actively involved in the community, with a particular interest in education, the arts and disability services. 12 Premier Investments Ltd # FSA Group Ltd # Breville Group Limited annual report 2014 Board of directors continued Sasha Kitto - appointed 26 June 2014 Samuel Weiss LLB, ACA Non-executive director AB, Harvard University; MS, Columbia Business School; FAICD Ms Kitto is a chartered accountant and has over 15 years' experience as a practising chartered accountant and in senior finance roles. Mr Weiss has had a long corporate career in the United States, Europe and Australia with leading consumer brand companies such as Nike, Gateway Computers and Sheridan. He devotes considerable time and energy to education, the arts and disadvantaged communities through his work as a past president of the Harvard Club of Australia, president of The Benevolent Society and as a director of The Sydney Festival. Mr Weiss is chairman of the people and performance committee. Reporting currency and rounding During the last three years he has served as a director of the following other listed companies: Performance indicators Management and the board monitor the financial performance of the company by measuring actual results against expectations as developed through an annual business planning and budgeting process. Altium Limited # OrotonGroup Ltd # iBuy Limited # 3P Learning Limited # iProperty Group Ltd GLG Corp Limited # denotes current directorship John Schmoll Non-executive director - resigned 19 August 2013, effective 1 September 2013 B.Com, FCA, FAICD Mr Schmoll completed his executive career on his retirement in 2002 as Chief Financial Officer of Coles Myer Ltd. Prior to this he held senior corporate and professional roles in Australia and South Africa including Arthur Young and Edgars Stores Ltd (South Africa's largest apparel and homewares retailer). Since his retirement he has accepted various non-executive director positions and undertaken some executive coaching roles. During the last three years he has served as a director of the following other listed companies: OrotonGroup Ltd # Patties Foods Ltd # AWB Limited (March 2005 - December 2010) The financial report is presented in Australian dollars and all amounts have been rounded to the nearest thousand dollars ($'000) unless otherwise stated under the option available to the company under ASIC class order 98/100. The company is an entity to which the class order applies. Appropriate key performance indicators (KPI's) are used to monitor operating performance and management effectiveness. Operating and financial review The operating and financial review has been designed to enhance the periodic financial reporting and provide shareholders with additional information regarding the Group's operations, financial position, business strategies and prospects. This review complements the financial report and has been prepared in accordance with the guidance set out in ASIC Regulatory Guide 247. Company overview The Group's underlying strategy is the design and development of innovative world class small electrical kitchen appliances and the effective marketing of these products across multiple geographies to drive growth in sales and profits. In line with this strategy, the Group has: # denotes current directorship Company secretaries built and staffed a world class product development centre in Sydney; continued to invest in its design and development capabilities; maintained an efficient procurement and quality assurance centre in Hong Kong; increased its investment in growth driving marketing activities; employed experienced marketing and sales executives in its key markets around the world; and maintained an efficient and effective administration process to support growth initiatives on an international platform. The names and details of the company's company secretaries in office during the year and until the date of this report are as below. The company secretaries were in office for the periods as indicated below. Mervyn Cohen B.Com, B.Acc, CA Mr Cohen is a chartered accountant and has over 20 years' experience in senior financial roles after beginning his career in Audit and Advisory. Mr Cohen is also Chief Financial Officer of the company, a position he had held since October 2006. Breville Group Limited annual report 2014 13 Directors' report continued Operating and financial review continued Group operating results Principal activities During the year, the principal activities of the Group were the innovation, development, marketing and distribution of small electrical appliances. In Australia and New Zealand, the Group trades under its company owned brands, Breville, Kambrook and Ronson and also distributes a range of Philips products in the personal care and garment care categories under a license agreement with Philips. In North America, the Group distributes Breville branded products through premium channels. Up until 30 June 2013, the Group was also the primary distributor in Canada of a range of Keurig branded single serve coffee machines and portioned coffee capsules. During May 2013, the Group launched a business in the UK marketing and distributing Breville designed premium flagship products under a new company owned brand, Sage. The Group's Hong Kong office performs the functions of a group procurement and quality assurance centre and also, a supplier of primarily Breville designed products to distributors globally. These distributors are located outside of the Group's principal markets of Australia, New Zealand, North America and UK. The products sold to distributors located in Europe (excluding UK) are sold on a non-Breville branded basis. The products sold to distributors outside of Europe, including in the Asia Pacific region, the