Annual Report 2003
Contents
01 Financial Highlights
02 Group Overview
04 Chairman’s Statement
06 Group Managing Director’s Review
14 Group Financial Director’s Review
18 Corporate Social Responsibility
20 Directors and Advisors
22 Report of the Directors
28 Independent Auditors’ Report
29 Consolidated Profit and Loss Account
31 Consolidated Balance Sheet
32 Company Balance Sheet
33 Consolidated Cash Flow Statement
34 Notes to Consolidated Cash Flow Statement
35 Accounting Policies
37 Notes to the Financial Statements
68 Five year Financial Summary
Financial Highlights
Glanbia plc is an international dairy, consumer
foods and nutritional products company.
A culture of customer-oriented service has earned
us a position of leadership as a supplier of quality
dairy based consumer products and food ingredients
to the health and nutrition, processed food and
beverage markets worldwide.
Profit before exceptional
items and tax
(EURO million)
Operating margin
(Pre-exceptional)
(%)
Adjusted earnings
per share
(cent)
77.1
71.8
66.6
53.7
4.5
3.9
3.4
3.6
19.3
17.4
15.9
11.6
2000
2001
2002
2003
2000
2001
2002
2003
2000
2001
2002
2003
Year end net debt/EBITDA
(times)
Interest cover
(times)
2.1
1.6
1.2
1.17
3.5
2.9
5.9
4.6
2000
2001
2002
2003
2000
2001
2002
2003
In Summary
(%) Group Turnover
(%) Group Operating Profit
(Pre-exceptional)
11.49
15.36
44.11
48.25
44.40
36.39
Consumer Foods
Dairy Food Ingredients
Agribusiness
Glanbia plc annual report 2003 01
Group Overview
Glanbia plays a vital role in health and
nutrition products around the world.
We pride ourselves on tracking consumer
lifestyle changes and in developing the
finest ingredients and food brands in
response to market needs.
Brand Portfolio
Avonmore is the number one brand in the
Irish milk market and the number two selling
grocery brand. Milk, cream, cheese, fresh
soup, spreads, and butters are all sold under
the Avonmore brand.
Yoplait is the number one yogurt choice
among Irish families. It celebrates 30 years
in Ireland this year.
Renowned as the ‘Fillet of Cheese’,
Kilmeaden Irish cheese is available in
four distinctive varieties.
Number two in the Irish market, “Everybody”
is a probiotic yogurt drink with essential
vitamins, minerals and the probiotic LGG.
Snowcream is the regional favourite in the
South East of Ireland – one of the first milk
brands to come to market when it was
launched in 1952.
Premier Milk is synonymous with Dublin
and has for generations been the preferred
choice of families in the capital.
Provon protein – premium whey protein
isolate (WPI) delivers 90% protein for sports
nutrition, health and wellness categories.
Bioferrin isolated lactoferrin with over
90% purity. This iron-binding protein is
useful for immune enhancement and
antimicrobial properties.
TruCal is a milk mineral complex with
appropriate ratios of calcium, phosphorous,
magnesium, potassium, zinc, and selenium
for maintaining and promoting bone health.
Salibra is a prebiotic protein product that
includes high levels of immunoglobulins
and lactoferrin. It also contains bioactive
lipids such as phosphatidyl serine (potential
cognitive function).
Glanbia’s weight management
ingredient that has been clinically tested
and shown to decrease body fat and
increase muscle. Contains active peptides,
proteins and minerals as part of a weight
management programme.
Snopro is a range of casein products
with casein protein functionality.
A range of whey protein concentrate (WPC)
products that provide specific and consistent
functional and nutritional benefits in a wide
variety of food applications.
02 Glanbia plc annual report 2003
Group Overview
Global Positions
United States of America
(cid:127) No.1 producer of US
barrel cheese
(cid:127) No.2 whey protein
concentrate
(cid:127) No.3 lactose
(cid:127) No.4 American type
cheddar cheese
Global Locations
Ireland:
Drogheda, Co. Louth
Tallaght, Dublin
Ballitore, Kildare
Kilkenny
Gorey, Co. Wexford
Waterford
Castlelyons, Co. Cork
Ballyragget, Co. Kilkenny
Virginia, Co. Cavan
Kilmeaden, Co. Waterford
Europe
(cid:127) No.1 pizza cheese supplier
in Europe
Global
(cid:127) Leading global supplier of
advanced technology whey
proteins and fractions
Ireland
(cid:127) No.1 dairy processor
(cid:127) 2 of the top 3 grocery brands
(cid:127) Avonmore No.1 & Premier
No.2 milk brands
(cid:127) Yoplait leads the standard
yogurt market
(cid:127) No.1 in cheese
(cid:127) Market leader in liquid milk
and cream
(cid:127) No.1 Irish pigmeat processor
Carrick-on-Suir, Co. Tipperary
Roosky, Co Roscommon
Clara, Co. Offaly
Edenderry, Co. Offaly
Roscrea, Co. Tipperary
Portlaoise, Co. Laois
Clonroche, Co. Wexford
Dungarvan, Co. Waterford
81 Retail Branches
UK:
Oswestry, Shropshire
Dumfriesshire, Scotland
Melton Mowbray, Leics
North Tawton, Devon
Malpas, Cheshire
Llangefni, Gwynedd
Magherlin, Co. Armagh
Portadown, Co. Armagh
Other:
Idaho, US
Monroe, US
Clovis, New Mexico
Lagos, Nigeria
Mexico City, Mexico
Gierle, Belgium
Glanbia plc annual report 2003 03
Chairman’s Statement
Our core businesses: cheese, nutritional ingredients
and consumer foods with a nutritional emphasis, all
performed satisfactorily and are now well positioned
to exploit growth opportunities into the future.
The potential of the Nigerian market for evaporated milk
and milk powder is the driver in the US$20m Glanbia joint
venture with PZ Cussons.
Chairman’s Statement
Tom Corcoran, Group Chairman.
In February 2004 the official sod turning took place in Clovis,
New Mexico on the site of the new US$190m cheese and
whey production facility. (Image courtesy of Clovis News Journal).
I am pleased to report on another year of
underlying earnings growth for Glanbia plc.
In 2003 we completed our UK restructuring
with the finalisation of a three-year business
reorganisation programme. During the year
the Group also commenced a number of
significant strategic investments – both joint
venture and stand-alone projects. Our core
businesses: cheese, nutritional ingredients
and consumer foods with a nutritional
emphasis, all performed satisfactorily and
are now well positioned to exploit growth
opportunities into the future. Glanbia’s
financial position was further strengthened
during the year as the Group benefited
from improved operating performance and
good cash flows.
Dividend
A final dividend of 2.94c per share is
proposed (2002: 2.80c), giving a total
dividend for the year of 5.00c per share
(2002: 4.76c), an increase of 5%. Subject
to shareholder approval the final dividend
will be paid on 24 May 2004 to shareholders
on the Register as at 23 April 2004, the
record date. Irish dividend withholding tax
will be deducted at the standard rate
where applicable.
Board
Kevin Toland, Group Development Director,
joined the Board as an Executive Director
on 10 January 2003.
Strategic Developments
2003 was a watershed year in that
significant progress was made in
developing our strategic focus on the high
growth areas of consumer products, dairy
ingredients and in particular the nutritional
market. This was achieved both through
wholly owned investments and a number
of strategic joint ventures, which offer
a relatively low risk entry into significant
growth markets. Specifically:
• The Group commenced construction of
the $190m cheese and whey products
production facility in New Mexico, US.
This new plant will be 50% owned by
Glanbia with the balance jointly owned by
Dairy Farmers of America Inc. and Select
Milk Producers Inc. It will position the
Group as the number one producer of
American type cheddar cheese in the
US and simultaneously build our global
position as a supplier of advanced
technology whey proteins to the
nutritional sector. Commissioning of the
new facility is planned for Autumn 2005.
• The Group entered into a strategic joint
venture with Conaprole of Uruguay in
respect of the sales and marketing into
Central and South American markets of
dairy ingredients manufactured by Glanbia
in Ireland and the US and by Conaprole in
Uruguay. This venture is now operational
and sales performance is encouraging.
• The Group announced a 50/50 joint
venture with PZ Cussons plc to build a
new US$20 million facility in Nigeria to
supply evaporated milk and milk powder
to the local Nigerian market. The factory
will be capable of handling 35,000 tonnes
of milk products per annum and will be
commissioned in early 2005. Glanbia will
have full responsibility for operations
while PZ Cussons plc will be responsible
for the marketing and distribution of the
product stream through its existing
Nigerian subsidiary.
• The Group announced the development
of a Group Innovation Centre, to be
completed by Autumn 2004. There is
growing consumer awareness of the link
between health and diet and Glanbia as
a food Group is committed to achieving
the highest standards of best practice
in relation to science based innovation.
Group strategy is focused on developing
products with a health based functional
foods and nutritional emphasis in both
ingredient and consumer form.
This new world-class research and product
development facility, to be based in Ireland,
is core to this strategy.
• On 23 February 2004, the Group
announced the sale of a 75% interest
in its UK hard cheese business, Glanbia
Foods Limited (through the sale of
100% of Glanbia Foods Limited and
the simultaneous creation of a new joint
venture with Milk Link Ltd which will be
25% owned by the Group) for a net
consideration of c118.7m.
Outlook
In determining the potential outcome for
2004 the Board has taken into consideration
the phasing of new investment projects, the
transition to a new EU dairy regime and a
weakened dollar. Taking these factors into
account, the Board expects to make further
progress in the current year.
Furthermore, the Board is confident that
the developments commenced in 2003,
together with planned initiatives in 2004,
will deliver satisfactory earnings growth in
2005 and beyond.
Appreciation
On behalf of the Board I would like to thank
all shareholders for their continued support
for the Group. The Board would also like
to thank our valued customers and the
consumer who is the ultimate barometer
of success. We would also like to express
our sincere appreciation to the Glanbia
management team, led by John Moloney,
and to the team of employees worldwide
for their commitment to Glanbia.
Tom Corcoran
Chairman
Glanbia plc annual report 2003 05
Group Managing Director’s Review
Glanbia closely monitors
consumer lifestyle trends
– in particular the growing
awareness of the link
between health and diet
and the demand for
products with specific
nutritional benefits.
John Moloney, Group Managing Director.
TruCal®, containing 24% calcium, addresses the fact that
nine out of ten teenage girls and adult women fail to meet
the recommended daily allowance of calcium (USDA).
Overview
Glanbia’s 2003 underlying results reflect
a solid performance in a challenging year,
with increased operational efficiency,
volume growth in key sectors, improved
margins and positive cash flows.
The results, after exceptional charges, reflect
the completion of restructuring in the UK
through the sale of Glanbia Fresh Meats (UK)
Limited and the creation of the joint venture
with Milk Link Limited to service the UK
cheese market.
Group turnover in 2003 was down 11.9%
to c2,041.07m (2002: c2,316.74m)
reflecting the impact of the restucturing
of operations in the UK in 2002 and 2003.
Operating profit before exceptional costs
(including share of operating profit of joint
ventures & associates) increased by 1.4%
to c92.79m (2002: c91.54m) and profit
before tax and exceptional items increased
by 7.4% to c77.14m (2002: c71.81m).
The Group continues to focus attention
on improving operational efficiencies and
driving value added products, which
resulted in an improvement in operating
margins to 4.5% (2002: 3.9%).
During the year the Group made a number
of strategic investments in the US, Nigeria,
Ireland and Mexico, by means of wholly
owned investments and a number of
strategic joint ventures into significant
growth markets. We also completed a
three year re-organisational programme
in the UK which culminated in the sale
of Glanbia Fresh Meats (UK) Limited, the
closure of the UK fresh meat facilities and
the formation of a joint venture with Milk
Link Limited to serve the UK hard cheese
market. With this narrowing of focus based
around core competencies in cheese,
nutritional ingredients and consumer foods
with a nutritional emphasis, Glanbia is now
well positioned to advance its growth
strategy. We are confident that this strategy
will provide a strong platform for earnings
growth into the future.
06 Glanbia plc annual report 2003
Review of Operations
Consumer Foods
The Group’s Consumer Foods businesses
encompass the manufacture and marketing
of value added, fast moving consumer
goods in Ireland, the UK and Continental
Europe. In Ireland this includes the market
leading dairy and chilled convenience food
business as well as the processing and
sale of Irish pork. In the UK it encompasses
the production of high quality own label
cheese products and the Leprino Joint
Venture producing mozzarella for the
European pizza sector.
Overview:
In 2003 Consumer Foods accounted for
44.11% of the Group’s turnover and
48.25% of the Group’s operating profit.
Overall a challenging operating environment
resulted in a reduction in operating profit
to c44.77m (2002: c47.59m), but
encouragingly, operating margins improved
to 5.0% (2002: 4.0%). Turnover declined to
c900.41m (2002: c1,175.11m) due to the
impact of the exit from the UK consumer
meats and foodservice distribution activities
in 2002 and the exit from the UK fresh
meats business in 2003.
Consumer Foods benefited from enhanced
operational efficiencies in key businesses,
new product extensions, nutritional product
introductions and the finalisation of the
reorganisation of the UK activities. Very
competitive block mozzarella markets and
currency weakness adversely impacted the
Glanbia Cheese business.
The new UK joint venture with Milk Link,
announced in February 2004, is a response
to ongoing margin pressure in the highly
competitive UK market and allows Glanbia
to retain a stake in a more integrated
business which will compete more
effectively in this market, while realising
cash for investment in high growth areas.
Consumer Foods
Turnover
(EURO million)
Consumer Foods
Operating Profit
(Pre-exceptional)
(EURO million)
1,175.1
900.4
47.6
44.8
2002
2003
2002
2003
Ireland:
Glanbia is Ireland’s leading supplier of
branded and value-added liquid milk
products and the market-leading supplier
of fresh dairy products, cheeses, soups
and spreads principally under the Yoplait,
Avonmore and Kilmeaden brands. The
Group also processes fresh pork for the
retail and foodservice trade, selling in
Ireland, Europe, the US and Asia.
The Group operates five milk processing
facilities and one fresh soup manufacturing
facility to serve the Irish Consumer Foods
business, as well as a number of distribution
and sales locations. Glanbia currently has
four pork processing facilities, one in
Roscrea, County Tipperary, one in Edenderry,
County Offaly, one in Clara, County Offaly
and one in Roosky, County Roscommon.
For over three decades the Glanbia brands
have been household names and research
indicates they are synonymous with quality,
convenience and health. This depth of
experience, combined with a constant
focus on innovation and marketing is the
driver that positions this business as the
market leader and the consumer’s choice.
Group Managing Director’s Review
The Glanbia brands and food ingredients are
synonymous with ‘nutrition from the fridge’.
Group Managing Director’s Review
Avonmore Supermilk now goes everywhere you want it to go.
Don’t just milk it. Supermilk it.
Cheese consumption in the US is 9 billion pounds p.a.
Glanbia is the number 1 producer of US barrel cheese
and one of the leading producers of American type
cheddar – the consumer’s choice.
Significant progress was made during the
year in terms of re-organising the Group’s
UK operations. In July 2003 the Group
announced its decision to withdraw from
its UK fresh pork operations and in February
2004 the Group announced its decision to
enter into a joint venture with Milk Link to
service the UK hard cheese sector.
Food Ingredients and Nutritionals
Food Ingredients comprises the US and
Irish dairy ingredients operations, as well
as the Group’s expanding nutritional
business. At facilities in Ireland and the
US, Glanbia processes and markets a
range of milk, cheese and whey protein
ingredients for sale on international
markets. It is also involved in a number
of strategic joint ventures.
Glanbia has a strong presence in
international dairy ingredients markets, is
the largest producer of barrel cheese in the
US, is the second largest producer of whey
protein isolate worldwide and is the largest
milk processor in Ireland.
Glanbia’s unique position as a large-scale
manufacturer of whey proteins in Ireland
and the US is the cornerstone of our
nutritional strategy.
Consumer eating habits have changed
dramatically in recent years, with less time
available for food preparation and a
consequent demand for convenient ‘on the
go’ food solutions. Also increased consumer
awareness in developed countries of the link
between food and health has been a critical
factor in the continued expansion of the
market for healthy food options.
Milk is an ideal source of protein and dairy
products an ideal carrier of nutrition
solutions. These properties combined with
Glanbia’s product innovation and nutritional
expertise place the Group in a strong
position to satisfy changing consumer
needs. In the Irish business health and
functionality have been addressed with
the introduction of probiotics, prebiotics,
vitamins and minerals as well as the
inclusion of more reduced fat offerings.
Key among Glanbia’s product innovations
is the exclusive introduction of the probiotic
LGG into the Irish product ranges. LGG
is the most clinically researched probiotic
culture (friendly bacteria), which enhances
natural resistance and maintains a healthy
digestive system. LGG is only available in
the yogurt drink ‘Yoplait Everybody’ and
the milk-based nutritional and functional
beverage, ‘Avonmore Milk Plus LGG’.
During the year additional calcium has
been introduced to ‘Yoplait Petits Filous’
for children’s growing bones and teeth.
Ongoing nutritional product innovations
are core to this business.
In anticipating and responding to consumer
needs for “food to go”, in 2003 the business
also introduced ‘Avonmore SuperMilk on
the Go’, a nutritious alternative to single
serve, carbonated soft drinks, juices and
bottled waters.
Irish pork operations had a reasonable
performance in 2003. The Group has
expanded processing capacity at its
facility in Roscrea and is in the process
of expanding capacity at its facility in
Edenderry to replace the capacity lost
in the fire in Roosky in 2002.
Against the background of a challenging
retail environment and a competitive liquid
milk sector, the Irish consumer foods
business overall had a good performance
in 2003 with volume growth and the
expansion into new value-added segments.
UK
The Group’s UK Consumer Foods
businesses for the period include Glanbia
Foods, Glanbia Cheese and the UK fresh
meats operations (up to the date of sale
– 5 July 2003). Glanbia Foods Limited
is Britain’s second largest producer of
cheddar, Stilton and British territorial
cheeses. Glanbia Cheese, the pizza
cheese joint venture with Leprino Foods,
is Europe’s leading producer of
mozzarella for the pizza sector, serving
quick service restaurants and chilled and
frozen pizza manufacturers. Glanbia
Foods performed satisfactorily in 2003.
Despite a highly competitive market we
achieved steady sales volumes and
enhanced operating efficiencies.