Middle East and South America, are Breville branded products. Strategic initiatives The Group continues to pursue a number of strategic growth initiatives including establishing important alliances with key industry participants and internationally recognised \"food thinkers\". The Group has: Continued its investment in product development and marketing; Entered into the portioned coffee market in Australia and New Zealand in partnership with Nespresso; Increased its marketing and product development resources to support growth in the Rest of World segment; Launched into the UK; Continued to collaborate with Heston Blumenthal as the Group's global ambassador for global advertising and marketing communication; 14 Subsequent to 30 June 2014, acquired the culinary division of the USA-based business PolyScience, one of the market leaders in the sous-vide category in the commercial and professional markets. The product range includes sous-vide, vacuum sealers and other complementary products. Breville Group Limited annual report 2014 Year to 30 June 2014 $m 2013 $m % Change Revenue 541.6 486.5 11.3% EBITDA 77.9 78.9 (1.2%) EBIT 70.4 71.6 (1.6%) Net profit after taxation 48.8 49.7 (1.9%) 37.48 38.23 (1.9%) 22.9% 24.7% Dividends per share (cents) 27.0 26.0 Net cash ($m) 47.0 43.4 Earnings per share EPS (cents) Return on equity (%)1 3.8% Minor differences may arise due to rounding 1 ROE is calculated based on NPAT for the 12 months ended 30 June 2014 (2013: 12 months ended 30 June 2013) divided by shareholders' equity at 30 June. Revenue of the consolidated entity for the year was $541.6m which was 11.3% higher than the consolidated revenue for the previous corresponding year of $486.5m. Earnings before interest and tax (EBIT) decreased 1.6% on the previous corresponding year to $70.4m. This decrease was driven primarily by the decrease in Keurig commission income, following the cessation of the majority of the Keurig distribution arrangement in Canada in June 2013. The Group's profit after income tax was $48.8m which approximated the earnings of the previous corresponding year of $49.7m. The basic earnings per share for the consolidated entity was 37.48 cents per share (2013: 38.23 cents per share). Segment results REVENUE Year to 30 June EBIT 2014 $m 2013 $m % Change 2014 $m 2013 $m Australia and New Zealand (ANZ) 261.6 240.9 8.6% 24.9 27.3 (9.1%) North America 200.2 192.4 4.1% 30.1 37.9 (20.5%) Rest of World 79.8 51.1 56.1% 20.2 15.7 28.8% (4.7) (9.3) 11.3% 70.4 71.6 Other TOTAL - 2.1 541.6 486.5 Minor differences may arise due to rounding % Change (1.6%) Operating and financial review continued Segment results continued ANZ Overall, the ANZ business performed well and gained market share throughout the year in a retail market environment where consumers remained cautious with their spending. Revenues of $261.6m were 8.6% higher than the prior corresponding year. Despite increased revenues, a stronger USD over the period compared to the prior year especially in the second half placed increased pressure on the landed cost of products resulting in a fall in EBIT by 9.1% to $24.9m (2013: $27.3m). EBIT margin was also unfavourably impacted by a highly competitive marketplace. North America North American revenue for the year increased by 4.1% to $200.2m despite a decline in Keurig commission income of $15.4m to $1.7m (2013: $17.1m). Full year sales revenue from Breville products of $198.5m (2013: $175.3m) increased by 13.2%. Following a very strong first half result which recorded a 29.9% increase in revenue from Breville products, second half North American revenues from Breville products finished 8.4% lower than the prior corresponding period. Second half revenue was adversely impacted by strong purchasing by major retailers late in the first half in anticipation of strong retail sales in post-Christmas trading, followed by adverse weather conditions which impacted many retailers. In addition, the juicing category which had exhibited exponential growth over the past two and a half years, experienced increased competition and an overall decline as consumer demand shifted to blending in the second half. Full year EBIT decreased by 20.5% from $37.9m to $30.1m primarily due to the fall in the high margin Keurig commission income. Rest of World Total revenue from this segment, comprising the rest of the world distribution business supplied from Hong Kong (previously the International Distributors segment) and for the first time, the new UK business, increased by 56.1% to $79.8m and EBIT increased by 28.8% to $20.2m (2013: $15.7m). The higher revenues were derived equally from the rest of world distribution business and the UK. The UK was recorded within the Group's Other reporting segment in the prior year given that trading commenced in May 2013. Strong orders from European strategic partners and growth in the Middle East and Asian geographies contributed to the higher revenues from the rest of world distribution business. The UK business delivered a positive earnings' result in its first full year of operation. Other Represents the Group's shared service facility, including the Group's design and development and global marketing functions. This segment also incurs the amortisation charge on capitalised product development projects. The movement from prior year is primarily attributable to a net over recovery of intra-group charges and lower group employee short term incentive expense. The prior year comparative includes revenues and costs associated with the UK business. Advertising and marketing expenses Consistent with the Group's intention of building awareness of its brands locally and internationally, the Group maintained its investment in growth driving marketing activities. The importance of online consumer research, reviews and communication continues to increase. The Group continues to invest in communicating its products' features and benefits through traditional and digital media, including emerging social media channels. In the online world of consumer reviews, consumer blogs and online sales, the quality and performance of Breville's products together with credible endorsements, will be a key to the Group's future success. Financial position The investment in working capital was marginally lower than the prior year. The level of inventory at year end increased by $10.5m compared to the prior year as a result of the fall in juicer sales in North America in the second half and associated time lag to reset the procurement supply chain as well as a wider range of new products. Trade and other receivables at year end were $12.3m lower driven by the softer total North American revenue in the second half of the year (including substantially decreased Keurig commission income). The Group's net cash position at 30 June 2014 was $47.0m compared to $43.4m at the same time last year. Operating cash flow for the year was $51.2m (2013: $37.0m). Breville Group Limited annual report 2014 15 Directors' report continued Operating and financial review continued Margin risk Capital expenditure The highly competitive nature of the small domestic appliance market together with changes in manufacturing costs, including commodity prices, could have an impact on the Group's financial results. This risk is mitigated by protecting the Group's intellectual property, brand building initiatives, introducing elements of variability into its cost structure and strengthening its long term supplier relationships. The Group continues to invest in efficiency and cost improvement projects to support a larger and more geographically diverse business. In the second half of the 2014 financial year, the Australian distribution business relocated and commenced operating from a new leased distribution centre in Minto, New South Wales. During the 2015 financial year, the Group will relocate its Sydney-based Australian business and corporate head office to new leased premises and will also during the first half of the 2015 year commence the implementation of a new Group-wide enterprise resource planning system (ERP). Foreign exchange exposures The Group operates in a number of countries and is subject to a number of exchange rate influences on its earnings. Firstly, the Group has a transactional exposure as its product purchases are primarily paid for in US dollars. In Australia, New Zealand, Canada and the UK, the exchange rate impacts product costs as the US dollar changes relative to those currencies. A stronger US dollar will generally have a negative effect on the Group's reported earnings in terms of this transactional exposure. The Group also has a translational exposure as its international earnings, a large portion of which are denominated in US dollars, are translated into Australian dollars for reporting purposes. A higher US dollar relative to the Australian dollar will generally have a positive effect on the Group's reported earnings in terms of this translational exposure. The transactional and translational exposures are considered to result in a partial natural hedge from a Group perspective. A weak Australian dollar is likely to have an adverse impact on the Australian segment's earnings (as a result of higher landed costs) but a positive impact on the translation of non-Australian dollar denominated results. Consumer demand risk Given the Group's reliance on consumer discretionary spending, adverse changes to the general economic and retail landscape and consumer sentiment in the principal markets in which the Group operates, can impact its financial results. The Group mitigates this risk by continued communication with its consumers to gain greater insight into the changing world of food and beverage trends and by keeping abreast with global economic and consumer data and industry trends. 16 Breville Group Limited annual report 2014 Group strategies and prospects The ongoing investment in innovation and an increasing portfolio of some of the world's best kitchen products, provides a strong platform to expand the Group's geographic reach and continue to grow global volumes. Although the economic environment remains uncertain, our product development and brand management strengths and a strong balance sheet, mean that the Group is well positioned for the future and the growth opportunities that lie ahead. Risk management The company's risk management is discussed in the corporate governance statement on page 31. Dividends The following dividends have been paid, declared or recommended since the end of the preceding year. Cents per ordinary share $'000 13.0 16,912 Interim FY14 dividend paid 14.0 18,213 Final FY13 dividend paid 12.0 15,611 Final dividends recommended: Dividends paid in the year: Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated entity that occurred during the year that have not otherwise been disclosed in this report or the consolidated financial statements. Directors' interests (ii) Executives: As at the date of this report, the interests of the directors in the shares or other instruments of Breville Group Limited were: Ordinary shares 50,288 S. Fisher - T. Antonie 8,000 S. Herman 100,000 D. Howell S. Klein 117,189 L. Myers 10,000 S. Weiss 121,775 Remuneration report (audited) This remuneration report outlines the compensation arrangements in place for directors and executives (collectively \"key management personnel\") of Breville Group Limited. For the purposes of this report, key management personnel (KMP) of the group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the