The result for Glanbia Cheese was below
expectations primarily due to the competitive
nature of the block mozzarella market driven
largely by a European response to the Mid
Term Review of the Common Agricultural
Policy. Overall the business benefited from
volume growth. The Northern Ireland facility
has yet to fully realise the benefits of
technology investments and capacity
expansion completed in October 2003.
Glanbia plc annual report 2003 09
Group Managing Director’s Review
Whey proteins are key ingredients in functional foods and
supplements. Glanbia’s unique position as a large-scale
manufacturer of whey proteins in Ireland and the US is the
cornerstone of its nutritional strategy.
In 2003 Glanbia launched new ingredient solutions that extend
the shelf life and improve the texture of nutritional bars.
Food Ingredients
and Nutritionals
Turnover
(EURO million)
910.1 906.2
Food Ingredients
and Nutritionals
Operating Profit
(Pre-exceptional)
(EURO million)
33.8
30.1
2002
2003
2002
2003
In addition to traditional usage in food
and infant formulae, whey protein fractions
and whey isolate are now key ingredients in
functional foods and supplements. These
include: dietary supplements; sports
nutrition; healthcare products; oral care
products; clinical nutrition, nutritional bars
and beverages.
Glanbia is a leading producer of these
high value-added whey-based nutritional
ingredients for domestic, US, Asian and
European markets.
Overview:
Overall, the division accounts for 44.40%
of the Group’s turnover and 36.39% of the
Group’s operating profit. Food Ingredients
and Nutritionals performed well during
2003, with operating profit up by 12.4%
on 2002. However results were impacted
by the weakness of the US dollar against
the Euro and weak US cheese markets in
the first half of 2003.
Divisional operating profit increased to
c33.77m (2002: c30.05m). The operating
margin was 3.7% (2002: 3.3%). Turnover
was down marginally to c906.21m
compared to c910.08m in 2002.
Ingredients US
The Group is the largest producer of US
barrel cheese, the second largest producer
of whey protein concentrate and the third
largest producer of lactose in the US. It is
one of the top producers of American type
cheddar cheese, supplying the food service,
food processing and retail sectors. The
business had a satisfactory performance
in 2003, delivering solid volume growth in
a year when cheese markets were weak,
particularly in the first half. The joint venture
in New Mexico, which was announced in
2003, will, on completion, make Glanbia the
number one producer of American type
cheddar cheese in the US.
Ingredients Ireland
In Ireland, Glanbia Ingredients is the
country’s largest dairy processor, utilising
over 30% of the national manufacturing milk
pool. Modern large-scale facilities in three
strategic locations produce a wide portfolio
of cheese, protein, butterfat-based and
formulated products and cream base for
Baileys Irish liqueurs. Glanbia exports over
95% of output to European, North and
South American, African and Asian markets.
This business had a satisfactory
performance during 2003.
10 Glanbia plc annual report 2003
Group Managing Director’s Review
Glanbia is Europe’s leading producer of mozzarella for the
pizza sector.
Glanbia has a strong
R&D capability and an
established track record
in the development of
innovative consumer
products and functional
foods. Colm O Brien,
PhD, is one of the team
of scientists who will be
driving innovation at
the Group’s new
Innovation Centre.
Nutritionals
Glanbia’s international nutritional ingredients
activities are now being brought to market
via a separate, focused business unit. Good
progress was made in developing nutritional
ingredients in 2003 and the business
performed in line with expectations.
Agribusiness
Turnover
(EURO million)
231.5 234.5
Agribusiness
Operating Profit
(Pre-exceptional)
(EURO million)
13.9
14.2
Glanbia continues to track the international
nutrition debate, led by the United States,
on the increasing incidence of lifestyle
related diseases. This has resulted in an
overall consumer lifestyle shift towards
nutrition and wellness.
The company’s focus on whey proteins is
on their efficacy in healthcare applications,
which is correlated to dietary behaviour
and lifestyle. Glanbia’s Nutritional business
produces lactoferrin which possesses
anti-microbial and immune system benefits.
The company also has a strong focus on
calcium and its applications in the
prevention of osteoporosis and on whey
protin as a prebiotic.
In 2003 the business commissioned new
protein hydrolysis capacity in the US and
continued its pipeline of new product
development with the introduction of two
novel ingredient solutions that extend the
shelf life and improve the texture of
nutritional bars: BarFlexTM and BarProTM
both of which are partially hydrolyzed milk
protein isolate, along with Prolibra TM-a
weight loss solution.
In 2002 the business introduced SalibraTM,
a bioactive whey fraction to support
intestinal health and wellness. Sales of
Salibra TM are growing and the product is
being introduced into the sports nutrition
sector in the US as a muscle development
and sports performance product. These
product introductions contributed to strong
sales growth in the year.
2002
2003
2002
2003
The business also added to its research
capability in Ireland and the US in the areas
of applications and clinical nutrition.
Agribusiness
The Agribusiness Division is the key linkage
between Glanbia and its farmer suppliers in
Ireland and is engaged primarily in farm input
sales, feed milling, milk assembly and grain
trading. The division also has interests in
fertiliser production, veterinary wholesaling,
malting and port services.
Overall the division had a good performance
in 2003. Market share gains were made in
feed and fertiliser sales in 2003. During the
year the Division continued its cost reduction
programme and achieved enhanced
operating efficiencies across all elements
of the business.
In 2003 the division accounted for 11.49%
of the Group’s turnover and 15.36% of the
Group’s operating profit. Turnover increased
to c234.45m (2002: c231.55m), operating
profit improved to c14.25m (2002: c13.89m).
The operating margin was 6.0%.
Group Managing Director’s Review
Through Gain Foods, Glanbia Agribusiness sponsors the current
Irish champion jockey, Paul Carberry.
Future direction
The Chairman has reported on the
progress made in achieving our strategic
objectives for 2003. Having completed
the strategic reorganisation of the Group,
Glanbia is now strongly focused on
growing its three core business platforms:
cheese, nutritional ingredients and
consumer foods. We have the scale,
technology, the efficiencies, the innovation
and most importantly, a committed team
of almost 5,000 people all dedicated to
maximising value for shareholders.
In 2004 growth will be achieved both
organically and, as appropriate, by
acquisition. In this regard the Group is
actively pursuing a number of potential
acquisition opportunities in the nutritional
ingredients sector.
Appreciation
The progress made in 2003 is a reflection
of the quality of our Board and I want to
thank the Chairman and Board for their
leadership during the year. I would also
like to thank all employees and my
management team for their contribution.
I believe Glanbia made significant progress
in 2003 and that we now have a solid
foundation for future growth.
John Moloney
Group Managing Director
Glanbia plc annual report 2003 13
Group Financial Director’s Review
Operating profit before exceptional items,
including share of joint ventures and
associates, was c92.79m, an improvement
of 1.4% from 2002. Adjusted earning per
share was 19.26 cent, an increase of
10.4% from 2002.
Group Financial Director’s Review
Results
Growth in operating profit before tax and
exceptional items of 7.4% to c77.14m,
an increase in operating margin to 4.5%
together with a further reduction in debt
and strengthening of the Group’s balance
sheet are key highlights of the 2003
results. Operating profit before exceptional
items, including share of joint ventures
and associates, was c92.79m, an
improvement of 1.4% from 2002 despite
an 11.9% reduction in Group turnover
reflecting the impact of restructuring of
operations in the UK in 2002 and 2003.
Details of divisional operating profit are
given in the Group Managing Director’s
review on pages 6 to 13.
The Group’s interest charge (including
interest on joint venture and associates)
decreased to c15.65m from c19.73m in
2002. Interest cover (operating profit to
interest) improved to 5.9 times (compared
to 4.6 times in 2002) while EBITDA interest
cover was 8.3 times and the ratio of year
end net debt to EBITDA was 1.17 times.
Substantial improvement in financial ratios
has been made in the last four years.
A net exceptional charge for the period
of c90.47m arises primarily from the
continued refocusing of operations around
group strategy. It included the sale of the
UK fresh meats business and the closure
of related meat processing facilities,
redundancy costs arising from the fire at
the Roosky pigmeat plant in 2002 and
costs related to the accelerating of
efficiencies and cost effectiveness across
all Irish business arising from the impact
of the EU Commission’s Mid Term Review.
Also included is the charge associated
with the sale of a 75% interest in Glanbia
Foods Limited which was announced on
23 February 2004. Of the net exceptional
charge c41.69m relates to the write-back
through the profit and loss account of
goodwill previously written off to reserves,
as required by accounting standards.
Geoff Meagher, Group Financial Director.
Glanbia produces 140,000 tonnes of cheese and some
50,000 tonnes of ingredients derived from the whey residue
at three facilities in Idaho, US.
As required under FRS 15 – ‘Tangible Fixed
Assets’ a review of the remaining useful
lives of plant and equipment owned by the
Group was carried out with a resultant
reduction of c5.77m in the depreciation
charge, as compared with the original
useful lives.
The disclosure requirements of FRS 17 –
‘Retirement Benefits’ are in note 34 to the
financial statements. The adoption of FRS
17 has had no impact on the results of 2003
or the prior year. The disclosures required
under FRS 17 show a net deficit of c92.81m
as at the balance sheet date. The increase
in the net deficit during 2003 was driven
mainly by the decline in corporate bond
yields. As part of the sale of a 75% interest
in Glanbia Foods Limited, which was
announced by the Group on 23 February
2004, the assets and obligations of the
Glanbia Foods pension scheme transferred
with Glanbia Foods Limited. The exclusion
of the deficit in the Glanbia Foods pension
scheme at the balance sheet date would
reduce the net pension liability in note 34
of the financial statements by c11.6m to
c81.2m. The Group is reviewing its options
in relation to this FRS 17 position.
Taxation
The tax charge for the year was c8.73m
– this represents an effective tax rate of
12.5% on taxable profits. This low tax rate
reflects the mix of profits in the various tax
jurisdictions in which the Group operates
and in particular the impact of the Irish
manufacturing rate of 10%.
Earnings per share and dividends
Adjusted earnings per share were 19.26c
compared to 17.44c in 2002 – growth
of 10.4%.
The total dividend per share for the
year is 5.0c, an increase of 5.0%
on the 2002 dividend.
Cash generation
Summary cash flows for 2003 and 2002 are
set out on page 16. Net cash generated
amounted to c22.5m resulting in a reduction
in year end borrowings to c153.80m.
Capital expenditure for the year, net of
disposals, amounted to c39.11m. The
group has applied c362m in capital
investment in the last five years, including
major expansions of the US facilities
in Idaho and the food ingredients plant
in Ballyragget.
The continued weakening of the US dollar
against the euro during 2003 resulted
in a decrease of c15.55m in non-euro
borrowings, shown as currency translation
impact in the cash flow statement.
Non-equity minority interests
Non-equity minority interests of c115.76m
(2002: c132.16m) comprise $100m
preferred securities and c38.20m
preference shares. The decrease of
c16.40m in non-equity minority interest
between 2002 and 2003 is due to the
further weakening of the US dollar against
the euro during 2003. Dividends paid
to non-equity minority interests plus
amortisation of issue costs during 2003
amounted to c11.01m.
Glanbia plc annual report 2003 15
Group Financial Director’s Review
Summary Cash Flows
Net cash inflow from operating activities
Returns on investments & servicing of finance
Interest paid
Dividends paid to minority interest
Taxation
Capital expenditure and financial investment
Acquisitions and disposals
Equity dividends paid
Change in net debt resulting from cash flows
Currency translation impact
Decrease in net borrowings
Net borrowings at start of year
Net borrowings at end of year
Balance sheet
Equity shareholders’ funds decreased to
c179.44m at the end of 2003 from
c181.3m in 2002, due mainly to the impact
of the finalisation of the restructuring of UK
operations in 2003. Capital employed
amounted to c300.87m at the end of 2003
compared to c320.44m in 2002, due to the
reduction in non-equity minority interests
arising from the weakening of the US dollar
against the euro in 2003. Net debt to capital
employed was 51.1% compared to 55.0%
in 2002, arising from the combination of
a stronger balance sheet and lower debt.
Financial Instruments and Derivative
Financial Instruments
The conduct of its ordinary business
operations necessitates the holding and
issuing of financial instruments and
derivative financial instruments by the Group.
The main risks arising from issuing, holding
and managing these financial instruments
typically include liquidity risk, interest rate
risk and currency risk. The Group approach
is to centrally manage these risks against
comprehensive policy guidelines. The Board
agrees and regularly reviews these
guidelines which are summarised below.
These policies have remained unchanged
during the past financial year.
The Group does not engage in holding
or issuing speculative financial instruments
or derivatives thereof.
The Group finances its operations by a
mixture of retained profits, preference
shares, preferred securities capital, medium
and short term committed bank borrowings
and uncommitted bank borrowings.
16 Glanbia plc annual report 2003
2003
E’000
94,507
(16,548)
(11,758)
(9,816)
(41,517)
6,176
(14,080)
6,964
15,547
22,511
(176,308)
(153,797)
2002
c’000
126,558
(20,236)
(11,813)
(4,990)
(17,925)
(8,141)
(13,533)
49,920
16,431
66,351
(242,659)
(176,308)
The Group borrows in the major global
debt markets in a range of currencies
at both fixed and floating rates of interest,
using derivatives where appropriate to
generate the desired effective currency
profile and interest rate basis.
Currency risk
Although the Group is based in Ireland,
it has significant investment in overseas
operations in the UK and the US. As a
result, the Group’s euro balance sheet can
be significantly affected by movements in
sterling/euro and US dollar/euro exchange
rates. The Group seeks to mitigate the
effect of these structural currency
exposures by borrowing in the same
currencies as the operating (or functional)
currencies of its main operating units,
thereby matching, to a reasonable extent,
the currency of its borrowings with that of
its assets. The Group regards goodwill as
a foreign currency asset for this purpose.
The Group also has transactional currency
exposures that arise from sales or
purchases by an operating unit in
currencies other than the unit’s operating
functional currency. The Group requires
all its operating units to mitigate such
currency exposures, by means of forward
foreign currency contracts.
Liquidity risk
The Group’s objective is to maintain a
balance between the continuity of funding
and flexibility through the use of borrowings
with a range of maturities.
In order to preserve continuity of funding,
the Group’s policy is that, at a minimum,
committed facilities should be available
at all times to meet the full extent of its
anticipated finance requirements, arising
in the ordinary course of business, during
the succeeding 12 month period.
This means that at any time the lenders
providing facilities in respect of this finance
requirement are required to give at least
12 months notice of their intention to seek
repayment of such facilities.
At the year end, the Group had
multi-currency committed term facilities
of c500m of which c288m was undrawn.
The weighted average period to maturity
of these facilities was 3.24 years.
Finance and interest rate risk
The Group’s objective in relation to interest
rate management is to minimise the impact
of interest rate volatility on interest costs in
order to protect reported profitability. This
is achieved by determining a long term
strategy against a number of policy
guidelines, which focus on (a) the amount
of floating rate indebtedness anticipated
over such a period and (b) the consequent
sensitivity of interest costs to interest rate
movements on this indebtedness and the
resultant impact on reported profitability.
The Group borrows at both fixed and
floating rates of interest and uses interest
rate swaps to manage the Group’s
exposure to interest rate fluctuations.
The numerical disclosures required under
Financial Reporting Standard No.13 in
relation to the above risks are set out in
note 38 to the financial statements.
Summary
The Group continued to make good
progress during 2003 in improving
underlying operating performance and key
financial ratios, whilst at the same time
completing its UK restructuring programme.
Geoff Meagher
Group Financial Director
Corporate Social Responsibility
Our vision recognises the importance of social and
environmental considerations at all levels of our
business strategy. Sustainability in action for any
business is about understanding that economic goals
are linked to environmental and social performance.
Glanbia is the proud sponsor of the annual Monroe
Balloon Rally in the US. For a few days in June of each
year, 60 balloons dot the skies with their bright colours
and beautiful designs. This popular community event
attracts over 7,000 visitors.
02 Glanbia plc annual report 2003
Corporate Social Responsibility
Irish sports star, national hero and hurler DJ Carey was the
captain of the 2003 All Ireland winning Kilkenny hurling team,
proudly sponsored by Glanbia.
In 2003 Glanbia supported the 2003 Special Olympics,
World Games which was held in Ireland.
The Group has a deep and proud history
of social and community involvement.
In 2002 the Board of Glanbia decided to
formally develop this culture through the
adoption of a Corporate Social Responsibility
(CSR) Programme. With Group headquarters
in Ireland, Glanbia decided to adopt the Irish
Business In the Community charter on CSR
as the Group standard. Glanbia was among
the first Irish companies to sign this charter,
which is designed to harness the impact of
business for the benefit of all stakeholders.
Since 2002 the Group has been formalising
all CSR activities to meet the needs of
stakeholders and support business strategy.
As an organisation with a deep reach into
communities throughout Ireland, the UK
and US, this has been an extensive and
rewarding process.
Our vision recognises the importance of
social and environmental considerations
at all levels of our business strategy.
Sustainability in action for any business is
about understanding that economic goals
are linked to environmental and social
performance. Our aim is to strive for
continuous improvement and in this regard
significant progress was made in 2003.
Environmental performance
During the year we adopted ISO14001 as
our global production standard. The Glanbia
Environmental Management Team identified
a set of key process indicators (KPI’s) and
completed a detailed risk assessment of all
of our sites. They have also identified base
emission loads to land, air and water.
Through the adoption of the standard,
Group businesses have made significant
progress in minimising the environmental
impact of ongoing improvements in
production processes.
Strategic Environmental Plans are now
being developed for each Business Unit
which will be the focus of activity for 2004.
Ongoing workshops will be carried out
throughout the year and a measurement
process will be put in place to monitor and
report at the end of the year.
Social impact
Glanbia has a proud tradition in supporting
community and charitable causes,
particularly around the communities where
we are based. We give substantial support
to amateur sports such as the GAA in
Ireland and to the essential services in our
communities in Ireland, UK and the US.
It is also our policy to communicate all
developments affecting both the Group
and the workplace to employees. Glanbia
has had a very positive response to its
“Heads Up” programme, which is designed
to harvest Group intelligence and energy
through the exchange of ideas across all
businesses. The “Heads Up” programme
has been instrumental in realising the four
key Group values:
- be the best
- find a better way
- pride in what we do
- people matter
The Group was a major sponsor of the
2003 Special Olympics, World Games.
The customer and employee response
received from our association with this
spectacular community initiative was
deeply encouraging.
Glanbia and in particular our employees
are also actively involved with a voluntary
second level school organisation, Junior
Achievement Ireland. This organisation
encourages student interest in the world
of work and commerce.
Also in 2003 we polled all employees
to nominate the Glanbia charity of choice.
Subsequently Glanbia is now committed
to linking our mission as a food and
nutritional company to support for
specified children’s health care
organisations in the US and Ireland.
People in the Workplace
People are core to the Glanbia strategy
and the continued commitment of our
employees is critical to our future
success. As an evolving company in
a rapidly changing environment, it is
essential that our people can change
with us and respond effectively to the
challenges of the marketplace. To this
end Group policy is to support employees
by providing relevant training and
development programmes.
Glanbia also operates a graduate
placement programme, attracting high
calibre graduates from leading universities.
The Group endeavours to attract and retain
the best people by providing a challenging
and rewarding career and personal
development path.
We comply with all appropriate equality
and anti-discrimination legislation and are
committed to providing equal opportunities
for the advancement of all employees.
Marketplace
Glanbia is proud of its brands and it is
important to us that our stakeholders –
consumers, customers and our business
partners/suppliers – are aware of how
we do business. Glanbia’s growth strategy
has in recent years involved the formation
of a number of strategic relationships with
other partners through joint ventures.
It is imperative to us as a Group that we
therefore respond promptly and positively
to all stakeholders needs.
A new marketing code is currently being
developed to include: consumer feedback;
packaging and labelling; product safety;
supplier dealings; advertising/promotions,
recruitment and people development.
Glanbia plc annual report 2003 19
Directors and Advisors
Tom Corcoran
Michael Walsh
Liam Herlihy
John Moloney
Billy Murphy
Tom Heffernan
Victor Quinlan
Chris Hill
John Callaghan
Ned Fitzpatrick
Non-Executive Directors
Thomas P Corcoran (aged 64) is Chairman
of Glanbia plc. He has served as a non-
executive Director since 1988 and was
appointed Chairman of the Company in
2000. He is also Chairman of Glanbia
Co-operative Society Limited. He is a
Director of Irish Co-operative Organisation
Society Limited, where he is currently a
Vice-President. He is a Director of Irish
Agricultural Wholesale Society Limited and
a Director of Waterford Leader Partnership
Limited. He has completed the Institute of
Directors Director Development Programme
(2003) and holds a Certificate of Merit in
Corporate Governance from the Institute of
Directors Centre for Corporate Governance
at University College Dublin. He farms at
Bohadoon, Dungarvan, Co. Waterford.
Liam Herlihy (aged 52) is Vice-Chairman of
Glanbia plc. He was appointed to the Board
in 1997 and was appointed Vice-Chairman
of the Company in 2001. He is also Vice-
Chairman of Glanbia Co-operative Society
Limited and a Director of Co-operative
Animal Health Limited. He completed the
ICOS Diploma in Corporate Direction in
2002. He farms at Headborough,
Knockanore, Tallow, Co. Waterford.
Michael J Walsh (aged 61) is Vice-
Chairman of Glanbia plc. He was appointed
to the Board in 1989 and was appointed
Vice-Chairman of the Company in 1996.
He is also Vice-Chairman of Glanbia Co-
operative Society Limited, a Director of Irish
Co-operative Organisation Society Limited
and a Director of The Irish Dairy Board
Co-operative Limited. He farms at Coolroe,
Graiguenamanagh, Co. Kilkenny.
John E Callaghan, FCA, (aged 61) was
appointed to the Board in 1998. He is
Chairman of First Active plc and a Director
of Rabobank Ireland plc. He was formerly
Managing Partner of KPMG (Ireland) and
Chief Executive of Fyffes plc.
Jerry V Liston, B.A., MBA, (aged 63)
was appointed to the Board in 2002. He is
Executive Chairman of the Michael Smurfit
Graduate School of Business, University
College Dublin and holds directorships in
other companies. He was formerly Chief
Executive of United Drug plc and a past
Chairman of the Irish Management Institute.
The following non-executive Directors
are farmers and all are Directors of Glanbia
Co-operative Society Limited:
Henry V Corbally (aged 49) completed the
ICOS Diploma in Corporate Direction in
2002. He farms at Kilmainhamwood, Kells,
Co. Meath.
Edward P Fitzpatrick (aged 56) is Vice-
Chairman of South Eastern Cattle Breeding
Society Limited and completed the ICOS
Diploma in Corporate Direction in 2003.
He farms at Knockmoylan, Mullinavat,
Co. Kilkenny.
James A Gilsenan (aged 44) completed
the ICOS Diploma in Corporate Direction in
2003. He farms at Drogheda Road, Collon,
Co. Louth.
Thomas P Heffernan (aged 48) is a Director
of South Eastern Cattle Breeding Society
Limited and completed the ICOS Diploma
in Corporate Direction in 2003. He farms
at Kearney Bay, Glenmore, Co. Kilkenny.
Christopher L Hill, B.Agr.Sc., (aged 45)
is a Director of Wicklow Rural Partnership
Limited and a member of the Wicklow
County Development Board. He completed
the ICOS Diploma in Corporate Direction
in 2002. He farms at Johnstown House,
Arklow, Co. Wicklow.
John J Miller (aged 63) is a Director of
Laois Leader Rural Development Company
Limited and is active in Spink Community
Council. He farms at Boleybeg, Abbeyleix,
Co. Laois.
20 Glanbia plc annual report 2003
Michael Parsons (aged 54) is Chairman
of Kilkenny Co-operative Livestock Market
Limited. He farms at Outrath, Kilkenny.
Eamon M Power (aged 49) is currently
completing the ICOS Diploma in Corporate
Direction and is a Master Farmer. He farms
at Corse, Fethard-on-Sea, Co. Wexford.
Frank Quigley (aged 61) farms at Feddans,
Carrick on Suir, Co. Waterford.
John V Quinlan, B.Agr.Sc., (aged 58) holds
directorships in a number of companies,
including Irish Sugar Limited. He is currently
completing the ICOS Diploma in Corporate
Direction. He farms at Baptistgrange,
Lisronagh, Clonmel, Co. Tipperary.
George E Stanley (aged 59) is a Committee
Member of The Centenary Co-operative
Creamery Society Limited. He farms at
Shinrone, Birr, Co. Offaly.
Executive Directors
John J Moloney, B.Agr.Sc., MBA,
(aged 49) is Group Managing Director since
June 2001. He was appointed to the Board
in 1997. He was appointed Deputy Group
Managing Director in October 2000 and
assumed the responsibilities of Chief
Operating Officer in January 2001. He joined
the Group in 1987 and held a number of
senior management positions including Chief
Executive of the Food Ingredients and
Agricultural Trading Divisions. He previously
worked with the Department of Agriculture,
Food and Forestry and in the meat industry
in Ireland. He is a Director of The Irish Dairy
Board Co-operative Limited, Repak Limited
and a Council Member of both the Irish
Business and Employers Confederation
and the Irish Management Institute.
Directors and Advisors
Jim Gilsenan
Henry Corbally
John Miller
Michael Parsons
Eamon Power
Jerry Liston
Eric Stanley
Geoff Meagher
Frank Quigley
Kevin Toland
William G Murphy, B. Comm, (aged 58) is
Deputy Group Managing Director since June
2001. He joined the Group in 1977 and has
held a number of senior positions including
Chief Executive of Dairy Food Ingredients,
Chief Executive of Consumer Foods Ireland
and Chief Executive of the Agribusiness
Division. He was appointed to the Board in
1989. Prior to joining the Group he worked
as a grain trader with Cargill Limited. He is
a Director of IAWS Group plc and Irish
Agricultural Wholesale Society Limited.
Geoffrey J Meagher, CPA, (aged 54)
is Group Financial Director since 1993.
He joined the Group in 1975 and held a
number of positions including that of Group
Financial Controller. Prior to that he trained
and worked with PricewaterhouseCoopers,
Chartered Accountants .
Kevin E Toland, FCMA, (aged 38) was
appointed to the Board on 10 January
2003. He joined the Group in 1999 and
is Group Development Director, having
previously held the position of Chief
Executive of the Consumer Foods Division.
Prior to joining Glanbia, Mr Toland held a
number of senior management positions
with Coca-Cola Bottlers in Russia and with
Diageo plc in Ireland and Central Europe.
Directors offering themselves
for re-appointment
The following Directors are retiring by
rotation in accordance with the Articles of
Association of the Company and, being
eligible, offer themselves for re-appointment:
John E Callaghan (aged 61), Thomas P
Heffernan (aged 48), Christopher L Hill
(aged 45), John J Moloney (aged 49),
William G Murphy (aged 58) and Michael
Parsons (aged 54).
All are farmers with the exception of John E
Callaghan, John J Moloney and William G
Murphy. All are Directors of Glanbia Co-
operative Society Limited with the exception
of John E Callaghan and William G Murphy.
Solicitors
Arthur Cox, Earlsfort Centre, Earlsfort
Terrace, Dublin 2, Ireland.
Pinsents, 3 Colmore Circus, Birmingham
B4 6BH, United Kingdom.
Stockbroker
J & E Davy, 49 Dawson Street,
Dublin 2, Ireland.
Shareholder Enquiries
All shareholders’ enquiries should be
addressed to the Registrar. Shareholders
may check their accounts on the Company’s
Share Register by accessing the Company’s
website at www.glanbia.com, clicking on
“For Investors” and “Shareholding Online”.
Shareholders may check their shareholdings,
recent dividend payments details and can
also download forms required to notify the
Registrar of changes in their details.
Board Committees
Audit Committee
JE Callaghan-Chairman, TP Corcoran,
L Herlihy, JV Liston, JJ Miller, EM Power,
GE Stanley, MJ Walsh.
Remuneration Committee
TP Corcoran-Chairman, JE Callaghan,
L Herlihy, JV Liston, MJ Walsh.
Nomination Committee
TP Corcoran-Chairman, JE Callaghan,
L Herlihy, JV Liston, JJ Moloney, MJ Walsh.
Secretary and Registered Office
Siobhán Talbot, B.Comm, FCA,
Glanbia House, Kilkenny, Ireland.
Registrar and Transfer Office
Computershare Investor Services
(Ireland) Limited, Heron House, Corrig
Road, Sandyford Industrial Estate,
Dublin 18, Ireland.
Telephone: +353 1 216 3100
Facsimile: +353 1 216 3151
Auditors
PricewaterhouseCoopers, Ballycar House,
Newtown, Waterford, Ireland.
Principal Bankers
ABN AMRO Bank N.V., Allied Irish Banks
p.l.c., Bank of Ireland, BNP Paribas S.A.,
Barclays Bank PLC, Citibank N.A., IIB Bank
Limited, Rabobank Ireland plc, Ulster Bank
Markets Limited.
Glanbia plc annual report 2003 21
Report of the Directors
for the year ended 3 January 2004
Introduction
The Directors are pleased to present their report to shareholders
together with the audited financial statements for the year ended
3 January 2004.
Principal activities
Glanbia plc is an international dairy, consumer foods and
nutritional products company. It is principally engaged in the
processing and marketing of cheese; dairy-based food ingredient
and nutritional products; dairy-based consumer products; fresh
milk; consumer and other meat products; manufacture of animal
feedstuffs and trading in agricultural products. Group processing
operations are located in Ireland, the UK and the USA. Sales and
marketing activities are undertaken in various European countries
and in the USA, South America, Asia and Africa. The Group
serves a broad customer base in the retail, food service and food
and beverage processing sectors.
Review of business
Group turnover for the year was c2,041.07m compared with
c2,316.74m in 2002. The Chairman’s Statement, Group
Managing Director’s Review and the Group Financial Director’s
Review contain a comprehensive commentary on the business
and the year-end financial position.
Results
Details of the results for the year and the appropriation thereof
are set out in the consolidated profit and loss account on
page 29.
Share Capital
The authorised share capital of the Company is 306,000,000
ordinary shares of c0.06 each. The issued share capital is
292,514,184 ordinary shares of c0.06 each.
Dividends
On 1 October 2003 an interim dividend of 2.06c per share
on the ordinary shares amounting to c5.980m was paid to
shareholders on the Register as at 5 September 2003. The
Directors have recommended the payment of a final dividend
of 2.94c per share on the ordinary shares which amounts to
c8.535m. Subject to shareholders approval this dividend will
be paid on 24 May 2004 to shareholders on the Register as
at 23 April 2004, the record date.
Future developments
Our plans for the future development of the Group are outlined
in the Chairman’s Statement; Group Managing Director’s Review
and the Group Financial Director’s Review.
Important events since the year end
On 23 February 2004, the Group announced the sale of a 75%
interest in its UK hard cheese business, Glanbia Foods Limited
(through the sale of 100% of Glanbia Foods Limited and the
simultaneous creation of a new joint venture with Milk Link Limited
which will be 25% owned by the Group). A provision for the loss
on this transaction is detailed in note 5 to the financial statements.
Substantial interests
As at 20 February 2004, Glanbia Co-operative Society Limited held
54.79% of the Company’s issued ordinary shares. The Company
has not been notified of any other interest of 3% or more in its
issued ordinary shares.
Research and development
The Group is committed to an ongoing and extensive
innovation programme to support a customer-led business and
marketing approach. There is growing consumer awareness of
the link between health and diet and Glanbia as a food Group
is committed to achieving the highest standards of best
practice in relation to science based innovation. It is directed
towards the development of technically superior dairy-based
food ingredient and nutritional products, cheese, high value
consumer food products, and the enhancement of proprietary
technologies and processes.
Safety, health and welfare
The Group is committed to complying with the Safety, Health
and Welfare at Work Act, 1989. A comprehensive statement
on safety, health and welfare at work has been prepared by
each of the relevant companies in the Group. The policies set
out in these statements are kept under review as part of the
process of safeguarding the wellbeing of employees.
Directors
The Directors of the Company are listed on pages 20 and 21 of
this Annual Report. In accordance with the Articles of Association
of the Company, John E Callaghan, Thomas P Heffernan,
Christopher L Hill, John J Moloney, William G Murphy and Michael
Parsons retire from the Board by rotation and, being eligible, offer
themselves for re-appointment. None of the Directors proposed
for re-appointment has a service contract with the Company.
Biographical details of Directors offering themselves for
re-appointment are set out on pages 20 and 21.
22 Glanbia plc annual report 2003
Directors’ and Secretary’s share interests
The interests of the Directors and Group Secretary and their
spouses and minor children in the share capital of the Company,
subsidiary companies and the holding Society are disclosed in
note 36 to the financial statements.
The remaining Directors comprise four executive Directors
and two independent non-executive Directors. All Directors are
required to submit themselves for re-appointment at least every
three years.
Share options
In 2002 the shareholders approved the introduction of a Long
Term Incentive Plan (“LTIP”) and Savings-Related Share Option
(“Sharesave”) Scheme in order to further align the interests of
Group personnel with those of shareholders. Options outstanding
under the Company’s 1988 Share Option Scheme, the LTIP and
the Sharesave Scheme as at 3 January 2004 amounted to
5,392,473 ordinary shares (4 January 2003: 5,954,528), made
up as follows:
The Board meets monthly and on other occasions as necessary.
The Board has a formal schedule of matters specifically reserved
to it for decision. All Directors have full and timely access to the
information necessary to enable them to discharge their duties.
All Directors have access to the advice and services of the
Group Secretary, who is responsible for ensuring that Board
procedures are followed. All Directors are entitled to take
independent advice, if necessary, at the Company’s expense.
Dates
exercisable
2004– 2013
2004– 2008
2005 – 2006
The Group continues to implement its core values programme
throughout the Group, the aim of which is to foster a Group
wide corporate culture based on performance, innovation, ethics
and people development. All Directors have participated in this
programme and continually review the conduct and operation
of Board meetings.
No of ordinary
shares
Price
range
Share option
scheme and LTIP
2,949,500
Sharesave Scheme
2,442,973
Total
5,392,473
c1.55 – c4.25
GBP£2.90
c1.20/GBP£0.764
As detailed in note 25 to the financial statements 2,168,354
ordinary shares have been purchased for the purpose of the
Sharesave Scheme and are held in an employee benefit trust
(“the Employees’ Share Trust”) pending exercise of the options.
Any further shares required for the Sharesave Scheme will be
existing shares purchased by the Employees’ Share Trust.
Corporate governance
The Board has reviewed the Combined Code, which is appended
to the Listing Rules of the Irish Stock Exchange. The Board
believes that, except in relation to the composition of the Board,
the Audit and Remuneration Committees as noted below, the
Company has complied throughout the financial period with the
provisions of the Combined Code.
Board/Board committees
The Company is a subsidiary of Glanbia Co-operative Society
Limited (“the Society”) which currently nominates from its Board
of Directors, which is elected on a three-year basis, fourteen
non-executive Directors for appointment to the Board of the
Company in accordance with the Articles of Association. The
Society, an Irish industrial and provident society, owns 54.79%
of the share capital of the Company and many of its members
supply milk and trade with Irish subsidiaries of the Company.
All Directors have been advised of their fiduciary duties and
of their obligation to bring an independent judgement to bear
on issues of strategy, performance, resources, including key
appointments and standards of conduct.
The roles of the Chairman and Group Managing Director are and
always have been separate. Mr JE Callaghan and Mr JV Liston
are independent non-executive Directors and Mr Callaghan is
the Senior Independent Director. The remaining non-executive
Directors are, as stated earlier, nominated by the Board of
Glanbia Co-operative Society Limited for appointment to the
Board of the Company.
Throughout the year to 3 January 2004 the Board had an Audit
Committee, a Remuneration Committee and a Nomination
Committee each of which has formal terms of reference that
have been approved and are reviewed by the Board.
Among the areas reviewed by the Audit Committee are the
accounting policies and practices adopted in the preparation
of the annual and interim financial statements, the scope, cost
effectiveness and result of the audit and the independence and
objectivity of the auditors. The Committee discusses the scope
and outcome of the internal audit programme with the Group
Internal Auditor. The auditors meet with the Committee at least
once a year without any executives being present.
Glanbia plc annual report 2003 23
Report of the Directors continued
for the year ended 3 January 2004
Membership of the Audit Committee which comprises
non-executive Directors under the chairmanship of Mr Callaghan
is set out on page 21 of this Annual Report.