group, directly or indirectly. Details of key management personnel (i) Directors: S. Fisher Non-executive chairman T. Antonie Non-executive director (appointed effective 19 December 2013) S. Herman Non-executive director D. Howell Non-executive director (resigned as chairman of audit and risk committee 19 December 2013) S. Klein Non-executive director L. Myers Non-executive director (appointed effective 1 September 2013) and chairman of audit and risk committee (appointed 19 December 2013) J. Schmoll Non-executive director (resigned as director 1 September 2013) S. Weiss Non-executive director and chairman of people and performance committee J. Lord Group chief executive officer S. Brady General manager - global marketing M. Cohen Group chief financial officer C. Dais Group general manager - business development and operations There were no changes of key management personnel after the reporting date. Compensation philosophy The performance of the company depends, in part, upon the quality of its directors and executives. The company must attract, retain, motivate and develop highly skilled directors and executives in order to secure the short and long term success of the business so to enhance shareholder value. Based on this philosophy, the company's compensation strategy and framework embodies two interrelated outcomes: improved business results and building a culture of high performance. The following principles define the compensation framework: Provide competitive rewards (for fixed and variable compensation) to attract high calibre employees; Link reward to sustained growth in shareholder value from dividends and growth in share price and the delivery of a consistent return on assets; Link rewards with the strategic goals and performance of the company; and Reinforce a competitive business strategy to deliver organisational success and enhanced shareholder value. People and performance committee The people and performance committee of the board of directors of the company is responsible for reviewing and recommending to the board executive and employee remuneration arrangements and executive succession as set out in the people and performance committee charter. The people and performance committee assesses the appropriateness of the nature and amount of compensation of executives and employees on an annual basis by reference to relevant individual and company performance and market conditions. The people and performance committee is responsible for the engagement of any external compensation consultants for work on executive remuneration. Breville Group Limited annual report 2014 17 Directors' report continued Remuneration report (audited) continued Structure Compensation structure In determining the level and make-up of executive compensation, the people and performance committee may engage an external consultant as appropriate, to provide independent advice detailing market related levels of compensation. No such external consultants were engaged for the year ended 30 June 2014. The group chief executive officer makes recommendations to the people and performance committee for consideration. In accordance with best practice corporate governance, the structure of non-executive director and executive compensation is separate and distinct. Non-executive director compensation Objective The board seeks to set compensation at a level which provides the company with the ability to attract and retain directors of high calibre whilst maintaining a level commensurate with companies of a similar size and type. Structure The Constitution and the ASX Listing Rules specify that the aggregate compensation of non-executive directors shall be determined from time to time by general meeting. The aggregate compensation of $950,000 per year was approved by shareholders at the annual general meeting held in November 2010. The compensation of non-executive directors is reviewed annually. Each director receives a fee for being a director of the company. An additional fee is also paid to each director who also acts as chairman of a board committee. The payment of additional fees for acting as chairman of a committee recognises the additional time commitment required by the director to facilitate the running of the committee. The compensation of non-executive directors for the year ended 30 June 2014 is detailed in Table 1 on page 23 of this report. Executive compensation Objective The company aims to remunerate and reward executives with a level and mix of compensation commensurate with their positions and responsibilities within the company and to: 18 Reward executives for company and individual performance against specific targets set with reference to business objectives and results; Align the interest, focus and performance of the executives with those of the shareholders; Attract, retain and motivate high performing executives; and Ensure total compensation is competitive by market standards. Breville Group Limited annual report 2014 Employment contracts are entered into with executives. Details of the contracts are provided on page 22. Compensation consists of the following key elements: Fixed compensation Variable compensation Short term incentive (STI); and Long term incentive (LTI) The proportion of the fixed compensation and variable compensation (potential short term and long term incentives) is established for each executive by the people and performance committee and approved by the board. Table 3 on page 25 of this report details the components (%) of the compensation of key management personnel of the Group. Fixed compensation Objective Fixed compensation is set to provide a base level of compensation which is appropriate to the position and responsibility and is competitive in the market. Fixed