The role of the Nomination Committee is to carry out the
selection process associated with the appointment of Directors
and to make proposals to the Board regarding the appointment
of Directors. Directors appointed during the year are required to
retire and seek re-appointment at the annual general meeting
following their appointment. All Directors are required to submit
themselves for re-appointment at intervals of not more than
three years. The appointment to the Board of non-executive
Directors nominated by Glanbia Co-operative Society Limited
(“the Society”) is subject to and co-terminus with their
appointments as Directors of the Society and is further subject
to their removal as Directors under the Articles of Association.
The remaining non-executive Directors are appointed to the
Board on the basis of a three-year term, which may be renewed
and are also subject to earlier removal under the Articles.
Membership of the Nomination Committee which comprises
a majority of non-executive Directors under the chairmanship
of Mr T Corcoran is set out on page 21 of this Annual Report.
Due to the composition of the Board, as explained above,
membership of the Board and of the Audit and Remuneration
Committees is not composed of the number of independent
non-executive Directors required under the Combined Code.
Remuneration
Remuneration Committee
The Remuneration Committee determines, on behalf of the Board,
the Company’s framework of executive remuneration and the
specific packages and conditions of employment for each of the
executive Directors and certain senior executives. The Committee
consults the Group Managing Director regarding remuneration
proposals and obtains internal and external professional advice
as deemed appropriate.
The remuneration of the non-executive Directors is determined by
the Remuneration Committee within the total amount approved by
the Company’s shareholders in general meeting from time to time.
The Remuneration Committee operates the Company’s Share
Option Schemes.
The members of the Remuneration Committee are Messrs
T Corcoran (Chairman), JE Callaghan, JV Liston, MJ Walsh
and L Herlihy.
Remuneration policy
Remuneration policy is based on attracting, retaining and
motivating executives to ensure that they perform in the best
interests of the Company and its shareholders. The Remuneration
Committee obtains external advice on remuneration in comparable
companies as necessary and has given full consideration to
schedules A and B to the Combined Code.
Currently the components of the remuneration package for
executive Directors are basic salary and benefits, performance-
related annual bonus, participation in the LTIP and participation
in a defined benefit pension scheme. Executive Directors also
participate in the share option scheme of the Company which
expired in August 1998.
Basic salaries and benefits
The basic salaries of executive Directors are reviewed annually
with regard to personal performance, competitive market practice
or where a change of responsibility occurs. Benefits-in-kind
consist principally of a company car. No fees are payable to
executive Directors.
Performance-related annual bonus
The Group operates a performance-related bonus scheme for
executive Directors, senior executives and other management.
Payments under the scheme for executive Directors depend
on the achievement of pre-determined goals for Group
performance and an assessment of individual performance
against agreed objectives.
Long Term Incentive Plan
As noted above, in 2002 the shareholders approved the
introduction of a Long Term Incentive Plan (“LTIP”) for selected
key Group employees in order to further align the interests
of key Group personnel with those of shareholders. Under the
2002 LTIP options cannot be exercised before the expiration
of three years from the date of grant and can only be exercised
if a predetermined performance criterion for the Company has
been achieved. The performance criterion is that there has
been an increase in the adjusted earnings per share of the
Company of at least the increase in the Consumer Price Index
plus 5% compounded during a three-year period.
To encourage participating executives to hold the shares issued
to them on the exercise of their options, share awards specified
as a percentage of the shares held may be made on the second
and fifth anniversary of the exercise of the option.
24 Glanbia plc annual report 2003
The number of shares which may be the subject of such awards
may not exceed 20% and 10% of the number of shares so held
on the respective anniversaries.
present at the AGM. The level of proxy votes for and against
was announced after each resolution had been passed on a
show of hands.
Benefits under the LTIP are not pensionable.
Employee Savings – Related Share Option Scheme
In 2002 the shareholders approved an employee Savings-
Related Share Option (“Sharesave”) Scheme. The Group
encourages eligible employees to save in order to buy shares
in the Company. The Sharesave Scheme provides a means
of saving and giving employees the opportunity to become
shareholders. In 2002 approximately 1,600 employees were
granted options under the Sharesave Scheme, no further
options were granted in 2003 under the Sharesave Scheme.
Going concern
After making enquiries the Directors have a reasonable
expectation that the Company and the Group have adequate
resources to continue in operation and existence for the
foreseeable future, and accordingly they continue to adopt
a going concern basis in preparing the financial statements.
Internal control
The Directors are required by the Combined Code to maintain
a sound system of internal control to safeguard shareholders’
investment and the Group’s assets.
Pension benefits
Pension benefits for executive Directors are calculated on basic
salary only. Benefits, which are agreed on appointment, are
designed to provide two-thirds of basic salary at retirement for
full service.
Service contracts
No Director has a service contract with a notice period in
excess of one year or with provisions for pre-determined
compensation on termination which exceeds one year’s salary
and benefits-in-kind.
Details of Directors’ emoluments and attributable pension benefits
are set out in note 9 and details of Directors’ shareholdings and
share options are included in note 36 to the financial statements.
Shareholders
The Company has dialogue with institutional shareholders during
the year and immediately following the announcement of the
half-year and full-year results, the Company presents these
results to investors and analysts. The Company responds to
enquiries from all shareholders and welcomes their attendance
at the Annual General Meeting.
Annual General Meeting
The Notice of the 2003 Annual General Meeting was despatched
to shareholders not less than 20 working days before the
meeting. Separate resolutions were proposed at the meeting
on each substantially separate issue, including a resolution to
receive and consider the 2002 financial statements and the
reports of the Directors and Auditors thereon. The Chairmen of
the Audit Committee and the Remuneration Committee were
The Board confirms that there are ongoing procedures for
identifying, evaluating and managing significant risks faced by
the Group. These, or their equivalent, have been in place for
the year covered in this Annual Report and Financial Statements
and up to the date of its approval and are themselves regularly
reviewed by the Board and accord with the Turnbull guidance 1
which the Board has fully adopted. The Board has also reviewed
the effectiveness of the current system of internal control
specifically for the purposes of this statement.
While acknowledging its responsibility for the system of internal
control, the Board is aware that such a system is designed
to manage rather than eliminate the risk of failure to achieve
business objectives, and can only provide reasonable and not
absolute assurance against material misstatement or loss.
The risk appetite of the Group is set by the Board. The strategy
for managing risk is formulated by the Group Executive
Committee, a management committee of the Group Managing
Director, and recommended to the Board.
In judging the effectiveness of the Group’s controls, the Board
monitors the reports of the Audit Committee and management.
Without diminishing its own responsibilities the Board has
delegated certain acts to the Audit Committee. These include
detailed reviews of key risks inherent in the business and of the
systems for managing these risks. The Committee summarises
its findings to the Board as required but at least half-yearly.
Glanbia plc annual report 2003 25
Report of the Directors continued
for the year ended 3 January 2004
The Group’s control systems include:
• a Code of Business Practice that defines a set of agreed
standards and guidelines for corporate behaviour;
• an organisational structure with clearly defined lines of
responsibility and delegation of authority;
• appropriate terms of reference for Board committees with
responsibility for policy areas;
• a formal schedule of matters specifically referred to the
Board for its decision;
• a comprehensive system of financial reporting to the Board,
based on an annual budget with monthly reports against
actual results, analysis of variances, scrutiny of key
performance indicators and regular re-forecasting;
• clearly defined guidelines for capital expenditure, including
detailed budgeting, appraisal and post-investment review;
• a Group Financial Management Manual that clearly sets out
the accounting policies and financial control procedures to
be followed by Business Units;
• a Treasury Risk Management policy approved by the Board
which ensures that foreign exchange and interest rate exposures
of the Group are managed within defined parameters;
• a Group wide risk assessment process which is maintained by
Business Unit Management reporting to the Group Executive
and Board as required;
• a Group Internal Audit function operating globally which
monitors and supports the internal financial control system and
reports to the Audit Committee and management. Internal
audit work is focused on the areas of greatest risk
to the Group determined on the basis of a risk management
approach to audit;
• the Audit Committee, a formally constituted committee of the
Board comprising non-executive Directors only, meets with
internal and external auditors to satisfy itself that control
procedures are in place and are being followed.
Finally the Directors, through the use of appropriate procedures
and systems, have ensured that measures are in place to secure
compliance with the Company’s obligation to keep proper books
of account. These books of account are kept at the registered
office of the Company.
Subsidiary and associated undertakings
A list of the principal subsidiary and associated undertakings
is included in note 37 to the financial statements.
Auditors
The auditors PricewaterhouseCoopers have expressed their
willingness to continue in office in accordance with Section
160(2) of the Companies Act, 1963.
Special business at the Annual General Meeting
Notice of the 2004 Annual General Meeting with details of the
special business to be considered at the meeting is set out in
a separate circular which is enclosed with this Annual Report.
Amendment to Articles of Association
Shareholders are being asked to increase the maximum number
of Directors of the Company to twenty two.
Disapplication of pre-emption rights, purchase of Company
shares and treasury shares
Under the second item of special business, shareholders are
being asked to renew the authority to disapply the strict statutory
pre-emption provisions in the event of a rights issue or in any
other issue up to an aggregate amount of c809,148.96 in nominal
value of ordinary shares, representing 4.6% of the nominal value
of the Company’s issued ordinary share capital for the time being.
This authority will expire on the earlier of the close of business on
17 August 2005 or the date of the Annual General Meeting of the
Company in 2005.
At the last Annual General Meeting of the Company
shareholders passed a resolution to give the Company, or any
of its subsidiaries, the authority to purchase up to 10% of its
own shares. This authority will expire on 18 May 2004. Under
the third item of special business, shareholders are being asked
to extend this authority until the earlier of the close of business
on 17 August 2005 or the date of the Annual General Meeting
of the Company in 2005. While the Directors do not have any
current intention to exercise this power, this authority is being
sought as it is common practice for public companies.
26 Glanbia plc annual report 2003
As required by the Listing Rules, options to subscribe for a total
of 2,949,500 ordinary shares were outstanding on 20 February
2004, representing 1.01% of the issued ordinary share capital at
that date. If this share buy-back authority which is being sought
from shareholders was used in full, these options would
represent 1.12% of the issued ordinary share capital.
Shareholders are also being asked under the fourth item of
special business to pass a resolution authorising the Company
to re-issue such shares purchased by it and not cancelled as
treasury shares. Such purchases would be made only at price
levels which it considered to be in the best interests of the
shareholders generally, after taking into account the Company’s
overall financial position. Furthermore the authority being sought
from shareholders will provide that the minimum price which
may be paid for such shares shall not be less than the nominal
value of the shares and the maximum price will be 105% of the
then market price of such shares.
On behalf of the Board
Thomas P Corcoran
Chairman
John J Moloney
Group Managing Director
Glanbia House
Kilkenny
2 March 2004
1 Guidance for Directors, Internal Control: Guidance for Directors on the
Combined Code (the “Turnbull guidance”) published in September 1999.
Statement of Directors’ responsibilities
Irish company law requires the Directors to prepare financial
statements for each financial year that give a true and fair
view of the state of affairs of the Company and the Group and
of the profit or loss of the Group for that period. In preparing
the financial statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are reasonable
and prudent;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper books of
account which disclose with reasonable accuracy at any time
the financial position of the Company and to enable them to
ensure that the financial statements are prepared in accordance
with accounting standards generally accepted in Ireland and
comply with Irish statute comprising the Companies Acts, 1963
to 2001, and the European Communities (Companies: Group
Accounts) Regulations, 1992. They are also responsible for
safeguarding the assets of the Company and the Group and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Legislation in Ireland governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
The maintenance and integrity of the Glanbia plc web site is
the responsibility of the Directors.
Glanbia plc annual report 2003 27
Independent Auditors’ Report: To the members of Glanbia plc
We have audited the financial statements on pages 29 to 67,
which have been prepared under the historical cost convention,
(as modified by the revaluation of certain fixed assets) and the
accounting policies set out in the statement of accounting
policies on pages 35 to 36.
Respective responsibilities of Directors and Auditors
The Directors’ responsibilities for preparing the Annual Report
and the financial statements in accordance with applicable Irish
law and accounting standards generally accepted in Ireland are
set out on page 27 in the statement of Directors’ responsibilities.
Our responsibility is to audit the financial statements in
accordance with relevant legal and regulatory requirements,
auditing standards issued by the Auditing Practices Board
applicable in Ireland and the Listing Rules of the Irish Stock
Exchange. This report, including the opinion, has been prepared
for and only for the Company’s members as a body in accordance
with Section 193 of the Companies Act, 1990 and for no other
purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come,
save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the financial
statements give a true and fair view and are properly prepared
in accordance with Irish statute comprising the Companies Acts,
1963 to 2001, and the European Communities (Companies:
Group Accounts) Regulations, 1992. We state whether we
have obtained all the information and explanations we consider
necessary for the purposes of our audit and whether the
Company balance sheet is in agreement with the books of
account. We also report to you our opinion as to:
• whether the Company has kept proper books of account;
• whether the Directors’ Report is consistent with the financial
statements; and
• whether at the balance sheet date there existed a financial
situation which may require the Company to convene an
extraordinary general meeting; such a financial situation
may exist if the net assets of the Company, as stated in
the Company balance sheet, are not more than half of its
called-up share capital.
We also report to you if, in our opinion, information specified
by law or the Listing Rules regarding Directors’ remuneration
and transactions is not disclosed.
We read the other information contained in the Annual Report
and consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with
the financial statements. The other information comprises only
the Directors’ Report, the Chairman’s Statement, the Group
Managing Director’s Review, the Group Financial Directors
Review and the Corporate Governance statement.
We review whether the Corporate Governance statement on
pages 23 to 26 reflects the Company’s compliance with the
seven provisions of the Combined Code specified for our review
by the Listing Rules, and we report if it does not. We are not
required to consider whether the Board’s statements on internal
control cover all risks and controls or to form an opinion on the
effectiveness of the Company’s or Group’s corporate
governance procedures or its risk and control procedures.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards
issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts
and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgements made by
the Directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the Company’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary
in order to provide us with sufficient evidence to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion, we also evaluated
the overall adequacy of the presentation of information in the
financial statements.
Opinion
In our opinion, the financial statements give a true and fair
view of the state of affairs of the Company and the Group at
3 January 2004 and of the loss and cash flows of the Group
for the year then ended and have been properly prepared in
accordance with the Companies Acts, 1963 to 2001, and the
European Communities (Companies: Group Accounts)
Regulations, 1992.
We have obtained all the information and explanations we consider
necessary for the purposes of our audit. In our opinion, proper
books of account have been kept by the Company. The Company
balance sheet is in agreement with the books of account.
In our opinion, the information given in the Directors’ Report
on pages 22 to 27 is consistent with the financial statements.
The net assets of the Company, as stated in the Company balance
sheet on page 32, are more than half the amount of its called-up
share capital and, in our opinion, on that basis there did not exist
at 3 January 2004 a financial situation which, under Section 40(1)
of the Companies (Amendment) Act, 1983, would require the
convening of an extraordinary general meeting of the Company.
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
Waterford
2 March 2004
28 Glanbia plc annual report 2003
Consolidated Profit and Loss Account
for the year ended 3 January 2004
Notes
Pre-
exceptional
2003
E’000
Exceptional
2003
E’000
Total
2003
E’000
Pre-
exceptional
2002
c’000
Exceptional
2002
c’000
Total
2002
c’000
2,386,437
(69,699)
2,316,738
(2,010,118)
306,620
(127,339)
(90,693)
88,588
2,947
91,535
(25,610)
–
13,754
(68,064)
(19,206)
Turnover
Less share of turnover of joint venture
Group turnover
Cost of sales
Gross profit
Distribution costs
Administrative expenses
2,109,760
(68,687)
2,041,073
(1,773,537)
–
–
–
–
2,109,760
(68,687)
2,386,437
(69,699)
2,041,073
(1,773,537)
2,316,738
(2,010,118)
267,536
(94,697)
(80,970)
–
–
(16,451)
267,536
(94,697)
(97,421)
306,620
(127,339)
(90,693)
1
3
Group operating profit
Share of operating profit
of joint venture and associates
91,869
(16,451)
75,418
88,588
916
–
916
2,947
–
–
–
–
–
–
–
–
–
Operating profit including joint
venture and associates
Loss on sale of operations
4
Provision for loss on sale of operation 5
Profit on sale of fixed assets
6
Loss on termination of operations
7
Group interest
8
Share of interest of joint
venture and associates
92,785
–
–
–
–
(15,023)
(16,451)
(28,190)
(49,146)
11,594
(9,827)
–
76,334
(28,190)
(49,146)
11,594
(9,827)
(15,023)
91,535
–
–
–
–
(19,206)
–
(25,610)
–
13,754
(68,064)
–
(627)
–
(627)
(521)
–
(521)
Profit/(loss) before taxation
Taxation
9
10
77,135
(10,272)
(92,020)
1,546
(14,885)
(8,726)
71,808
(7,939)
(79,920)
–
(8,112)
(7,939)
Profit/(loss) after taxation
66,863
(90,474)
(23,611)
63,869
(79,920)
(16,051)
Equity minority interest
Non-equity minority interest
Loss for the year
Dividends
Loss absorbed for the year
Earnings per share
Fully diluted earnings per share
Adjusted earnings per share
11
12
13
13
13
On behalf of the Board
TP Corcoran JJ Moloney GJ Meagher Directors
(251)
(11,005)
(34,867)
(14,515)
(49,382)
(12.01c)
(12.01c)
19.26c
(677)
(12,619)
(29,347)
(13,833)
(43,180)
(10.06c)
(10.06c)
17.44c
Glanbia plc annual report 2003 29
2003
E’000
2002
c’000
(14,885)
(8,112)
4,125
4,544
(10,760)
(3,568)
(45,257)
(38,636)
2003
E’000
2002
c’000
(34,867)
(29,347)
5,520
3,127
(29,347)
(26,220)
2003
E’000
(34,867)
(14,515)
(49,382)
5,520
41,688
318
2002
c’000
(29,347)
(13,833)
(43,180)
3,127
49,607
3,191
(1,856)
181,297
12,745
168,552
179,441
181,297
Consolidated Profit and Loss Account (continued)
for the year ended 3 January 2004
Note of historical cost profits and losses
Loss before taxation
Difference between historical cost depreciation
charge and actual depreciation charge
Historical cost loss before taxation
Historical cost loss absorbed for the year
Statement of total recognised gains and losses
Loss for the year
Currency translation difference on
foreign currency net investments
Total recognised losses for the year
Reconciliation of movements in shareholders’ funds
Loss for the year
Dividends
Other recognised gains
Goodwill on disposal
Currency translation adjustment on goodwill reserves
Net change in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
On behalf of the Board
TP Corcoran JJ Moloney GJ Meagher Directors
30 Glanbia plc annual report 2003
Consolidated Balance Sheet
as at 3 January 2004
Assets employed
Fixed assets
Tangible assets
Goodwill
Financial assets
Investments in joint venture:
Share of gross assets
Share of gross liabilities
Investments in associates
Other investments
Current assets
Stocks
Debtors
Cash and bank balances
Notes
2003
E’000
2002
c’000
14
15
363,641
2,466
416,826
4,420
16
16
17
18
19
40,542
(27,598)
12,944
9,607
15,903
30,527
(17,426)
13,101
9,101
14,252
38,454
36,454
404,561
457,700
202,736
210,402
59,775
472,913
180,022
226,838
90,953
497,813
Creditors – Amounts falling due within one year
20
348,751
317,442
Net current assets
Total assets less current liabilities
Less:
Non-current liabilities
Creditors – Amounts falling due after more than one year
Provisions for liabilities and charges
Deferred taxation
Capital grants
Capital and reserves
Called up equity share capital
Share premium account
Merger reserve
Revenue reserves
Capital reserve
Equity shareholders’ funds
Equity minority interests
Non-equity minority interests
On behalf of the Board
TP Corcoran JJ Moloney GJ Meagher Directors
124,162
180,371
528,723
638,071
22
183,682
275,407
23
24
25
26
27
28
29
30
30
27,559
16,611
23,723
18,505
300,871
320,436
17,551
80,005
113,148
(34,088)
2,825
179,441
5,671
115,759
17,551
80,005
113,148
(32,232)
2,825
181,297
6,983
132,156
300,871
320,436
Glanbia plc annual report 2003 31
Notes
2003
E’000
2002
c’000
16
519,516
518,325
19
20
944
133
1,077
43,243
5,124
94
5,218
56,396
(42,166)
(51,178)
477,350
467,147
22
3,397
1,905
473,953
465,242
25
26
28
29
17,551
435,273
16,903
4,226
17,551
435,273
8,192
4,226
473,953
465,242
Company Balance Sheet
as at 3 January 2004
Assets employed
Fixed assets
Financial assets
Current assets
Debtors
Cash and bank balances
Creditors – Amounts falling due within one year
Net current liabilities
Total assets less current liabilities
Less non-current liabilities
Creditors – Amounts falling due after more than one year
Capital and reserves
Called up equity share capital
Share premium account
Revenue reserves
Capital reserve
On behalf of the Board
TP Corcoran JJ Moloney GJ Meagher Directors
32 Glanbia plc annual report 2003
Notes
(a)
Consolidated Cash Flow Statement
for the year ended 3 January 2004
Net cash inflow from operating activities
Returns on investments and servicing of finance
Interest received
Interest paid
Finance lease interest
Dividends paid to equity minority interest
Dividends paid to non-equity minority interest
Taxation
Capital expenditure and financial investment
Purchase of fixed assets
Disposal of fixed assets
(Purchase)/disposal of investments
Acquisitions and disposals
Purchase of subsidiary undertakings
Disposal of subsidiary undertakings
Termination of operations
Fire insurance proceeds (net of redundancy and other costs)
Equity dividends paid
Cash inflow before management of liquid resources and financing
Financing
Decrease in term loans
Decrease in finance leases
Minority interest redeemed
Capital grants received
Decrease in cash in year
Reconciliation of net cash flow to movement in net debt
Decrease in cash in year
Decrease in debt and finance leasing
Change in net debt resulting from cash flows
Translation difference
Movement in net debt in year
Net debt at 4 January 2003
Net debt at 3 January 2004
(b)
2003
E’000
277
(16,676)
(149)
(1,463)
(10,295)
(41,741)
2,629
(2,410)
–
795
(1,851)
7,332
(34,478)
(987)
(100)
5
2003
E’000
94,507
2002
c’000
126,558
2002
c’000
913
(20,938)
(211)
(123)
(28,306)
(11,690)
(32,049)
(9,816)
(4,990)
(35,018)
6,377
10,705
(677)
1,184
(8,648)
–
(76,658)
(1,024)
–
11
(17,936)
(8,141)
(13,533)
49,909
(77,671)
(27,762)
(27,762)
77,682
49,920
16,431
66,351
(242,659)
(176,308)
(41,522)
6,276
(14,080)
7,059
(35,560)
(28,501)
(28,501)
35,465
6,964
15,547
22,511
(176,308)
(153,797)
Glanbia plc annual report 2003 33
Notes to Consolidated Cash Flow Statement
for the year ended 3 January 2004
(a) Net cash inflow from operating activities
Group operating profit (before exceptional items)
Reorganisation and merger costs
Profit on disposal of fixed assets
Depreciation
Capital grants released
(Increase)/decrease in stocks
(Increase)/decrease in debtors
Increase/(decrease) in creditors
Goodwill amortisation
(b) Analysis of net debt
Net cash
Cash at bank and in hand
Debt
Debt
Finance leases
2003
E’000
2002
c’000
91,869
88,588
(338)
(415)
38,125
(1,443)
(35,004)
(2,333)
3,749
297
(775)
(885)
53,072
(1,670)
27,850
34,185
(74,120)
313
94,507
126,558
At
4 January
2003
c’000
Cash flow
c’000
Exchange
movement
c’000
At
3 January
2004
E’000
90,953
(28,501)
(2,677)
59,775
(264,652)
(2,609)
34,478
987
18,224
(211,950)
–
(1,622)
(267,261)
35,465
18,224
(213,572)
Net debt
(176,308)
6,964
15,547
(153,797)
Analysed as follows:
Cash and bank balances
Loans due within one year
Finance leases due within one year
Finance leases due after one year
Loans due after one year
90,953
–
(1,117)
(1,492)
(264,652)
(176,308)
59,775
(42,523)
(698)
(924)
(169,427)
(153,797)
34 Glanbia plc annual report 2003
Accounting Policies
The significant accounting policies adopted by the Group are
as follows:
(a) Basis of preparation
The financial statements have been prepared in accordance
with accounting standards generally accepted in Ireland and
Irish statute comprising the Companies Acts, 1963 to 2001.
Accounting standards generally accepted in Ireland in
preparing financial statements giving a true and fair view are
those published by the Institute of Chartered Accountants
in Ireland and issued by the Accounting Standards Board.
These financial statements are prepared for a 52 week
period ending on 3 January 2004, comparatives are for
the 53 week period ended 4 January 2003. The balance
sheets for 2003 and 2002 have been drawn up as at
3 January 2004 and 4 January 2003 respectively. The
results to 3 January 2004 are referred to as 2003 results.
(b) Basis of consolidation
The Group financial statements, which are stated in euro,
are prepared under the historical cost convention as modified
by the revaluation of certain fixed assets. They incorporate:
(i) The financial statements of Glanbia plc and its
subsidiaries including results of subsidiaries acquired
from the date of their acquisition.
(ii) The Group’s share of the results and net assets of associated
companies and joint ventures based on the equity and
gross equity methods of accounting respectively.
Inter-group sales and profits have been eliminated
on consolidation.
(c) Turnover
Turnover comprises the invoiced value, excluding value
added tax, of goods supplied and services rendered.
Certain dairy products are sold based on “on account”
price agreements which are subject to adjustment when
the final prices are agreed.
(d) Earnings per share
Earnings per share represents the profit in cent attributable
to each equity share, based on the consolidated profit after
tax, minority interests and preference dividends, divided by
the weighted average number of equity shares in issue in
respect of the period.
Adjusted earnings per share is calculated by excluding
exceptional items and goodwill amortisation.
In calculating fully diluted earnings per share, the difference
between the number of shares issued on exercise of all
options and the number of shares that would have been
issued at fair value is regarded as dilutive.
(e) Stocks
Stocks are valued at the lower of cost or net realisable value.
Cost in the case of raw materials, bought-in goods and
expense stock comprises purchase price plus transport
and handling costs less discounts, rebates and subsidies.
Cost in the case of products manufactured by the Group
consists of direct material and labour costs together with
the relevant production overheads based on normal levels of
activity. Net realisable value represents the estimated selling
price less costs to completion and appropriate selling and
distribution costs.
(f) Debtors
Provision is made for all debts, the collection of which is
considered doubtful. In arriving at this provision, account
is taken of the age profile of the debt and its adherence to
credit terms.
(g) Fixed assets and depreciation
(i) Assets acquired under finance leases are included in
fixed assets on the basis given in the accounting policy
on leasing, less accumulated depreciation.
(ii) Other fixed assets are stated at cost or valuation less
accumulated depreciation. As detailed in note 14, the
Group revalued its land, buildings, plant and equipment
(excluding leased plant) as at 31 December 1992 and
3 January 1993. On adoption of FRS 15, the Group
followed the transitional provisions to retain the book
value of the assets that were revalued, but not to adopt
a policy of revaluation in the future.
(iii) Depreciation is calculated on all fixed assets, other than
freehold land, on a straight line basis by reference to the
expected useful lives of the assets concerned, or the period
of any related finance lease, whichever is the shorter.
Interest incurred on payments on account of major fixed
tangible assets under construction is included in the cost
of these assets.
(iv)
(v) Any surplus or deficit on realisation of revalued assets
is calculated by reference to their carrying value, and
is dealt with through the profit and loss account.
(h) Financial fixed assets
Financial fixed assets are shown at cost less provisions for
permanent diminution in value. Income from financial fixed
assets, is recognised in the profit and loss account in the
year in which it is receivable.
(i) Capital grants
Capital grants received and receivable by the Group are
credited to capital grants accounts and are transferred to
the profit and loss account over the expected useful lives
of the assets to which they relate.
(j) Leasing
Tangible fixed assets, acquired under a lease which transfers
substantially all of the risks and rewards of ownership to the
Group, are capitalised as a fixed asset. Amounts payable
under such leases (finance leases), net of finance charges, are
shown as short or medium term borrowings, as appropriate.
Finance charges on finance leases are charged to the profit
and loss account over the term of the lease on an actuarial
Glanbia plc annual report 2003 35
Accounting Policies (continued)
basis. All other leases are operating leases and the annual
rentals are charged to the profit and loss account.
(k) Taxation
Corporation tax is calculated on the results for the year after
taking account of manufacturing and similar reliefs, capital
allowances and group relief.
(l) Deferred taxation
In accordance with FRS 19, deferred tax is provided in full
on timing differences which result in an obligation at the
balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they
crystallise based on current tax rates and law. Timing
differences arise from the inclusion of items of income and
expenditure in taxation computations in periods different
from those in which they are included in financial statements.
Deferred tax is not provided on unremitted earnings of
subsidiaries, associates and joint ventures where there is
no commitment to remit these earnings, or on the revaluation
of assets, such as property, unless a binding sales agreement
exists at the balance sheet date.
Deferred tax assets are recognised to the extent that it is
regarded as more likely than not that they will be recovered.
Deferred tax assets and liabilities are not discounted.
(m) Foreign exchange and hedging
(i) Monetary assets and liabilities in foreign currencies are
translated into euro at the exchange rates ruling at the
balance sheet date. All hedging instruments are matched
with their underlying hedge item. Each instrument’s gain
or loss is brought into the profit and loss account, at
the same time and in the same place as is the matched
underlying asset, liability, income or cost. For foreign
exchange instruments this will be in operating profit
matched against the relevant purchase or sale, and
for interest rate instruments, within interest payable or
receivable over the life of instrument, or relevant interest
period. The profit or loss on an instrument may be deferred
if the hedged transaction is expected to take place or
would normally be accounted for in a future period.
(ii) Exchange adjustments arising on:
(a)
(b)
the retranslation of the net investment in foreign
subsidiaries and;
forward contracts and borrowings used to hedge
net equity investments in foreign subsidiaries, are
transferred directly to reserves, and reflected in the
statement of total recognised gains and losses.
asset or liability. Any profit or loss arising on such early
termination is accounted for over the remaining life of
the underlying hedged asset or liability.
If the matched underlying asset or liability prematurely
ceases to exist, or is no longer considered likely to exist
prior to the maturity date of any associated financial
instrument held as a hedge, the hedging instrument is
terminated and any profit or loss arising together with
any incurred and unamortised premia or fees are
recognised in the profit and loss account at that time.
Instruments which cease to be recognised as hedges
are marked to market.
(iv) All other gains and losses arising from changes in
exchange rates are dealt with through the profit and
loss account in the year in which they occur.
(n) Goodwill
Goodwill represents the difference between:
(i) The fair value attributable to the net separable assets
of undertakings acquired; and
(ii) The fair value of the acquisition consideration.
With effect from 4 January 1998, goodwill is capitalised
and classified as an asset on the balance sheet. Goodwill
is amortised on a straight line basis over its useful economic
life (not exceeding twenty years) which has been determined
by reference to the periods over which the value of the
underlying businesses are expected to exceed the values
of their identifiable net assets.
Goodwill on acquisitions which arose before 4 January 1998,
remains offset against revenue reserves. On subsequent
disposal of such businesses any related goodwill is taken
into account in determining the profit or loss on disposal.
(o) Research and development expenditure
All expenditure on research and development is written off to
the profit and loss account in the year in which it is incurred.
(p) Pension schemes
The Group’s pension schemes, both contributory and
non-contributory, are funded over the employees’ period of
service. The Group’s contributions are based on the most
recent actuarial valuation of the funds.
The disclosures required under the transitional arrangements
of Financial Reporting Standard 17 “Retirement Benefits” for
the year ended 3 January 2004 are shown in note 34.
(iii) All premia or fees, paid or received in respect of a financial
instrument held as a hedge are accounted for over the
originally anticipated life of the underlying hedged asset
or liability even if the financial instrument is subsequently
terminated prior to maturity of the underlying hedged
(q) Finance costs of capital instruments
Costs incurred in connection with the issue of debt and
non-equity shares are charged to the profit and loss account
on an annual basis over the lives of the related instruments.
36 Glanbia plc annual report 2003
Notes to the Financial Statements
3 January 2004
1 Segmental analysis
(a) Analysis by class of business
Turnover
Consumer Foods
Food Ingredients
Agribusiness
2003
E’000
900,411
906,210
234,452
2002
c’000
1,175,114
910,075
231,549
2,041,073
2,316,738
Total turnover for Food Ingredients was c1,079.120m (2002: c1,099.481m) of which c172.910m (2002: c189.406m) represented
inter-segment sales and c906.210m (2002: c910.075m) comprised sales to third parties. Inter-segment sales within Consumer
Foods and Agribusiness were not material.
Pre-exceptional operating profit including share of profits of joint venture and associates
Consumer Foods
Food Ingredients
Agribusiness
Net assets
Consumer Foods
Food Ingredients
Agribusiness
Unallocated liabilities
Total net assets
2003
E’000
44,773
33,765
14,247
2002
c’000
47,590
30,051
13,894
92,785
91,535
2003
E’000
194,454
187,318
72,896
454,668
2002
c’000
209,146
211,673
75,925
496,744
(153,797)
(176,308)
300,871
320,436
Glanbia plc annual report 2003 37
Notes to the Financial Statements (continued)
3 January 2004
1 Segmental analysis (continued)
(b) Analysis by geographical segments
Turnover by destination
Ireland
Rest of Europe
USA/other
Turnover by origin
Ireland
Rest of Europe
USA/other
Pre-exceptional operating profit including share of profits of joint venture and associates
Ireland
Rest of Europe
USA/other
Net assets
Ireland
Rest of Europe
USA/other
Unallocated liabilities
Total net assets
2003
E’000
793,753
653,747
593,573
2002
c’000
837,533
885,703
593,502
2,041,073
2,316,738
2003
E’000
2002
c’000
1,132,431
1,163,733
459,028
449,614
686,667
466,338
2,041,073
2,316,738
2003
E’000
74,178
3,894
14,713
2002
c’000
58,597
12,072
20,866
92,785
91,535
2003
E’000
296,717
101,204
56,747
2002
c’000
290,232
135,308
71,204
454,668
496,744
(153,797)
(176,308)
300,871
320,436
The Directors consider segmental analysis of operating profit to be more meaningful than analysis of profit/(loss) before taxation.
2 Employees and remuneration
The average number of persons employed by the Group during the year was 5,052 (2002: 6,416) and is analysed into the
following categories:
Number of persons employed
Consumer Foods
Food Ingredients
Agribusiness
38 Glanbia plc annual report 2003
2003
2002
3,371
969
712
4,794
923
699
5,052
6,416
2 Employees and remuneration (continued)
The staff costs are comprised of:
Wages and salaries
Social welfare costs
Pension costs
3 Exceptional items
Redundancy cost arising from fire at Roosky plant (note 6)
Restructuring cost associated with EU Commission’s Mid Term
Review of Common Agricultural Policy
2003
E’000
170,224
17,774
8,796
2002
c’000
209,632
20,372
7,002
196,794
237,006
2003
E’000
(9,505)
(6,946)
(16,451)
2002
c’000
–
–
–
4
Loss on sale of operations
The loss arises primarily from the sale by the Group of its UK Fresh Meats operation at West Bromwich. The Group also disposed
of a pig farm during the year, and recognised an additional loss representing increased pension obligations to former employees,
of the UK Dairies operation which was disposed of in a prior period.
Loss on disposal of asset
Goodwill write-back to profit and loss account
on sale
Goodwill written off on sale
Fresh Meats
c’000
UK Dairies
c’000
Pig Farm
c’000
Total
E’000
(10,852)
(5,417)
(651)
(16,920)
(10,262)
(99)
–
–
(909)
–
(11,171)
(99)
(21,213)
(5,417)
(1,560)
(28,190)
The loss on sale in 2002 arose mainly from the Group’s sale of its UK Foodservice distribution business in August 2002. The Group also sold
two farms during 2002.
5 Provision for loss on sale of operation
The provision arises from the sale by the Group of a 75% interest in its UK hard cheese business (Glanbia Foods Limited),
which was announced on 23 February 2004.