compensation is reviewed annually by the people and performance committee. The process consists of reviewing company and individual performance, relevant comparative market compensation, internal relativities and, where appropriate, external advice on policies and practices. Structure Executives are given the opportunity to receive their fixed compensation in a variety of forms including cash and non-cash benefits. Remuneration report (audited) continued Variable compensation - short term incentive (STI) Objective The objective of the STI plan is to reward executives and other employees on the achievement of company and individual value adding performance objectives established annually, providing them with the opportunity to earn over and above their fixed compensation should the agreed objectives be achieved. Depending upon their position and seniority in the organisation, executives and other employees are eligible for a STI award of between 20% - 50% of their fixed or base annual remuneration. The incentive payment is based on the achievement of financial and non-financial objectives, with the former dependant upon a multiplier in accordance with a sliding scale. Objectives for each participant are determined on an individual basis aligned to enhance shareholder value. The principle objectives of the plan are: To ensure that the company delivers its primary financial results and achieves its targets every year to deliver sustainable performance and continued organisational growth; To achieve business goals through rewarding value adding individual performance; To contribute to the development of a performance culture across the company; and To promote and facilitate the concept of shared ownership whereby executives and employees who contribute to the success of the company will also share in that success. The total potential STI available is set at a level to provide an incentive to the executives and employees to achieve and exceed personal, financial and operational targets. Structure Actual STI payments are determined on the basis of the achievement of specific targets and objectives set at the commencement of the year. Financial performance targets include net profit before tax. Individual objectives are aligned to the non-financial components of the Group strategy. The company has predetermined financial performance benchmarks which must be met in order to trigger payments under the STI plan and these are varied on a yearly basis in line with the annual budgeting process. On an annual basis, after consideration of performance against the established targets/objectives, incorporating both company financial targets and individual objectives, the group chief executive officer recommends to the people and performance committee an amount, if any, of the STI payment each executive (excluding the group chief executive officer) is eligible to receive. This recommendation, together with a recommendation by the people and performance committee of an amount if any, of the STI payment the group chief executive officer is eligible to receive, is then put to the board for approval. The group chief executive officer may also award discretionary bonuses to recognise and reward key contributions from high performing employees. All discretionary bonuses are presented as recommendations to the people and performance committee and the board for approval. The aggregate of the annual STI payments available for executives across the company is subject to the approval of the people and performance committee and the board and payments are typically paid in cash. The minimum amount of the STI payments assuming that no executives meet their respective targets/objectives (including company financial targets and individual objectives) for the 2014 financial year is nil (2013: nil). Variable compensation - long term incentive (LTI) Objective The objective of the LTI plan is to reward executives and other employees in a manner that aligns this element of compensation with the creation of shareholder value. The LTI plan is only made available to executives and other employees who are able to influence the generation of shareholder value and have a direct impact on the company's performance against relevant long term performance hurdles. Depending upon their position and seniority in the organisation, executives and other employees are eligible for a LTI award of between 20% - 50% of their fixed annual compensation. Structure - performance rights plan LTI grants to executives and other employees (collectively \"participants\") are provided in the form of performance rights awards issued in accordance with the Breville Group Limited Performance Rights Plan (PRP). LTI grants to participants (excluding the group chief executive officer) are recommended by the group chief executive officer to the people and performance committee. This recommendation, together with a recommendation by the people and performance committee of a LTI grant to the group chief executive officer, is then put to the board for approval. Breville Group Limited annual report 2014 19 Directors' report continued Remuneration report (audited) continued Variable compensation - long term incentive (LTI) continued Structure - performance rights plan continued An offer under the PRP grants a participant the right to a certain number of fully paid ordinary shares in the company. Upon satisfaction of the performance hurdles, the right will vest and be convertible into shares. The company uses time-based and financial-based hurdles. Earnings per share (EPS) is the financial-based performance hurdle for the LTI plan. EPS represents the earnings per share from operations adjusted for nontrading items. The use of EPS ensures an alignment between shareholder return