Loss on disposal of asset after year end
Write-back of goodwill on asset disposed after year end
2003
E’000
(18,629)
(30,517)
(49,146)
2002
c’000
–
–
–
Glanbia plc annual report 2003 39
Notes to the Financial Statements (continued)
3 January 2004
6 Profit on sale of fixed assets
The profit arises from the excess of insurance proceeds received over the net book value of assets destroyed by fire at the pigmeat
processing plant in Roosky, Ireland on 8 May 2002.
On disposal of investments
Profit on disposal of tangible assets
2003
E’000
–
11,594
2002
c’000
13,396
358
11,594
13,754
The Directors have taken the decision not to reinstate the processing plant at Roosky but rather to restore the lost capacity at the two
remaining pig processing plants, with the result that a redundancy cost of c9,505k has been incurred during the year (note 3).
7
Loss on termination of operations
The loss arises from the decision to close the Group’s UK Fresh Meats operation at Drongan and Gainsborough, and an
adjustment relating to the loss arising from the closure of the Group’s UK Consumer Meats operation in June 2002.
2003
E’000
Loss arising on termination of operations
Goodwill write-back to profit and loss account on termination
Goodwill written off on termination
(8,578)
–
(1,249)
2002
c’000
(30,370)
(37,694)
–
8 Group interest
Loans and overdrafts:
Repayable within five years
Senior notes
Finance leases
Interest receivable
9 Profit/(loss) before taxation
(a) The profit/(loss) before taxation is stated after charging/(crediting):
Depreciation
Auditors’ remuneration
Research and development expenditure (net of grants)
Operating lease rentals – plant and machinery
– other
Capital grants released
40 Glanbia plc annual report 2003
(9,827)
(68,064)
2003
E’000
2002
c’000
(7,362)
(7,735)
(149)
223
(11,314)
(8,679)
(211)
998
(15,023)
(19,206)
2003
E’000
2002
c’000
38,125
53,072
564
615
4,695
5,483
4,348
3,756
6,326
6,865
(1,443)
(1,670)
9 Profit/(loss) before taxation (continued)
(b) Directors’ remuneration
The salary, fees and other benefits for each of the Directors during the year were:
Salary and
fees
c’000
Performance
bonus
c’000
Short term
incentive
plan
c’000
Pension
contribution
c’000
Other
benefits
c’000
Executive Directors
JJ Moloney
WG Murphy
GJ Meagher
KE Toland (note (a))
2003
2002
Non-Executive Directors
TP Corcoran
MJ Walsh
L Herlihy
JE Callaghan
JV Liston
HV Corbally
EP Fitzpatrick
JA Gilsenan
TP Heffernan
CL Hill
JJ Miller
M Parsons
EM Power
F Quigley
V Quinlan
GE Stanley
2003
2002
329
217
208
227
981
644
70
32
32
38
38
13
13
13
13
13
13
13
13
13
13
13
353
337
216
148
143
125
632
332
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2003 Total remuneration
1,334
2002 Total remuneration
981
632
332
–
–
–
–
–
62
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
62
76
64
61
65
266
158
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
266
158
10
21
19
17
67
44
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
67
44
2003
Total
E’000
631
450
431
434
1,946
70
32
32
38
38
13
13
13
13
13
13
13
13
13
13
13
353
2,299
2002
Total
c’000
466
393
381
–
1,240
70
32
32
38
22
13
13
13
13
13
13
13
13
13
13
13
337
1,577
Glanbia plc annual report 2003 41
Notes to the Financial Statements (continued)
3 January 2004
9 Profit/(loss) before taxation (continued)
(b) Directors’ remuneration (continued)
(a) Mr KE Toland was appointed a Director on 10 January 2003.
(b) No fees are payable to executive Directors. The performance bonus refers to payments to executive Directors based on individual
and Group performance. The Short Term Incentive Plan (“STIP”) was introduced in 2001 for executive Directors as part of an overall
plan to align the interests of all senior management more fully with shareholders interests. The STIP ceased in August 2002, at
which time the executive Directors were granted share options under the Company’s 2002 Long Term Incentive Plan.
(c) Details of Directors’ share options are set out in note 36 to the financial statements.
(d) The Remuneration Committee of the Board, which comprises solely of non-executive Directors, determines the Company’s policy
on executive Director remuneration and sets the remuneration package of each of the executive Directors. There are no contracts
of service for executive Directors which are required to be made available for inspection.
The following pension benefits accrued to executive Directors of the Company:
JJ Moloney
WG Murphy
GJ Meagher
KE Toland
2003
2002
Transfer value
of increase in
accrued pension
c’000
Annual pension
accrued in 2003
in excess of inflation
c’000
Total annual
accrued pension at
3 January 2004
c’000
413
140
88
27
668
465
34
7
6
5
52
32
151
142
119
28
440
337
42 Glanbia plc annual report 2003
Pre-
exceptional
2002
c’000
Exceptional
2002
c’000
10 Taxation
Pre-
exceptional
2003
E’000
Exceptional
2003
E’000
4,031
(457)
3,574
345
(453)
(108)
–
136
3,602
7,112
(442)
–
–
–
–
–
–
–
–
–
(1,546)
–
6,670
(1,546)
10,272
(1,546)
Irish corporation tax
Current tax on income for the year
Adjustments in respect of prior years
Foreign tax
Current tax on income for the year
Adjustments in respect of prior years
Share of current tax of joint venture
Share of tax of associates
Total current tax
Deferred tax
Group
Joint venture
Total deferred tax
Total tax charge
Total
2003
E’000
4,031
(457)
1,680
37
3,574
1,717
345
(453)
1,851
(537)
(108)
1,314
–
136
169
92
3,602
3,292
5,566
(442)
5,124
8,726
4,809
(162)
4,647
7,939
Total
2002
c’000
1,680
37
1,717
1,851
(537)
1,314
169
92
3,292
4,809
(162)
4,647
7,939
–
–
–
–
–
–
–
–
–
–
–
–
–
The current tax charge for the year is lower than the current charge that would result from applying the standard rate of Irish
corporation tax to profit on ordinary activities. The differences are explained below:
Profit on ordinary activities before taxation
Profit on ordinary activities multiplied by standard
rate of Irish corporation tax of 12.5% (2002: 16%)
Effects of:
Earnings at reduced and passive Irish rates
Excess of depreciation over capital allowances
Other deferred tax timing differences
Utilisation of tax losses
Difference in effective tax rates on overseas earnings
Adjustments to tax charge in respect of previous periods
Expenses not deductible for tax purposes and other adjustments
Current tax charge for the year, including associates
Group
Associates and joint venture
2003
E’000
2002
c’000
77,135
71,808
9,642
11,489
(819)
1,187
(1,339)
(2,849)
(1,887)
(910)
577
(1,650)
2,054
(2,896)
(2,664)
(2,959)
(500)
418
3,602
3,292
3,466
136
3,031
261
3,602
3,292
Glanbia plc annual report 2003 43
Notes to the Financial Statements (continued)
3 January 2004
11 Profit attributable to Glanbia plc
Of the loss for the year of c34.867m (2002: c29.347m), profits of c23.226m (2002: c17.371m) have been dealt with in the financial
statements of Glanbia plc, the holding Company.
A separate profit and loss account has not been prepared for the holding Company because the conditions laid down in Section
3(2) of the Companies (Amendment) Act, 1986 have been complied with.
12 Dividends
Interim dividend paid ordinary shares
Less credit for own shares held by Employee Share Trust
Final dividend proposed Ordinary shares
Less credit for own shares held by Employee Share Trust
Total ordinary dividends for the year
13 Earnings per share
Loss after taxation and minority interest
2003
cent
per share
2.06
–
2.06
2.94
–
2.94
5.00
2003
E’000
6,026
(46)
5,980
8,600
(65)
8,535
14,515
2002
cent
per share
1.96
–
1.96
2.80
–
2.80
4.76
2002
c’000
5,733
–
5,733
8,191
(91)
8,100
13,833
2003
E’000
2002
c’000
(34,867)
(29,347)
Weighted average number of ordinary shares in issue
290,303,425
291,702,675
Earnings per share
Adjustments:
Goodwill amortisation
Exceptional items
Loss on sale of operations
Provision for loss on sale of operations
Profit on sale of fixed assets
Loss on termination of operations
Adjusted earnings per share
Fully diluted earnings per share
(12.01c)
(10.06c)
0.10c
5.13c
9.71c
16.93c
(3.99c)
3.39c
0.11c
–
8.78c
–
(4.72c)
23.33c
19.26c
17.44c
(12.01c)
(10.06c)
In the opinion of the Directors, adjusted earnings per share is a more appropriate indicator of underlying performance.
44 Glanbia plc annual report 2003
14 Tangible assets – Group
Cost or valuation
As at 4 January 2003
Currency translation adjustment
Additions
Disposals
Reclassification
Write down arising from termination of operations
Land and
buildings
c’000
Plant and
equipment
c’000
Motor
vehicles
c’000
235,452
(10,340)
8,451
(21,401)
169
(5,396)
585,553
15,490
(26,159)
29,697
(26,779)
(1,964)
(765)
85
498
(63)
1,795
–
Total
E’000
836,495
(36,414)
38,646
(48,243)
–
(6,161)
As at 3 January 2004
206,935
559,583
17,805
784,323
Depreciation
As at 4 January 2003
Charged to profit and loss account
Currency translation adjustment
On disposals
Reclassification
As at 3 January 2004
Net book value
As at 3 January 2004
As at 4 January 2003
63,069
7,718
(2,312)
(5,851)
20
342,445
29,970
(11,927)
(17,084)
(1,846)
14,155
437
102
(40)
1,826
419,669
38,125
(14,137)
(22,975)
–
62,644
341,558
16,480
420,682
144,291
218,025
1,325
363,641
172,383
243,108
1,335
416,826
(a)
Included in the net book values of plant and equipment are assets acquired under lease agreements with a net book value
of c16,560,000 (2002: c20,370,000). The depreciation charged in respect of these leased assets and included in the total
depreciation charge above was c3,734,000 (2002: c3,483,000).
(b) A valuation of former Avonmore freehold land and buildings, plant and equipment (excluding leased plant) was carried out
by Messrs Lisney, Valuers, as at 3 January 1993. The valuation was based on open market value in existing use, and where
appropriate, on open market value calculated on a depreciated replacement cost basis. The valuation supported the overall
value of the assets valued. The valuers also estimated the remaining useful lives of the assets which have been used in
determining the depreciation rates set out below.
(c) Land and buildings, plant and equipment of the former Waterford operations were valued by Fergus Slattery Rushton,
Surveyors and Valuers, on 31 December 1992, on an existing use basis incorporating the depreciated replacement cost,
and open market value methods. Subsequent additions are stated at cost.
(d) The main rates of depreciation used in these financial statements are as follows:
Buildings
Plant and equipment
Motor vehicles
%
3 – 5
5 – 33
20 – 25
(e) As required under FRS 15, a review of the useful lives of the Group’s plant and equipment was carried out during the year with
a resultant reduction in the depreciation charge of c5,771,000, as compared with the original useful lives.
Glanbia plc annual report 2003 45
Notes to the Financial Statements (continued)
3 January 2004
15 Goodwill – Group
At 4 January 2003
Goodwill on disposal
Currency translation adjustment
Amortised to profit and loss account
At 3 January 2004
The cumulative goodwill amortised at 3 January 2004 was c1,389,000 (2002: c1,092,000).
2003
E’000
4,420
(1,348)
(309)
(297)
2002
c’000
5,042
–
(309)
(313)
2,466
4,420
16 Financial assets
Company
At 4 January 2003
Additions
Disposals
At 3 January 2004
Group
At 4 January 2003
Additions
Share of retained profit
Disposals/redemption
Transfers
Amounts written off
Currency translation adjustment
Subsidiaries
c’000
Associates
c’000
Other
investments
(note 17)
c’000
Total
E’000
513,544
1,395
–
–
–
–
3,386
1,492
(301)
518,325
1,492
(301)
513,544
1,395
4,577
519,516
Joint venture
c’000
Associates
c’000
Other
investments
(note 17)
c’000
13,101
9,101
680
167
–
–
–
(1,004)
–
428
–
78
–
–
14,252
2,302
–
(608)
–
(43)
–
Total
E’000
36,454
2,982
595
(608)
78
(43)
(1,004)
At 3 January 2004
12,944
9,607
15,903
38,454
46 Glanbia plc annual report 2003
17 Other investments
Own shares
Irish Dairy Board
Moorepark Technology
Quoted investments
Glanbia Enterprise Fund Limited
Other
Market value
Quoted investments (including own shares)
2003
Company
E’000
2003
Group
E’000
2002
Company
c’000
2,868
–
–
19
1,690
–
2,868
9,425
331
80
1,690
1,509
3,169
–
–
19
198
–
2002
Group
c’000
3,169
9,692
373
80
198
740
4,577
15,903
3,386
14,252
5,140
5,657
3,387
3,704
The amount included above as own shares relates to 2,168,354 ordinary shares in Glanbia plc held by an Employee Share Trust.
The Employee Share Trust was established in May 2002 to operate in connection with the Company’s Savings Related Share Option
Scheme (“Sharesave Scheme”). The trustee of the Employee Share Trust is Mourant & Co., a Jersey based trustee services company.
The shares purchased by the Employee Share Trust cost c3,202,121 and had a market value of c4,727,012 at 3 January 2004
(2002: c3,221,900). The shares are being written down to the option price of c1.20 (GBP£0.764) over the period to the earliest
date on which the options granted under the Sharesave Scheme can be exercised.
The purpose of the Sharesave Scheme, which is open to Irish and UK employees, is to provide a tax efficient method for employees
to save money for the purpose of acquiring shares in the Company. To participate in the Sharesave Scheme in 2002, employees
agreed to save a fixed amount between c12 and c320 (GBP£10 and GBP£250 in the UK) each month for a three year period in a
Revenue approved Save as You Earn (“SAYE”) contract.
As detailed in note 25 to the financial statements, options over 2,988,622 ordinary shares were granted in 2002 under the
Sharesave Scheme of which options over 2,442,973 ordinary shares remain outstanding at 3 January 2004. The options
granted in 2002 are exercisable, under normal circumstances, between 2005 and 2006. No further options were granted in
2003 under the Sharesave Scheme.
In the opinion of the Directors, the value of the unquoted investments is not less than as shown above.
Glanbia plc annual report 2003 47
Notes to the Financial Statements (continued)
3 January 2004
18 Stocks – Group
Raw materials and other stocks
Finished goods and goods for resale
Expense stocks
The replacement cost of stocks is not materially different from the above amounts.
2003
E’000
11,375
174,751
16,610
2002
c’000
6,898
157,854
15,270
202,736
180,022
19 Debtors
Amounts falling due within one year
Trade debtors
Amounts due by joint venture
Amounts due by associated companies
Value added tax
Other debtors
Prepayments and accrued income
Amounts due from/(to) parent
Glanbia Co-operative Society Limited
Amounts falling due after one year
Pension prepayment/surplus
2003
Company
E’000
2003
Group
E’000
2002
Company
c’000
2002
Group
c’000
–
–
–
–
–
913
148,349
9,043
128
5,119
17,119
20,257
–
–
–
–
–
153,144
6,230
140
5,109
7,222
1,011
30,455
31
(3,695)
4,113
(802)
–
14,082
–
25,340
944
210,402
5,124
226,838
48 Glanbia plc annual report 2003
20 Creditors – Amounts falling due within one year
Trade creditors
Amounts due to associated companies
Other creditors (note 21)
Accruals and deferred income
Borrowings (note 38)
Bills of exchange
Dividend payable (note 12)
Amounts due to subsidiary companies
21 Other creditors
Corporation tax
PAYE and PRSI
Other creditors
22 Creditors – Amounts falling due after more than one year
Borrowings (note 38)
Other creditors
2003
Company
E’000
2003
Group
E’000
2002
Company
c’000
113
–
–
1,505
–
–
8,535
33,090
141,517
1,406
21,161
111,370
43,221
20,189
9,887
–
55
–
–
1,222
–
–
8,100
47,019
2002
Group
c’000
144,614
1,208
27,807
112,614
1,117
20,630
9,452
–
43,243
348,751
56,396
317,442
2003
Company
E’000
–
–
–
–
2003
Group
E’000
8,276
3,532
9,353
21,161
2002
Company
c’000
–
–
–
–
2002
Group
c’000
14,535
3,486
9,786
27,807
2003
Company
E’000
2003
Group
E’000
2002
Company
c’000
2002
Group
c’000
3,397
–
170,351
13,331
1,905
–
266,144
9,263
3,397
183,682
1,905
275,407
The maturity profile of the Group’s borrowings is analysed in note 38. The Company’s borrowings are due between one and
five years.
Glanbia plc annual report 2003 49
Notes to the Financial Statements (continued)
3 January 2004
23 Deferred taxation – Group
Liability at 4 January 2003
Translation difference
Receipt from joint venture
Profit and loss account
Liability at 3 January 2004
2003
E’000
23,723
(2,728)
998
5,566
2002
c’000
21,109
(2,195)
–
4,809
27,559
23,723
The receipt from joint venture reflects the settlement in respect of a deferred tax asset in Glanbia Cheese Limited.
The deferred tax balance of c27.559m represents the net liability arising from the following:
Amount
provided
c’000
21,282
(959)
7,236
27,559
2003
E’000
2002
c’000
18,505
20,203
5
(418)
(38)
11
–
(39)
(1,443)
(1,670)
16,611
18,505
Capital allowances
Redundancy
Other timing differences
24 Capital grants – Group
At 4 January 2003
Receivable for year
In disposed subsidiaries
Currency translation adjustment
Released to profit and loss account
At 3 January 2004
50 Glanbia plc annual report 2003
25 Called up equity share capital
(a) Authorised:
2003
E’000
2002
c’000
306,000,000 ordinary shares of c0.06 each
18,360
18,360
(b) Issued:
292,514,184 ordinary shares of c0.06 each
17,551
17,551
In accordance with the terms of the 2002 Long Term Incentive Plan (“LTIP”), options over 160,000 ordinary shares were granted
during the year and are exercisable between 2006 and 2013. Total options over 2,069,500 ordinary shares were outstanding at
3 January 2004 under the LTIP, at prices ranging between c1.55 and c1.90. Furthermore, in accordance with the terms of the LTIP,
executives to whom options were granted in 2002 are eligible to receive share awards related to the number of ordinary shares
which they hold on the second anniversary of the exercise of the option, to a maximum of 168,400 ordinary shares.
In accordance with the terms of the Company’s 2002 Sharesave Scheme, options over 2,442,973 ordinary shares which were
granted in 2002, remain outstanding on 3 January 2004 and are exercisable, under normal circumstances, between 2005 and 2006.
In May 2002, the Company established an Employee Share Trust to operate in connection with the Company’s Sharesave Scheme.
As detailed in note 17 to the financial statements, 2,168,354 ordinary shares were held by the Employee Share Trust at 3 January
2004. The dividend rights in respect of these shares have been waived.
Total options over 5,392,473 ordinary shares were outstanding at 3 January 2004 at prices ranging between c1.20 and c4.25
and GBP£0.764 and GBP£2.90, exercisable in periods up to 2013.
26 Share premium account
At 3 January 2004 and at 4 January 2003
Company
c’000
Group
c’000
435,273
80,005
Glanbia plc annual report 2003 51
Notes to the Financial Statements (continued)
3 January 2004
27 Merger reserve – Group
Share premium – representing excess of fair value over nominal value of ordinary
shares issued in connection with the merger of Avonmore Foods plc and Waterford Foods plc
Merger adjustment (note (a))
Share premium and other reserves relating to nominal value of shares in Waterford Foods plc
2003
E’000
2002
c’000
355,271
(327,085)
84,962
355,271
(327,085)
84,962
113,148
113,148
(a) The merger adjustment represents the difference between the nominal value of the issued share capital of Waterford Foods plc,
and the fair value of the shares issued by Avonmore Foods plc in 1997, calculated in accordance with Regulation 22(5) of the
European Communities (Companies: Group Accounts) Regulations, 1992 (“The Regulations”).
(b) The presentation shown above is a departure from Regulation 22(5) of the Regulations as noted above, but has been adopted
by the Directors as they believe that the presentation is required to give a true and fair view of the state of affairs of the Group
as required by Regulation 14 of the Regulations and the Companies Acts. The presentation adopted is in accordance with
the required accounting practice as outlined in Financial Reporting Standard 6 for merger accounting. Had the requirements
of Regulation 22(5) of the Regulations been complied with, the merger adjustment would have been shown as an adjustment
to consolidated reserves, and the share premium account would have been identified separately in the Balance Sheet.
28 Revenue reserves
Company Subsidiaries
c’000
c’000
Joint
venture and
associates
c’000
Total profit
and loss
reserves
c’000
Currency
translation
reserve
c’000
Goodwill
reserve
c’000
Total
revenue
reserves
c’000
At 4 January 2003
Currency translation difference on
foreign currency net investments
Goodwill on disposal
(Loss absorbed)/profit
retained for year
8,192
61,191
6,243
75,626
(32,490)
(75,368)
(32,232)
–
–
–
–
–
–
–
–
8,711
(58,688)
595
(49,382)
5,520
–
–
318
41,688
5,838
41,688
–
(49,382)
At 3 January 2004
16,903
2,503
6,838
26,244
(26,970)
(33,362)
(34,088)
52 Glanbia plc annual report 2003
29 Capital reserve
At 3 January 2004 and at 4 January 2003
30 Minority interests
At 4 January 2003
Share of profit for the year
Currency translation adjustment
Dividend paid to equity minority interest
Dividend payable to non-equity minority interest
Increase in minority interest in subsidiaries
Minority interest redeemed
Company
c’000
4,226
Group
c’000
2,825
Equity
2003
E’000
6,983
251
–
(1,464)
–
1
(100)
Equity
2002
c’000
Non-equity
2003
E’000
Non-equity
2002
c’000
6,428
677
–
(123)
–
1
–
132,156
11,005
(17,107)
–
147,777
12,619
(16,550)
–
(10,295)
(11,690)
–
–
–
–
At 3 January 2004
5,671
6,983
115,759
132,156
Non-equity minority interest includes US$100 million 7.99% cumulative guaranteed preferred securities issued by a subsidiary during
1996, net of issue costs. The holders of these securities have no rights against Group companies other than the issuing entity and,
to the extent prescribed by the guarantee, the Company.
The structure of the guarantee is such so as to provide for payment obligations (dividends and redemption payments) under
the securities to rank subordinate to all the creditors of the Group, and to be made only to the extent that there are sufficient
distributable profits available. The securities are redeemable on 14 November 2006 and are renewable for further ten year periods
by mutual agreement.
Non-equity minority interest also includes c38.2m cumulative redeemable preference shares issued by Waterford Foods plc in 1993
and 1995. The rate of dividend on these shares is currently 8.5%.
Waterford Foods plc has the right to reset the rate of dividend on the seventh and fourteenth anniversaries of the date of allotment
of the first tranche of shares. The shares may be redeemed by Waterford Foods plc at any time at the issue price. Any such early
redemption may entitle the holders, in certain circumstances, to receive an additional redemption premium. The holders of the shares
may call for redemption at the issue price if the dividend rate is reset and in certain other circumstances. All shares in issue on the
twenty-first anniversary of the date of issue of the first tranche of shares, will be redeemed at the issue price. On a winding up
of Waterford Foods plc the holders of the shares will be entitled, in priority to any other shareholders, to the amount paid up or
credited as paid up (including any premium paid) in respect of the shares and to all arrears of dividends. The shares do not carry
any voting rights.
Glanbia plc annual report 2003 53
Notes to the Financial Statements (continued)
3 January 2004
31 Capital commitments
Capital expenditure approved:
Contracted for
Not yet contracted for
32 Operating lease commitments
Commitments under operating leases, payable in 2004, expire as follows:
Within one year
Two to five years
After five years
2003
Company
E’000
2003
Group
E’000
2002
Company
c’000
–
–
–
14,547
86,050
100,597
–
–
–
Company
c’000
–
–
–
–
2002
Group
c’000
12,672
40,591
53,263
Group
c’000
710
5,240
538
6,488
33 Contingent liabilities
Company
(i) The Company has guaranteed the liabilities of certain subsidiaries in the Republic of Ireland in respect of any losses or liabilities
(as defined in Section 5 (c) of the Companies (Amendment) Act, 1986) for the year ended 3 January 2004 and the Directors are
of the opinion that no losses will arise therefrom. These subsidiaries avail of the exemption from filing audited financial statements,
as permitted by Section 17 of the Companies (Amendment) Act, 1986.
(ii) The Company has guaranteed certain liabilities of Glanbia Milk Limited and Avonmore Delaware L.P., and the Directors are
of the opinion that no losses will arise therefrom.
Group
(i) Bank guarantees, amounting to c18.117m (2002: c15.780m) are outstanding as at 3 January 2004, mainly in respect of
payment of EU subsidies.
54 Glanbia plc annual report 2003
34 Pension schemes
(a)
In the Republic of Ireland and the United Kingdom the Group operates defined benefit schemes which provide retirement and
death benefits for the majority of employees. The schemes are funded through separate trustee controlled funds.
The contributions paid to the schemes are in accordance with the advice of professionally qualified actuaries. The latest actuarial
valuation reports for these schemes, which are not available for public inspection, are dated between 31 December 2000 and
30 June 2003. The contributions paid to the schemes in 2003 are in accordance with the contribution rates recommended in the
actuarial valuation reports. The aggregate market value of the assets at these actuarial valuation dates was in excess of c342m.
The most recent actuarial valuations show that the schemes are less than 100% funded in respect of discontinuance liabilities.
In relation to accrued liabilities based on pensionable salaries projected to normal retirement age, the aggregate value of the assets
of the schemes represented 90% of these accrued liabilities at the relevant actuarial valuation dates. The Group has made proposals
to members of the pension schemes in relation to the funding of the schemes. On actuarial advice, the pension charge will be increased
for the effects of this deficit and the variation from the regular cost will be amortised over the employees’ expected remaining working
lives. The pension cost charged to the profit and loss account for 2003 amounted to c8,091,000 (2002: c5,946,000).
The principal assumptions adopted for the actuarial valuations assume that the long-term rate of investment return exceeds
the rate of increase in pensionable salaries by between 2% and 2.5% per annum. The method of funding used in calculating the
contribution rates was the Projected Unit Method.
In the United Kingdom the Group also operates defined contribution schemes for the Group’s employees. The pension cost charged
to the profit and loss account for 2003 amounted to c230,000 (2002: c492,000).
In the U.S.A., the Group operates defined contribution schemes for the Group’s employees. The pension cost charged to the profit
and loss account is equal to the contributions paid. The pension cost charged for 2003 amounted to c475,000 (2002: c564,000).
(b) FRS 17 Retirement benefits
The transitional arrangements of FRS 17 require disclosure of the assets and liabilities as at 3 January 2004 and 4 January 2003
calculated in accordance with the requirements of FRS 17.
Financial assumptions
The assets of the schemes operated by the Group have been taken at market value and the liabilities have been calculated using
the following principal actuarial assumptions:
Inflation rate increase
Discount rate
Salary rate increase
Pension payment increase
2003
%
2.25
5.5
3.5
2002
Irish Schemes
2001
2003
%
2.5
5.75
3.5
%
2.5
6.0
3.5
%
2.6
5.6
3.1
2002
UK Schemes
%
2.25 - 2.5
5.75
3.25 - 3.5
2001
%
2.5
6.0
3.5
2.25 - 3.5
2.5 - 3.5
2.5 - 3.5
1.85- 3.25
1.75 - 3.25
2.5 - 3.0
Scheme assets
The expected long term rate of return on the assets of the schemes at 3 January 2004 and 4 January 2003 were as follows:
Equities
Bonds
Other
2003
%
8.5
4.44 - 5.0
7.5
2002
%
8.5
5.75
7.5
2001
%
8.5
6.0
7.5
Glanbia plc annual report 2003 55
Notes to the Financial Statements (continued)
3 January 2004
34 Pension schemes (continued)
Scheme assets (continued)
The assets of the Group schemes at 3 January 2004 and 4 January 2003 were as follows:
Equities
Bonds
Other
Total assets
Actuarial liabilities
(Deficit)/surplus
Related deferred tax asset/(liability)
2003
E’000
235,110
78,778
25,965
2002
c’000
206,775
79,248
28,020
2001
c’000
273,947
86,263
23,702
339,853
(440,260)
314,043
(392,148)
383,912
(367,993)
(100,407)
7,594
(78,105)
4,876
15,919
(2,198)
Net pension (liability)/asset (note (a))
(92,813)
(73,229)
13,721
(a) As detailed in note 5, on 23 February 2004 the Group announced the sale of a 75% interest in Glanbia Foods Limited to Milk
Link Limited. As part of this transaction, the assets and obligations of the Glanbia Foods pension scheme transferred with
Glanbia Foods Limited. The exclusion of the deficit in the Glanbia Foods pension scheme at 3 January 2004 would reduce
the net pension liability noted above by c11.6m to c81.2m.
On full implementation of FRS 17 the amounts that would have been charged, on the basis of the above assumptions, to the profit
and loss account and the statement of total recognised gains and losses for the year ended 3 January 2004 and 4 January 2003
are as follows:
Analysis of the amount that would have been charged to the operating profit in 2003 and 2002 under FRS 17
Current service cost
Past service cost
Disposals
2003
E’000
10,086
295
–
2002
c’000
9,760
117
(861)
10,381
9,016
Analysis of amount that would have been credited to other finance income in 2003 and 2002 under FRS 17
Expected return on pension scheme assets
Interest on past service scheme liabilities
Net credit to finance income
2003
E’000
2002
c’000
23,326
(21,864)
29,400
(21,566)
1,462
7,834
Analysis of amount that would have been recognised in statement of total recognised gains and losses (STRGL)
Actual return less expected return on pension scheme assets
Experience (losses)/gains arising on pension scheme liabilities
Effect of changes in assumptions underlying the present value of scheme liabilities
Actuarial loss that would have been recognised in statement of total recognised
gains and losses
56 Glanbia plc annual report 2003
2003
E’000
16,120
(3,835)
(35,088)
2002
c’000
(86,424)
510
(12,527)
(22,803)
(98,441)
34 Pension schemes (continued)
Movement in (deficit)/surplus during the year
(Deficit)/surplus in schemes at beginning of year
Translation of opening balances
Current service cost
Past service cost
Disposals
Cash contributions
Finance income
Experience loss
Deficit at end of year
2003
E’000
(78,105)
3,043
(10,086)
(295)
–
6,377
1,462
2002
c’000
15,919
–
(9,760)
(117)
861
5,599
7,834
(22,803)
(98,441)
(100,407)
(78,105)
History of experience gains and losses
2003
2002
Difference between the actual and expected return on scheme assets expressed as a percentage
of scheme assets
Experience (losses)/gains on scheme liabilities expressed as a percentage of the schemes
actuarial liabilities
Total loss on STRGL as a percentage of schemes actuarial liabilities
4.7%
(27.5%)
(0.9%)
(5.2%)
0.1%
(25.1%)
If the above amounts had been recognised in the financial statements, the Group net assets and profit and loss account reserve
would be as follows:
Net assets
Net assets as reported
Pension liability calculated on the basis of FRS 17
Less: SSAP 24 asset that will be reversed on implementation of FRS 17
Plus: Pension provision that will be reversed on implementation of FRS 17
Net assets on FRS 17 basis (note (b))
Reserves
Profit and loss account reserve as reported
Pension (liability)/asset calculated on the basis of FRS 17
Less: SSAP 24 asset that will be reversed on implementation of FRS 17
Plus: Pension provision that will be reversed on implementation of FRS 17
2003
E’000
300,871
(92,813)
(14,082)
14,171
2002
c’000
320,436
(73,229)
(25,340)
8,843
208,147
230,710
2002
c’000
75,626
(73,229)
(25,340)
8,843
2001
c’000
118,806
13,721
(27,306)
10,758
2003
E’000
26,244
(92,813)
(14,082)
14,171
Profit and loss account reserve on FRS 17 basis (note (b))
(66,480)
(14,100)
115,979
Comprising:
Profit and loss account reserve on FRS 17 basis
Excluding pension (deficit)/asset
Pension (deficit)/asset
26,333
(92,813)
59,129
(73,229)
102,258
13,721
(66,480)
(14,100)
115,979
(b) As noted above, on 23 February 2004 the Group announced the sale of a 75% interest in Glanbia Foods Limited to Milk Link Limited.
As part of this transaction the assets and obligations of the Glanbia Foods pension scheme transferred with Glanbia Foods Limited.
If this transaction had been recognised in the financial statements, the net assets on an FRS 17 basis at 3 January 2004 would
amount to c228.45m and the profit and loss account reserve on an FRS 17 basis at 3 January 2004 would amount to (c46.18m).
Glanbia plc annual report 2003 57
Notes to the Financial Statements (continued)
3 January 2004
35 Related party transactions
(a) Transactions with principal shareholder
Glanbia Co-operative Society Limited (“the Society”) holds 54.79% of the issued share capital of the Company. A significant
number of shareholders of the Society either trade with or supply milk to the Company or its subsidiaries.
The Company and its subsidiaries provide various administration, milk advisory, shareholder advisory, secretarial and legal services
to the Society and also make certain payments on behalf of the Society. The charge for these services amounted to c1.539m
for the year (2002: c1.603m). The Society has obligations to certain of its members in the form of loan stock, investment stock
units, convertible stock and patronage bonus, the level of which is dependent on trade between those members of the Society
and the Company and its subsidiaries.
There was no interest payable by the Society in relation to financing transactions between the Society and the Company during
2003 (2002: c0.857m).
The Society owns Glanbia House, which is the Registered Office of the Company, and charged rent to the Company in respect
of this property of c253,948 (2002: c253,947).
The balance due from the Company and its subsidiaries to the Society at 3 January 2004 is c3.695m (2002: c0.802m).
(b) Transactions with Directors
The majority of non-executive Directors of Glanbia plc trade farm produce and farm inputs with Irish subsidiaries of the Company.
All transactions are carried out on terms consistent with those applied to dealings with unrelated parties. At 3 January 2004, trading
balances due from Directors amounted to c75,382 (2002: c80,878). Details of 2003 trading are summarised below:
Purchases from Directors
Sales to Directors
Total amounts traded
2003
E’000
2002
c’000
1,557
1,478
Highest level of trading with an individual Director
569
559
2003
E’000
729
244
2002
c’000
733
237
(c) Transactions with affiliated companies
The Company and its subsidiaries transacted purchases and sales with associated companies, including the joint venture as listed
in note 37. At 3 January 2004, net balances due from associated companies amounted to c7,765,202 (2002: c5,162,072) and
purchases from associated companies amounted to c13,966,660 (2002: c20,311,472) for the year. Sales to associated companies
amounted to c82,361,399 (2002: c80,939,893).
58 Glanbia plc annual report 2003
36 Directors’ and Secretary’s interests
The interests of the Directors and Secretary and their spouses and minor children in the share capital of the Company, the holding
Society and subsidiary companies/societies were as follows:
(a) Glanbia plc
Beneficial
Directors
TP Corcoran
L Herlihy
MJ Walsh
JJ Moloney
JE Callaghan
HV Corbally
EP Fitzpatrick
JA Gilsenan
TP Heffernan
CL Hill
JV Liston
GJ Meagher
JJ Miller
WG Murphy
M Parsons
EM Power
F Quigley
JV Quinlan
GE Stanley
KE Toland
Secretary
S Talbot
Ordinary shares
of c0.06
03/01/04
05/01/03
**
Number of units
*
*
*
$
81,520
81,804
23,708
60,000
35,000
1,495
38,501
2,842
27,644
31,966
–
212,327
61,136
230,827
26,344
37,893
35,148
21,347
28,724
13,650
81,520
81,804
23,708
60,000
35,000
1,495
38,501
2,842
27,644
31,966
–
212,327
61,136
230,827
26,344
37,893
35,148
21,347
28,724
13,650
9,100
9,100
There have been no changes in the interests of the Directors and Secretary between 3 January 2004 and 20 February 2004.
Executive Director
*
** Or at date of appointment if later
$ Appointed as an Executive Director 10 January 2003
Glanbia plc annual report 2003 59
Notes to the Financial Statements (continued)
3 January 2004
36 Directors’ and Secretary’s interests (continued)
(a) Glanbia plc (continued)
Details of movements on outstanding options over the Company’s ordinary share capital are set out below. Outstanding options
are exercisable on dates between 2004 and 2012.