and reward for participants. In addition to the grant of performance rights awards which are subject to an EPS performance hurdle, performance rights awards may also be granted in accordance with the PRP as a retention award where the performance condition is continued employment with the company to vesting date. If the performance hurdle is not met or if the participant ceases to be employed by the company, any unvested performance rights will lapse unless otherwise determined by the board. There are no cash alternatives. The performance rights cannot be transferred and are not quoted on the ASX. Holders of performance rights are not entitled to notice of, or attend, a meeting of shareholders of the company, or receive any dividends declared by the company, until the rights have vested and then converted into shares. Once allocated, disposal of shares is subject to restrictions whereby board approval is required to sell the shares granted within three years of the shares being allocated to the participant or; if the participant ceases to be employed by the company, within twelve months of the date employment ceases; or such other date as the board determines. In the event of a takeover bid where the bidder and its associates become entitled to at least 50% of the voting shares of the company, any performance rights granted will vest where the board, in its absolute discretion, is satisfied that pro rata performance is in line with any performance condition applicable to those performance rights. Any performance rights which do not vest will immediately lapse, unless otherwise determined by the board. Other The number of ordinary shares in the company which could be acquired by executives and other employees holding performance rights if all outstanding performance rights were vested shall not exceed 5% of the total number of issued shares of the company. 20 Breville Group Limited annual report 2014 Remuneration report (audited) continued Variable compensation - long term incentive (LTI) continued Relationship of rewards to performance The table below shows the details of LTI plans for which compensation has been included in the remuneration tables on pages 23 and 24 of this report. LTI Plan (for the year ended) Performance rights June 2011 Performance rights June 2012 Number outstanding 30 June 2014 (Executive only) Number outstanding 30 June 2013 (Executive only) - Issued for nil consideration. - Exercise price is $0. - Term of three years and there are 2 performance hurdles each representing 50% of the total number of performance rights: (a) Base EPS hurdle - to vest, group's underlying EPS for the year ending 30 June 2013 must be at least 30.00 cents per share. (b) Stretch EPS hurdle - to vest, the group's underlying EPS for the year ending 30 June 2013 must be at least 33.00 cents per share. - 100% vested as at 30 June 2014. - 135,000 - Issued for nil consideration. - Exercise price is $0. - Term of three years and to vest, the group's underlying EPS for the year ending 30 June 2013 must be at least 37.00 cents per share. - 100% vested as at 30 June 2014. - 47,000 152,000 152,000 - 34,500 156,000 156,000 - 37,234^ 84,000 - Performance hurdles/conditions - Issued for nil consideration. - Exercise price is $0. - Term of three years and there are 2 performance hurdles each representing 50% of the total number of performance rights: (a) Base EPS hurdle - to vest, group's underlying EPS for the year ending 30 June 2014 must be at least 33.50 cents per share. (b) Stretch EPS hurdle - to vest, the group's underlying EPS for the year ending 30 June 2014 must be at least 36.50 cents per share. - 0% vested as at 30 June 2014. - Issued for nil consideration. - Exercise price is $0. - Term of up to twenty four months: (a) 50% of the performance rights to vest, participants must be employed by the company on 3 December 2012. (b) 50% of the performance rights to vest, participants must be employed by the company on 2 December 2013. - 100% vested as at 30 June 2014. Performance rights June 2013 - Issued for nil consideration. - Exercise price is $0. - Term of three years and there are 2 performance hurdles each representing 50% of the total number of performance rights: (a) Base EPS hurdle - to vest, group's underlying EPS for the year ending 30 June 2015 must be at least 43.22 cents per share. (b) Stretch EPS hurdle - to vest, the group's underlying EPS for the year ending 30 June 2015 must be at least 47.33 cents per share. - 0% vested as at 30 June 2014. - Issued for nil consideration. - Exercise price is $0. - Term of 12 months and to vest, the group's underlying EPS for the year ending 30 June 2013 must be at least 42.00 cents per share. - Lapsed as at 30 June 2014. Performance rights June 2014 ^ - Issued for nil consideration. - Exercise price is $0. - Term of three years and there are 2 performance hurdles each representing 50% of the total number of performance rights: (c) Base EPS hurdle - to vest, group's underlying EPS for the year ending 30 June 2016 must be at least 46.00 cents per share. (d) Stretch EPS hurdle - to vest, the group's underlying EPS for the year ending 30 June 2016 must be at least 49.20 cents per share. - 0% vested as at 30 June 2014. this represents an STI award provided to the CEO following his appointment pursuant to his contract. Breville Group Limited annual report 2014 21 Directors' report continued Remuneration report (audited) continued Group performance The table below shows the performance of the group over the past five years. 30 June 2010 30 June 2011 30 June 2012 30 June 2013 30 June 2014 Underlying basic earnings per share (cents) 21.98 27.61 35.35 38.23 37.48 Basic earnings per share (cents) 17.44 24.47 35.35 38.23 37.48 Total dividends (cents) 11.00 16.50 24.0