Beneficial
Directors
JJ Moloney
1988 Share Option Scheme
2002 Long Term Incentive Plan
Sharesave Scheme
GJ Meagher
1988 Share Option Scheme
1988 Share Option Scheme
2002 Long Term Incentive Plan
WG Murphy
1988 Share Option Scheme
1988 Share Option Scheme
2002 Long Term Incentive Plan
KE Toland
2002 Long Term Incentive Plan
Sharesave Scheme
Secretary
S Talbot
2002 Long Term Incentive Plan
Sharesave Scheme
Options – Ordinary shares of c0.06
Number of units
05/01/03 Granted during year 03/01/04
**
150,000
290,000
4,593
50,000
75,000
205,000
50,000
75,000
225,500
164,000
4,593
164,000
4,593
–
–
–
–
–
–
–
–
–
–
–
–
–
150,000
290,000
4,593
50,000
75,000
205,000
50,000
75,000
225,500
164,000
4,593
164,000
4,593
Exercise
price
c
4.25 (b)
1.55 (c)
1.2 (d)
1.97 (a)
4.25 (b)
1.55 (c)
1.97 (a)
4.25 (b)
1.55 (c)
1.55 (c)
1.20 (d)
1.55 (c)
1.20 (d)
Options:
(a) Exercisable by Directors at any time up to April 2004.
(b) Exercisable by Directors at any time up to May 2008.
(c) Exercisable by Directors and Secretary between 2005 and 2012.
(d) Exercisable by Directors and Secretary, under normal circumstances, between September 2005 and March 2006.
There were no other changes in the interests of the Directors and Secretary between 3 January and 20 February 2004.
JJ Moloney, GJ Meagher, KE Toland and S Talbot, as participants of the 2002 Long Term Incentive Plan, are eligible for a share
award of 10% of the ordinary shares that they continue to hold following the second anniversary of the exercise of the option.
Participants in the Sharesave Scheme are deemed to be interested in 2,168,354 ordinary shares beneficially owned by the Glanbia
Employees’ Share Trust as at 3 January 2004 (2,167,949 ordinary shares as at 20 February 2004).
No options granted to the Directors or Secretary lapsed during the year. The market price of the shares as at 3 January 2004
was c2.18 and the range during the year was c1.20 to c2.18. The 1988 Share Option Scheme expired on 31 August 1998.
** Or at date of appointment if later.
60 Glanbia plc annual report 2003
36 Directors’ and Secretary’s interests (continued)
(b) Glanbia Co-operative Society Limited
“A” Ordinary shares
of c1
Convertible redeemable
“B” shares of c0.01
03/01/04
03/01/04
05/01/03
**
Number of units
Number of units
05/01/03
**
Beneficial
Directors
TP Corcoran
L Herlihy
MJ Walsh
HV Corbally
EP Fitzpatrick
JA Gilsenan
TP Heffernan
CL Hill
JJ Miller
M Parsons
EM Power
F Quigley
JV Quinlan
GE Stanley
65,761
86,515
12,793
4,058
22,401
2,259
25,100
15,051
22,150
6,349
24,570
24,666
8,850
599
65,019
83,247
11,513
3,458
21,830
1,721
24,261
14,276
20,863
5,738
23,578
24,075
8,565
539
307
1,401
981
207
643
106
347
345
621
471
512
221
240
33
910
3,945
1,780
698
1,371
581
1,013
997
1,628
825
1,223
704
410
93
There have been no changes in the above interests between 3 January 2004 and 20 February 2004.
** Or at date of appointment if later.
Glanbia plc annual report 2003 61
Notes to the Financial Statements (continued)
3 January 2004
36 Directors’ and Secretary’s interests (continued)
(b) Glanbia Co-operative Society Limited (continued)
Convertible loan stock units
c0.01269738
“C” shares
of c0.01***
03/01/04
03/01/04
05/01/03
**
Number of units
Number of units
05/01/03
**
Beneficial
Directors
TP Corcoran
L Herlihy
MJ Walsh
JJ Moloney
HV Corbally
EP Fitzpatrick
JA Gilsenan
TP Heffernan
CL Hill
GJ Meagher
JJ Miller
WG Murphy
M Parsons
EM Power
F Quigley
JV Quinlan
KE Toland
Secretary
S Talbot
*
*
*
*
220,440
1,062,568
140,392
–
217,781
243,713
167,020
197,755
–
–
289,109
–
155,883
240,306
167,199
–
–
–
145,390
656,968
88,431
–
136,802
152,174
103,548
123,551
–
–
187,337
–
96,610
158,022
108,321
–
–
–
1,924,500
16,626,637
1,100,000
4,634,869
63,498
6,497,492
3,714,146
203,157
3,426,974
8,880,921
6,309,314
2,904,610
1,269,738
4,945,207
2,634,869
1,067,686
–
924,500
6,039,219
500,000
1,634,869
63,498
3,645,061
1,714,146
203,157
1,126,974
2,380,921
6,181,322
2,142,766
1,269,738
1,134,869
1,134,869
813,686
–
7,182,246
3,658,558
JA Gilsenan had a beneficial interest in 1,382 Investment Stock Units of c0.1269738 in the Society as at 5 January 2003, which
were cashed during 2003.
There have been no changes in the above interest between 3 January 2004 and 20 February 2004 with the exception of convertible
loan stock units issued to Directors who are milk suppliers in accordance with the conditions of the 2004 Revolving Share Plan of
the Society.
Executive Director.
*
** Or at date of appointment if later.
***
Increase in shareholding to be issued in March 2004.
62 Glanbia plc annual report 2003
(1)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(3)
(2)
(4)
(4)
(5)
(6)
(4)
(4)
(7)
(8)
(9)
37 Details of the Company’s interest in its principal subsidiary and associated undertakings are as follows:
Address of
Group interest % registered office
Principal activities
Grain and Fertilizers
Dairy Products
Property and Land Dealing
Operation of Pig Rearing Facilities
Manufacture of Animal Feed Products
Financing
Financing
Dairying, Liquid Milk and General Trading
Pork and Bacon Products
Milk Products
Milk Products
Investment Holding
Investment Holding
60
100
100
100
100
100
100
100
100
100
100
100
100
Fertilizers
73.34
Holding Company
Holding Company
Supply of Animal Feeds
Consumer Foods Products
Manufacture and supply of Cheese, Butter and Dairy Products
Holding Company
Investment Holding
Holding Company
Milk Products
Holding Company
100
100
100
100
100
100
100
100
100
100
(a) Subsidiaries
D Walsh & Sons Limited
Glanbia Consumer Foods Limited
Glanbia Estates Limited
Glanbia Farms Limited
Glanbia Feeds Limited
Glanbia Finance (Ireland) Limited
Glanbia Financial Services
Glanbia Foods Society Limited
Glanbia Fresh Pork Limited
Glanbia Ingredients (Ballyragget) Limited
Glanbia Ingredients (Virginia) Limited
Glanbia Investments (Ireland) Limited
Glassonby
Grassland Fertilizers (Kilkenny) Limited
Waterford Foods plc
Glanbia (UK) Limited
Glanbia Feedstuffs Limited
Glanbia Foods (NI) Limited
Glanbia Foods Limited
Glanbia Holdings Limited
Glanbia Investments (UK) Limited
Glanbia Inc.
Glanbia Foods Inc.
Glanbia Foods B.V.
(b) Associated
undertakings/joint ventures
Glanbia Cheese Limited
Co-operative Animal Health Limited
31 December 2002
South Eastern Cattle Breeding Society Limited 31 December 2002
Malting Company of Ireland Limited
South East Port Services Limited
31 October 2003
3 January 2004
Agro Chemicals
Cattle Breeding
Malting
Port Services
Addresses of registered offices of subsidiary and associated undertakings are as follows:
(1)
20 Patrick Street, Kilkenny, Ireland.
(2) Glanbia House, Kilkenny, Ireland.
(3)
(4)
Palmerstown, Kilkenny, Ireland.
Second Floor, 2 Albert Road, Tamworth, Staffordshire, B79 7JN, England.
(5) Unit 4, Carn Industrial Estate, Portadown, Co Armagh, BT63 5RH, Northern Ireland.
(6) Maes y Clawdd, Maesbury Road, Oswestry, Shropshire, SY10 8NL, England.
(7)
Suite 780, Wilmington Trust Centre, 1100 North Market Street, Wilmington, Delaware, USA.
(8) Richfield, Lincoln County, Idaho, 83349 USA.
(9) Krijtenbogtstraat 2A, 5066 BJ, Moergestel, The Netherlands.
(10) Tullow, Co Carlow, Ireland.
(11) Dovea, Thurles, Co Tipperary, Ireland.
(12) South Link, Togher, Cork, Ireland.
Date to which
results included
Principal activities
Address of
Group interest % registered office
3 January 2004
Cheese Products
51
50
57
33.33
49
(4)
(10)
(11)
(12)
(3)
Associated companies are treated as such where the Group has significant but not dominant influence over operating and financial policies.
Glanbia plc annual report 2003 63
Notes to the Financial Statements (continued)
3 January 2004
38 Borrowings and financial instruments
An outline of the objectives, policies and strategies pursued by the Group in relation to financial instruments is set out in the
Group Financial Directors Review on pages 14 to 16.
For the purposes of the disclosures which follow in this note, short term debtors and creditors which arise directly from the
Group’s operations have been excluded as permitted under FRS 13. The disclosures therefore, focus on those financial instruments
which play a significant medium term role in the financial risk profile of the Group.
(a) Maturity of financial liabilities
The maturity profile of the Group’s financial liabilities, other than short term creditors such as trade creditors and accruals, as at
3 January 2004 were as follows:
In less than one year or on demand
Between one and two years
Between two and five years
Less cash balances
At 3 January 2004
At 4 January 2003
Finance
Net
leases borrowings
E’000
E’000
Non-equity
minority
interest
E’000
698
466
458
1,622
43,221
466
169,885
213,572
–
–
115,759
115,759
Debt
E’000
42,523
–
169,427
211,950
Total
E’000
43,221
466
285,644
329,331
(59,775)
–
(59,775)
–
(59,775)
152,175
1,622
153,797
115,759
269,556
173,699
2,609
176,308
132,156
308,464
Debt includes Stg£65m (c92.133m) of senior notes issued by way of private placement to institutional investors, of which Stg£30m
were repaid in January 2004 and Stg£35m are repayable in March 2006.
(b) Borrowing facilities
The Group has various borrowing facilities available to it. The undrawn committed facilities available at 3 January 2004 in respect
of which all conditions precedent had been met at that date, are as follows:
In less than one year or on demand
Between one and two years
Between two and five years
In more than five years
2003
E’000
2002
c’000
21,473
4,828
–
145,126
146,159
120,000
–
–
287,632
149,954
64 Glanbia plc annual report 2003
38 Borrowings and financial instruments (continued)
(c) Interest rate risk profile of financial liabilities
Euro
Sterling
US dollars
Finance leases
(d) Fixed rate financial liabilities
Euro
Sterling
US dollars
2003
Floating rate
financial
liabilities
E’000
2003
Fixed rate
financial
liabilities
E’000
2003
Total
E’000
2002
Floating rate
financial
liabilities
c’000
2002
Fixed rate
financial
liabilities
c’000
2002
Total
c’000
38,337
(36,853)
19,112
37,594
191,354
78,165
75,931
154,501
97,277
33,905
7,219
16,027
37,397
207,501
94,759
71,302
214,720
110,786
20,596
307,113
327,709
57,151
339,657
396,808
1,622
329,331
2,609
399,417
Weighted average
interest rate
2003
%
8.50
6.69
7.99
7.25
2002
%
8.50
6.69
7.99
7.25
Weighted average
period rate is fixed
2002
2003
years
years
3.58
1.26
2.87
1.96
4.57
2.26
3.86
2.96
Fixed rate financial liabilities include US$100m (maturing November 2006) and c38.2m (maturing July 2007) non-equity
minority interest.
The floating rate financial liabilities comprise bank borrowings bearing interest at rates fixed in advance for periods ranging from
overnight up to six months by reference to inter-bank interest rates (EURIBOR, £LIBOR, $LIBOR). The figures shown in the table
above also take into account various interest rates and currency swaps used to manage the interest rate and currency profile of
financial liabilities.
(e) Currency exposures
As explained on page 16 of the Group Financial Directors Review, the Group’s currency exposures arising from its investment
overseas (its structural currency exposures) are mitigated to a reasonable extent. Gains and losses arising from these structural
currency exposures are recognised in the statement of total recognised gains and losses.
Transactional (non-structural) exposures comprise monetary assets and monetary liabilities of the Group that are not denominated
in the operating (or “functional”) currency of the operating unit involved, other than certain borrowings treated as hedges of net
investments in overseas operations. Transactional exposures give rise to the net currency gains and losses recognised in the profit
and loss account.
At 3 January 2004, taking into account the effect of any currency swaps, forward contracts and other derivatives entered into
to manage these exposures, the Group had no material transactional currency exposures.
Glanbia plc annual report 2003 65
Notes to the Financial Statements (continued)
3 January 2004
38 Borrowings and financial instruments (continued)
(f) Fair value of financial assets and financial liabilities
Set out below is a comparison by category of the net carrying amounts and estimated fair values of all the Group’s financial
assets and financial liabilities as at 3 January 2004.
Negative figures in the table below represent financial assets.
Net carrying amount
2002
c’000
2003
E’000
Estimated fair value
2002
c’000
2003
E’000
Primary financial instruments held or issued to finance the Group’s operations:
Non-equity shares
Long term fixed rate borrowings
Short term and current portion of long term borrowings
Cash balances/financial assets
115,759
92,133
121,439
132,156
99,908
167,353
126,527
96,012
121,439
137,428
107,041
167,353
(59,775)
(90,953)
(59,775)
(90,953)
Derivative financial instruments held to manage the interest rate
and currency profile:
Interest rate swaps and similar instruments
Forward foreign currency contracts and currency options
269,556
308,464
284,203
320,869
1,599
–
1,599
–
–
–
4,314
(3,506)
6,993
(623)
808
6,370
Market rates have been used to determine the fair value of all swaps and forward foreign currency contracts. The fair values of all
other items have been calculated by discounting expected future cash flows at prevailing year end interest rates.
Due to seasonal aspects of the business, cash balances at year end are typically higher than on average throughout the year.
66 Glanbia plc annual report 2003
38 Borrowings and financial instruments (continued)
(g) Hedges
The Group’s policy is to hedge the following exposures:
•
• Structural and transactional currency exposures and currency exposures on future committed sales – using currency swaps,
Interest rate risk – using interest rate swaps, currency swaps and interest rate options.
forward currency contracts and currency options.
Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged is itself recognised.
The table below shows the extent to which the Group has unrecognised gains and losses on financial instruments and deferred
gains and losses in respect of financial instruments used as hedges.
Unrecognised gains and losses:
On hedges at 4 January 2003
Arising in previous year and recognised in 2003
Arising in previous year and not recognised in 2003
Arising in 2003 and not recognised in 2003
On hedges at 3 January 2004
Of which:
Expected to be recognised in 2004
Expected to be recognised in 2005 or later
Deferred gains and losses:
On hedges at 4 January 2003
Arising in previous year and recognised in 2003
Arising in previous year and not recognised in 2003
Arising in 2003 and not recognised in 2003
On hedges at 3 January 2004
Of which:
Expected to be recognised in 2004
Expected to be recognised in 2005 or later
39 Approval of the financial statements
The Directors approved the financial statements on 2 March 2004.
Gains
E’000
Losses
E’000
Net
E’000
623
(623)
–
3,506
(6,993)
4,278
(2,715)
–
(6,370)
3,655
(2,715)
3,506
3,506
(2,715)
791
3,492
14
(602)
(2,113)
2,890
(2,099)
–
–
–
–
–
–
–
(2,241)
695
(2,241)
695
(1,546)
(1,546)
–
–
(1,546)
(1,546)
(520)
(1,026)
(520)
(1,026)
Glanbia plc annual report 2003 67
Five year Financial Summary
Profit and loss accounts
2003
Emillion
2002
c million
2001
c million
2000
c million
1999
c million
Turnover
2,041.1
2,316.7
2,625.4
2,401.7
2,503.9
Operating profit
Interest (net)
Share of operating profit of joint
venture and associates
(Loss)/profit on sale of operations
Provision for loss on sale of operation
Reorganisation and merger costs
Profit/(loss) on sale of fixed assets
Loss on termination of operations
(Loss)/profit before taxation
Taxation
Minority interests
(Loss)/profit
Dividends
75.4
(15.7)
0.9
(28.2)
(49.1)
–
11.6
(9.8)
(14.9)
(8.7)
(11.3)
(34.9)
(14.5)
88.6
(19.7)
2.9
(25.6)
–
–
13.8
(68.1)
(8.1)
(7.9)
(13.3)
(29.3)
(13.8)
91.7
(26.6)
1.6
(2.1)
–
–
(3.5)
–
61.1
(7.4)
(13.6)
40.1
(13.2)
81.8
(28.9)
0.8
23.1
–
(2.8)
5.5
–
79.5
(5.5)
(14.5)
59.5
(12.6)
(Loss absorbed)/profit retained
(49.4)
(43.1)
26.9
46.9
Key financial ratios
Operating profit before exceptional items/turnover*** %
(Loss)/profit before tax/turnover
%
Earnings per share
Fully diluted earnings per share
Adjusted earnings per share
Borrowings/capital employed**
Current assets/current liabilities
Quick assets*/current liabilities
times
times
c
%
c
c
4.5
(0.7)
(12.01)
(12.01)
19.26
51.1
1.4
0.8
3.9
(0.3)
(10.06)
(10.06)
17.44
55.0
1.6
1.0
3.6
2.3
13.71
13.71
15.85
75.2
1.5
0.9
3.4
3.3
20.35
20.35
11.55
101.5
1.4
1.0
92.1
(34.1)
0.5
(84.2)
–
(9.1)
–
–
(34.8)
(8.9)
(13.6)
(57.3)
(20.8)
(78.1)
3.7
(1.4)
(19.58)
(19.58)
11.43
138.0
1.5
1.0
*
Current assets less stocks
** Excluding capital grants
*** Excluding share of turnover of joint venture and associates
68 Glanbia plc annual report 2003
l
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Glanbia plc
Glanbia House
Kilkenny, Ireland
Telephone: +353 56 7772200
Fax: +353 56 7772222
www.glanbia.com